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Lolthien avatar 2:07 PM on 07.16.2009
What can used games sales tell us?

These recent stories about a rebellion against used games from the various game makers has gotten me thinking. Why are used game sales so bad from a producer's standpoint? Why are so many used games being sold? Is there anything that can be done to resolve the conflict there?

The first question is pretty easy to answer. Basically Game Publishers, and by extension the development companies that rely on the publishers for their royalties, only get money from the first sale of any particular game. And they get a large portion of it too. A retailer may only see a dollar or maybe two in profit on new game sales, the rest of our $60 goes straight to the publisher, and from there a portion goes on to developers, marketers, etc. Therefore, they see each used game sale (from which they receive NO money at all) as a lost sale. After all, if a used version of RTS Shooter 2k..er 10, is not available, then a customer would simply pay full price for a new copy, and thus for each used copy that is bought, one less new copy is sold.

Obviously from this goes our second question, why are so many being sold. Obviously retailers are pushing used games hard because they receive 100% of the profit on that used game themselves. The only cost is the pittance they pay those who turn in used games, and instead of the one or two dollar profit they would see on a new game, they might see twenty, thirty, or possibly forty dollars in profit from the sale. Therefore any retailer would be crazy not to push used games as much as possible.

To the consumer, the choice is obvious. If the game plays the same, and is indistinguishable from a new retail copy except that it is five or ten dollars cheaper, what kind of person would pay full price?

And I think therein lies the solution. Price. If games cost $30 instead of $60, how many more new copies would be sold during the first week before any used were available? In my head I can already hear some of you saying, "Twice as many.. duh".. out there in internetland. But from some basic research already done on the Steam Network suggests that the increase in sales could be ten times or more. As many other non-video-game experiments with markets forces suggest, there is a threshold most people have in their head relating to disposable income. Anything below that mark doesn't seem to register as money even worth counting as spent. (Yours for only $19.99 anyone?)

In fact, 2K games tried this YEARS ago with their last officially endorsed NFL game NFL 2K5. And not only was that game well up to any measurable standards of the time, it is widely considered the best of any of the NFL 2K games, and enjoyed a huge surge in sales large enough to scare EA into signing an exclusive deal with the NFL, effectively shutting down 2K Sports football franchise.

Reduced pricing for games really is the only option for these game publishers to short circuit the chain of used game sales being exploited by Gamestop and others is to lower the retail cost of new games when they are still brand new. Obviously, the executives and stockholder boards at these companies are scared pantsless that lowering the initial cost will make their rampant profits over the past decade or so go up in smoke... and I'm no economist so that might be true. But it seems to me, that if there is a market for lower priced games (not necessarily USED games) they would be fools to not find a way into that market.

So that's my challenge to the game publishers: EA.. make the next Madden cost $19.99! Ubisoft.. make the next Splinter Cell priced at $19.99! What is the worst that would happen? You only make one third the profits if the exact same number of people buy your game. And yes, that would be bad, but if TEN TIMES the number of people buy your game, then you've increased sales by more than three times. And profits come pouring in from there.

So, I invite comment from the Dtoid community, am I crazy? What have I forgotten? Is this the best idea ever and you happen to be president of EA and want to offer me a job as VP of Marketing??? Just let me know below!

Tagged:    cblog    Industry events  

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