HMV CEO Defends Used Game Sales

October 5, 2010 -

The CEO of UK retailer HMV understands why publishers are against used game sales, but he doesn’t seem to agree with them.

Simon Fox (pictured), speaking to GamesIndustry.biz, Fox indicated that publishers he talks to are “mixed” on the subject of used games, saying, “I've met both types - publishers that genuinely think what we're doing is wrong, or if it's not wrong that they should be benefiting from what we're doing. And others feel much more relaxed.”

Perhaps unsurprisingly, Fox demonstrated a pro-consumer sentiment, saying that he believes used game sales contribute to the sales of new titles.

As he explained:

We genuinely think that actually what it does is enable people to buy new product - and it allows them to trade-in previously-played product to get a credit and put that back into the games market. The way we've certainly geared our offer is that it's far more advantageous for the customer not to take cash, but to take a credit that's then used in buying another game.

Fox added, “I think it's slightly odd that publishers should somehow think that they have a claim to profit that a customer might make on a second sale.”


Comments

Re: HMV CEO Defends Used Game Sales

You know, on the "it drives up prices" argument: I'm certainly no fan of $60 games either, but Ars put an article up yesterday pointing out that, adjusted for inflation, games cost a lot more 15 years ago.

Granted, cartridges cost more to produce than discs, and those Genesis games used to come with nice plastic cases and full-color manuals.  But still and all, today's game prices aren't really a recent development.

Re: HMV CEO Defends Used Game Sales

""nobody rational assumes every single used copy is a lost sale."

This is the video game industry. The same industry where mythical figures are created under the assumption that every pirated copy of a game is a lost sale.

Of course this rationale is in play.

Re: HMV CEO Defends Used Game Sales

Second-hand games are hardly pro-consumer, they end up pushing up the cost of games.

HMV used to have a decent selection of games, they have now sacrificed that to sell second-hand games. My choice has been greatly reduced, plus it increases the chance of me being sold a second-hand game as new.

The used-games industry has been very damaging to the games culture. Games are now just disposable pieces of entertainment, they are the condoms of popular culture (once it's been used throw it away). Does it really make developers want to make games that last long or have a replayability about them when people believe that they should always sell their games?

Re: HMV CEO Defends Used Game Sales

Yes damaging indeed.

The used market is the primary driving factor in many studios efforts to bring their older library of games to the current Market.

Nintendo's Virtual Console, PS1 Classics, GoG.com etc are all there because people have been going back to used games sales in order to get those games. If there was no used market, there is no guarantee that those services would exist.

As for the disposable entertainment complex, that is not 100% the fault of the used market. It has many factors. There is the hype machine of publishers who want you to buy their newest shiniest game at the expense of all other games, there is the practice of not allowing returns on open games regardless of reason, there is the mentality of publishers to make games as quickly as possible with little regard to quality. I could go on and on about the practices of the games industry that drive the desire of game consumers to ditch their games so quickly.

I try to hold ono my games and have infact not sold or traded a game in over 5 years, but there are times when I can't justify holding onto a crap game. Since the only way I can recoup some of my losses is by selling it or trading it in, I will do so.

E. Zachary Knight
Oklahoma City Chapter of the ECA
http://www.theeca.com/chapters_oklahoma

Re: HMV CEO Defends Used Game Sales

The way some talk they would like it so once a game is no longer produced or supported it should vanish off the face of the earth so no one can ever enjoy it again.

Re: HMV CEO Defends Used Game Sales

Actually this is one of the biggest annoyances that I have with the industry, games are hardly available for long, it's almost as though there is an one batch produced for release and then that's it. Many games are quite rare and the only way to acquire them is through the used market and if they are sleeper hits it's even more likely that people will hold onto them, and then when they are sold second-hand they're very expensive.

Now is the production of one batch in response to the used games market? Are companies aware that the only time they're going to sell the game is at release before it goes onto the second-hand market? Once it's gone onto the used market there's no point in producing the game because those copies aren't going to sell?

My concern is for the consumer. Shops like GAME now have very little selection of new titles instead they just focus on selling used games, they're actually reducing competition, consequently keeping prices high.

Re: HMV CEO Defends Used Game Sales

"The used-games industry has been very damaging to the games culture."

My NES collection says otherwise.

Re: HMV CEO Defends Used Game Sales

Fox added, “I think it's slightly odd that publishers should somehow think that they have a claim to profit that a customer might make on a second sale.”

Oh please.  If those self same people could tax your air they would.  Squeeze ever dollar from the end user that dares use thier software (sorry mostly EA but hey).  The idea I am reaching for is "blood from a stone".    Their interest is money, bottom line.    Odd yes, but hense is the bitter taste of reality. 

Re: HMV CEO Defends Used Game Sales

There's nothing illegal about used games sales. However it does hurt the developers while it's a cash cow for the retailers. It's a business model that makes retailers more money.

There's also nothing wrong or illegal with developers creating content that cannot be resold through used game sales. It's a business model that makes developers more money.

So Retailers, quit whining about being despised by developers. You brought that on yourselves.

Developers, quit calling used game customers "cheaters" and "pirates". Treat them like customers and offer them things that the used game market can't.

Re: HMV CEO Defends Used Game Sales

"it does hurt the developers"

Prove it.

You, and the publishers, are operating under the assumption that a used game sale is the same as the loss of a new game sale.  That is not inherently true.  If somebody buys a used game, that's because it costs less than a new one; there is absolutely no guarantee that the customer would buy the game at full price if it weren't available used.

Furthermore, some customers may be more likely to buy new games knowing they can resell them later and make some of that money back.

The relationship between the new and used game market is symbiotic, not parasitic.

"There's also nothing wrong or illegal with developers creating content that cannot be resold through used game sales."

There's nothing illegal about it.  "Wrong" is a matter of opinion.

"It's a business model that makes developers more money."

It's a business model that makes PUBLISHERS more money.  There's a difference.

"So Retailers, quit whining about being despised by developers. You brought that on yourselves."

I can only think of one retailer that brought that on itself.  The rest of the retailers shouldn't suffer a stigma over the actions of one.

"Developers, quit calling used game customers "cheaters" and "pirates". Treat them like customers and offer them things that the used game market can't."

Fair enough, as far as it goes, but what is it that the new games market can offer that used games CAN'T?  Free access to online play or DLC isn't something that the used games market can't offer, it's something that the publishers choose not to offer to customers who bought their games used.  Again, there's a difference.

Re: HMV CEO Defends Used Game Sales

double post

Re: HMV CEO Defends Used Game Sales

>You, and the publishers, are operating under the assumption that a used game sale is the same as the loss of a new game sale. [...] If somebody buys a used game, that's because it costs less than a new one; there is absolutely no guarantee that the customer would buy the game at full price if it weren't available used.

You, and HMV's Mr. Fox, are operating under the assumption that the games industry are going "There is the used market, we demand it gives us all its money" instead of going "There is a competing market, how can we get people to come to us instead of them", much the same way as they might say "How can we get people to buy games instead of films?", or Nescafe might say "How can we get people to buy Nescafe instead of the supermarket's own brand?"

Your second point really assumes that new games are always available.

You're taking a very short-sighted view and looking at the wrong group of people. Any retailer selling any product is going to consider what the size of their market is before ordering anything from a wholesaler.

So, if some branch of HMV knows it's going to sell (let's say) twenty copies of Game X lifetime, it can either a/ buy twenty copies at wholesale, either in one go or over time, or b/ knowing that about half the copies they sell will probably be traded back in, only buy ten, wait for five to come back, sell those for a second time (totalling 15 sales), get three of those back to sell again (total 18), and then see one or two of those back (total 19 or 20)

The result there is that the used market has cannibalised ten sales of that particular game at wholesale. A good few consumer sales will have been made as used copies of the games will be the only option on offer, as a result of the supply of new titles being artificially constrained by the retailer- a lot of people will buy new if given the option.

>Furthermore, some customers may be more likely to buy new games knowing they can resell them later and make some of that money back.

Again, this is very short-sighted. Firstly, we have the obvious point I made above about new copies being unavailable. The next thing is that the used market contributes to prices being so high.

Firstly, any price in any marketplace is only sustainable as long as people are prepared to pay it. It might be that people work overtime to make the money, they might borrow it or steal it, or they might trade games in to make up the difference- the end result is that the games industry have gone "Games are £40" and you've said "Okay, I will pay that much". If used went away, £40 stopes being sustainable, and prices come down.

But let's look at the broader picture as well. Let's say HMV buys games from wholesale at £30 a pop, and sells those to consumers new at £40. If they can sell a used copy for £35, where is the incentive for them to lower the new price? There's room for them to do it and still profit, after all.

The new price comes down, then the used price has to come with it, so it's in retailers' best interest to keep new prices arbitrarily high, which puts them out of the reach of certain customers, ultimately reducing sales of new games.

Incidentally, that same practice, if it was played out over two stores rather than one, would be considered anti consumer- it'd be called "price fixing", and be massively illegal.

A third issue, generally ignored altogether in this discussion is how the used market also pushes entire games out of retail- if you walk into any games shop, you'll often find the same multiformat game on the shelves six times- once on Wii new, and again on Wii used. A third time on PS3 new, and fourth time on PS3 used. New on 360 for a fifth time, and the sixth on 360 used.

Obviously while this only affects bricks-and-mortar retailers, the shelf space the used games take up have pushed an entire multiformat title (or three single format titles) out of the retail market altogether, forcing them into online-only, and while that's coming on in leaps and bounds, it's hardly comparable to retail sales overall. I don't think that's doing any developers any favours.

/b

Re: HMV CEO Defends Used Game Sales

"You, and HMV's Mr. Fox, are operating under the assumption that the games industry are going "There is the used market, we demand it gives us all its money" instead of going "There is a competing market, how can we get people to come to us instead of them", much the same way as they might say "How can we get people to buy games instead of films?", or Nescafe might say "How can we get people to buy Nescafe instead of the supermarket's own brand?""

But the way they're offering a "better" product is by deliberately crippling their product if it's sold secondhand.  I don't like to argue by analogy, but if you want to go with the Nescafe example, this is the equivalent of making coffee makers that will only brew 2/3 of a pot of coffee if you use the store-brand beans.

...

...yeah, that's why I don't like to argue by analogy.

"Your second point really assumes that new games are always available."

Well sure, because in the case where new games AREN'T available, the used-game market is absolutely, 100%, unequivocally NOT TRANSLATING TO LOST SALES.  That's not a point that even needs to be argued; it's self-evident.  I'm only speaking of cases in which there's (alleged) competition between the new- and used-games market because that's what we're TALKING about.

"The result there is that the used market has cannibalised ten sales of that particular game at wholesale. A good few consumer sales will have been made as used copies of the games will be the only option on offer, as a result of the supply of new titles being artificially constrained by the retailer- a lot of people will buy new if given the option."

And where is this place where you live where there is only one retailer and no access to Amazon?

"The next thing is that the used market contributes to prices being so high."

That's the industry's argument.  Where's the proof?  They say used game sales and piracy are to blame; I say they'll use any excuse they can to jack their prices up to the maximum amount the market will bear.

Give me examples that show the used game market is a significant contributor to increased prices.  Examples that aren't made-up.

"The new price comes down, then the used price has to come with it, so it's in retailers' best interest to keep new prices arbitrarily high, which puts them out of the reach of certain customers, ultimately reducing sales of new games."

True.  But you can only jack the price up so high before people look elsewhere -- I buy most of my new games at Amazon because they're cheaper there than GameStop.

Re: HMV CEO Defends Used Game Sales

Of course it's parasitic.

Your loss of sale argument is just a straw man, nobody rational assumes every single used copy is a lost sale. Nobody rational even thinks there's anything wrong with used games sale in general. Pretty much everyone is happy if Timmy sells his game on craigslist for or something for a decent price because hey there's a good chance Timmy is going to use that money towards more games anyways.

The problem is when retailers make an industry of it. They contribute little of value and syphon huge amounts of profit away from developers and gamers. 

I'm also not sure why you're trying to to differentiate between publishers and developers in this case except of course that it's easier to paint publishers as evil faceless cooperations. The publishers fund the developers. Regardless of how you may feel about that relationship it's a necessary one otherwise all studios would just be independent. My opinion is very similar to most everyone I've talked to who actually make games. 

The industry is just going to move more and more towards online content and digital distribution as long as this keeps up. It's kind of a shame since a lot of the kinds of games I like to play (ie. games based on strong single player campaigns) don't lend themselves well to the business models that are still profitable.

 

Re: HMV CEO Defends Used Game Sales

"Your loss of sale argument is just a straw man, nobody rational assumes every single used copy is a lost sale."

Actually, a strawman is when you take somebody's argument and pretend he's saying something other that what he's actually saying in order to knock down something that's obviously false.

Permit me to demonstrate.

Person 1 says, "You, and the publishers, are operating under the assumption that a used game sale is the same as the loss of a new game sale."  Clearly speaking generally, in a rule-of-thumb sense.

Person 2 claims that person 1's argument was that publishers believe "every single used copy is a lost sale", clearly exaggerating and distorting person 1's general statement.

See?  Strawman.

"Nobody rational even thinks there's anything wrong with used games sale in general."

Agreed.  But lots of people are irrational.

"The problem is when retailers make an industry of it. They contribute little of value and syphon huge amounts of profit away from developers and gamers."

Again, prove it.  Show me some numbers.  Show me an indication -- not just conjecture, but actual evidence -- that it siphons huge amounts of profits away from publishers -- let alone developers or gamers.

"I'm also not sure why you're trying to to differentiate between publishers and developers in this case except of course that it's easier to paint publishers as evil faceless cooperations."

And I'm not sure why you're trying to suggest that publishers and developers are the same thing when they're clearly distinct entities -- except, of course, that it's easier to paint developers as people whose hard work is being exploited.

"The publishers fund the developers. Regardless of how you may feel about that relationship it's a necessary one otherwise all studios would just be independent."

Yes, but unless a developer has a royalty agreement, he's not making more or less money depending on the number of sales.  Yes, if a game tanks, that hurts the studio that developed it, and there may be layoffs or even, worst-case, a total shutdown -- but can you think of a single example of a game where that's happened solely as a result of the secondhand market?  A single one?

"My opinion is very similar to most everyone I've talked to who actually make games."

Oh, well okay, if your opinion is the same as some guys who you won't name who supposedly make games, that makes it more factually accurate.

Re: HMV CEO Defends Used Game Sales

I don't know, I think they contribute something of significant value.  A whole logistics system to streamline the process of buying/selling used games in a simple and convient manner... in other words, what retail does in general.

To say they add nothing is essentially saying retail in general adds nothing and we should all go buy goods strait from the manufacturer.

Re: HMV CEO Defends Used Game Sales

The general economic model, as I understand it, has used sales resulting in a neutral to positive gain for publishers.

Most of this meme that second hand sales 'hurts the developer' are coming from over promoted executives who think they understand economics when in reality what they really have are good organizational and people skills.. which are critical for runing a buisness.... but not well suited to understanding secondary effects.

It is also an argument that comes up with every new media, which each form trying to stop those 'leachers' who are in fact helping line the pockets of the very people trying to stop them.

 
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Matthew Wilsonthe lose of nn would not be good for us, but it will not be good for verizion/comcast/att in the long run ether.04/24/2014 - 2:16pm
Matthew Wilsonsadly yes. it would take another sopa day to achieve it.04/24/2014 - 2:13pm
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E. Zachary KnightMatthew, you are saying a lot of things but I am still unclear on your point. Are you saying that the loss of Net Neutrality will be good in the long run?04/24/2014 - 2:06pm
Matthew WilsonOfcourse it does I never said it did not.though over time the death of NN will make backbone providers like Google, level3 and others stronger becouse most isps including the big ones can not provid internet without them. they can peer with smaller isps04/24/2014 - 1:54pm
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Andrew EisenGee, I guess putting a former cable industry lobbyist as the Chairman of the FCC wasn't that great of an idea. http://www.nytimes.com/2014/04/24/technology/fcc-new-net-neutrality-rules.html?_r=204/23/2014 - 7:26pm
Andrew EisenIanC - I assume what he's getting at is the fact that once PS3/360 development ceases, there will be no more "For Everything But Wii U" games.04/23/2014 - 5:49pm
Andrew EisenMatthew - Yes, obviously developers will eventually move on from the PS3 and 360 but the phrase will continue to mean exactly what it means.04/23/2014 - 5:45pm
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Matthew Wilson@Andrew Eisen the phrase everything but wiiu will be meaningless afer this year becouse devs will drop 360/ps3 support.04/23/2014 - 4:43pm
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