Sale of the Century: The Pre-Owned Debate

The sale of pre-owned games is a major talking point in the games industry; with publishers complaining that the sale of used titles is adversely affecting both their profit margins and their ability to continue producing top quality AAA products. But this is only one side of a multi-faceted story. In this feature, we attempt to peel back the layers of the pre-owned games debate by speaking to everyone affected, from the publishers to the retailers themselves.

The pre-owned market is a bigger threat to the games industry than piracy, according to Blitz Games co-founder Andrew Oliver, contributing hyperbole to a debate that has spiralled out of control in recent months, as games publishers struggling with increasing production costs continue to lash out at a niche retail sector scrambling for profits.

It’s a familiar tale. Each and every time you stroll into EB and pick up a pre-owned title at a reduced price you’re technically contributing zero to the development team that produced it, and nothing to the publisher that helped fund and distribute it. Every cent of the profit from that specific sale goes directly into the coffers of the retailer you bought it from - EB, JB Hi-Fi, Game - and publishers are saying that simply isn’t cricket.

“The sale of back catalogue games largely underpins the development risks of bringing new games to market”, explains Ron Curry, CEO of the Interactive Games & Entertainment Association. “When that source of revenue is reduced, through events such as piracy or the lost sale opportunity due to pre-owned games, it has a knock on effect.”

On some level it’s an issue we’re all responsible for. We all contribute to it - well, most of us. We’d surmise that a large percentage of gamers have innocently taken a bag of used games to EB, scattered a sackful of memories onto the desk, and traded their collection towards whichever flavour of the month AAA title was being pimped at that precise moment. Others may have taken advantage of the ever-growing pre-owned sections - picking up a handful of bargains instead of shelling out the full $100 for a new title. On some level, by participating in this cycle, we’re taking part in a process that has negative consequences for the entire games industry as a whole.

But the issue is more complicated than it would initially seem. On the surface it’s the familiar battle between publisher and retailer, but at the heart it’s a scramble for dollars in an all-consuming price war that could spell the end for the way in which we buy and consume games - an endgame that could adversely affect gaming for all involved.

The Sale of the Century “It’s probably best that we stay out of this article on this occasion,” began Ben Grant, Marketing Director at Game, when we asked him for comment. “I will say however, that if it wasn’t for the pre-owned business, specialist retailers simply would not exist today, as the mint business alone does not deliver the profit levels required to run a successful specialist operation.”

Ben Grant has been more than willing to talk to us freely about a number of issues in the past, but shied away from the pre-owned games debate - and with good reason. Video game publishers and retailers like Game and Electronics Boutique are notoriously interdependent - they need each other to survive, and the issue of game trades is as touchy as it gets.

So it was hardly surprising that the only niche retailer willing to talk to us regarding the issue was Mark Langford, Managing Director of Game Traders, a company that deals with publishers less directly. Having been involved in video games retail for decades Mark has witnessed some changes in the niche video games retail sector, and has picked up on a few trends here and there. The most obvious? Almost all of his competitors have gone bust.

“I’m going to be totally honest here,” starts Mark, ominously, “and I suppose it may offend a few people - but the bottom line is 10 years ago when I started this business there were 160 independent games retailers in this country, at a rough guess. Today? You could probably count them on one hand.

“They’re all gone - and the reason is all the majors are discounting all the titles on day one. They’re all going at cost price, and that’s why there aren’t any independent retailers anymore.”

Mark’s referring to the day-one price-slashing that mega retailers, such as Big W and K-Mart, regularly partake in, reducing brand new titles directly down to cost price the second they’re released. In a crowded market, it’s difficult for niche retailers like GameTraders et al to compete.

In fact, it’s more than difficult. According to Mark Langford it’s nigh on impossible.

“If we didn’t change,” claims Mark, “and we relied on trying to compete on price, we simply wouldn’t survive. Don’t get me wrong, we’re competitive on price, but that’s because of the trades. The trades allow us to compete against the big department stores on price.”

On the Precipice But Ron Curry, who, in a sense, represents video games publishers in Australia, completely disagrees. We asked Ron if niche retail could survive without the pre-owned market.

“Of course it could,” claims Ron, “and it has done for many years. You only have to look back not too many years ago to see that the industry existed nicely without the proliferation of pre-owned games.”

To an extent we agreed with Ron, but when we put this theory to Mark Langford his reaction was immediate and instinctive. He quite literally laughed out loud.

“Rubbish!” laughs Mark. “Things have changed. The reason we can’t do it now is that the maximum margin of a new game is 25%, and on formats like the PS3 it’s closer to 22%. Then when you price match, or you have too much stock and it isn’t selling, your margins are under 20%.

“If you could maintain 25% you might survive, but the simple fact is that videogames are like fruit and veg - some of them go off within a week! In fact that’s what we say to our licensees: treat games like fruit and veg. You’ll get your constants like Modern Warfare and Halo that continue to sell, but if you get a highly anticipated release and it doesn’t sell like you hoped, you’ve got to dump it - because if it’s sitting there for 60 days, it just doesn’t have the value anymore.”

The Loss Leaders The facts are clear - in videogames, profit margins are low. Lower than they’ve ever been before; and when you have to compete with other retailers selling at cost price, it becomes increasingly more difficult to make money from new games alone - especially when you don’t have the financial clout to buy in bulk the same way Big W and other big retailers do. The only way stores like EB, Game and Game Traders can compete, according to Mark Langford at least, is through trades.

“Publishers give these deals to the big department stores, big rebates, that they won’t give to us. They will if we buy 20,000 of them, but we’re a smaller group.”

And when mega retailers buy in bulk, and demand low prices from publishers for the stock, everyone loses - the publishers, and the niche retail sector struggling to compete with the low prices.

Mark agrees. “These retailers are the ones that put big pressure on the publishers - they’ll buy 20,000 units, but they want a deal. And the publishers have to take the hit.”

But, perhaps unfairly, or perhaps as a result of frustrations regarding the whole process, Mark has little sympathy for games publishers.

“They’re the ones that brought it on themselves,” he claims. “They’re the ones that wanted their games in the big stores, and in turn the big retailers were happy to sell some of this stuff on as a loss leader. They buy a pair of socks and a toaster along with their game and Big W’s happy.”

A loss leader. Mark is referring to the fact that big retailers, such as Big W and JB Hifi, can afford to discount in lieu of the fact that customers will generally buy something in addition to the cheap game they’ve just picked up - a luxury unavailable to most niche games retailers.

But that’s just one problem Mark Langford has to deal with. In most respects, for smaller retailers specifically, the odds are stacked against them.

“The rents and the costs of staffing, in shopping centres in particular are unbelievably high. Some of the rent you pay in these centres - you’re talking over $200,000 a year just in rent in some of the prime locations.

“And the big retailers like Big W - they pay less for rent per square metre. They’re probably paying $250 per square metre, and we’re paying over $1000!”

Adapting and Reacting But as unfair as this may seem, this endgame is the result of a free market. If you can afford to buy in bulk, and you have the means to distribute and sell said product, then you should get a discount. And conversely, if you can’t find a way to compete in the market, you must evolve or face the consequences - that, whether you agree with it or not, is the nature of commerce.

The flipside of this argument, however, is that game trades and the sale of pre-owned games is another direct result of said free market in action. Selling in bulk results in lowered cost at retail, lowered prices at retail results in the proliferation of pre-owned sales, which, in turn, drives dollars back in the niche retail market. It’s a co-dependent cycle that everyone plays a part in maintaining.

Business, in that respect, is Darwinian - natural selection at work - you must adapt or die.

And we can see this process in action. EA, for example, has trialled its ‘Online Pass’ system with games such as Medal of Honor and FIFA 11. If you happen to have bought a pre-owned copy of either of these games, you’ll have to pay a premium in order to get the full online experience, giving EA, and any other publisher that follows suit, a second bite at the royalty cherry.

GameTraders are evolving too, through trades obviously, but also by wisely embracing the niche market it serves.

“That’s the only reason we’re still around,” claims Mark. “We’re adapting. We’ve cottoned on to the fact that gamers love what we do, and we’ve been diversifying a bit. We’re the only major supplier of rare games in the country. We get a hold of all sorts of stuff that collectors love. We do anime, manga, figurines, and gaming related products - that gives us an edge. We’re actually reacting to business conditions.”

All intelligent evolutionary steps - but are these reactions symptomatic of an industry on the brink of some sort of revolution? Are efforts by both the publishers and the retailers the last desperate splutter of an industry on the verge of major change?

The inevitable advent of digital distribution says yes. Development costs are ever increasing, while profit margins are continuing to decrease. And very few experts expect these trends to reverse themselves any time soon.

Mark Langford grudgingly agrees.

“Let’s be honest about it - publishers may not tell you this, but they definitely want to go down that track. Why wouldn’t they? If we were to say to them, in 10 years time will your customers be downloading directly onto their consoles - are they going to say no?”

In that respect digital distribution is most likely the real endgame, which will be great for developers, and possibly even help publishers. Above all it’ll probably best serve the consumer. But retail? 100% online delivery of all videogames will probably be the final death knell for the niche outlets that have been so paramount to the growth of gaming as an industry and a medium - and we can’t help but feel a little sad about that.

“We think there’s probably a good ten years left in the industry,” claims Mark Langford, finally. “But past that? We just don’t know.”


    If I get a choice between buying something that I then have to pay for again through bandwidth and then store somewhere to actually receiving a physical item (such as a Blu-Ray with manual) then I always go the latter since it is tangible.

    I think many forget the importance of tangible media. It's also a big part of the eBook vs Book debate. One is easier to store and move around, the other actually has a tangible existence where you can literally see how far you are through a book by the position of your bookmark.

      Very much agreed about tangible media. I love the little booklets, and having them next to me while I play. I remember more from a booklet I have in my hands, and there's some nice about having a shelf full of games.

        I feel it's worth mentioning, Street Fighter sucks when you don't have the manual with you to tell you the combos.

          Every move is in the options menu in game, in every match.

        The new COD Black Ops booklet was barely existent.

        But seriously, all big business is starting to grind my gears. They moan constantly (although much worse than I am now). The opening statement about profit margins is spot on, it will affect them as as they are too high not to mention most games not AAA. They need to start looking facing facts like the Movie industry has. They can't keep charging $80-$100 for games in Aus and expect volume sales.

        I completely agree! It's the same with music too - I tried downloading a legit album but it's just not the same. Also, I love the smell of new stuff ;)

        I disagree about the tangible media aspect. Videos, books, photos, music and anything else that can be digitized simplifies the clutter at home, organizes it, and stores it safely. I grew up loving to read books and I find the digitization of products is much more friendlier. Even with gaming services like OnLive hold my interest because of the lack of need for physical media.

    Excellent article. And whilst I also think games will go download only in the future, I really don't see the cost of games dropping....which will probably impact how many games people end up buying.

      Of course games will go down in price! Hell the only reason we have it so bad on steam is because of publishers opting to sell the games at the same price as the DVD so that people will not buy download only.

    Another thing to add to the debate is that the aussie dollar is almost on par with the US dollar and i for one is starting to look abroad to purchase my games as i can save a hell of alot of money!!

    That's about three pages worth of analysis given to something I can sum-up it a single paragraph. Are there second hand car dealers? Are there second hand book shops? Are there second hand DVD stores?

    SUCK IT UP GAMES INDUSTRY! If the price of premium titles weren't so over-inflated there wouldn't be as big a drive to the second hand market.

    For an analysis of the inflated price of games, see here:

      comparing games & movies in thar article is weak. way more people can watch a movie. also few people buy a game just because someone directed it, unlike movies.
      plus game prices haven't really moved with inflation as well - it could be much worse.

        Yeah, games are actually cheaper than in the cartridge days - I still remember Super Street Fighter 2 (on Megadrive) going for $169.95, and Virtua Racing going for $199.95! I've even got the magazines to prove it (i.e. Sega Megazone/Hyper>>)

        That's the exact conclusion the articles reaches: we pay more in order to cover the deficit made by all those who don't, which actually makes it less likely for those who don't to enter the market.

        As for following directors, I'm not sure how that's relevant. Even so, it is becoming more prevalent. Just think of Will Wright, Hideo Kojima, or Peter Molyneux and the like. There's also an equivalent phenomenon for following studios, such as Blizzard, Valve, or BioWare.

    Also, you might want to note that some larger chains such as Dick Smith, Big W, EB Games, JB Hifi, etc tend to buy things in bulk. So for example, Dick Smith may want to buy 100 boxes of Game A or Microsoft might do a deal such as that JB orders X amount of Xboxes and they get X amount of third party games added on. And this is on top of the discounts which are warranted for bulk buys.

    That's probably the main reason why games devalue so quickly because of this bulk buy/deal system.

    I can understand where the retailers are coming from. I have, for the last few years now, been a faithful buyer of brand new games. I have flirted with the odd pre-owned game but only if said game happens to be too old and now unavailable new. I have also been buying the game as cheap as possible and often getting stores to price match so, while my intention was to become a 'friend to the developer' in order to unsure good games in the future, I have become the 'enemy' of the smaller games store. On another note, I assume I'm not the onlyone who gets a regular kick out of the preowned game prices in EB? You know, the ones that are still higher than most other retailers?

      I'm about the same. I much prefer brand new games to pre-owned, but I still like to save some money.

      And about the ridiculous second-hand prices at EB? I saw Halo Reach at EB for $120 new, $112 second-hand. It was brand new and not on special at K-Mart for $109... Where's the logic?
      And I've seen EB sales where the new games are discounted to prices below the second-hand price...

        RE: the "new copies cheaper than P/O" that's most likely because the company has so many excess new copies that they need to get rid of them, because as it says in the article, the longer they have the excess, the less they're worth, and the more they lose in the long run

    A flooded games market probably doesn't help developers either. Too few customers scattered over too many games....

    The problem with all this is the venerable collectors edition, which is currently in a golden age, will die along with retail distribution.

    I rarely buy pre-owned games but when I do buy I get it returned straight away as soon as i finish it.

    Ya know, everytime I hear a developer bitching and moaning about second hand games destroying the industry all I can think of is "Harden the fuck up"

    Every other industry has had to deal with second hand sales. If they are hurting so much by it then there business model is broken.

    If they're broken so badly that the used sales kill them. Well fuck em, let em die then. That's capitalism. Make way for people without a retarded business model.

      Couldn't agree more. The harsh reality is you can't be protected or the whole system will collapse. If video games get protection, then used cars should be taken off the market too. So should used musical instruments, and anything else used.

      How much does it cost to develop a game? Several million US$? How much does it cost to present the packaged media or digital package? A few cents? You wanna sell more games, then think about the price you are selling to retailers.

      I live in Japan where games are between AUD$25 and AUD$80 at the most. Buying a game is an impulse buy, almost accidental.I don't usually consider the 2nd hand section for anything but PS2 or Super Famicom games. If I were a PS3 owner in Australia, every time I buy a game I would get a bad feeling about my car payments, my mortgage, the weekly shopping. How is this conducive to making people buy more games if every time they buy a game they get a bad feeling in their gut? Ever heard of Pavlov's dog, Australian game distribution industry?

    The main reason that I buy digital copies is them being cheaper or more convenient, but mainly the price - if they are about the same price I will go for a disk or memory card every time. For me trad-ins mean that the games that I buy aren't worthless (in a monetary sense) and that when I tire of the game I can use it to get part of another game.

    My issue with 2nd hand games at established retailers is that they don't save much money $5-10 on big titles etc.
    I'm happy to buy & sell on eBay etc for a $20-40 discount and only buy when store price is nearly the same (signed post is a killer) or they have a 3 for 2 offer etc which they do when over stocked.
    If a little of that money goes to the publisher with an 'Online Pass’ then I don't care who gets my 'FIXED GAMING SPEND' as long as what I perceive the value to be doesn't change.
    Special Editions are a cheap way to 'value add' but why give the Games Shops the benefit - do it as a postcard mailer direct from Importer or Distributor!

      PS How does digital distribution serve the consumer?
      I can buy in a walled garden market place with a controlled price (unless I buy direct from devlopers without Sony/MS/Nin getting a slice - Never gonna happen!) without the ability to sell on - Fixed income I tell you!
      Only other option I would consider is fixed monthly gaming subscription for whatever games I wanted to play - If the price was right & I had the time

        In most cases Matty (unless it's a particularly greedy publisher) an online distributed game will cost you less than a store bought second hand.

          Same comment below - Steam might be cheaper to entice but PSN or XBox Live are generally more expensive so how do the entice me? & they are always more expensive than a PC version of a game.

          Walled Gardens are not competative and not cheap.

          The idiots are those who can't be bothered to get more for their games selling themselves and they are the same people who pay the inflated EB etc prices. People are doing it to themselves and EB etc are just supplying to consumer lazyness!

            The XBox live arcade stuff is fine. The downloadable full games. I agree, complete rip off. Someone is being greedy.

    Its all nuts, you buy something, its yours. If I sell my matress in the Trading Post, Harvey Normans dont come chasing me whinging and whining do they!


      No but the federal safety inspectors might.

      ps don't resell mattresses

        Don't buy used mattresses either. **shudders**

    One inevitable outcome I think of digital distribution taking over is that once it does there will be less reason for it to be so cheap.

    People mostly buy on steam and the like because of how much they save, not because they don't want a disk or cant be bothered going to the shops, and it is offered so low to entice people into this relatively new service.
    Once they don't have that competition I can see digital distributors steadily raising their prices.

      Are we still "allowed" to make a "backup" copy anymore...

    While I don't mind digital distribution, my main issue is a monopoly store. Xbox' games on demand service has a couple of reasonably priced games but mostly you can pick the titles up cheaper elsewhere. It's useful for older titles which are sometimes difficult to get hold of though.

    Also you can't trade those titles in, they're locked to your account. It would be a poor situation if there were no alternative. XBLA games are all in this situation now, as Amazon stopped selling codes. I don't mind not being able to trade them as they are so cheap, but other may.

      but only part of the cost you pay at the moment is subject to competition anyway (the retail part). A big chunk of what you pay is fixed by the developer and the platform holder anyway. Digital distribution won't really change that in my opinion.

    I have a few friends in the industry who have lost jobs in the past due to developers going bust and it's only getting worse now.
    My friends were all lucky enough to get back in with other companies; but most of the people they worked with were not so lucky!

    I am in the industry too, however not in the same situation - we build simulations for clients and are also creating a virtual world type platform (which will not be released like a game). It takes years of development and millions of dollars to buy\produce 3D engines, content and Games! It relies on investors and cash flow from previously released products to keep afloat for small companies. Second hand games obviously hurt the previous product release revenue pretty badly.

    He talks about "The rents and the costs of staffing"
    Yep we pay all that too.

    As much as I love my SC2\wow\GTA collector editions (I'm an artist and love the art books and box art stuff) I'd be happy for Cheaper digital downloads. It's a loss for EB, etc But it's a win for consumer and game developers in my opinion.
    The downside of digital downloads are the Wanctivisions who charge more online for CoD MW's than retail copies.
    I guess Aussie broadband prices make digital a little crap too... but they are getting better.


      I think collectors editions will still exist, they would just be mail out that's all. At least that's the way I see it.

    Is anyone aware that not everyone has internet access?

    I mean good enough to get these kind of games online?

    I know so many people who rely on their smartphone, their parent's, works or even a friends internet connection.

    So few of my friends bother with downloadable content or even online gaming.

    It'll be ten years before the net is cheap enough and good enough in Australia before customers will favour downloads over retail.

      With retail game download sizes being anywhere between 4 and 15Gb nowadays, I'd only be able to download at most 5 games in any given month, assuming I didn't use the internet for anything else. Furthermore, the download speeds aren't the greatest, which leaves me sitting there for tens of hours, and even days, waiting for the game to finish downloading. Sure, digital distribution may be cheaper, but in Australia the convenience factor is almost non-existant to most consumers...

        This is somewhere i think that retailers could still have a place in the market, even if it all goes digital, you still need to buy a console, you have the facility to buy the console and you provide a service to obtain the game data, like a steam back up, steam backs up its files into encrypted data, that could then be sold at a nominal fee to consumers who dont have means to download all their games themselves, if digital game stay the price they are then you wouldnt end up paying more then buying a hard copy in the first place

        That's the exact reason I go for a disc over digital distribution. Downloading a 4GB game, to me, is insanely stupid. The only time I ever did it was with Burnout Paradise, and I'll only ever download a game from an online marketplace (ie PSN) if the price is good, and the file size isn't ridiculously large. 99% of the time, I'll get the disc based copy from a brick and mortar store instead, because it is much, much more convenient for me.

    very well written, and a topic that sits close to me, as i've worked for EB Games for 2 years, and now Game for 6 months.

    As a developer, this whole issue of pre-owned sales makes the digital-distribution-only approach more attractive. The apps store, steam (...possibly psn store and xbox marketplace) seem to be steps in the right direction to overcome 2nd hand sales.

    I do agree that specialist retailers should evolve in order to stay in business, and one way to do this would be to provide something that the big retailers can't.

    Like sell niche titles, specialized collector's editions, or rare out-of-print games.

    Perhaps do away with that expensive shopfront and sell online (ala Ebay).

      Kel, I am a developer too. I don't mind if someone has my game and sells it to a friend or on Ebay. Fine go for it. I object to stores ripping off everyone by buying back games for $10 and selling them for $50-80. That is just obscene.

        I think that's the problem I have with it. But at the same time, I recognise that there is a struggle at retail that also needs resolving.

          Well there is nothing the developer can do. They rarely do more than break even. Last time I went through and looked at the breakdown of a $100 game it Australia it went this way. $5 developer, $5 manufacturing, $5 console company, $10 publisher, $25 wholesale distribution, $50 retailer.

            $50 retailer! HAHA are you KIDDING? go find a retailer who makes $50 on ANY $100 product new not just games, the only place youll find that is maybe fashion.

              I am not joking. At one stage I was working as a publishers internal developer. I know what the retailers were charged, we got the spreadsheet each month because we could purchase from our employer at the same wholesale price. Their makeup is 100%

                you have no idea what youre talking avout, those figure you saw were bogus, or youre full of it, ive worked in retail for years, including EB, and several otehr places that sold games, and i can guarantee not a single one had 100% mark up on ANYTHING, thats not how retail works, so mr 20 year developer how bout you stick to it because you have no idea how the selling side works

                  OK. Not going to argue with you. I know what the games wholesale prices to the stores were and I know what they sold them for. Unless they discounted them it was close on 100%

              Actually I should say that the 100% markup is on full price titles. If they start discounting a newly release title they are cutting into that. But still they are getting them at $50 or $60 (the $60 sell at $119 unless discounted)

                I work for dick smith and my friend works for EB. DS bought modernwarfare2 for $75 (factored in freight/handling in that price) and sold it for $77 on release day. EB games bought it for around $79 and sold it for $119.95 on release day. This is only one example and usually only happens with big AAA titles. So there's some similar figures to what 20 yr developer is saying.

                I been led to believe that in the next generation of consoles we will have the option of both digital/retail (complete library release for release) and it will be up to the consumers to decide and that will be done with their wallets.

              you know iphone4 costs A$6.50 to make...

            In the article Mark says the usual margin is 25% for the retailer. Where do you get 50% from?

              Generally 25% 1st margin is the retailers expectation. Add on top of that:
              *Volume rebate
              *co-operative advertising allowance
              *event allowance
              *price protection rebate

              All this goes into the retailers coffers tho I've never heard of total margin reaching 50%.

            yeah, Pachter (- "Pach Attack" at broke it down pretty much the same a while back...

              I'm assuming $50 going to the retailers is gross and not net.

      Pushing the online retailers i.e. steam, x-box live, playstation store to add gifting and sharing options would help drive adoption. Being greedy will hinder.

      i.e. imagine if you could download a game, play it, then gift it to a friends account.... or lend it to a friends account for a couple of weeks.... or have a used section where I could sell the game "i.e. sell my digital rights" get some cash back with you getting a cut from royalties (double dip...... shabam!).

      If digital content is like physical content where I own it outright and have options to share or sell it I'd adopt. Alternatively if the digital price is 50% less than physical I would adopt but I doubt that distribution is 50% of revenue.

        You mean, bring back "Shareware?"

    A really interesting read Mark. I enjoyed it. But while it's interesting to know this information - I don't think anyone is going to shed a tear for the publishers because we don't want to spead $100 for a game.

    We, as consumers, are still going to go for the best deal whether it be in a bargain bin at JB Hi fi or from overseas. I for one am going to be buying Medal of Honor from Play Asia because it only cost me $AUD50.

    Mark from Gametraders said he's adapted to survive - publishers also need to adapt to survive. They can't keep overcharging consumers or their games will just start selling less and less.

    Console makers get a cut of the profits too, don't they?

    I'm surprised they haven't gotten involved in this.

    Good article. Very thorough. I think that all retail will die in the long term, not just gaming.

    I think however that one point that is at the crux of the whole thing is that certain games are niche but being treated like main stream. We can spend 500 million dollars on Avatar because it's a popcorn action flick that 100's of millions will flock to see (well maybe tens of millions). I think one of the main issues is that we are spending up to 100 million dollars on some core games that the gamer does not think is worth the 120 dollars. This is where the downward pressure on price is coming from, supply and demand. Something has to give, even if the delivery is done in digital, at some point the budget cost of a game such as, lets say, Gears Of War, will not be within the limits of being supported by the hardcore market.

      Well, some of the replies here make you wonder why you even bother developing games most of your life? You think develpers are rolling in cash? No. It's pretty rare and more and more studios are going under every day. Developers are lucky if they see even 5% of the money a game sells for at retail. Most times the advertising budget is bigger than the developers budge. The more online sales the better for the developers and the consumer. It's the publisher, retailers and other middle men who make all the money. At least the publisher takes the risk of funding the game. The second hand game market is a ripoff for everyone. They resell games that they pay you 10-15 dollars for 50-80, barely lower than retail. Cut the whole bunch of leeches loss. Let the developers who do all the work and the buys be the winners. Ever notice how cheap iphone games are? Yes, the developer can distribute and market themselves and everyone wins.

        If you're development costs can't make ends meet due to used game sales. Then you're doing something wrong. Any industry that can't handle second hand sales is a failure of an industry to start with.

        Obviously if so many companies are going bust and developers can't handle the cost of development the the developers business model is obsolete.

        Game developers having a go at second hand sales seems an awful lot similar to the music industry bitching about pirates killing the industry. If a developer couldn't change with the times and goes bust then so be it. That's the way things work. A new development studio will rise up in it's place with a better understanding of the market.

        Let the old developers die if they can't make ends meet. People won't stop making games, they'll just make with a smarter business model.

        And unless the internet situation in a lot of places worldwide changes, download only will kill more developers then it saves.

          I am not saying the developer will die because of that. It doesn't help though. The worst part is the rip off to the consumer. Go into an EB, Game or even JB. Ask them what they pay second hand for a selection of titles. Now walk to the shelves and take a look at what they sell those second hand games for.

      Interesting, we have about 10 friends in common on facebook. Not related to Brian by any chance?

        ha ha yep :)

          Cool, I worked with Brian for a while

    Interesting article. Although, I dislike digital distribution because I actually want physically own games. Also, I personally don't really download games and I don't usually sell my physical games back to the retailer anyways, which is why I dislike the idea. If this platform turned to digital distribution completely, many people will dislike it. Although in saying that, I don't mind the option of having both distribution platforms available.

    I don't feel too strongly either way. The massive publishers are akin to the major retailers and I don't have too much sympathy, particularly when they own the developer too - independents seem happy enough at the moment with digital distribution, so that's all good. The mid-size developers will be the one's that suffer though - not streamlined enough to run on their own, not big enough to deliver a triple A.

    Besides that, I've only ever bought one pre-owned game (Dead Rising) and have never traded any of my games in just because I don't feel like I am getting a fair deal; ~$10 equivalent so you can mark it up to $50+? Sure, buddy.

    Anyways, nice feature Mark - MOAR!

    I wrote something not long ago about the preference for either physical or digital distribution of games.

    It worries me that in the next few years, we'll see an eventual transition from hard copies in the store to solely online distribution services being used instead.

    Still, while I regularly buy pre-owned games (especially for PS2), trading in games as far as I'm concerned is usually not worth it.

    I believe the real cause for concern here in regards to our games industry is not pre-owned titles but instead importation from places like Europe and especially the UK.

      I think there will always be a market for store games. There may be codes and other measures in place to reduce on selling. In the end though it will result in better games. Developing games is a very expensive thing and the more money the makes it to the people who do the actual work the better. It means more people can be put on a game to get bigger and better games. The 95% that goes elsewhere... what does that do? Boost advertising? I think there is a ligit reason for MS/Sony to get a cut. They do provide the hardware after all, sometimes at a loss. Publishers, well they risk a lot of money. And many games loose them most of it.

      Yeah the cost of getting games imported makes it a much more viable proposition than buying second hand I have found. In the last week or so I've bought Assassins Creed GOTY ($30) from Ozgameshop and Kane and Lynch 2 ($25) from Play-Asia, both for PS3. Good luck trying to find a second hand version that cheap in an Australian games store.

      I don't know who it is who are paying $100 odd to buy second hand copies of Modern Warfare 2 at EB or Game. Mental.

        Yep, buy overseas. No difference to the developer and publisher, they get the same. You can see by the prices where the money goes in the Australian wholesale/retail situation.

          actually yes its a big deal to publishers, publishers pay a lot of money to sell a game in a country such as aus, distribution rights etc etc, look at rock band, that cost a whole new lot of licensing fees for all the tracks, now do you think they are happy when you import the game? they paid all this money to sell it here and you go by pass it? no they will not be happy and they will just impose more and more regioning locking us down to buying only the type of games they want to sell us

            You are saying that publishers want to pay those fees? They either paid a flat rate in which case where you get it from makes no difference or they are paying per unit sold in which case they saved money. Don't see your point.

              those are AUSTRALIA specific costs, not a flat rate for worldwide distribution, hence they paid those costs to sell the product SPECIFICALLY in Australia, so yes it does matter where you bought the game, if it didnt matter where you bought the game, why is there regioning in the first place?

                Regioning? Usually so that the publisher can sell the game at a different price point in different companies or to keep the countries distribution chain happy so they get their cut of the pie.
                If you are talking licensing fees for things like movie titles it in every case I know of a flat fee. Titles like guitar hero are probably different because of the music content.

                  Yeah good luck with your logic. The PS3 is region free, and always will be. Unless of course you're talking DLC. But who cares you just buy from where you got the game...

          You think Ozgameshop and Play-Asia are good?

 actually remove the VAT off prices from some of their products so long as it over 17/18 pounds. In other words, it's even cheaper for Australians to import games from them because the price advertised on their website is in reality more expensive than what we end up paying.

          Also take into account that a certain amount of games never get a true Australian release so importing is the only way to get them.

            We buy from them all the time. Stuffed if I am going to pay Australian prices. Everyone in the chain tacking on their percentage as it goes through the chain. Maybe piat hasn't seen the price that the games get sold by the publisher at? By the time they get to the end store they are probably already marked up a couple of times.

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