Studio Head Claims Used Game Sales Will Doom The Entire Industry

Secondhand games have been the bread and butter of retail chain GameStop for years, and the target of publishers' ire for just as long. Many consumers prefer not to pay the new retail price (a hefty $US60, for most titles) for every game they play, and the system of selling and purchasing pre-owned discs works well for a significant number of those players.

Publishers and distributors, however, make no revenue when a game changes hands for the second or third time, and are often hostile to the used market. In an interview with GamesIndustry International, Denis Dyack, head of development studio Silicon Knights (Too Human, Blood Omen: Legacy of Kain), firmly planted the flag against used sales.

Dyack feels that the pre-owned game market has finally reached the point where it's grown to full maturity, and that this poses a problem for developers like Silicon Knights. "I would argue that used games actually increase the cost of games," he said. He then delved into the idea of a "long tail" of sales, explaining that while a game used to continue to generate revenue even as it aged, that day has come and gone:

Because there are no used games, you could actually sell a game for a long time, and get recurring revenue for quite a while. Recurring revenue is very key. Now there is no tail. Literally, you will get most of your sales within three months of launch, which has created this really unhealthy extreme where you have to sell it really fast and then you have to do anything else to get money.

No one genuinely doubts that the process in which most games are designed and sold is a business environment, and a costly one at that. It takes cash to make even a small game, and recouping expenses and generating profit through sales is only natural for a business. But does the handoff of discs from the original player to another player really harm developers that badly?

Dyack holds the position that yes, used sales are interfering with other sales and destroying the entire development industry:

I would argue, and I've said this before, that used games are cannibalising the industry. If developers and publishers don't see revenue from that, it's not a matter of hey 'we're trying to increase the price of games to consumers, and we want more,' we're just trying to survive as an industry. If used games continue the way that they are, it's going to cannibalise, there's not going to be an industry. People won't make those kinds of games. So I think that's inflated the price of games, and I think that prices would have come down if there was a longer tail, but there isn't.

For those of us who consider the PC our gaming platform of preference, used games have been a non-issue for many, many years. But the long tail that Dyack is so worried about losing has continued to flourish, with major sales on many titles in the weeks, months, and years after launch, through digital download platforms like Steam and retailers like Amazon.

Meanwhile, rumours about the next generation of consoles consistently theorize that secondhand games are going to be harder and harder to play in the future. Dyack is far from the only studio head who would like to see the secondhand market disappear entirely. The proliferation of "online pass" models in recent months is only the newest way publishers have tried to discourage selling or buying used games, and it seems unlikely to be the last.

Pre-owned increases cost of games, cannibalizes industry, says Dyack [GamesIndustry]

(Top photo: Flickr user trevorturk)

Comments

    The supply chain is just fundamentally broken.

    Publishers, distributors, wholesalers and whatnot all want their share. This bumps the price up to the point that when it finally gets in the hands of retailers, their margins are often rather slim. So we see them try to take on new revenue streams like selling disc insurance or becoming pawn stores. This then decreases revenue for publishers/developers because they're not seeing a cent of second hand sales, so they bump up their prices to cover their increasing costs.

    The price gets bumped up along the supply chain, so when the retailer sees it they have to either raise the price or make less money. So they double-down on the second hand thing.

    There's probably some economic theory called Price Entropy or whatever that explains all this. Really, the best solution for the customer is to be able to cut out as many middle men as possible. Services like Steam, Origin and GOG are a step in the right direction but until they hold the majority of the market, I doubt we're going to see much of a difference.

      You're not wrong, but how does physical media fit into your 'best solution'? Even if in another 2 generation's time we completely lose all physical media for game purchases, there will still be a large number of consumers who want to buy something tangible.

        I guess having the option for consumers to purchase direct from the manufacturer is one option. If every publish had a digital store for their games and you could opt to pay a slight premium to have the physical disc sent out when you buy from them.

        That or just have retailers/publisher have their own distribution network so that there are as few steps from production to purchase as possible.

        Really, it's not my problem to solve.

          Exactly Trjn, it's not the customers problem to solve, but we want to do it anyway.

          With the constant rise of the internet exclusive deals etc need to go away, distribution rights etc suck more than ever, because we can see the problem.

          Publishers should have moved a long time ago to the model you talk about.

          Imagine if Activision had an online store, and you could buy games from them and always have access, and you could as you say, pay a slight premium for the physical disc to also be sent out.

          They could save so much money in the long run...sure they would need to keep their in-store advertising for the moment, but there would come a point when they would just advertise online and on tv, and ship from one to three centralised locations around the world.

          If they were publisher/distributor and retailer all in one then they could themselves take a greater profit and still sell the items for less to their customers...and provide better service and customer support.

    This is the guy who made X-Men Destiny and Too Human? Two games that were "THE HYPEST GAMES EVER" according to him, failed to sell well and went straight into being used games? Ok.

    Unfortunately retail is forced to sell pre-owned games as the publishers charge way too much for their product. Yes a rather simplistic view, but when it comes down too it, they don't make enough money on mint sales to justify their existence.

    Those pesky kids and there second hand games! I told you they would ruin us all!

    If distributors/ publishers could come up with a way for retailers to actually make a profit on mint games then they wouldn't have an issue ditching them. At the end of the day some people will pay a couple of extra bucks to have the "new" copy instead anyway. So cut the crap developers, make games that are worth playing and NOT trading in after a week in the first place. On a side note, I don't hear car manufacturers complaining about the used car market, they pump out minty fresh rides, make a profit and continue to do so year after year despite the second hand market.

    "...retail price (a hefty $US60, for most titles)..." [above]
    "...although it’d be nice if retail 3DS games were less than $US40 a pop."
    [in http://www.kotaku.com.au/2012/03/the-nintendo-3ds-is-now-one-year-old-and-it-doesnt-suck/]

    These make me want to COMPLETELY HULK OUT.
    (ノಠ益ಠ)ノ彡┻━┻

    The second hand games market has been around since the 8-bit Nintendo era (possibly longer) and the games industry is still around today. So you know what that means? These types of claims are pointless. If the second hand market was killing the industry then it would have died years ago. This is just another greedy business wanting more money

      Precisely, yet they want us to believe that we are doomed. DOOOOOMED.

      http://chrisbaker.typepad.com/.a/6a01156f1b6b31970c01348854d22f970c-320wi

        http://www.youtube.com/watch?v=0A5XOIMs6D0

          http://www.youtube.com/watch?v=USHHQRodF88

    I buy all my games new, but i buy most of them when they are under $30 and i import them from the UK. Importing new games are better then buying them in Australia because they are cheaper, come shrink wrapped so i know that the disc has not been touched since production. (Eg. The PS3 logo strip in the wrap or the Xbox COA unbroken.) Compared to Australian stores where they open the games and store them in drawers or filing cabinets. I even bought a "new" copy of FIFA 09 PC from an EB Games store a few years back and the disc was scratched to hell. I don't like preowned games because i don't know where they have come from or what condition the disc in in. But i see some people like the cheaper option for games, especially the ones without Online Passes (eg: call of duty).

    not to mention the fact that due to the high pricing of new games, it is often these trades that they hate so much paying them for their games that come out. i'm always trading to bring the cost down.

    I just read "DOOM" and got all excited

      +4 haha

    Can someone please enlighten me why publishers etc should be the only ones getting money from their released product? We dont see manufactures and distributors of cars, fridges, gym equipment etc etc bitching about not getting money from their second hand product getting re-sold.

      Some rubbish about not owning buy buying a license.. on going costs.. blah blah blah...

      Honestly its all a load of rubbish but hey "gamers" still swallow all this crap hook line and sinker for everyone of us here who knows how much these complaints are based on crap there will be another 2 or more rabid fanboi cursing preowned as a tool of the devil for supposedly taking away well deserved money from devs and pubs...

    I think there are 2 main points that need to be followed...

    Games first need to be something worth playing (something Too Human and X-Men failed to live up too)
    Games secondly should be made with realistic budgets to coincide with realistic sales expectations.

    The second hand market has always been around and not just in videos games, don't buy an old book, CD, DVD anything from an op shop, nothing goes back to the people that made it. It's not going to kill the industry.

      Too Human is still one of the best games I've ever played. If people gave it a couple of hours to get the hang of the controls, instead of instantly dismissing them, and realised that dying constantly was because they hadn't learnt how to defeat the enemies yet (Who change and get more complex as you level up which keeps them interesting), then the game would have ended up with a lot more love. I too thought the controls were a bit "WTF" at first but now I love them. Most people that I know who love it admit to not having much love for it at some stage early on. I also hated Oblivion for about 6 hours before finally loving it!

    Step 1. Sell the game at full price on release.
    Step 2. Once sales have died down, keep selling the game, but at a discounted price. Used games become less of an economic imperative for both game owners and retailers of used games if the new game is cheap.

    Problem solved.

    Trying to sell a 2 year old game for >$50 is just silly, and it happens all the time.

      Step 3. Used market adjusts to a lower price point to stay competitive.
      Step 4. all games are 99 cent digital downloads

      Extreme but not unfathomable

    Blah blah blah....
    The profit on new hardware and games is like 10% only supermarket have such low margins but they have massive turnover.Without pre-owned there would be no EBgames and the GAME chain would have gone belly-up years earlier.
    If you want to make money out of used game players make DLC thats actually worth playing.They should look at it as not losing a customer but gaining one.

    What's the nonsense about a long-tail. When have publishers ever kept games in circulation that long after release? I remember being unable to buy a copy of Metal Gear Solid well before the PS2 was released. I remember I had to buy a second hand copy of snake eater because I didn't buy it straight away and they never seemed to release a second round of the game.

    I could list a crap load of games from every generation that were made unavailable well inside the life-span of the console it was released on.

    Its funny, pre-owned games are only $5-10 cheaper than new, & in many cases an online pass must be purchased too. If anything pre-owned has pushed me into buying new 99% of the time!

    Dooooooooom I tell you. Dooooooooom

    Kate, fact of the matter is that down under, our retail purchases for the majority of new titles are the equivalent of US$95, and in some (but rare) instances US$115. When you compare this to an average households disposable income (after bills, food, but not including other expenditures like clothing) of less than $250 - $300 a month, the cost of games becomes quite hefty.

      Should've payed more attention in school huh? disposable income of $300 a month, really?

        Really? You don't (Really?) believe people other than you (really?) budget differently to you, assigning different proportions of their income to non-disposable things they value more than you? Really?
        For example, a larger house, more luxurious car, more aggressive saving and investment, larger family, medical expenses, education, self employment and retained profits....

        All of these things mean a person more sensible with money than you, earns more money than you, or both, would have less disposable income than you. The irony is that people who spend more time in school probably DO have less disposable income than you. Really.

        Chris, You're a condescending moron. As tunblor has already pointed out thoroughly not everyone likes to throw away more than $300 a month on useless crap that we don't actually really need, (e.g games, although i love them so much).

    Publishers have already solved this problem, why is he complaining? They dont make games anymore they make DLC platforms. If you want to the whole experience you have to pay extra. The only difference between buying the platform new or used is how much extra youll have to pay after the initial purchase.

    I wish these devs would shut the fuck up. Seriously. The astronomical profits that they are getting from sales greatly outweighs the loss from second hand sales. Once you start reporting quarterly losses then come back and bitch to me about it.

      What, have you been living under a rock or something? Have a look at THQ's quarterly losses over the last couple of years. These companies aren't closing down studios left, right and center for fun, you know?

    I'm sorry, I don't hear Holden or Toyota or Suberu or Nissan or any other car manufacturer complaining because they don't get any revenue from the used car market. Last time I checked some of these companies are in much worse situations than any game dev.

    Maybe they will just keep complaining until they get a government handout ensuring they stay in the country for the next decade.

    Bring on a full digital market so these stupid publishers will stop bloody whinging.

    Hey Dyack! I recently got Eternal Darkness used and am enjoying every bit of it.

    Had it not been for the used game market, I never would have gotten my hands on a copy.

    Where does that put your arguement now? It doesn't help either that you make that tank of a game, Too Human.

      His argument is because of used games they don't continue to produce games. They stop after 3 months, so there are less copy's out there. Wow not one copy on ebay for less than $20. If they could still sell it in stores I'd imagine they'd be more inclined to make a sequel.

    Maybe game makers should actually start producing quality products and give value for money instead of something that looks nice but only offers 3 days worth of play(if you're lucky) and then you never touch again. Its no wonder people trade them in they value is diminished.

    Game companies are becoming as whiney as the music and movie industries, they take customers for fools, serve up any old drivel with pretty visuals, no substance and then expect top dollar.

    Good games sell by the truck load and people hang onto them, crap games get returned to the used games shelves.

Join the discussion!

Trending Stories Right Now