Are Used Games to Blame?

Money Talks.

We've all heard of the used games market and how it's the cause of the downward spiral of profits publishers are used to but in reality, could it truly that simple?  Retailers such as Gamestop/EB Games are certainly to blame as they have trivialized the concept of re-selling games and taken the "stigma" of pawn-shops out of reselling your finished games.  But how much of the decline in sales and profits is because of the used games market and is there anything publishers can do to stop this trend?

In possibly the most famous of interviews where a developer directly attacks the used games markets, Epic Games President Dr. Michael Capps describes the used games market as an enemy to developers.  The interview he gave to gamesindustry.biz is filled with examples of how secondary markets are the reason why developers are losing sales and profits are dropping despite having the largest population of players in they history of gaming.  His point of view is that the publishers do not see a dime from secondary sales, while their primary retail partners are making the majority of its profits from secondary sales.  This all boils down to money folks.

It's certainly understandable that publishers, as any other content creator, needs to make a living.  And by you purchasing the game first hand rather than second hand ensures your money is going directly to support the people that are making these games.  However, the problem comes when you look at the price and cost of these retail games.  Here in Canada, your average new release title costs $60-70 depending on its popularity.  If you're a frugal person, you would have to wait the larger part of a year before a price drop in that game would occur - often times a price drop of $10-15 at most.  Again, this all boils down to money.

Capps suggested that if the secondary market continues to grow, measures such as paid unlockables would be implemented.  What he's saying isn't extra content or special features.  He gives the example of the final boss in Gears of Wars 2 and how if you did not own the original version of the game, you would go online to pay a fee to fight the final boss and finish the game.  Where if you purchased the game first hand, you would have the unlock code already.  This is similar to the age old arcade concept of "Please insert more coins to continue." How in the world could publishers think a decade old strategy could work again?  I believe the key is not looking at video game developers as gamers but as business owners and executives.

For those of you that are familiar with the corporate culture, very few and often disconnected people makes 90% of the decisions.  These are the people I call the "upper minority".  The gaming industry is no different.  So for Epic and others in similar positions to believe that locking down content is sound and thereby protecting their profits is not surprising.  What this basically turns to is encouraging piracy and development of further tools that allow for the consumer to find EVEN BETTER prices.

Valve's president Gabe Newell has already said during this year's DICE keynote, that piracy is a reaction to the lack of service being presented to the public.  He argues that pirates are people that spend thousands on their machines and equipment so gaining something that is normally $60 isn't much of a motivation.  DRM itself is harming the industry more than it's doing good.  By placing too much DRM in games, it forces consumers to look at alternatives and that when pirated versions WITHOUT the DRM starts to look more enticing.

Newell also continues to address the theory that a game cannot be on sale until the end of its life cycle.  He uses the examples of Team Fortress 2, where after every major update, sales goes up over 100% and retail sales also goes up by over 25%!  With a more recent title such as Left 4 Dead, by dropping the price from $40 to $25 a few weekends ago, Valve ended up selling 3000% more copies than the week before!  That one weekend's sale price pushed more copies then when the game first launched.  This goes to prove that longevity can be had with some creative marketing for a good product, not by adding DRM schemes and requiring additional "quarters" to continue to keep playing.  By enticing new players to buy your original content and by keeping it fresh and free/cheap, you reduce the need for players to seek used games to save that extra buck.

With competing thoughts from two big-wigs of the gaming industry and representatives of the "upper minority" as suggested before, how does a designer and worker bee feel about the used games market?  Soren Johnson, project lead and designer for Civilization 4, said in a post on his personal blog that Gamestop is part of the games industry and that the used games market helps to segment the industry as a whole.  Consumers needs products at every price point and with all games selling at the $50-60 mark, it greatly limits who will be buying your products.

However, he does support Epic's idea of paying extra if you've purchased the used copy to gain extras.  This is a fundamentally flawed point as it ties back directly to what Newell pointed out.  You are trying to create value in the new retail game by making the used version less attractive while pirates are making the full pirated version even MORE attractive by offering it for free.

The one point he makes with digital distribution is the costs involved.  Not everyone can have the broadband connections necessary to pull content and not every game is cheaper on Steam than retail.  He gives the example of Civilization 4.  When Civ 4 was released, it was selling for $29.99 on Steam while the Amazon.com copy was selling for $24.XX.  That's customers under-served.

What is absolutely necessary is a revamping of the whole notion of content distribution.  iTunes has shown the world that digital music is the way of the future and the sooner labels recognize that, the better.  While there is not one ultimate iTunes equivalent in gaming, Steam is getting close.  While Steam inherently has DRM as each title you purchase is tied to your account only, it doesn't stop you from sharing your login with a friend so they can also try out the game (which is the whole fair use bit).  As long as you have your account information, you will always have access to the games you've purchased from Steam.  You can install it as many times as you like as long as you are logged into your account. Steam is not perfect but it's certainly trying the hardest to make this future of games work for the consumer and the developer.  

The used games market isn't to blame for the decline in sales and profits.  It's the developer's unwillingness to be open to price changes, inability to react to market conditions and reluctance to trust its consumers that's causing its pocket book to shrink.  I personally would rather buy a new game than a used one because of the perceived value in new games.  But when the local video store sells its rental units of GTA4 and COD4 at two for $40 only four weeks after release, I can't argue with the added value in saving $60.  If GTA4 launched on Steam for $40 originally, I probably would have paid the extra $20 just to have it 4 weeks earlier. But since it didn't and launched with poor implementation on the PC months after its console counterpart, giving $20 to my video store didn't seem like a bad idea.