Used Games Aren't To Blame For All The Video Game Industry's Problems

There's been a lot of chatter this week about used games, mostly spurred by the news that Xbox One games will come with one-time registration codes, meaning you can't just swap them with your friends or trade them at a GameStop.

Microsoft has promised some sort of ecosystem for used games, but the Xbox manufacturer has been sketchy about the details, probably because they're not finalised yet. Still, by the time we get our hands on the Xbox One, the concept of a "used game" as we know it may no longer exist.

Some think this is a horrendous, consumer-unfriendly move. Others argue that it could help the video game industry stay alive. Today, Ben Kuchera wrote an interesting article over at the Penny Arcade Report, concluding that the death of used games could lead to a healthier video game industry:

Without the used market sucking up all those sales and all that consumer money, it's very possible we'll see Steam-style sales on older or bundled games on the Xbox One. It's not a sure thing, but killing used games is going to free up a ton of money for companies to try new ideas in terms of sales and pricing. The people who get innovative and take advantage of this structure will thrive. The rest are likely to slowly choke on the new economics of game development.

It needs to be made clear, if all the studio closings and constant lay-offs haven't made this explicit: The current economics of game development and sales are unsustainable. Games cost more to make, piracy is an issue, used-games are pushed over new, and players say the $US60 cost is too high. Microsoft's initiatives with the Xbox One may solve many of these issues, even if we grumble about it. These changes ultimately make the industry healthier.

I don't disagree with many of Kuchera's points — in fact, I've made some similar arguments about how a world without used games might not be so bad — and he's totally right that the current state of the video game industry is unsustainable. If Microsoft could facilitate a digital network as affordable and convenient as Steam, it will hurt far less when they rip away our right to borrow video games. And, hell, maybe that will happen.

But I can't help but feel as though used games, like piracy, have become the scapegoat of an industry desperate to explain away its dire financial straits. Big publishers like EA and Square Enix are not consistently struggling because customers go to GameStop for cheaper games. Activision is not closing down studios because we sell their products on eBay. THQ went bankrupt because they doubled down on uDraw and busted, not because people traded in too many copies of Homefront.

The video game industry is running headfirst into a wall and blaming the wind.

There's a post on NeoGAF, brought to my attention by Wired's Chris Kohler, that really stood out to me today. (Warning: it's a bit lewd.) Here's a relevant excerpt, in which GAFfer Burai sarcastically lists a number of missteps that used games are almost certainly not responsible for:

But no, it's all used games that did this. Used games made Capcom make some horrible design decisions on DmC and piss off the entire fanbase. Used games made Activision and EA flood the market with guitar games and accessories long after people stopped caring. Used games made Microsoft make a fourth Gears of War game that nobody asked for from a developer nobody cares about. Used games made Sony pump out another God of War game after they spent the past few years flooding the market with HD remasters. Used games made Sony make a Smash Bros clone with no appealing characters to help sell it. Used games made Bizarre Creations make James Bond and racing games no-one wanted. Used games make publishers shutter studios the moment the game they were working on goes gold, before they've even had a chance to sell a single new copy, let alone a used one.

I could go on. And on. And on. You could write a book about every single executive level screw-up this gen and yet these same people with their million dollar salaries and their shill puppets still try to insult our intelligence and blame used games and awful, entitled consumers for companies shutting and talented people losing their jobs.

We are watching an industry full of exceptionally smart people continue to make exceptionally stupid decisions. Job insecurity and volatile working conditions have become the norm. Video games are getting more and more expensive, and expectations are becoming less and less realistic. Games like Tomb Raider and Hitman Absolution sell millions of copies, yet Square Enix sees them as failures, because the world has gone insane.

Maybe it's inertia. No matter how many times we point out some of the biggest issues in gaming — bloated budgets, poor executive decisions, toxic reliance on Metacritic — nothing changes. Publishers blame used games and piracy, and they have convinced Microsoft (and perhaps Sony) to create a console that fights both used games and piracy, at the expense of our rights as customers. Yet publishers can't seem to take a step back and wonder whether they're even addressing the right problem. They're trying to fix a gunshot with a band-aid.

Let's say used games go away forever. Will studios really stop shutting down? Will publishers' profit margins really start going up? Or will the video game industry just find something else to blame?


Comments

    The idea that game trading is killing the industry is pure fallacy.

    When you trade a game to EB you are not selling it for cash, you are trading it for more product, I'd say a good 9/10 of these are trades to new game related products. It is just circulating funds through the industry. Also just like piracy most people buying preowned wouldn't have bought it at all if they couldn't.

    It is simply a straw man so Microsoft can wall up their garden more and be anti competitive.

      How does this benefit Microsoft? Why would they willingly want to be anti-competitive?

      I would think that it is really the developers and publishers that have pushed this concept into the coming generation and Microsoft are taking the heat for it whilst they prepare to reap the benefits of the decrease in the used game market...

        Except neither Nintendo nor Sony are doing the same? And I don't see the movie industry complaining about the used DVD and BD market? It is anti competitive because if you can't source the games second hand they can charge what ever price desired for their product, you can't get it cheaper second hand or borrow it so if you want to play you pay.

          Correct but it remains to be seen if Sony will be taking similar measures... I think EA announcing the abandonment of the SeasonPass means that they are confident in the new generation of consoles rectifying the perceived imbalance for them.

          I just think the majority of the blame for this needs to go to the root cause of the issue and the fact that it has become an issue at all stems from the developers and publishers...similar to the anti-piracy issues raised as the deathknell for the movie industry (despite the introduction of private DVD sales which collected revenue that did not exist to that level in the VHS era)

            But that is the point, game trading it not the root cause, there is no evidence to support that. At all. It ia scare mongering, same thing with piracy there is no proof that it makes the impact that major corporations make out.

      Dude you totally missed the point. The issue is when stores give say a $10 credit for a used game, then go on to sell that game for $30+. With no money going to the developer/publisher.

      Hell Heavy Rain sold 2 million copies but 3 million individuals have trophies for the game. That's a million sales where no money went back to the produced the product.

      Even not having trade ins aren't an issue for pc why should consoles be different?

      Also games are much cheaper now then they were in the 90's and the turn of the century.

        games arent THAT much cheaper at launch (at least in oz) for either console or PC, than they were in the 90s or 10 years ago. the $80-100+ for 'premium' titles is still there and isnt likely to go away any time soon. steam mitigates this somewhat, but not every title is on steam or even available as a digital download.

    Unless game prices are lowered to compensate, I think that getting rid of used games will just mean that people will buy less games at launch and wait til they get cheaper.

    People who can't afford new games and buy 2nd hand or trade old games towards them will not have that option anymore, and those who do buy new releases will be less likely to shell out full price for a game that they will be stuck with forever because they know they can't get any money back.

      Yeah. It's not like they're suddenly injecting more money into gamers' wallets. The amount they have been spending, they will continue to spend. Only now with higher prices, they'll buy fewer games.

      Or at least... that's what I'd argue if preorder prices weren't frequently still stupidly high at places like EB. Pre-owned for $90 instead of $110! Woo!

      Problem with that is that there is no incentive for the prices to go down with a system like this. If you can't trade, sell or borrow games there is no way to get them cheaper which is the main drive for the slashing of price.

        But what if this turns the console games market into something like steam?? I hate gaming on my PC, but I still have a bunch of stuff from steam that I bought in "Sales frenzy" week - I cant onsell them but because we have had this model for a while of buying used games we think it is the way it should be.... Try onselling your itunes collection! If the used market dies, we might actually see real competition between console and PC pricing, especially with Steam boxes and Ouya blurring the lines a bit....
        Then again it might be all crap. I for one would like to see Microsoft get it right, because I have an unhealthy relationship with my xbox, and I want to love the XBone, but the track record lately is not that flash for any of the big console players.....

    The gaming industry has survived for how many decades, and they're only now complaining that it's "killing the industry". Pull the other one.

    I'm all about supporting the developer, but this is just Micro$oft trying to get their grubby little hands on more of our money.

      You honestly think MSFT are going to just bank 100% of any fee and say to the dev 'Sorry, nothing here'? Their cut will be in the extreme minority with the rest going to the dev, as opposed to a physical retailer who banks 100% of that money and nothing goes back to the publisher.

    The money made by eliminating used sales won't be reinvested... it will just be recorded as an increase in profits.

      And by the publisher's no doubt.

      In fact here is the big question, what happens to a game where the studio closes but the publisher remains open?

        The publisher owns the IP in most cases, and they create/buy a new studio to work on it, if they think the IP has legs. Otherwise they just sit on it, and fans of that IP have to hold out hope that maybe, maybe one day someone will do something with it.

        (See: Homeworld.)

          That might explain why some publishers close studios after games ship (even if they make a boat load of money).

          By getting rid of the developer, the publisher does not have to offer any royalties or bonuses (assuming such is laid out under clear contractual terms) over the long run. All sales of the game goes straight to publisher.

            I'm pretty confident that in most deals the developer doesn't see much from sales or royalties. Theory seems to go that their reward is getting paid while they're working and not earning (which can be for years), and the reward from sales is almost exclusively for the publisher who was bankrolling them all that time. Invest -> Reward.

            Given that your reward as a developer is your paycheck and 'working in a job you love,' I'm sure it's a bit hard to swallow the months of crunch and getting fired immediately after QA is done.

    Why should EB be the only one who collects profits from selling used games? How are Ubi, EA, Activision etc completely cut out of that loop when it's their product being re-sold?

    Given that EB flagrantly flaunt their 7 day return policy to allow people to return launch titles they've finished, which are then on-sold to people who would normally have bought a brand new disc, this is simply depriving the publishers/devs of a launch sale - which is where the bulk of a titles sales are from.

    Oh, and if you think Microsoft are the only ones who are going to go down this path, you're flat out wrong. If EA, Ubi, Activision et al have signed on to this process, they're hardly going to allow Sony to continue flogging their 2nd hand games around willy-nilly, otherwise I imagine when it comes time to launch major platform exclusives, the publishers will be choosing the platform that protects their launch income instead of the one that allows it to be cannibalised by the retailer.

    Let’s say used games go away forever. Will studios really stop shutting down?

    No because other factors such as making lousy games and poor investment choices can lead to such closures.

    In fact, a publisher owned development student may close anyway because the execs in the publishing organisation choose to close them. Even if the game sells phenomenally well.

    Will publishers’ profit margins really start going up?

    It's safe to say they are already up - they get the lion's share after all for each copy sold.

    Or will the video game industry just find something else to blame?

    The industry did when no-one took piracy seriously so most likely they will find another scape goat.

    The video game industry is running headfirst into a wall and blaming the wind.

    That sums up the current situation. Publishers just do not want to own the consequences for their own mistakes.

    Last edited 24/05/13 1:15 pm

    They are to blame for most of them.

    I don't know why Microsoft's decision shocks you people.

    I still find the argument intriguing, as I still have no idea what a "used game" is..... how can you have used data?

    When you buy a game, you aren't buying the plastic disc [which is worth, what, 10 cents?], you are buying the right to use the data it contains. It's not like a car. "Used" data isn't any different or less functional than "new" data, so why should you pay less for it?

    The concept is a relic of the game cartridge era, which is becoming totally redundant.

    With respect to trading in games: not all instances will circulate money through the industry. First, the game you traded in will be sold to someone else. So the developer of your traded game loses a new game sale, and the retailer gets the money. Second, the game you buy might ALSO be a used game. So the developer of THAT game will also miss out. The money circulation is between the retailer and the user, at this point.

    I heard somewhere that a PS3 game sold 2 million copies, but 3 million people had trophies for the game. I can only imagine how bad it must feel to know that 1 million copies of your game profited somebody else.

    Yes, there are other issues that affect the industry, like costly development budgets, an expansion of gaming options, and a crowd of 'me-too' games with little innovation. But denying that used games hurt the industry, is naive.

      But denying that used games hurt the industry, is naive.

      It is not naivety, it is a fact. If anything, the number of used games is a good indicator on how well one has done.

      Taking your example, if I made the game in question the ratio tells me that half my audience is not happy with the work thus I should learn why and improve my next product.

      The better I make the next game, the less likely they are to part with their copy later.

      Furthermore, if I was a developer and/or publisher, I would be looking at important issues rather than worrying about used game sales. That is like worrying about the direction of the wind (excuse me for using your example, Jason), I have no control over it and I have no right to control it. I have to work with it.

      Last edited 24/05/13 2:22 pm

      But it's an investment in the future. If you accept that (for example) 50% of the people who bought it second-hand would never have bought it new, you suddenly have a consumer base of an extra 500,000 people who might be hyped enough by their purchase to invest fully in your NEXT product.

      If they aren't, it's the fault of the product, not the market.

      There's probably an economic term for it, the next thing up from a loss leader. It's the way all creative industries work. Certainly, as an author, I rely on it. I don't expect my first book to sell especially well (nor does any author), but the sales of the sequel will almost always be higher.

      Last edited 24/05/13 3:30 pm

        You assume that they will get to make another game seeing as sales were 2/3 of what they should have been. Would you work for 2/3 your pay just for a chance to get 100% of it next time? Its a bullshit copout by people who trade in and buy used. These are the people who are likely to time after time only buy used and trade in whatever they have to get it, most wont suddenly decide to pay retail just because they liked the old one if they can still save a few bucks.

          Everyone else in every other creative industry does it. If games can't cope, there's something fundamentally wrong with the business model.

    I have nothing against the concept of used game trading, the only moral evil is the insanely bloated markups the retailers put on them. Take a game to EB and you'll get $5-$10 dollars store credit and then they'll sell it for $5 less than new. Frankly I'd rather spend the extra $5 on a new game than continue to let the retailer gouge both the seller and the buyer of said used product. That however is the only thing wrong, all this noise from publishers and console manufacturers is just smoke and mirror stuff to cover their massive failings.

    If you are spending $50 million every year to pump out a new COD when people are still playing and buying the old one, then maybe you can cut back to one every 2 years, use $5 million or so to make an innovative new IP that will likely recoup its development cost and then sit back on the remaining $20 million and play like Scrooge McDuck, it's not like your games aren't making shit loads of money, stop setting the bar so high for yourselves.

    As to the used game issue, people like me will still buy games new out of some sense of "starting from scratch" or inherent obsessive compulsive tendencies. All of this is a moot point, retailers can't conjure up used games, in order for a used game to exist then someone needs to spend money on a new game to begin with.

    Great article Jason. Although I don't see the industry benefiting from no used games policy.

    As has already been suggested ppl will just buy less simple.

      And most likely pirate more as they can no longer try before buying.

      Me I buy new when I can (and I find a reasonable price) but in some cases used is my only option if the game is out of print.

      For example, if it were not for a copy I found in the nearby Salvation Army Opportunity Shop I would not have a copy of Eternal Darkness.

      I came late to most games (because I could not afford them as a kid growing up) and as a result most games I would love to try are no longer printed.

      Besides me, let's ask the question: how can late comers and new generations of games come across such past gems if not for second hand sales?

    if there is no such concept as a used game, and more people are buying their games, can i expect to see the developers/publishers lowering the price of their wares since they will be making more money?

      Hey you! Stop using common sense! It's illegal!

      *Releases a pack of dogs on Zen.*

      @Those still reading this: Yes I am being silly.

        if only you could do the same to the publishers :(

      Games are cheaper now then they were in 90's.
      Build a bridge and get over it. I did

    Eliminating used games is another way of raising the price of games, and anyone who has even the most basic grasp of supply and demand should know that if you raise prices, you reduce demand. This bit - "Without the used market sucking up all those sales and all that consumer money... ", shows you that that guy has NO IDEA what he is talking about.

    Even if there is a reactivation fee to buy second hand, they still have it better off than PC gamers. Buy a PC game? That's it, there is pretty much no second hand.

    Regarding a post about 2 Million in sales and 3 Million accounts with trophies. I think that was Heavy Rain, but you must remember that alot of that 1 Mil might be from other people in the same household playing the game for themselves. Used sales will also factor in, but it wouldn't be anywhere near 1 Mil.

    Furthermore, David Cage and Sony have been on the record in the past and mentioned that Heavy Rain was very profitable for them.

    For me, the most important aspect should be realistic budgets. Recent reports have suggested that games like Resident Evil 6 and Assassin's Creed 3 have had over 600 people in the development cycle. This is an insane amount of people and you can argue that as your staff increases, the quality of the product can stuff to suffer.

    RE2 supposed had no more than 50 people work on it, RE4 less than 100... both games are better than RE6.

    What about 38 Studios that made Kingdom of Amalur, making a startup company, borrowing $75Mil and releasing their first game, a game which needed to sell AT LEAST 3 Million copies to BREAK EVEN! It's hard enough to have a game break 1 Mil copies now, so what were they honestly thinking? They were doomed from the beginning.

    If I could get some store credit for some of my Steam library - that would be awesome.

    Mind you, it's not so bad when you remember you paid less than $5 for most games.

    Damn Steam sales!!!

    So we should lose access to used games first, hoping that on good faith they will implement steam style sales and/or rethink pricing schemes down the road?

    Pre-owned sales make up almost half of the total revenue the games industry pulls in. Which when you consider the price is half as much if not less than for a used game over a new game, means that about 66% of the market isn't willing to pay USD$60 or AUD$80 for a new game.

    I'm just sort of curious about who decided to try and force 66% of the market to pony up more money than they're willing to pay be killing 2nd hand games; thought that that was a better idea than figuring out a way to retail them cheaper.

    Basically in my opinion: technologically blocking 2nd hand games, is blocking two thirds of your customers from your products.

    Last edited 24/05/13 3:44 pm

      That depends on how they handle it. We may actually see better pricing on new games than we're currently getting on used. Think of it this way, EB don't really care about their new prices because they sell used games. They reached a point where they were actually going out of their way not to sell new games. That's why years after release the sticker price is still outrageous for new games nobody wants.
      The new price was basically just something they could show the customer so they'd see that compared to the $60 new price $50 was a great deal (so regardless of actual value it's the higher the better when it comes to new prices). If the used game market goes away they have to go back to selling new games, and if they go back to selling new games they're going to have to remain competitive and actually draw people in with legitimate sales.
      It stands to reason that they'd start discounting older games to get them moving. They'll probably continue to chase the people who currently buy pre-owned because there's serious money there, they'd just do it with more traditional approaches. If things worked out right you'd probably end up getting new games for pre-owend prices if you were willing to wait a few months.
      If the used game market really is a significant portion then the prices are going to have to meet them somehow.

      I don't support Microsoft's move at all but it could still have interesting results.

        I live of the second hand market, I buy maybe 4 new games a year at full retail price, and thats if im really lucky.. otherwise i generally live off the $15 - $20 bargain bin games several months after, as do most of my friends, if im looking at having to pay 80 - 120 for every game that comes out most people i know will pretty much quit, not many people in the minimum wage and dole bracket can afford that crap, personally i will stick with used games, no Xbone and no ps4 if they pull the same thing with their "locking chip", i will work my way backwards pick up the $15 games i might not have tried before and stick with nintendo, as will most people i would assume. and if i have any spare maybe i will just put in in an envelope and mail it to nintendo with a love letter saying the used game market support earns you my love and extra money.

          But that's what I'm trying to say. They're still going to want your money because it adds up to a significant amount, and now stores are going to have to find alternative ways to reach it. The reason new games stopped getting cheaper with age is that new game prices were used to justify used game prices. A $60 new price tag meant they could charge $50 for the used version, so they resisted reducing the new price as much as possible.
          You may end up getting cheaper games through sales than you currently do through used. I mean look at Steam. There's no real used game market and they're constantly encouraging publishers to slash prices for quick and easy sales.

          Again, don't support Microsoft at all with this. I'm a massive 360 fan but there is no way I'm supporting the XBOX One. I'm just pointing out that the long term ramifications may include some benefits.

            I will beat them at their own game.. I will buy a used xbox when I can mod it to play used games :D (if i was smart enough i would be doing the modding myself)

            I think they will use the physical copy defence.. and australia will resort to the higher minimum wage defence.. i stand by the I'm too old for this shit defence

    Thank god publishers don't sell cars or houses.

    The bet here is that used games are a simple substitute for new games and so they are effectively eliminating some of their "competition". It won't necessarily work out that way. People will be less willing to buy new games because they can't be resold, and will have less money to spend on new games because they can't sell their old ones.

    The net result may be to reduce demand rather than increasing it.

    This is a dumb idea. Person A makes a copy of the game they just bought. Person B puts it in their console and pays $10-$20 to unlock the 'used game'. gg.

    I put $1000 into Star Citizen because Chris Roberts is making a game I want to play. The games industry is dying because as a whole it is being run by retards with no idea of what people want to buy or play. NOONE WANTS DLC+++ Noone wants to buy 50,000 shitty addons to your crap game that's a remake of 50 other games (all in genres that Are old, stale, have 50+ competitors out right now and which are boring). MMOs are a small genre they are not the new frontier of gaming. The real games that people want to play have genuine compelling stories and reasonable graphics. Squadron 42 is going to give me the STORY I've been wanting to hear. Star Citizen is going to give me the twitch-based online space combat I've wanted since 1997 when Wing Commander: Secret Ops came out. I refuse to spend money on the shit that the industry is pumping out and expects me to pay $110 for the privilege of tainting my systems with. EA has spent the last 15 years driving awesome companies into the ground with shitty business models and I hope they reap what they've sown. I haven't bought one of their games since Emperor: Battle for dune. I don't expect I ever will again unless by some miracle they start making some decent titles. Syndicate was a travesty. Thank god they didn't make another Wing Commander.

    Last edited 24/05/13 8:57 pm

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