#54: Why Game Companies Should Stay Out of Used Games

The other day, I had a discussion with a friend of mine over the impact of used game sales on the profits of game developers. While we argued for quite a long time on the subject, a lack of data led to a stalemate. Having said that, it made me start thinking about used games. I have always been a massive supporter of the used market, but had a hard time justifying exact why developers and publishers should stay out it, since they would logically want people to purchase new releases instead. Despite how massively unpopular measures like Online Pass systems are to the gaming populace, they are not annoying enough for consumers to outright boycott companies that use them. This means that on the consumer front, there is also no reason to not include them in the vain hopes to combating used game sales. Upon reflection, I realized that indeed there are very good reasons to not try to stifle the used games market and realize that it is not a developer's enemy that needs to be stamped out, which just so happens to be the topic for this week.

The first reason publishers would be wise to not fight used games is that, depending on how far they go, it could be illegal. This is because of a law that is on the books in the United States (and I assume most developed countries, though perhaps in different forms) called the First Sale Doctrine. For those not familiar with copyright law, the First Sale Doctrine says that when a consumer purchases copyrighted material from its copyright owner in a lawful manner, the rights to that one specific copy of the material transfers to them, including rights to barter with or otherwise dispose of it. The copyright owner is no longer allowed to have any influence over that one particular copy. The one exception to this is that the new owner, who bought the copyrighted work, is NOT allowed to copy or duplicate it; Aside from that, the consumer now owns that copy in its entirety and the original copyright owner no longer has authority over it. Because of this, there is a possible, if admittedly weak, case to be made that using Online Passes or other methods of curtailing used games may be illegal. The same may even be said of On-Disc DLC, but that exists outside the purview of this article. Though this may seem like a good reason, there are a few loose ends to it. First of all, to the best of my knowledge (and I am no legal scholar by any means), because of a variety of different reasons including court costs, time, effort, and the massive amount of resources that publishers have at their disposals, this has and likely will never be challenged in the court of law. Honestly, most sane people (myself included) would rather just spend the $10 on an online pass or whatever than go through all of that. Also, the First Sale Doctrine strictly applies to physical goods. When dealing in digital distribution, what consumers purchase is not an actual product but rather a license to use the data and copy it onto their system. This may be changed some time down the road, but until then it is pretty cut and dry. There is also no protection for server access, so if the Online Pass is strictly for some online component (and not something like Arkham City's Catwoman missions), there is also no legal leg to stand on.

Another very good justification for allowing used game sales to continue as they have for a long time is that the money that consumers get by trading in used games can go towards new games. According to Gamestop's statements, (which are admittedly biased, so take them with a grain of salt) 70% of all the money that given out through used game trade-ins immediately goes in that direction, in support of publishers and developers. In a dwindling economic environment, this is even more important now than it ever was before. People are on tight budgets, some more than others. For these people, trading in games is often the only way they can get the $60 necessary to purchase new games on release day. It is either that or do not buy that game at all, which neither the publisher nor the potential customer desire. This war on used games has a potential to severely reduce the potential market and profit margins for game publishers. Without the money that is generated through trade-ins, it becomes more difficult for lower income wage earners to afford gaming. Games are a luxury product after all, they are no where near necessary. When it comes time to cut the budget and see where one can save money, games are often the first things to take the fall, being as extraneous and expensive as they are. Keeping this in mind, it may actually be more important to preserve the used games market in order to allow people to continue to buy video games and stimulate the market.

The last reason I will go over that publishers have to ignore used games is that later on, they can help generate a market for future games. What I mean by that is simple. If there is one thing that publishers can be counted on trying to do, it is make sequels to IPs in their possession. (Unless it is Mirror's Edge; Yes, I am talking to you, EA!) Once sequel time comes, then companies are going to obviously want to attract as large an audience as they possibly can. One of the easiest ways to do this is though the used game market. Instead of dropping $60 on a brand new game that they may not like, consumers would be more willing to spend a smaller amount, maybe $20-30, on a used copy of the previous game in the franchise. Then, they could learn whether or not they truly like the concepts and ideas behind the series before jumping in blind with the new installment. This is quite a common practice that people have come to adopt. I know quite a few people who have gone on to buy many other games based on what they have seen in a previous game. For me personally, I would have never bought the latest Hitman game if I had not taken the time to play through Blood Money the summer before. My purchase of Fallout: New Vegas was also entirely based upon my enjoyment of its previous installment, Fallout 3. This form of brand recognition is something that publishers count on to sell units. It does not make sense to stifle that by trying to inhibit used game sales.

The bottom line here is that used game sales are just a boogeyman. I have yet to see any conclusive evidence that used games harm the sales of new games. Considering that its the only fair way to operate, I must assume that used games are innocent until proven guilty. It is far more likely in my opinion that video game are not as profitable due to a combination of over-inflated budgets and an unwillingness to lower prices to below $60 to compete in the marketplace. Games like The Walking Dead prove that high budgets are not necessary to make remarkable games. Steam sales prove that lower prices, even if only temporarily, will boost sales and improve overall revenue. Instead of trying to needless combat this used games “menace,” the industry should focus on improving itself and changing away from an obviously unsound business model.

#17: The True Problem with Modern Gaming

The games of today have come a long way from the games of old. Graphical fidelity has greatly advanced and allows for more rich and detailed environments. The streamlining of many often-used systems in games has made gaming more accessible to the masses. Different genres and new indie titles ensure that for every individual, there is a game to cater to his/her specific tastes. Gaming has played host to a myriad of innovations. However, despite this, there are many ways in which gaming has been degressing. This week, I will be looking at the potential causes of these worsening trends in gaming.

One the main reasons that major gaming corporations cite to explain downward trends in gaming is used games. According to game developers, used games are eating too much into profits, meaning they have to produce other ways to make money (through micro-transactions, DLC, etc.). There is some truth to used games affecting profits of game developers. Gamestop is particularly well-known for this. Gamestop's used game programs are responsible for a very decent chunk of their profits. They actively try to get customers to buy used and trade in their games through sales, money-back guarantees, and special one-time offers.

While this does result in an overall loss for game developers, there is one critical detail being missed: Used games are nothing new to the game industry. For years, people have been buying and selling used games and companies have not had a problem with them in the past. Furthermore, I could argue that used games are not as commonplace as they were before. Because of recent developments in gaming, used game sales for the PC are effectively dead. There are game trading systems on services like Steam, but used games have long been absent, at least from PC gaming, for awhile now. With the advent of online pass systems, console gaming has also begun to deter used game sales. Also, the economy has been taking its toll on people's budgets, gamers being no exception. For many people, trading in and barter games is the only way to buy new games and support the developers they care about. This means that there is a possibility that used games are necessary for the industry to remain profitable in this economy. With all of this, I find it hard to believe that used games the cause of the problems in modern gaming.

So then, if used games are not the trouble, then what could be. Many people have made the argument that the problems are caused by the new level of inter-connectivity present in modern gaming. I can see where this argument is coming from. With the exception of the PC and the original X-Box, gaming never really had any sort of online service until now, and certainly not to this degree. Developers never really had the capacity to change and impact the game post-release. For the most part, the product that was released was the same product ten years down the line. Any glitches that were there on day one would still be there. Any overpowered/weak equipment in games would stay that way. This gave developers tons of incentive to test and test and test everything that got released. If they did not, then their reputation would be ruined and people would no longer buy their games. Nowadays, day 1 patches, downloadable content, and updates for games are the norm. It is entirely possible, and this does happen, for games to be horribly, awfully, disgustingly broken at release, almost to the point of unplayability, only to be patched within the first few weeks. (Isn't that right, Fallout: New Vegas?) Furthermore, it is true that content can be withheld from the game and released later as DLC. Capcom and the Street Fight X Tekken debacle have proven this to be true.

As much as I dislike this (and I really dislike this), I do not think this is the cause of all the problems. While inter-connectivity has never been prevalent in gaming, it has certainly always been present. On the PC and the original X-Box, patches and expansion packs were used. Back then, developers had this functionality. However, the problems we are facing now were not around back then. Developers never (or at least not enough to be noticed) abused the use of patches and DLC to adjust games and hide away features in the name of profit. They might have hid away buggy parts of games or worked around them, but they never fixed it and released it later. No, something had to change to start this system of overuse and abuse.

What I have come to believe is that the animosity towards used games and the abuse of inter-connectivity are not problems of the industry. Rather, they are symptoms of bigger issues. The question remains: What are the problems? I believe that these issues are caused by two connected problems: Overinflated budgets in gaming and overall bad business sense in the game industry. These two problems are born from one central problem: The gaming industry is trying really hard to emulate the movie industry, when that is a grave mistake. Games have become more graphics-intensive these last few years. The more advanced graphics become, the more people need to be hired in order to make these graphics and (more importantly) the more programs and graphics engines cost to lease. This results in budgets for modern games skyrocketing. They want cinema-quality productions no matter the cost. The problem is that while the companies do this in order to stay on the cutting edge and keep their consumer base interested, this is not necessary. The truth is that graphics are only a small, minor consideration to gamers when deciding what games to buy. We gamers only take graphics into consideration when they begin to affect whether or not they can play the game (as in, when the game is incredibly ugly and hard to look at or when they lead to high load times). I have never once heard somebody refuse to buy a game specifically because the graphics were not as good as every other game. Nonetheless, this over-inflation of the budget causes the money-grubbing the modern gaming is becoming. It pushes deadlines up and “inspires” many of the DLC schemes gamers hate.

But this is not the only problem. Gaming has become more like the movie industry when that is not conducive to business. Like movies, game sales are usually tracked in the first week, and that is what many people use to determine the overall success of the game. Also, games tend to hype up their initial release and then let the hype fizzle out after a few weeks. This is detrimental to the industry. It works for movies for several reasons. One, theater ticket sales are only a small portion of initial profits. Odds are that released movies have tie-in products as well like toys, novelizations, even the inevitable movie tie-in game (Ugh). Furthermore, after movies are released, they have alternative methods to make money. Film producers can continue to profit off of DVD and Blu-Ray sales as well as the syndication of their works on TV channels like HBO. As a result, even a movie that was a complete flop at the box office can profit in the long run.

Similar to movies, games are trying to get tons of money through initial sales. Unlike films, games generally do not have the added safety nets that films do. As a result, with the current business model, game companies have to recoup all of their losses within the first week. Combined with the high graphics budgets, this is suicide. It means that any AAA game that is not of a well known brand is almost guaranteed to fail. A normal product normally would be able to fix the situation and still make some sort of profit by changing the price or something, but games have become increasingly inflexible as of late. Most modern games are released at a flat rate of $60. Like any other product, these prices are subject to change with the market. Unlike any other product, these prices can take months or, as it often the case, years to drop there prices. Instead of adjusting to supply and demand, prices for games are nearly unchanging. Used games are not subject to this and will often fluctuate with the demands of the market. This is why Gamestop is able to profit from used games. In fact, I have heard tales of times where Gamestop intentionally opens up unopened games to pawn them off as “used” at a loss in order to clear up shelf space. This mimicry of the movie industry combined with the inability to use basic business sense when selling the finished product (not a service, to the person who actually said that) is damaging the industry.

So how do we fix these two problems. There are two ways we can do this. First, we can vote with our wallets. We can support companies with good business models and deny companies who use poor business models or unethical practices. This is not done nearly enough in modern gaming. Gamers have demonstrated an inability to live without. We do not realize the power we hold over these corporations. So, this strategy seems unlikely. The second option is to do what gamers are best at: Bitch and Moan. Bitching and moaning are not bad. It is okay to criticize game companies. They need feedback, now more than ever. As one of my favorite game commentators, Shamus Young, once said, “If games aren't improving, than you haven't been complaining hard enough.” Input from the consumers is vital to improving the state of the industry. The last alternative is to do nothing. This is the worst possible option. At the rate games are going, if we do not do anything, than game companies will eventually begin to collapse. Budgets will grow unsustainable, given time. Nobody wants this. I certainly do not want this. If I complain about the state of the industry, than it is a because I love the industry. I hate these practices because I love gaming. I write this blog post because I love gaming. I love what these companies are able to do and I want them to continue to thrive. Hell, I want to be able to take-part in the creation of games. Everyday I hear about development studios closing shop, I feel terrible for all of the talent set loose in the process. We need to change this industry. We need to make it sustainable, else we will be seeing a repeat of the Atari E.T. Incident.

#12: Game Publishers vs. Used Games

This topic is a serious issue among the gaming community. Simply inserting the words “used games” into a forum post is bound to transform whatever, otherwise benign, discussion into a huge flame war. Nonetheless, it is an issue that needs to be discussed. Game publishers have been trying for a long while now to defeat used game sales. There are valid reasons for this, and there are valid reasons to oppose it. In this article, I will attempt of give you an overview of used games, the method used to combat them and the pros and cons behind this tactic. Lastly, I will share with you my own idea for fighting used games.

The issue of used game sales is one that can be approached from a couple of different angles. Used game sales are a slightly different animal than used books or movies. For books, the cost of publishing a book is relatively low compared to other mediums. Therefore, it takes and much lower sales margin in order to make a profit from books. Movies, while they have high production cost, are also different because they go through several phases of profit making. First, they go into theaters and get profits from both national and international releases. They are then sold later on as DVDs and lastly they are televised on various networks after that. This means that both movies and books can more than afford the hit they take with regards to profits lost through used game sales. On the other hand, video games do not have these advantages. Modern games have incredibly high production values. It cost several millions of dollars to make a AAA game. Furthermore, they have only one method of profiting: sales. Modern games need to sell millions of copies just to recoup their losses. You (like me) could argue that this is endemic to other problems in gaming like the incessant need to keep advancing graphically when there is no need to, but it is impossible to say that the need sell tons of copies does not exist. To this end, publishers have come up with many ways to try to stave off used sales intentionally propagated by gaming outlets, most notably Gamestop.

Perhaps the most prevalent means of combating used games sales is through online pass systems. Online passes are special codes included with new copies of video games. These codes are used to unlock various features of the game. This means that people who buy the game used will be locked out of the content unless they pony up ten dollars in order to purchase the missing content themselves. This means that the publisher can make up some of the income lost through used game sales. That would normally be considered a positive. However, there are many downsides to this system. For one, this has the distinct tendency to piss off the consumer base that publishers and developer depend on to make their money. Not many people admit this, but public relations can be a significant factor in how well companies do. Consumers who feel like they have been screwed over are less likely to continue to buy products from the company they feel screwed by. There is another issue with online passes that should be obvious, but something that not many companies seem to forget: Not everybody in the world has access to a stable internet connection. This is typically a non-issue because the content blocked by an online pass is usually an online feature, like multiplayer. However, there are documented cases of games that had online pass-blocked content that was in the single player portion of the game. The most notable case of this was the Catwoman content in Batman: Arkham City. There are people who bought that game new, who rightfully own that content. However, they are unable to access this content because it is blocked by a system that requires an internet connection to function properly. This is outrageous. This is a publisher screwing over a completely loyal customer and then openly insulting them for it. While this is certainly an egregious way to combat used game sales, it is not the only way they do so.

The overall flaw with online passes is that it feels like the consumers are getting screwed out of their money. With that in mind, I have my own thought behind the best way to combat used game sales. I feel that the best way to stop used game sales is to reward consumers for buying new games instead of punishing consumers for getting used one. To do this, I would recommend giving consumers of new copies of games a discount on future DLC. This method engenders good will amongst the consumer base. People who buy used games will not feel screwed by the publishers. This might even inspire them to buy new when they buy future titles from the publisher in order to support them. People who buy new will also feel rewarded because even if they never actually use that discount, it shows that the developers care about their fans and support them. Lastly, Customers who lack an internet connection still have access to all the features they normally have. There is much to be said about positive PR. Publishers do better when they have the support of the fans who keep them in business. It is a flawed strategy, admittedly, but it is still a better alternate to online passes.

In the end, any method of fighting used games is nothing more than a bandage used to mask the overall problem of games being too expensive to make. The best possible decision is to stop trying to go for graphical fidelity, stick with decent, not not horrible, graphics, and focus more on making quality games. This graphics war is a huge issue when it inflates the cost of making games and of the games themselves. I do not know a single gamer who bought a game just because the graphics were good. The problem with online passes and used games is a symptom of an even greater problem. I hope the developers and publishers learn this soon, else the industry may be in for some tough times pretty soon.