Despite Publishers’ Complaints, They Benefit from Used Game Sales

We often hear publishers bemoan the fact that they don’t see any revenue from used game sales. But is that really true?

In a recent interview with IGN, Game Crazy’s Director of Used Games Marc Mondhaschen says that publishers are reaping benefits from game trade-ins, albeit indirectly:

We did a study not too long ago for a very large vendor who we managed to figure out for them 20 percent of their sales inside the first 28 days were paid for with trade dollars. So you got 20 points of their sales that wouldn’t happen unless we had a trade business going. And that’s specialty retail. Game specialty retail is maybe a third of the channel, 35 percent of the channel. So you got 10 percent of your sales that wouldn’t happen unless somebody was out there trading games with your customers.

And if you didn’t have specialty retail it would be pretty hard to sell innovation into the channel at all. I mean, Wal-Mart doesn’t really buy Katamari Damacy. So, in order to innovate, in order to grow innovation in the business you need a specialty games retailer that actually knows something about videogames. And in order to have them, they need the margins through used games…

Mondhaschen explains that while publishers don’t typically see any money from used game sales, they do benefit in other ways:

When The Lost and Damned came out we started selling a whole lot more Grand Theft Auto 4, both on the new side and on the used side. Which, then, sort of funds people’s ability to go play L&D again…

-Reporting from San Diego, GamePolitics Senior Correspondent Andrew Eisen

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  1. 0
    questionmark1987 says:

    Thank you, you argue well as well.

    The reason I posted that is not because I want to prove that game developers aren’t making money, but to show that sometimes as consumers we’re really not aware of the costs and how many sales really have to be made in order to make back money on a game.

    I have heard (though I am pretty sure it’s NOT common) of game budgets as high as 93 mil.

    Even at the idea of 10 mil (which still might be low but I dare not try to say that without some numebrs to back myself up) that’s (figuring in your numbers) 200,000 copies at the current price point, 1,000,000 copies at the $10 price point just to make profit.

    If we assume we all love developers and think even the ones who make a bad game shouldn’t LOSE money on the deal, because regardless they are providing something to the market, then having to sell 200,000 copies in order to break even isn’t such a bad idea I think. That’s close to the average MMO subscribership (including all types of MMOs) and for less well known titles a good numebr to shoot for in sales. Higher cost games will need to sell more but those are the ones we see selling in the millions.

    I only wish I had some more real world numbers to work with.

  2. 0
    Ratros says:

    I apologise, I shoulda mentioned I was pulling the numbers out of thin air.  And once again you make good points.  Although I disagree with you, I respect your opinion and the way you voice it.

    I once had a dream about God. In it, he was looking down upon the planet and the havoc we recked and he said unto us, "Damn Kids get off my lawn!"

  3. 0
    questionmark1987 says:

    I can’t offer anything to look up for proof, I can only say I have experience working in QA and these are the numbers my managers used to push us to find as many bugs as possible for the FIRST submission. Even then there’s not guarantee the company will approve the game. I’m not sure if those numbers are published anywhere. And yes I know this makes my number’s look shady, but if I had a published number somewhere to show you I would offer it, frankly I just don’t know that those numbers are published anywhere.

  4. 0
    FlakAttack says:

    I can attest to this. Business school is more about the law than it is about business and economics. Not that it would make a difference. My economics professor was a damned fool who thought Keynesian economics was the best path and failed me because I rarely agreed with him on anything.

    Now, many countries across the planet are in terrible debt. There’s no money left to be borrowed. Everyone is like "OMG WUT I DU" and I’m here with some money in the bank. Turns out saving money is a good idea. Who could have known?

    Anyway, that was off on a silly tangent… point is, just look at where most politicians went to school… they’re usually out of business or law schools. So are our executives. Surprise surprise.

  5. 0
    FlakAttack says:

    "Gamers don’t understand the economics of games because many of us don’t know these hidden costs that get paid to make our favorite games."

    The companies should be speaking out and letting us know how much it costs. I have no reason to support them if what they propose does nothing for me and makes an undisclosed amount of money for them. I will simply say ‘no’ and keep walking.

    "Bottom line if you’re a stamp collector you pay lots of money for rare stamps. If you’re a bowler you pay for a good bowling ball etc. If your a gamer, suck it up and pay the price to support the people that make the games you play."

    What do these examples have to do with anything? Most rare stamps are purchased from third parties and there is even a market for used bowling balls. Collecting older books? Almost always have to go through a third party. Old games too.

    You make long-winded arguments while questioning the facts for one side but do nothing to prove YOUR point, making your argument simply one’s word against another. Even ignoring that, I don’t see your arguments as being particularly convincing, especially due to their notable bias.

    You say in a later post it costs $10,000 for resubmissions to Nintendo, as an example. Do you have proof of these numbers? This is an honest question, as this type of information may be relevant to my future.

    Just figured I’d add this for those that are curious: I have only ever bought one used game and it was a PC game that was no longer being sold anywhere. I don’t like to buy used, but I will not take that right away from other people simply because it’s useless to me.

  6. 0
    questionmark1987 says:

    The problem is you’re using several generalizations that don’t mix. Your price points are real (they jsut are can’t argue that). The creative cost is wrong, which is the main problem with the equation. It costs more then  1,000,000 to LICENSE the Unreal Engine for a game, millions more for dev kits which more then one are needed, even mroe if you’re developing for multiple platforms, etc. etc.

    I can’t give you a realistic figure of the total cost off the top of my head but I would generalize and say 10,000,000 is probably more realistic for a AAA title, maybe half that for a crappy title.

    The other problem is that you are using a set price point based on american prices that doesn’t take into account fluctuations between defferent regions and currencies. Chinese people do not pay the same as americans, neither do europeans.

    I agree games COULD be cheaper and make a profit, but the problem is that no matter how cheap they get there will still be pirating and used game sales. The grass is always greener until it’s free, people will always want a better deal and always think they deserve one. That’s the kind of mentality consumers, especially american ones, have. Because of this prices rise to try and manage the losses caused by those individuals and we get the price point we have now. You might have forgotten but when the Nintendo came out they actually LOWERED the price of games to $50ish from around $70. Gamers, especially younger gamers, tend to forget this.


    As for rentals, do I think they are great for the industry? No. I would rather see someone buy a game anyday of course. But do I think they are better then someone being able to own a game without compensating the devs? Yes.

  7. 0
    Ratros says:

    NOOOOO I miss the chance to argue with questionmark, one of my favorite opposing views. Oh well, I’ll post this anyways.


     I’m going to agree with you on the fact that most people don’t know what it takes to make a game, price or otherwise.  But I’ll have to disagree with you on whether games could be cheaper or not.  Once the game is created, translated, and so forth, all it takes is to put said game on a disk.


    So here’s what we got going into a sale:


    manufacturing cost = box + disk + manuel (we’ll call this MC)


    Creative cost = Everything it took to get the game ready for manufacturing  (We’ll call this CC)


    Sale Price:  How much the game sales for. (SP of course)


    Revenue:  SP – MC (This’ll be R)


    Profit:  R – CC


    Now then let’s say it takes 1,000,000 to create one game and 5 to manufacture a copy.


    Now then we have two sale prices 55 and 15.


    Let’s start out with 55 (most places do a five to ten dollar mark up):

    Using the formulas I’ve laid out

    55 – 5 = 50

    1,000,000/50 = 20,000

    So profit starts once 20,000 copies have been sold.


    Using 15:

    15 – 5 = 10

    1,000,000/10 = 100,000

    With this you have to sell an extra 80,000 for profit.


    Now this sounds like a lot, but think for a moment how many people are in the US/Canada/Europe alone.  Now think about how many of them are gamers.  Now think how many would purchase said game at said price.  A bit simple, but you see the point.  I’m not saying that it’s this simple, or that this is an exact model, but it works much the same way, so YES games COULD be cheaper and make more of a profit.


    Oh and if you’re against Used Games that don’t give revenue to developers, then you should also be against rentals since many just rent the game and complete it without ever giving money to said developers.


    I once had a dream about God. In it, he was looking down upon the planet and the havoc we recked and he said unto us, "Damn Kids get off my lawn!"

  8. 0
    questionmark1987 says:

    Read this again, if you think most game company CEOs are being paid in the millions you’re sadly mistaken. There’s a few out there (EA, Blizzard, T2, Rockstar, Etc.) but the actual majority of developes only ever see 000,000 on their cost analysis for their games.

  9. 0
    questionmark1987 says:

    They may not be experts but I would say the average CEO is more aware of the economics of their companies markets then joe guy on the street who can’t even figure out why it takes so long for the game’s price to drop because he hasn’t seen anyone buy it at his hometown store.

  10. 0
    questionmark1987 says:

    I agree in fact.


    But I find it odd that so many gamers believe they’re getting ripped off when they don’t even understand how or why it costs so much to make a game. For example, if a company submits a game to Nintendo for approval after their QA cycle, and the game is rejected because it has a bug or other concern, they get a few chances (I believe 4 submission attempts but it varies between the different 1st parties, some only get 1 free attempt) after that, Nintendo charges $10,000 a submission. And no that’s not a typo, it costs $10,000 to say "Hey look this over and decide if it’s ok to ship." Not to mention every game has to go through (for north america) the NintendoNA inspection and the NintendoJapan inspection.

    Gamers don’t understand the economics of games because many of us don’t know these hidden costs that get paid to make our favorite games. Tons of money is paid by most companies to just get language translation. The thing I see though is a lot of gamers complaining about costs of gaming without understanding why it costs so much and demanding it be cheaper. Then when they’re presented with information that shows thier behavior (used games, pirating, etc.) is actually making it harder for companies to survive, and thus driving companies to do things like DLC and DD and DRM, they freak and make things even worse.

    Bottom line if you’re a stamp collector you pay lots of money for rare stamps. If you’re a bowler you pay for a good bowling ball etc. If your a gamer, suck it up and pay the price to support the people that make the games you play. RESEARCH your game purchases, it’s really not that hard anymore especially when you can just rent something and try it out first. Make smart purchases and you’ll feel like your dollar is well spent. Frankly I know myself and others like being able to look around at places like Gamestop. But that impulse shopping is more responsible for bad game purchases then anything else.



  11. 0
    questionmark1987 says:

    I didn’t say that either, in fact my post up near the top notes that both sides use faulty logic. I don’t disagree that people use the value of trade ins to buy new games, I don’t believe that trade ins create more profit for the actual people making games however because I think those sales are counterbalanced by the loss of new sales the traded in games cause. I don’t htink every used sale would have been a new sale but I do believe a significant enough portion of them would be that it makes a difference. Without real numbers (which gamestop and gamecrazy are both convieniently avoiding releasing for the general public) we can’t make any real observations on it.

  12. 0
    Adamas Draconis says:

    Question: And the guys who are for all intents and purposes calling the sale/trade of used games theft are being objective?


    Hunting the shadows of the troubled dreams.

  13. 0
    ZippyDSMlee says:

    And you miss my point, those that live that far away from normal day to day lives of the commen people see the world diffrently be it right or wrong.


    And becuse of that they can not always cope with the flow of real world issues becuse they have a narrow view of how thigns should work and thus not always able to change with the times.


    /zippy mumbo jumbo 😛

    Until lobbying is a hanging offense I choose anarchy! Stop supporting big media and furthering the criminalization of consumers!!

  14. 0
    Neeneko says:

    I think you missed my point.

    I did not mean to say that the ‘average’ person knew more about economics then businessmen and CEOS.   What I was getting at is just because someone has been successful in business does not mean they know much about economic or even how the pieces fit together.  Often getting to those ranks involve strong organizational and people skills, which are not opposed to knowledge of economics, but does not require it either.

    Unfortunately I have met quite a few businessmen (and seen more in the news) that seem to feel that because they made a bunch of money that they ‘understand’ how money works in a larger system.  It is the standard ‘because I am expert in my domain, I am an expert in all related domains’ falicy.

  15. 0
    questionmark1987 says:

    I’m sorry to say dude but you’re ignorant. Yes CEOs and top people get paid obscene amounts of money, that doesn’t make the laymens view of economy anymore correct.

    As for the figures gamecrazy and gamestop put out to defend themselves, if you actually knew anything about statistics you’d know anyone with any skill in numbers and statistics can manipulate data to say whatever they want it to. I could come up with a statistically correct set of data that used game sales causes puppy rape. All it takes is the right sample size and wording. The reason I could care less what gamestop and gamecrazy have to say in their defense is that they aren’t objective in their research.

  16. 0
    ZippyDSMlee says:

    The problem is the people that went to school have learned ways to fool the system and hide money while raking in a obscene paycheck the witless board members give them.

    The people are only seem ignorant because common sense/logic stops working after its been drown with a few million dollars…. and those with book smarts can not function well outside their little "green" world.

    Until lobbying is a hanging offense I choose anarchy! Stop supporting big media and furthering the criminalization of consumers!!

  17. 0
    starsrift says:

     "So you got 10 percent of your sales that wouldn’t happen unless somebody was out there trading games with your customers."

    To jump from counting how many new sales are made with "trade dollars" to the idea that there would not be a sale without the "trade dollars" seems obviously fallacious. How can we assume that?


  18. 0
    questionmark1987 says:

    The omissions thing is more the devs way of fighting piracy and used sales. I don’t agree with releasing an incomplete game that requires DLC to finish, but I do think releasing a game that can be completed but putting a lot of the nifty bells and whistles that make it amazing as FREE (underline exclamation exclamation) DLC that requires registration of the game with the publishing or developement company to recieve a code to unlock/download the nifty bells and whistles is perfectly reasonable in the current market.

    The preorder special stuff gamestop does is along the same lines and I support it heavily. I think I wouldn’t have a problem with gamestop if they would cut back on their used game sale focus. Really, when I go in and ask for a new copy and have to say no 50 times to the used offer it gets a bit irritating in more ways then one.

  19. 0
    State says:

    Of course I mean console generation, to my knowledge there isn’t exactly a set of generations when dealing with PCs.

    I know there has been an issue with companies releasing glitchy games (now with the possibility of downloadable bug fixes to fix problems after launch, so it’s a growing problem). But games like Tomb Raider: Underworld where they omit a level from the complete game only to sell it as downloadable content well that’s another matter.

  20. 0
    State says:

    Only in this generation have they had the ability to withhold levels and such only to release it a week later as downloadable content. Beautiful Katamari was a disgrace with half the game locked required the purchase of keys to unlock content on the disc.

  21. 0
    questionmark1987 says:

    I call shenanigans. First off people that trade in games are more likely to buy used if at all possible, because like with the trade ins they are trying to save money. Would some new sales be lost if used games were removed from the market, maybe. But ALL used sales would be lost (over time) and many people who bought used before would choose to buy new because they still want the game. Overall it would be a benefit to the industry (speaking about the developers and publishers not retailors). Steam is a great example of this, and it’s funny because people ignore it. Valve is hugely sucessful and they don’t even have the most popular games, it’s just they make money off EVERY sale, and they can offer things like free DLC etc. for thier games. Imagine how much more free and cheaper stuff we would get if all the game companies were able to make money off of every purchase of their product.


    I should clarify all used sales in a store. There will always be person to person sales as long as we have a solid medium.

  22. 0
    State says:

    I thought this fact was pretty much well known, that to claw money back that is lost on used games downloadable content is used.

    So games will be sold incomplete and the consumer is expected to pay more money just to have the complete game. We’re going to end up getting less for our money and much of it will be down to the used games market.

  23. 0
    ZippyDSMlee says:

    Well the thing to not be missed here is that a good poration,more than 30% less than 70%, of the used game sales goes into new games. Since the "buy and dump to buy new, new is good old is bad,ect" thing in media is pretty revelent still. Now you do away with used sale and you will reduce people consumeing new and used items and my question is on that are they willing to lose and or deley sales to weed out potinail losses.

    Until lobbying is a hanging offense I choose anarchy! Stop supporting big media and furthering the criminalization of consumers!!

  24. 0
    SpaceGhost2K says:

    I’ve worked for Game Crazy a couple of times as a store manager. I’ve met Marc and he’s a hell of a guy. But his conclusions here are seriously flawed.


    Maybe it’s true that one publisher’s sales in the first 28 days were paid for with used sales dollars. But what isn’t being said is that this is at one retailer, and not a big one. Game Crazy has a tenth of the stores GameStop does, and their stores sell less per store. Game Crazy does maybe 1/20th of the business GameStop does. In fact, if Gamestop had some stores that have sales as low as the bottom GC stores, they would close them outright.


    What also isn’t being said is that it’s an assumption that used sales "made" those new sales happen. In actuality, those sales would not have been lost if the buyer couldn’t use trade dollars. They would have just found the money somewhere else or waited a week.


    When I hear a report from EA that this is the state of the union, I’ll believe it, but when I hear a "pro used game" report from a used game retailer, I can’t believe it’s anything other than a spin to justify their position in the industry.


    If publishers are benifitting from used game sales in any way, it is that used game sales help pay for payroll in stores where there are more educated and interested salespeople. Used game clerks are smarter than big box clerks, and publishers benefit from their knowledge and passion. Having "Beulah from the garden department filling in for someone in Electronics who is at lunch" is not something that is going to happen in a used game store.

  25. 0
    ZippyDSMlee says:

    Because artists and their Shepard’s/slave drivers forget  art is something to be consumed more than to be purchased. Its not that they are mutually exclusive thigns but more equals even more so in a society that says if you do not consume you are nothing.

    Until lobbying is a hanging offense I choose anarchy! Stop supporting big media and furthering the criminalization of consumers!!

  26. 0
    SpiralGray says:

    I just don’t understand why this is still being discussed ad nauseum. There are places that buy and sell used CDs, used movies, used books, and this is absolutely no different. The publishers need to get over it, it’s going to happen, tough noogies. Lower your prices and more people will buy new games.

  27. 0
    questionmark1987 says:

    As opposed to the mass amounts of americans who are (if even) only high school educated.

    Yes that group is so much MORE intelligent and informed about economics then people who have gone to school and actually done the work to learn how money works in an economic system.

    Logic fail.

  28. 0
    Neeneko says:

    The problem is that it is ‘indirrect’.  People have trouble with indirrect effects, and most of the people complaining about the used game market are, well, kinda simple.  Or at minimal they see things in very simple terms rather then looking at whole systems.

    It is actually a good example of just because someone is successful, or even becomes a CEO, does not mean they know anything about economics.  Unfortunatly a lot of people assume that if someone makes a lot of money then they know how money actually works…..

  29. 0
    questionmark1987 says:

    All I have to say is that if game developers can’t say every used sale is a lost new sale, game trade-in retailors can’t say that every new sale paid for in some part with used dollars would be a lost sale without that trade in.

    Faulty logic comes from both sides.

  30. 0
    ded2me says:

    "So you got 10 percent of your sales that wouldn’t happen unless somebody was out there trading games with your customers. "

    Couldnt agree more.  But publishers don’t want 10 percent!  They want 101%.  They will never be happy with anything, jeez.

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