surf dtoid with 
Rising (10+)
People you follow
send message
follow
followers
An interesting argument and personally I think that the online pass is simply an interim measure before games go to a digital format eventually at some point in the future anyway.
I do however think that online passes should allow online play up to a certain level or for a certain amount of time to let gamers try out the game... for those that do borrow the game from a friend or rent the game (or have other gamers in the household considering buying a second copy for online play - both my husband and myself have our own PS3 units and it's not unusual for us to buy one copy then for each of us to try out the online and if both of us like it, we'll buy a second copy so we can play online together. Buying 2 copies can be too expensive, especially if the game is a piece of crap like so many are nowadays).
I do however think that online passes should allow online play up to a certain level or for a certain amount of time to let gamers try out the game... for those that do borrow the game from a friend or rent the game (or have other gamers in the household considering buying a second copy for online play - both my husband and myself have our own PS3 units and it's not unusual for us to buy one copy then for each of us to try out the online and if both of us like it, we'll buy a second copy so we can play online together. Buying 2 copies can be too expensive, especially if the game is a piece of crap like so many are nowadays).
"An interesting argument and personally I think that the online pass is simply an interim measure before games go to a digital format eventually at some point in the future anyway. " - Yeah, I think this is largely true. I guess my Steam example speaks to that, haha.
"I do however think that online passes should allow online play up to a certain level or for a certain amount of time to let gamers try out the game" - Yeah, don't take anything I've said as tacit approval for the -way- online passes are instituted. I'm sure there are stupid little issues here and there that just could be better dealt with. However, economically, it's win, win for gamers and developers. The better the system of online passes is, the more true this is.
I also wonder how online passes will affect multiplayer for less popular games. Will this create an incentive to maintain multiplayer for longer? Interesting possibility, although this is not part of my main argument at all. Just thinking out loud.
"I do however think that online passes should allow online play up to a certain level or for a certain amount of time to let gamers try out the game" - Yeah, don't take anything I've said as tacit approval for the -way- online passes are instituted. I'm sure there are stupid little issues here and there that just could be better dealt with. However, economically, it's win, win for gamers and developers. The better the system of online passes is, the more true this is.
I also wonder how online passes will affect multiplayer for less popular games. Will this create an incentive to maintain multiplayer for longer? Interesting possibility, although this is not part of my main argument at all. Just thinking out loud.
"So, to recap: online passes will NOT destroy the gaming market; they CAN create a better distribution of resources (gamers and developer, not gamer, developer, and GameStop); they create more options for gamers; and the used market metaphor really says nothing about them."
Agreed. But there is something you're missing on the whole, and it's a pretty important thing if you want to be pragmatic about the world rather than idealistic:
People like simple. It's something that, unsurprisingly, a lot of folks tend to ignore or simply not take into account in their calculations of the world. People will defend things which are indefensible, so long as they are simple. People will demand you believe a lie, as long as it's simple. Truth tends to be inherently more strange and complex.
So, here's the problem; your explanation is correct, but too complicated. There are millions of gamers out there with their own wants and needs, and what is your explanation to them? Crap. Useless, meaningless crap. You know what matters to them? That they can get a game that's $60 for $50. Or $40/$30/$20 with trade-ins. It's simple. It's easy to understand. "How could something so simple be a problem?", they might ask. "It's impossible." You talk about the economics of the issue, but you ignore the most compelling thing about it; people don't think about the big picture. They think small. They think simple.
That is not the case for all, but it is important to take into account the manifestations of your opponents (those being people who are pro-used games, in this case), and you can not win all of them over with logic or even cleverly discussed and well thought out arguments. People can be shockingly determined to be stupid if they feel it's in their best interest. They often revel in it, in fact.
"If you agree with this basic argument then.. why do you want to see money go to Gamestop?"
For most people, it's because they don't think of the money going to anyone. They see the money as being exchanged for something. You need to understand this about people, in day to day life; they lean toward narcissism. Not in the extremely deeply self-absorbed way, it's just something that happens as a general course of being human. What happens with money once it's out of their personal sphere of influence is of little consequence to them. Their focus shifts strictly to whatever they've selected for purchase; that item has moved into their pockets, and their money has gone out. It's not about money going to Gamestop, it's about a game that is now in the hands of the person who paid for it. That payment can be lower with used games, and that makes it easier to get more games right now for less money. That is very simple, and thus very compelling. More compelling, I'm afraid, than much of what you've written.
Which is a sad thing, but unbearably true.
Agreed. But there is something you're missing on the whole, and it's a pretty important thing if you want to be pragmatic about the world rather than idealistic:
People like simple. It's something that, unsurprisingly, a lot of folks tend to ignore or simply not take into account in their calculations of the world. People will defend things which are indefensible, so long as they are simple. People will demand you believe a lie, as long as it's simple. Truth tends to be inherently more strange and complex.
So, here's the problem; your explanation is correct, but too complicated. There are millions of gamers out there with their own wants and needs, and what is your explanation to them? Crap. Useless, meaningless crap. You know what matters to them? That they can get a game that's $60 for $50. Or $40/$30/$20 with trade-ins. It's simple. It's easy to understand. "How could something so simple be a problem?", they might ask. "It's impossible." You talk about the economics of the issue, but you ignore the most compelling thing about it; people don't think about the big picture. They think small. They think simple.
That is not the case for all, but it is important to take into account the manifestations of your opponents (those being people who are pro-used games, in this case), and you can not win all of them over with logic or even cleverly discussed and well thought out arguments. People can be shockingly determined to be stupid if they feel it's in their best interest. They often revel in it, in fact.
"If you agree with this basic argument then.. why do you want to see money go to Gamestop?"
For most people, it's because they don't think of the money going to anyone. They see the money as being exchanged for something. You need to understand this about people, in day to day life; they lean toward narcissism. Not in the extremely deeply self-absorbed way, it's just something that happens as a general course of being human. What happens with money once it's out of their personal sphere of influence is of little consequence to them. Their focus shifts strictly to whatever they've selected for purchase; that item has moved into their pockets, and their money has gone out. It's not about money going to Gamestop, it's about a game that is now in the hands of the person who paid for it. That payment can be lower with used games, and that makes it easier to get more games right now for less money. That is very simple, and thus very compelling. More compelling, I'm afraid, than much of what you've written.
Which is a sad thing, but unbearably true.
Hmm, I have to disagree with you.
The situation you paint seems quite odd - you think that the crippled used games market would result in less game sales in general (which I agree) and that would make companies to lower prices to sell more. But you seem to be forgetting that the used games market is already an incentive to lower prices! Do you really think that publishers would risk putting game prices so low that people who used to buy used games would buy new ones even though they would still have to pay for online passes? I can't see this happening.
You use Steam as an example, but that is a totally different circumstance. Steam is an digital platform that millions of people world-wide use, and not a retail store that only acts in one or two countries. Since they have access to a much wider market and they don't have to deal with shipping and other costs, and since it's incredible ease to just buy a game and have it on your computer without leaving your home (not to mention the marketing is much more effective), they can allow themselves to put very low prices because it sells like water. Steam and retailers like GameStop have very different characteristics, you can't compare them.
You are also forgetting that online passes don't block exclusively the multiplayer portion. There are online passes that block singleplayer content that are already in the disc, like the PS3 version of Mass Effect 2.
And though lots of people justify the use of online passes because of "server costs", I don't see how that would be a problem. Because, you see, there will never be more players using the multiplayer than the number of people who bought the game new. Even though someone who bought a used game might use the multiplayer regularly (which is not always the case, since many people who buys used games eventually trades them for credit), it would be like the original buyer were still playing multiplayer. No additional costs for the developers. Also, by having the multiplayer always with some new people (playing through new or used copies), it ensures the game has a community to keep the game alive and buy DLC or simply cultivate the interest to a sequel.
Finally, I would like to say that I spend my childhood buying only used games for consoles. I live in a different country and the situation is different, but still, if I didn't have access to videogames in my childhood (because new games were too pricey), I very probably wouldn't waste the money I waste on them now. It's like McDonald's - they aim mostly at children because they know they are cultivating kids that will grow to buy hamburguers in the future. A lot of people wouldn't like McDonald's hamburguers if they didn't use to eat them in the past.
The situation you paint seems quite odd - you think that the crippled used games market would result in less game sales in general (which I agree) and that would make companies to lower prices to sell more. But you seem to be forgetting that the used games market is already an incentive to lower prices! Do you really think that publishers would risk putting game prices so low that people who used to buy used games would buy new ones even though they would still have to pay for online passes? I can't see this happening.
You use Steam as an example, but that is a totally different circumstance. Steam is an digital platform that millions of people world-wide use, and not a retail store that only acts in one or two countries. Since they have access to a much wider market and they don't have to deal with shipping and other costs, and since it's incredible ease to just buy a game and have it on your computer without leaving your home (not to mention the marketing is much more effective), they can allow themselves to put very low prices because it sells like water. Steam and retailers like GameStop have very different characteristics, you can't compare them.
You are also forgetting that online passes don't block exclusively the multiplayer portion. There are online passes that block singleplayer content that are already in the disc, like the PS3 version of Mass Effect 2.
And though lots of people justify the use of online passes because of "server costs", I don't see how that would be a problem. Because, you see, there will never be more players using the multiplayer than the number of people who bought the game new. Even though someone who bought a used game might use the multiplayer regularly (which is not always the case, since many people who buys used games eventually trades them for credit), it would be like the original buyer were still playing multiplayer. No additional costs for the developers. Also, by having the multiplayer always with some new people (playing through new or used copies), it ensures the game has a community to keep the game alive and buy DLC or simply cultivate the interest to a sequel.
Finally, I would like to say that I spend my childhood buying only used games for consoles. I live in a different country and the situation is different, but still, if I didn't have access to videogames in my childhood (because new games were too pricey), I very probably wouldn't waste the money I waste on them now. It's like McDonald's - they aim mostly at children because they know they are cultivating kids that will grow to buy hamburguers in the future. A lot of people wouldn't like McDonald's hamburguers if they didn't use to eat them in the past.
"but I don't think they're that imaginative"...
I think that's the problem here. If online passes were designed to actually promote price discrimination amongst consumers (i.e. $50 new games + $10 online passes, each sold separately) then I think online passes would be great. However, under their current implementation, the goal of publishers appears to be to create disincentives to buy used NOT incentives to buy new. If they actually priced their products to account for price discrimination I think the online pass system would function much better. But publishers do not seem willing to give up their $60 price point.
The funny thing in all this is that publishers may be inadvertently creating incentives to buy used games. Assume that gamers who trade games in are most likely going to do so regardless of the trade-in value. Also assume (and I believe this is true, not positive though) that a large majority of people who own consoles don't play online games or even have their consoles connected to the internet. If prices for trade-ins decrease, and consequently the sales price for used games decrease to account for the online pass, and new games remain at the same $60 price point (with packed-in online passes) then the price disparity between used and new games will grow. And for that majority of gamers who don’t game online their incentive to purchased used games has just increased. So publishers may be shooting themselves in the foot. Interesting to think about….
I think that's the problem here. If online passes were designed to actually promote price discrimination amongst consumers (i.e. $50 new games + $10 online passes, each sold separately) then I think online passes would be great. However, under their current implementation, the goal of publishers appears to be to create disincentives to buy used NOT incentives to buy new. If they actually priced their products to account for price discrimination I think the online pass system would function much better. But publishers do not seem willing to give up their $60 price point.
The funny thing in all this is that publishers may be inadvertently creating incentives to buy used games. Assume that gamers who trade games in are most likely going to do so regardless of the trade-in value. Also assume (and I believe this is true, not positive though) that a large majority of people who own consoles don't play online games or even have their consoles connected to the internet. If prices for trade-ins decrease, and consequently the sales price for used games decrease to account for the online pass, and new games remain at the same $60 price point (with packed-in online passes) then the price disparity between used and new games will grow. And for that majority of gamers who don’t game online their incentive to purchased used games has just increased. So publishers may be shooting themselves in the foot. Interesting to think about….
The market doesn't just magically "respond" to people not buying stuff, as you argue. There will be a lag time, if they even change at all. In that lag time, the gaming market COULD crash. You forget that companies and publishers are as thick as arctic ice. If they haven't budged from their 60 dollar price points due to the global recession, they certainly won't because of this.
I didn't need to read any further than your first point because your entire thesis is set not in facts, but whether someone higher up will make a good or fair business decision. You can't rely on that as economic fact.
I didn't need to read any further than your first point because your entire thesis is set not in facts, but whether someone higher up will make a good or fair business decision. You can't rely on that as economic fact.
@Blindfire: Yeah, I definitely agree that this is too complicated for the mass argument. Consider it a start
@Time Glitch: "The market doesn't just magically "respond" to people not buying stuff, as you argue. There will be a lag time, if they even change at all. In that lag time, the gaming market COULD crash. You forget that companies and publishers are as thick as arctic ice. If they haven't budged from their 60 dollar price points due to the global recession, they certainly won't because of this.
I didn't need to read any further than your first point because your entire thesis is set not in facts, but whether someone higher up will make a good or fair business decision. You can't rely on that as economic fact."
I guess you're exactly the kind of person BlindFire was talking about. You didn't even read the whole argument, yet you dismiss it entirely.
Like I said, game companies already do EVERYTHING I talk about. Companies and retail outlets respond to LOW SALES NUMBERS with LOWER PRICES. Think about ANY GAME OUT THERE, and you will notice that the 60 dollar price point gets abandoned within WEEKS. I really don't understand what your argument is. Why is it that game companies can respond to slow sales with any cause EXCEPT the dreaded online pass effect? Jesus Christ, if the market worked the way you think it works, there wouldn't BE any market. We'd all be communists because capitalists would be borderline retarded.
I mean, can you just imagine this conversation? "Hey Bob, our sales of World War II III are low." "Well, we should probably have a sale or something." "Well, we just instituted this whole online pass thing. We should probably never have a sale ever again." "Oh my God, we're going bankrupt!" "With my last breath.. no.. more.. sales....**dies**"
@Time Glitch: "The market doesn't just magically "respond" to people not buying stuff, as you argue. There will be a lag time, if they even change at all. In that lag time, the gaming market COULD crash. You forget that companies and publishers are as thick as arctic ice. If they haven't budged from their 60 dollar price points due to the global recession, they certainly won't because of this.
I didn't need to read any further than your first point because your entire thesis is set not in facts, but whether someone higher up will make a good or fair business decision. You can't rely on that as economic fact."
I guess you're exactly the kind of person BlindFire was talking about. You didn't even read the whole argument, yet you dismiss it entirely.
Like I said, game companies already do EVERYTHING I talk about. Companies and retail outlets respond to LOW SALES NUMBERS with LOWER PRICES. Think about ANY GAME OUT THERE, and you will notice that the 60 dollar price point gets abandoned within WEEKS. I really don't understand what your argument is. Why is it that game companies can respond to slow sales with any cause EXCEPT the dreaded online pass effect? Jesus Christ, if the market worked the way you think it works, there wouldn't BE any market. We'd all be communists because capitalists would be borderline retarded.
I mean, can you just imagine this conversation? "Hey Bob, our sales of World War II III are low." "Well, we should probably have a sale or something." "Well, we just instituted this whole online pass thing. We should probably never have a sale ever again." "Oh my God, we're going bankrupt!" "With my last breath.. no.. more.. sales....**dies**"
@kalidan: "If prices for trade-ins decrease, and consequently the sales price for used games decrease to account for the online pass, and new games remain at the same $60 price point (with packed-in online passes) then the price disparity between used and new games will grow."
This is exactly the central argument I debunked above. The thing is, you don't NEED to change the initial 60 dollar price point in order for online passes to be good rather than bad. I think that is the long-run result, but, really, it's immaterial. As I've stated before, companies will respond by dropping prices both more quickly and more significantly. They already do this for every other reason. I have yet to see any reason why this should be any different. Exactly why would low sales from the online pass effect have a different effect than low sales for any other reason? Why would companies not respond the exact same way? I'm utterly perplexed by this.
@Time Glitch: One other thing I just realized. You argue that the adjustment time for this could be slow. But, again, the whole anti-Online Pass group acts like the used game market adjusts instantly and perfectly to any subtle nudge, while retail outlets and game publishers are moronic retards unwilling to budge for any reason. If the market doesn't just magically adjust, then we should see slow and gentle adjustment across both the used and new game markets. Why should we expect the one to be more rapid than the other?
This is exactly the central argument I debunked above. The thing is, you don't NEED to change the initial 60 dollar price point in order for online passes to be good rather than bad. I think that is the long-run result, but, really, it's immaterial. As I've stated before, companies will respond by dropping prices both more quickly and more significantly. They already do this for every other reason. I have yet to see any reason why this should be any different. Exactly why would low sales from the online pass effect have a different effect than low sales for any other reason? Why would companies not respond the exact same way? I'm utterly perplexed by this.
@Time Glitch: One other thing I just realized. You argue that the adjustment time for this could be slow. But, again, the whole anti-Online Pass group acts like the used game market adjusts instantly and perfectly to any subtle nudge, while retail outlets and game publishers are moronic retards unwilling to budge for any reason. If the market doesn't just magically adjust, then we should see slow and gentle adjustment across both the used and new game markets. Why should we expect the one to be more rapid than the other?
There is one major flaw with the initial argument of this blog. Yes the market can respond to a drop in game sales and lower prices, but all that does is put everything back at square one. The online pass is there to make up lost money, so to let it do its thing we are going to take losses in this other proven method. It is completely and utterly pointless, as well as a waste of time and money.
Second, why is Gamestop a bad thing? Yes you pay more and get less for your money and trade ins, but that is the point of a middle man. The extra loss is the cut for convenience, and personally I find going to EB or Gamestop a hell of a lot more convenient than shipping a game I sold on Ebay if all i'm going to do with the money is buy another game.
Second, why is Gamestop a bad thing? Yes you pay more and get less for your money and trade ins, but that is the point of a middle man. The extra loss is the cut for convenience, and personally I find going to EB or Gamestop a hell of a lot more convenient than shipping a game I sold on Ebay if all i'm going to do with the money is buy another game.
@Script-br: Sorry I took so long getting to you. I wanted you to have your own post because I think you actually bring up a few good points. I disagree overall, but you've manage to disagree with me without assuming that total insanity rules the market.
"But you seem to be forgetting that the used games market is already an incentive to lower prices!"
I understand this argument, and, on face, it seems to make sense. Unfortunately, it's wrong. Why? Because of something I call the 5 dollar effect. Essentially, used games, at places like GameStop, are typically prices around 5 dollars less than new games. No matter what.
This creates two disincentives for companies to respond to used games by lowering prices. In other words, for the following reasons, used games do not lower prices.
1. Lowering prices to compete with used games does not actually help your place. The same 5 dollar gap will apply no matter how much the price is lowered. As a price competitor, used games will always beat out new gaems.
2. Because the 5 dollar effect is fairly consistent, it actually creates reasons NOT to lower prices. Why? Imagine two scenarios: in the first, you have a 60 dollar new game against a 55 dollar used game. In the second, you have a 30 dollar new game (let's say its 6 month after release and it's a minor title) and a 25 dollar used game. Same situation, right? Wrong. In the first, the 5 dollar effect leads to a de facto price savings of under 10% (about 8.3%). In the second, it's almost a 17% savings over the new game prices. In other words, since the 5 dollar effect tends to be consistent, prices drops to counter used games will be COUNTERPRODUCTIVE. They will actually make the used game even cheaper relative to the price of the new game.
There's also one other reason why used games are bad for overall prices. Let's imagine you have all the money spent on gaming in a year. Let's ignore a bunch of complications (retail outlets, delivery, etc.) and focus on three potential sources for this money: GameStop, the consumer, and game publishers. The more money that goes to GameStop means less money that goes to the consumer and/or the game publisher. Like I said in the main article, every dollar that goes to GameStop is a dollar not in your wallet or not paying for game development from your favorite companies.
"You use Steam as an example, but that is a totally different circumstance. Steam is an digital platform that millions of people world-wide use, and not a retail store that only acts in one or two countries. Since they have access to a much wider market and they don't have to deal with shipping and other costs, and since it's incredible ease to just buy a game and have it on your computer without leaving your home (not to mention the marketing is much more effective), they can allow themselves to put very low prices because it sells like water. Steam and retailers like GameStop have very different characteristics, you can't compare them."
I agree that Steam has more differences to the boxed game market than what I indicate. However, people argue that the inability to sell used games will crash the market or, at the least, increase prices. I argue that it will help the market and lower prices. Steam is one of the few examples of a gaming market run without the possibility of used game sales. Insofar as it is a reasonable example, it follows my logic far more than the anti-Online Pass logic. I don't think differences about delivery system and such make a big difference for this example. If there is more that I'm missing, I'd be curious to hear exactly how and why Steam is a bad example.
"You are also forgetting that online passes don't block exclusively the multiplayer portion. There are online passes that block singleplayer content that are already in the disc, like the PS3 version of Mass Effect 2. "
This is part of a general theme that I think has some truth to it. Let me separate two things out for a second. Let's separate out the "online pass" element from "companies being shitty." Let's say that the first entirely encapsulates the idea of making used game purchasers buy the online portion of the game. Let's say that everything else is in the second category.
Companies are already shitty in a lot of ways. Without online passes, multiplayer is already stupid a lot of the time. Nintendo.. friend codes? Seriously. Call of Duty elite, what? Sony's PSN going down. XBL costing money. These are all examples of companies being shitty. Shitty things happen regardless of whether or not the core online pass experience is around.
However, I do agree on one front: online passes perhaps increase the chances of companies doing shitty stupid things, and that's a potential negative. Here is just another hoop where things can go wrong; another joint that your armor doesn't protect so well. And, yes, I think there is potential for issues here.
The answer to this is not to throw the baby out with the bathwater. It's to focus on particularly stupid actions as they come. Is a company locking down both SP and MP content? Don't buy it and openly criticize it. Is a company used online passes as an opportunity to, I don't know, make you register for their forums or something? Respond as necessary. However, don't act like this is a central issue for the online pass idea. It's an issue of how companies act sometimes and how they implement the online pass idea.
"But you seem to be forgetting that the used games market is already an incentive to lower prices!"
I understand this argument, and, on face, it seems to make sense. Unfortunately, it's wrong. Why? Because of something I call the 5 dollar effect. Essentially, used games, at places like GameStop, are typically prices around 5 dollars less than new games. No matter what.
This creates two disincentives for companies to respond to used games by lowering prices. In other words, for the following reasons, used games do not lower prices.
1. Lowering prices to compete with used games does not actually help your place. The same 5 dollar gap will apply no matter how much the price is lowered. As a price competitor, used games will always beat out new gaems.
2. Because the 5 dollar effect is fairly consistent, it actually creates reasons NOT to lower prices. Why? Imagine two scenarios: in the first, you have a 60 dollar new game against a 55 dollar used game. In the second, you have a 30 dollar new game (let's say its 6 month after release and it's a minor title) and a 25 dollar used game. Same situation, right? Wrong. In the first, the 5 dollar effect leads to a de facto price savings of under 10% (about 8.3%). In the second, it's almost a 17% savings over the new game prices. In other words, since the 5 dollar effect tends to be consistent, prices drops to counter used games will be COUNTERPRODUCTIVE. They will actually make the used game even cheaper relative to the price of the new game.
There's also one other reason why used games are bad for overall prices. Let's imagine you have all the money spent on gaming in a year. Let's ignore a bunch of complications (retail outlets, delivery, etc.) and focus on three potential sources for this money: GameStop, the consumer, and game publishers. The more money that goes to GameStop means less money that goes to the consumer and/or the game publisher. Like I said in the main article, every dollar that goes to GameStop is a dollar not in your wallet or not paying for game development from your favorite companies.
"You use Steam as an example, but that is a totally different circumstance. Steam is an digital platform that millions of people world-wide use, and not a retail store that only acts in one or two countries. Since they have access to a much wider market and they don't have to deal with shipping and other costs, and since it's incredible ease to just buy a game and have it on your computer without leaving your home (not to mention the marketing is much more effective), they can allow themselves to put very low prices because it sells like water. Steam and retailers like GameStop have very different characteristics, you can't compare them."
I agree that Steam has more differences to the boxed game market than what I indicate. However, people argue that the inability to sell used games will crash the market or, at the least, increase prices. I argue that it will help the market and lower prices. Steam is one of the few examples of a gaming market run without the possibility of used game sales. Insofar as it is a reasonable example, it follows my logic far more than the anti-Online Pass logic. I don't think differences about delivery system and such make a big difference for this example. If there is more that I'm missing, I'd be curious to hear exactly how and why Steam is a bad example.
"You are also forgetting that online passes don't block exclusively the multiplayer portion. There are online passes that block singleplayer content that are already in the disc, like the PS3 version of Mass Effect 2. "
This is part of a general theme that I think has some truth to it. Let me separate two things out for a second. Let's separate out the "online pass" element from "companies being shitty." Let's say that the first entirely encapsulates the idea of making used game purchasers buy the online portion of the game. Let's say that everything else is in the second category.
Companies are already shitty in a lot of ways. Without online passes, multiplayer is already stupid a lot of the time. Nintendo.. friend codes? Seriously. Call of Duty elite, what? Sony's PSN going down. XBL costing money. These are all examples of companies being shitty. Shitty things happen regardless of whether or not the core online pass experience is around.
However, I do agree on one front: online passes perhaps increase the chances of companies doing shitty stupid things, and that's a potential negative. Here is just another hoop where things can go wrong; another joint that your armor doesn't protect so well. And, yes, I think there is potential for issues here.
The answer to this is not to throw the baby out with the bathwater. It's to focus on particularly stupid actions as they come. Is a company locking down both SP and MP content? Don't buy it and openly criticize it. Is a company used online passes as an opportunity to, I don't know, make you register for their forums or something? Respond as necessary. However, don't act like this is a central issue for the online pass idea. It's an issue of how companies act sometimes and how they implement the online pass idea.
"There is one major flaw with the initial argument of this blog. Yes the market can respond to a drop in game sales and lower prices, but all that does is put everything back at square one. The online pass is there to make up lost money, so to let it do its thing we are going to take losses in this other proven method. It is completely and utterly pointless, as well as a waste of time and money."
I responded to this point in the blog. The short version is this: any dollar that goes to GameStop is a dollar that does not go to you or the game developer. Insofar as more dollars go to the game developer or the consumer, we all experience a net gain over the current state of affairs.
"
Second, why is Gamestop a bad thing? Yes you pay more and get less for your money and trade ins, but that is the point of a middle man. The extra loss is the cut for convenience, and personally I find going to EB or Gamestop a hell of a lot more convenient than shipping a game I sold on Ebay if all i'm going to do with the money is buy another game."
Like I said, any dollar that goes to GameStop is money that is not in your wallet or is not being used to make video games.
I responded to this point in the blog. The short version is this: any dollar that goes to GameStop is a dollar that does not go to you or the game developer. Insofar as more dollars go to the game developer or the consumer, we all experience a net gain over the current state of affairs.
"
Second, why is Gamestop a bad thing? Yes you pay more and get less for your money and trade ins, but that is the point of a middle man. The extra loss is the cut for convenience, and personally I find going to EB or Gamestop a hell of a lot more convenient than shipping a game I sold on Ebay if all i'm going to do with the money is buy another game."
Like I said, any dollar that goes to GameStop is money that is not in your wallet or is not being used to make video games.
Also, to those that thing this is a big stink over nothing: http://www.joystiq.com/2009/01/23/gamestop-used-games-revenue-estimated-to-be-2-billion/ - Gamestop's 2009 revenue for used games ALONG was 2 billion dollars.
2 billion dollars. Not being used to make games. Not being used to buy games.
http://www.theesa.com/facts/pdfs/VideoGames21stCentury_2010.pdf - By comparison, according to The ESA, total gaming sales were 10 billion dollars.
Is it any wonder that companies hate GameStop?
2 billion dollars. Not being used to make games. Not being used to buy games.
http://www.theesa.com/facts/pdfs/VideoGames21stCentury_2010.pdf - By comparison, according to The ESA, total gaming sales were 10 billion dollars.
Is it any wonder that companies hate GameStop?
@killias2 That is a NOT bad thing though. That IS capitalism 100%. As someone who made it very apparent in your blog post that you are scared of communism, why do you see this as bad?
Plus that was not a response to my point. My point is that the change you suggest will keep the money exchange exactly where it is, not to mention that gamestop can only benefit from that situation by having the money to cut a deal to be the middle man to sell the online passes.
Plus that was not a response to my point. My point is that the change you suggest will keep the money exchange exactly where it is, not to mention that gamestop can only benefit from that situation by having the money to cut a deal to be the middle man to sell the online passes.
"That is a NOT bad thing though. That IS capitalism 100%. As someone who made it very apparent in your blog post that you are scared of communism, why do you see this as bad? "
By the same token, ditto with online passes. It's just capitalism.
"My point is that the change you suggest will keep the money exchange exactly where it is, not to mention that gamestop can only benefit from that situation by having the money to cut a deal to be the middle man to sell the online passes."
Umm, what? If you take that 2 billion dollars in used game revenue and distribute it to game developers (who will make new games with it!) and game consumers (who will buy more games with it!), how is that not a net positive?
By the same token, ditto with online passes. It's just capitalism.
"My point is that the change you suggest will keep the money exchange exactly where it is, not to mention that gamestop can only benefit from that situation by having the money to cut a deal to be the middle man to sell the online passes."
Umm, what? If you take that 2 billion dollars in used game revenue and distribute it to game developers (who will make new games with it!) and game consumers (who will buy more games with it!), how is that not a net positive?
" If you take that 2 billion dollars in used game revenue and distribute it to game developers (who will make new games with it!) and game consumers (who will buy more games with it!), how is that not a net positive?"
Because it wont be, simple as that. As I already said, gamestop would end up being the one selling the online passes, and publishers will make less money from new games sales. They will be lucky if they make as much as they do now, and gamestop will the only one making any real profit.
Because it wont be, simple as that. As I already said, gamestop would end up being the one selling the online passes, and publishers will make less money from new games sales. They will be lucky if they make as much as they do now, and gamestop will the only one making any real profit.
"As I already said, gamestop would end up being the one selling the online passes"
GameStop can sell online passes, but I think this is a situation that would end up looking more like buying PSN credit or something like that at a retail distributor. The retail outlet would make a small cut (not unlike new game sales), but, for the most part, the money would go to game developers as well as encouraging higher new game sales. I mean, this seems more like an expansion of GameStop's new game sales rather than anything approaching their Pawn-o-graphic nature.
"publishers will make less money from new games sales. " - They would make less -per sale-, but they would sell more new games (because less used games are being sold). The money doesn't just disappear here.
"They will be lucky if they make as much as they do now, and gamestop will the only one making any real profit."
Honestly, I have no idea where you're coming up with these conclusions. Can you explain your view of the gaming economy to me?
GameStop can sell online passes, but I think this is a situation that would end up looking more like buying PSN credit or something like that at a retail distributor. The retail outlet would make a small cut (not unlike new game sales), but, for the most part, the money would go to game developers as well as encouraging higher new game sales. I mean, this seems more like an expansion of GameStop's new game sales rather than anything approaching their Pawn-o-graphic nature.
"publishers will make less money from new games sales. " - They would make less -per sale-, but they would sell more new games (because less used games are being sold). The money doesn't just disappear here.
"They will be lucky if they make as much as they do now, and gamestop will the only one making any real profit."
Honestly, I have no idea where you're coming up with these conclusions. Can you explain your view of the gaming economy to me?
Its simple, I honestly do not see the increased amount of new game sales making up for the loss per unit sold. Not to mention during that middle period where people quit buying games before the prices lower, many people will fall out of the habit of buying games. The only way this would work is a total overhaul of the industry all at once. Which why would a 12 billion dollar industry do that? Again that brings me to my original point, the whole idea is a waste of time and effort. If you want to sell more games, encourage people to buy new instead of punishing others for buying used.
"Exactly why would low sales from the online pass effect have a different effect than low sales for any other reason? Why would companies not respond the exact same way? I'm utterly perplexed by this."
I'm not saying they would not lower the price after release more quickly if new sales are bad. They most likely would. Which in turn would cause the price of used copies to drop as well as trade-in values. My point in that paragraph is that the online pass has the potential to increase the disparity in pricing between new and used games due to the "extra" cost of an online pass, making used games more attractive to potential customers. This point becomes interesting when you consider that many console owners don't play online games. I simply find it interesting that publishers could possibly be creating more of an incentive to buy used when they appear to be trying to create incentives to buy new.
"Umm, what? If you take that 2 billion dollars in used game revenue and distribute it to game developers (who will make new games with it!) and game consumers (who will buy more games with it!), how is that not a net positive?"
"not a single dollar stays in the wallet of gamers"
I'm sure publishers/developers would love an extra 2 billion. But you aren't assumming that 2 billion in used profits is a bad thing are you? That 2 billion doesn't appear out of thin air. It comes from turning games into credit. So while gamers aren't receiving literal dollars, they are receiving a good (in this case credit). The service Gamestop provides is something people value, hence the profits. I don't personally find it valuable, but obviously many people do. And those who do use it obviously buy more games with that credit. So can't we consider that a "net positive" as well?
I'm not saying they would not lower the price after release more quickly if new sales are bad. They most likely would. Which in turn would cause the price of used copies to drop as well as trade-in values. My point in that paragraph is that the online pass has the potential to increase the disparity in pricing between new and used games due to the "extra" cost of an online pass, making used games more attractive to potential customers. This point becomes interesting when you consider that many console owners don't play online games. I simply find it interesting that publishers could possibly be creating more of an incentive to buy used when they appear to be trying to create incentives to buy new.
"Umm, what? If you take that 2 billion dollars in used game revenue and distribute it to game developers (who will make new games with it!) and game consumers (who will buy more games with it!), how is that not a net positive?"
"not a single dollar stays in the wallet of gamers"
I'm sure publishers/developers would love an extra 2 billion. But you aren't assumming that 2 billion in used profits is a bad thing are you? That 2 billion doesn't appear out of thin air. It comes from turning games into credit. So while gamers aren't receiving literal dollars, they are receiving a good (in this case credit). The service Gamestop provides is something people value, hence the profits. I don't personally find it valuable, but obviously many people do. And those who do use it obviously buy more games with that credit. So can't we consider that a "net positive" as well?
Maybe this example will be more clear.
Let's imagine some game. Let's call it World War II III.
Right now, somebody buys this game for 60 dollars new and trades it in for.. let's say 30. Someone else buys it used for 55 dollars.
So, total, 85 dollars are spent on this game. 60 dollars goes to the developer (actually, that money is cut up in a variety of ways, but let's focus here).
Imagine a world where, instead, the developer sells the game for 40 a copy. 80 dollars are spent instead of 85. However, the developer gets part of all 80 instead of just 60. Also, both purchasers get full, permanent copies of this game. It is a partial loss for a very small group of players: those who like to play a game immediately and then sell it immediately. For everyone else, game companies included, it's a win.
Also, the remaining 5 dollars.. well.. that probably goes to other games in the long-run.
Let's imagine some game. Let's call it World War II III.
Right now, somebody buys this game for 60 dollars new and trades it in for.. let's say 30. Someone else buys it used for 55 dollars.
So, total, 85 dollars are spent on this game. 60 dollars goes to the developer (actually, that money is cut up in a variety of ways, but let's focus here).
Imagine a world where, instead, the developer sells the game for 40 a copy. 80 dollars are spent instead of 85. However, the developer gets part of all 80 instead of just 60. Also, both purchasers get full, permanent copies of this game. It is a partial loss for a very small group of players: those who like to play a game immediately and then sell it immediately. For everyone else, game companies included, it's a win.
Also, the remaining 5 dollars.. well.. that probably goes to other games in the long-run.
To clarify, this is NOT supposed to be a representation of the post-online pass world. It's supposed to clarify the underlying mechanisms and how money going to GameStop is not money in our pocket or helping to fuel further game development.
I think the more realistic scenario is that the same 60 dollar initial price stays, but you see quicker and larger drops in price. So maybe by week three you're looking at 30 dollar new games on sale instead of 40 or 50. By month five 30 is less a sale price and more a permanent price, while, now, it takes closer to a year to see that.
However, the same long run mechanics apply. As I've argued, there is NO REASON to assume that companies will not respond to sluggish sales with price drops. As a result, over time, you should see lower prices, more money going directly to the developer, and more gamers enjoying games.
I think the more realistic scenario is that the same 60 dollar initial price stays, but you see quicker and larger drops in price. So maybe by week three you're looking at 30 dollar new games on sale instead of 40 or 50. By month five 30 is less a sale price and more a permanent price, while, now, it takes closer to a year to see that.
However, the same long run mechanics apply. As I've argued, there is NO REASON to assume that companies will not respond to sluggish sales with price drops. As a result, over time, you should see lower prices, more money going directly to the developer, and more gamers enjoying games.
"If you want to sell more games, encourage people to buy new instead of punishing others for buying used."
How do you encourage buying new unless you provide some sort of incentive for buying new? Am I missing something here?
"Its simple, I honestly do not see the increased amount of new game sales making up for the loss per unit sold."
Why? Where does the money go? It's not like they have to drop the price -that- much to make up for the trade-in effect. You make it seem so simple, but I honestly have no idea why this would be true.
"Not to mention during that middle period where people quit buying games before the prices lower, many people will fall out of the habit of buying games."
Again, this implies that the used game market reacts instantly to changes while the new game market is slow and idiotic. In reality, both would be reacting slowly and simultaneously. Online passes become more widespread -> slow drop in trade in prices -> slow drop in trade-in fueled sales -> slow drop in new game prices to counteract drop in sales. I don't see why we should see steps 1-3 happen instantly and then wait 6 months for the final step. I also don't know why anyone would drop out of the gaming market. How many people do you even know that use trade-ins to fuel buying? I don't know anyone. Also, even ignoring the inevitable response to sluggish sales, game prices drop constantly. Just because you can't use trade-ins to rent a brand new game for two weeks for 30 bucks, doesn't mean you won't buy it for 30 dollars new a month later.
How do you encourage buying new unless you provide some sort of incentive for buying new? Am I missing something here?
"Its simple, I honestly do not see the increased amount of new game sales making up for the loss per unit sold."
Why? Where does the money go? It's not like they have to drop the price -that- much to make up for the trade-in effect. You make it seem so simple, but I honestly have no idea why this would be true.
"Not to mention during that middle period where people quit buying games before the prices lower, many people will fall out of the habit of buying games."
Again, this implies that the used game market reacts instantly to changes while the new game market is slow and idiotic. In reality, both would be reacting slowly and simultaneously. Online passes become more widespread -> slow drop in trade in prices -> slow drop in trade-in fueled sales -> slow drop in new game prices to counteract drop in sales. I don't see why we should see steps 1-3 happen instantly and then wait 6 months for the final step. I also don't know why anyone would drop out of the gaming market. How many people do you even know that use trade-ins to fuel buying? I don't know anyone. Also, even ignoring the inevitable response to sluggish sales, game prices drop constantly. Just because you can't use trade-ins to rent a brand new game for two weeks for 30 bucks, doesn't mean you won't buy it for 30 dollars new a month later.
"My point in that paragraph is that the online pass has the potential to increase the disparity in pricing between new and used games due to the "extra" cost of an online pass, making used games more attractive to potential customers. This point becomes interesting when you consider that many console owners don't play online games. I simply find it interesting that publishers could possibly be creating more of an incentive to buy used when they appear to be trying to create incentives to buy new. "
VERY interesting point. I really hadn't considered this at all. However, insofar as this is true, we should actually see used game prices stabilize. I mean, if people are still buying 'em up like hotcakes, we shouldn't even see that much of a price drop to begin with. I'm not sure how much this affects the overall argument, but this is probably the most interesting counter in this entire thread.
"I'm sure publishers/developers would love an extra 2 billion. But you aren't assumming that 2 billion in used profits is a bad thing are you? That 2 billion doesn't appear out of thin air. It comes from turning games into credit. So while gamers aren't receiving literal dollars, they are receiving a good (in this case credit). The service Gamestop provides is something people value, hence the profits. I don't personally find it valuable, but obviously many people do. And those who do use it obviously buy more games with that credit. So can't we consider that a "net positive" as well?"
To my knowledge, these 2 billion dollars are the money the company makes from used game sales. As in my stylized simplified example above, there is a more efficient way to run a gaming industry than this. Instead of using trade-ins to fund game purchases, games should just be cheaper. Then everyone wins.
VERY interesting point. I really hadn't considered this at all. However, insofar as this is true, we should actually see used game prices stabilize. I mean, if people are still buying 'em up like hotcakes, we shouldn't even see that much of a price drop to begin with. I'm not sure how much this affects the overall argument, but this is probably the most interesting counter in this entire thread.
"I'm sure publishers/developers would love an extra 2 billion. But you aren't assumming that 2 billion in used profits is a bad thing are you? That 2 billion doesn't appear out of thin air. It comes from turning games into credit. So while gamers aren't receiving literal dollars, they are receiving a good (in this case credit). The service Gamestop provides is something people value, hence the profits. I don't personally find it valuable, but obviously many people do. And those who do use it obviously buy more games with that credit. So can't we consider that a "net positive" as well?"
To my knowledge, these 2 billion dollars are the money the company makes from used game sales. As in my stylized simplified example above, there is a more efficient way to run a gaming industry than this. Instead of using trade-ins to fund game purchases, games should just be cheaper. Then everyone wins.
So you're saying that people will quit buying used games outright because one sector making about the same amount of money is worth destroying another that you don't like just because it does what it does well.
I should get more involved in arguments I'm in. In the time it took me to write 50 words you wrote three whole only short blogs :P
"So you're saying that people will quit buying used games outright because one sector making about the same amount of money is worth destroying another that you don't like just because it does what it does well."
The used games industry is not a separate sector. I'm sorry if you disagree, but I simply think gaming dollars are better spent by gamers or by the gaming industry than by GameStop. What exactly does GameStop provide to gamers at larger that I am unaware of? Maybe I'm biased as I'm largely a PC gamer. They gave up on PC games a long, long time ago, and I really don't think it's hurt PC gaming at all.
The used games industry is not a separate sector. I'm sorry if you disagree, but I simply think gaming dollars are better spent by gamers or by the gaming industry than by GameStop. What exactly does GameStop provide to gamers at larger that I am unaware of? Maybe I'm biased as I'm largely a PC gamer. They gave up on PC games a long, long time ago, and I really don't think it's hurt PC gaming at all.
"So you're saying that people will quit buying used games outright because one sector making about the same amount of money is worth destroying another that you don't like just because it does what it does well."
The used games industry is not a separate sector. I'm sorry if you disagree, but I simply think gaming dollars are better spent by gamers or by the gaming industry than by GameStop. What exactly does GameStop provide to gamers at larger that I am unaware of? Maybe I'm biased as I'm largely a PC gamer. They gave up on PC games a long, long time ago, and I really don't think it's hurt PC gaming at all.
The used games industry is not a separate sector. I'm sorry if you disagree, but I simply think gaming dollars are better spent by gamers or by the gaming industry than by GameStop. What exactly does GameStop provide to gamers at larger that I am unaware of? Maybe I'm biased as I'm largely a PC gamer. They gave up on PC games a long, long time ago, and I really don't think it's hurt PC gaming at all.
"I should get more involved in arguments I'm in. In the time it took me to write 50 words you wrote three whole only short blogs :P"
:P I've been thinking about this for a while, so I guess I have a lot to say about it. Like I said above (somewhere... in the wall of text), I actually started this journey as a supporter of used games/opponent of the online pass phenomenon.
:P I've been thinking about this for a while, so I guess I have a lot to say about it. Like I said above (somewhere... in the wall of text), I actually started this journey as a supporter of used games/opponent of the online pass phenomenon.
That's a mistype on my part, I meant to say "sect".
PC gaming could be considered a whole different sect itself compared to console games, and that's due to steam and its peers like Good old Games. Used game sales and new game sales are different sects in the same way that new and used care sales are.
PC gaming could be considered a whole different sect itself compared to console games, and that's due to steam and its peers like Good old Games. Used game sales and new game sales are different sects in the same way that new and used care sales are.
"PC gaming could be considered a whole different sect itself compared to console games, and that's due to steam and its peers like Good old Games. Used game sales and new game sales are different sects in the same way that new and used care sales are."
I don't want to write another de facto blog here, but I don't think the new/used car = new/used video game metaphor works as well as people indicate. Generally, cars degrade over time; they don't have things like multiplayer except maybe warranties; there is real value in the actual physical parts and materials of cars, while there isn't for video games; and video games are motivated largely by micro purchases while cars are motivated largely (~30 dollars) by macro purchases (~10,000 dollars). Like I said, I don't want to write a whole new blog about it right here, but that should give you a sense of my starting point for what said blog would look like.
In any case, it seems like -all- gamers want the following: 1. More games bought, 2. More games available, 3. More money in their wallet. It seems to me that the used game industry hurts all three, but I think you probably have heard enough of that broken record.
I don't want to write another de facto blog here, but I don't think the new/used car = new/used video game metaphor works as well as people indicate. Generally, cars degrade over time; they don't have things like multiplayer except maybe warranties; there is real value in the actual physical parts and materials of cars, while there isn't for video games; and video games are motivated largely by micro purchases while cars are motivated largely (~30 dollars) by macro purchases (~10,000 dollars). Like I said, I don't want to write a whole new blog about it right here, but that should give you a sense of my starting point for what said blog would look like.
In any case, it seems like -all- gamers want the following: 1. More games bought, 2. More games available, 3. More money in their wallet. It seems to me that the used game industry hurts all three, but I think you probably have heard enough of that broken record.
Your economic foundations are flawed because they rest on general notions and models assumed for a relatively competitive market. Video games are, in fact, actually one of the least competitive markets in the world; the hardware industry itself is actually a monopoly by the standard terms and definitions.
Everything you say would be accurate if video games themselves weren't so highly concentrated in the hands of a few publishers and developers.
What your theory seems to rest on is that the less money people get for trade-ins, the more demand overall will drop off.
There is no evidence of a drop off in demand though. In fact, over the past few years, demand has risen, as well with attempts to raise prices and monetize the industry more and more with DLC and additional services.
You don't even have to argue it on a theoretical level: Just look at the history of the past few years, and where the market is going. The direction is headed towards pricier games and services, not lower.
Everything you say would be accurate if video games themselves weren't so highly concentrated in the hands of a few publishers and developers.
What your theory seems to rest on is that the less money people get for trade-ins, the more demand overall will drop off.
There is no evidence of a drop off in demand though. In fact, over the past few years, demand has risen, as well with attempts to raise prices and monetize the industry more and more with DLC and additional services.
You don't even have to argue it on a theoretical level: Just look at the history of the past few years, and where the market is going. The direction is headed towards pricier games and services, not lower.
In fact, the value for video game trade ins themselves have declined, even without online passes. I could remember getting $35, $40 for a new game that was maybe only a week old a few years ago.
Now: $25. If I'm lucky.
At the same time, profits and demand are at record highs.
The trends just don't match up with the argument. Mostly because, as I mentioned, the argument is mismatched with what type of market video games are actually in.
Now: $25. If I'm lucky.
At the same time, profits and demand are at record highs.
The trends just don't match up with the argument. Mostly because, as I mentioned, the argument is mismatched with what type of market video games are actually in.
"You don't even have to argue it on a theoretical level: Just look at the history of the past few years, and where the market is going. The direction is headed towards pricier games and services, not lower."
What you say and what I say can both be true simultaneously. The general trend can be for higher prices while one giant structural shift can lower prices.
Let me put it this way.
Let's say the trend is increasing: 1, 2, 3, 4, 5, 6, 7, 8, 9, 10, etc.
Let's say that some exogenous shock hits that reduces price by 5 units. That doesn't effect the general trend. It just sort of creates a different intercept from that time on.
1, 2, 3, 4, 5, 6, 7, 8, 9, 10, SHOCK, 5, 6, 7, 8, 9, 10, etc.
Of course, this doesn't prove that this would happen or anything. I'm talking more in the abstract.
"Everything you say would be accurate if video games themselves weren't so highly concentrated in the hands of a few publishers and developers. "
Yep, and this tendency has led to there being virtually no drops in price on games ever. Because there's no competition.
Wait, what? Holy crap! Call of Duty Black Ops is 40 bucks on Amazon.com! I don't know how this is possible at all given the complete lack of competition, but the price has GONE DOWN somehow. I guess Amazon is just being crazy today. WAIT WAIT, Gamestop has Halo 3 for 20 dollars new! Man, that's such a huge drop from the initial price of 60. Again THIS MUST BE UNPOSSIBLE!
What you say and what I say can both be true simultaneously. The general trend can be for higher prices while one giant structural shift can lower prices.
Let me put it this way.
Let's say the trend is increasing: 1, 2, 3, 4, 5, 6, 7, 8, 9, 10, etc.
Let's say that some exogenous shock hits that reduces price by 5 units. That doesn't effect the general trend. It just sort of creates a different intercept from that time on.
1, 2, 3, 4, 5, 6, 7, 8, 9, 10, SHOCK, 5, 6, 7, 8, 9, 10, etc.
Of course, this doesn't prove that this would happen or anything. I'm talking more in the abstract.
"Everything you say would be accurate if video games themselves weren't so highly concentrated in the hands of a few publishers and developers. "
Yep, and this tendency has led to there being virtually no drops in price on games ever. Because there's no competition.
Wait, what? Holy crap! Call of Duty Black Ops is 40 bucks on Amazon.com! I don't know how this is possible at all given the complete lack of competition, but the price has GONE DOWN somehow. I guess Amazon is just being crazy today. WAIT WAIT, Gamestop has Halo 3 for 20 dollars new! Man, that's such a huge drop from the initial price of 60. Again THIS MUST BE UNPOSSIBLE!
Obviously, I'm being facetious here, but I think you fundamentally misunderstand the way the game economy works. Sure, there isn't a lot of macro competition. However, there is TONS of micro level competition. There is even competition for sales among different entries in the same series of games (!!!). Otherwise, why would we ever see lower prices for anything? Price levels are set for individual games based on how they're doing economically. If a game isn't selling well, then the price will drop to encourage more purchases. This is true regardless of the reasons for WHY a game isn't doing well. If a game isn't doing well because there aren't enough trade-in fueled purchases, then its price will be dropped the same way as if it wasn't doing well for some other reason (like maybe too much genre competition, or bad reviews, etc. etc.).
If someone can give me an explanation for game price adjustments other than "they lower prices to increase sales," I'm willing to pull back my entire theory. Alternatively, if someone can explain to me why this would be true of most causes of poor game sales but not true of this particular cause (the trade in effect), I will similarly pull back my entire theory.
Your Black Ops and Halo comparisons are off base.
Why did those prices drop? Because demand dropped off at a micro level, because most of the demand has already been satisfied. The people willing to pay for it at $60 have already purchased it - there is no more maximizing that price point, it's already been maxed out. The only place go to sell off the remaining copies already made is to lower the price, rather than eat a loss.
Demand for a particular, singular game cannot be compared to the demand for new, fresh games.
Games titles individually have always dropped in price, yet game prices have risen and risen. Demand for Pepsi may taper off now and then, but demand for soda altogether is rarely effected by it.
Because the fact of the matter is that the sequel to Black Ops, MW3, will not sell at $40 on day one: It will sell at $60. The sequel to Halo 3 will not be $20: It will be $60.
Until they've sold all they can, they've fulfilled all the demand, at the $60 price point.
Why did those prices drop? Because demand dropped off at a micro level, because most of the demand has already been satisfied. The people willing to pay for it at $60 have already purchased it - there is no more maximizing that price point, it's already been maxed out. The only place go to sell off the remaining copies already made is to lower the price, rather than eat a loss.
Demand for a particular, singular game cannot be compared to the demand for new, fresh games.
Games titles individually have always dropped in price, yet game prices have risen and risen. Demand for Pepsi may taper off now and then, but demand for soda altogether is rarely effected by it.
Because the fact of the matter is that the sequel to Black Ops, MW3, will not sell at $40 on day one: It will sell at $60. The sequel to Halo 3 will not be $20: It will be $60.
Until they've sold all they can, they've fulfilled all the demand, at the $60 price point.
I think most of Jim's argument is based on how games are already above market price, and the rise of online passes and constant DLC is making this even more true.
If all games were priced lower it would be a more competitive market, with more sales across the board for new copies and less well-marketed or easily pitched, but quality games.
My guess is that you'll see this in the follow-ups from Jim, where he will move on to advocate that reversing this trend and having more variety in game pricing (they're art, not a commodity) and release dates can keep the used games industry from destroying studios.
If the bigger games weren't upping their net cost constantly, gamers would be buying less well-known games instead, and these underdogs would be able to lower their prices and still sell enough volume for a stable profit margin.
Big publishers are basically emulating the beer industry by turning a product with a large amount of variety into a commodity, so they can sell a higher volume and push more artful, craft products out of business.
I still think that not selling titles at only one time of the year would be a smart decision for any but the biggest franchises. Right now I buy 2-3 games I really want during the holidays, wait a couple months and buy used copies of the games I missed to keep me going through the next year.
If more games were releasing throughout the year, even must-buys, and more games were sold at more reasonable prices, I'd be buying more fresh copies - and thus, even more of these online passes that are really just taking advantage of a dominant market position.
If all games were priced lower it would be a more competitive market, with more sales across the board for new copies and less well-marketed or easily pitched, but quality games.
My guess is that you'll see this in the follow-ups from Jim, where he will move on to advocate that reversing this trend and having more variety in game pricing (they're art, not a commodity) and release dates can keep the used games industry from destroying studios.
If the bigger games weren't upping their net cost constantly, gamers would be buying less well-known games instead, and these underdogs would be able to lower their prices and still sell enough volume for a stable profit margin.
Big publishers are basically emulating the beer industry by turning a product with a large amount of variety into a commodity, so they can sell a higher volume and push more artful, craft products out of business.
I still think that not selling titles at only one time of the year would be a smart decision for any but the biggest franchises. Right now I buy 2-3 games I really want during the holidays, wait a couple months and buy used copies of the games I missed to keep me going through the next year.
If more games were releasing throughout the year, even must-buys, and more games were sold at more reasonable prices, I'd be buying more fresh copies - and thus, even more of these online passes that are really just taking advantage of a dominant market position.
"Until they've sold all they can, they've fulfilled all the demand, at the $60 price point."
Like I said, for my argument to hold, the initial price doesn't have to change. They just need to move passed the 60 dollar price point more quickly and more radically. If trade-in effects lead to less demand, this should hold true. You even admit that pricing responds to demand. Trade-in effects are just one other element of demand.
"think most of Jim's argument is based on how games are already above market price, and the rise of online passes and constant DLC is making this even more true. "
I don't know that something can be above the market price. There might be a better market price in some different equilibrium, but.. the market price is the market price.
In any case, I definitely agree with you that there should be more variety in terms of initial sale prices. I would say, however, that there is already a WIDE variety of price points based on micro-level factors. So this isn't really an issue for my argument. Because prices fluctuate rapidly post-release, they are able to deal with demand shocks, regardless.
I do think that, one a long enough time horizon, a move away from used games would lead to lower initial prices. As the need for post-release adjustment becomes more extreme and more constant, I think that the incentives for lower at-least prices will increase. Already, there's SOME move that way: Super Street Fighter IV and UMvC3, the new No More Heroes release, digital games, etc. If the trade-in effect exists, over time, I don't see why this won't become more common.
Still, we don't need shifts in the initial price point for online passes to be a good thing. You just need post-release variability, which is already universal.
Like I said, for my argument to hold, the initial price doesn't have to change. They just need to move passed the 60 dollar price point more quickly and more radically. If trade-in effects lead to less demand, this should hold true. You even admit that pricing responds to demand. Trade-in effects are just one other element of demand.
"think most of Jim's argument is based on how games are already above market price, and the rise of online passes and constant DLC is making this even more true. "
I don't know that something can be above the market price. There might be a better market price in some different equilibrium, but.. the market price is the market price.
In any case, I definitely agree with you that there should be more variety in terms of initial sale prices. I would say, however, that there is already a WIDE variety of price points based on micro-level factors. So this isn't really an issue for my argument. Because prices fluctuate rapidly post-release, they are able to deal with demand shocks, regardless.
I do think that, one a long enough time horizon, a move away from used games would lead to lower initial prices. As the need for post-release adjustment becomes more extreme and more constant, I think that the incentives for lower at-least prices will increase. Already, there's SOME move that way: Super Street Fighter IV and UMvC3, the new No More Heroes release, digital games, etc. If the trade-in effect exists, over time, I don't see why this won't become more common.
Still, we don't need shifts in the initial price point for online passes to be a good thing. You just need post-release variability, which is already universal.
But the lowering of trade-in values doesn't lead to a drop in demand.
Look at the values over the years. The values have been declining, even before online passes, and prices have remained stable.
In the mean time, the industry has grown and gained more money.
What you're saying is not wrong in a typical market model, but it is not an exact fit due to the fact that video games are an atypical, highly concentrated model which lacks the level of competition typically seen in say, t-shirts and soda makers.
Look at the values over the years. The values have been declining, even before online passes, and prices have remained stable.
In the mean time, the industry has grown and gained more money.
What you're saying is not wrong in a typical market model, but it is not an exact fit due to the fact that video games are an atypical, highly concentrated model which lacks the level of competition typically seen in say, t-shirts and soda makers.
I think Steam is only a good example on the cases where they have to get cd keys from the publishers and then sell them, outside of that, the model of selling something and taking a certain percent of the sale, without having to invest/pay for the copies they sell, lets them be more flexible with pricing since they don't have to worry about things like shelf space or getting back their investment. For Steam the worst case scenario when selling a game is that they earn cents, for physical stores is that they don't recover their, investment which would mean losing money.
"The values have been declining, even before online passes, and prices have remained stable. "
Wasn't somebody else just talking about how budgets were getting out of hand?
"If the bigger games weren't upping their net cost constantly, gamers would be buying less well-known games instead, and these underdogs would be able to lower their prices and still sell enough volume for a stable profit margin. "
I'm going to be supremely lazy and just say that http://en.wikipedia.org/wiki/Video_game_development#History basically backs up Bleh Blah over you on this. Game budgets are increasing even though prices are staying constant.
Weird.
At the end of the day, I don't really understand why you think that demand doesn't matter for the game industry. If you're right, why do micro game prices frequently shift? It's like you understand that demand matters one second then dismiss it the next.
Let's go back to this:
"Because demand dropped off at a micro level, because most of the demand has already been satisfied. The people willing to pay for it at $60 have already purchased it - there is no more maximizing that price point, it's already been maxed out. The only place go to sell off the remaining copies already made is to lower the price, rather than eat a loss. "
Here you basically follow my version of demand. There is some amount of money gamers are willing to spend on games. Once most 60 dollar-okay gamers are consumed, then it moves on to 55 dollar-okay gamers, then 50, then 45, then 40, etc.
Let's say that, all of a sudden, games' initial price jumps to 65. Wouldn't there be a smaller number of 65-okay gamers than 60 dollar-okay gamers? What am I missing?
Wasn't somebody else just talking about how budgets were getting out of hand?
"If the bigger games weren't upping their net cost constantly, gamers would be buying less well-known games instead, and these underdogs would be able to lower their prices and still sell enough volume for a stable profit margin. "
I'm going to be supremely lazy and just say that http://en.wikipedia.org/wiki/Video_game_development#History basically backs up Bleh Blah over you on this. Game budgets are increasing even though prices are staying constant.
Weird.
At the end of the day, I don't really understand why you think that demand doesn't matter for the game industry. If you're right, why do micro game prices frequently shift? It's like you understand that demand matters one second then dismiss it the next.
Let's go back to this:
"Because demand dropped off at a micro level, because most of the demand has already been satisfied. The people willing to pay for it at $60 have already purchased it - there is no more maximizing that price point, it's already been maxed out. The only place go to sell off the remaining copies already made is to lower the price, rather than eat a loss. "
Here you basically follow my version of demand. There is some amount of money gamers are willing to spend on games. Once most 60 dollar-okay gamers are consumed, then it moves on to 55 dollar-okay gamers, then 50, then 45, then 40, etc.
Let's say that, all of a sudden, games' initial price jumps to 65. Wouldn't there be a smaller number of 65-okay gamers than 60 dollar-okay gamers? What am I missing?
"...for physical stores is that they don't recover their, investment which would mean losing money."
http://latimesblogs.latimes.com/entertainmentnewsbuzz/2010/02/anatomy-of-a-60-dollar-video-game.html - I'd like to point out that the physical material of games is actually not costly. It's not priceless, but it typically represents about 4 dollars of the total cost. Also, retailers are actually left with very little of the bill. Not only do they get a big chunk of the total profit, but they also get a fair amount of insurance against the publisher lowering prices significantly.
In any case, even though Steam may have some more room for pricing flexibility, I still don't see why the structure is different. I mean, the major argument people seem to be making isn't that there isn't enough pricing flexibility to offset the trade-in effect. It's that publishers won't take advantage of it.. for some reason. It's clear that Steam CAN move prices around a lot, but the better question is WHY does Steam move prices around so much. I think online passes get us closer to the Steam-type scenario even if there are still other differences between the two platforms.
http://latimesblogs.latimes.com/entertainmentnewsbuzz/2010/02/anatomy-of-a-60-dollar-video-game.html - I'd like to point out that the physical material of games is actually not costly. It's not priceless, but it typically represents about 4 dollars of the total cost. Also, retailers are actually left with very little of the bill. Not only do they get a big chunk of the total profit, but they also get a fair amount of insurance against the publisher lowering prices significantly.
In any case, even though Steam may have some more room for pricing flexibility, I still don't see why the structure is different. I mean, the major argument people seem to be making isn't that there isn't enough pricing flexibility to offset the trade-in effect. It's that publishers won't take advantage of it.. for some reason. It's clear that Steam CAN move prices around a lot, but the better question is WHY does Steam move prices around so much. I think online passes get us closer to the Steam-type scenario even if there are still other differences between the two platforms.
You are all over the place.
If budgets are getting out of hand, do you think game prices are going to DECREASE?
All costs are passed onto the consumer.
And you are missing the point:
INDIVIDUAL game prices can fluctuate. The DEMAND FOR INDIVIDUAL games is not the same as DEMAND FOR GAMES. If Pepsi sells less, that doesn't mean the soda market is selling less. In fact, total sales of all soda producers could go up while Pepsi goes down.
Just like the demand for Halo 3 goes down while the industry makes more money than it ever has.
Individual game prices fluctuate because each individual game has a certain, unique level of demand to it. Once that demand is filled, they must cut the price to appeal to other demand levels. But that demand is not the same as the demand for games as a whole.
Which demand do you think is higher right now? Demand for Gears of War 1, or Gears of War 3?
Will Gears of War 1 sell more copies of Gears of War 3 this week? It is cheaper! If you think so, close your economics text book.
"That's a silly comparison! Gears 1 is way older than Gears 3, of course it'll sell less!"
Then you finally understand why your entire argument is silly.
Game prices drop because they are old and because there is less demand for that particular title. They do not cut prices to try to be competitive, per se. You don't see games trying to undercut each other on day one like that. It's a common characteristic of oligopic market structures: Even if one firm wanted to lower prices, all other firms would lower them to match. So no one often lowers it.
And with development costs rising, that alone is incentive enough not for anyone to ignite a price war. That, and the demand for games overall has yet to drop off. Not the demand for ONE game - for ALL games.
If budgets are getting out of hand, do you think game prices are going to DECREASE?
All costs are passed onto the consumer.
And you are missing the point:
INDIVIDUAL game prices can fluctuate. The DEMAND FOR INDIVIDUAL games is not the same as DEMAND FOR GAMES. If Pepsi sells less, that doesn't mean the soda market is selling less. In fact, total sales of all soda producers could go up while Pepsi goes down.
Just like the demand for Halo 3 goes down while the industry makes more money than it ever has.
Individual game prices fluctuate because each individual game has a certain, unique level of demand to it. Once that demand is filled, they must cut the price to appeal to other demand levels. But that demand is not the same as the demand for games as a whole.
Which demand do you think is higher right now? Demand for Gears of War 1, or Gears of War 3?
Will Gears of War 1 sell more copies of Gears of War 3 this week? It is cheaper! If you think so, close your economics text book.
"That's a silly comparison! Gears 1 is way older than Gears 3, of course it'll sell less!"
Then you finally understand why your entire argument is silly.
Game prices drop because they are old and because there is less demand for that particular title. They do not cut prices to try to be competitive, per se. You don't see games trying to undercut each other on day one like that. It's a common characteristic of oligopic market structures: Even if one firm wanted to lower prices, all other firms would lower them to match. So no one often lowers it.
And with development costs rising, that alone is incentive enough not for anyone to ignite a price war. That, and the demand for games overall has yet to drop off. Not the demand for ONE game - for ALL games.
"If budgets are getting out of hand, do you think game prices are going to DECREASE? "
See this point:
"Let me put it this way.
Let's say the trend is increasing: 1, 2, 3, 4, 5, 6, 7, 8, 9, 10, etc.
Let's say that some exogenous shock hits that reduces price by 5 units. That doesn't effect the general trend. It just sort of creates a different intercept from that time on.
1, 2, 3, 4, 5, 6, 7, 8, 9, 10, SHOCK, 5, 6, 7, 8, 9, 10, etc. "
It doesn't even have to be drastic as all that. It would could also look like:
1, 2, 3, 4, 5, 6, 7, 8, 9, 10, SHOCK, 10, 11, 12"
"Individual game prices fluctuate because each individual game has a certain, unique level of demand to it. Once that demand is filled, they must cut the price to appeal to other demand levels. But that demand is not the same as the demand for games as a whole. "
Agreed. Agreed. Agreed.
"Which demand do you think is higher right now? Demand for Gears of War 1, or Gears of War 3? "
Gears of War 3
"Then you finally understand why your entire argument is silly. "
Umm, what?
"Game prices drop because they are old and because there is less demand for that particular title. They do not cut prices to try to be competitive, per se."
Umm, yes. That's EXACTLY what they do. Video games, like all items, compete with EVERYTHING when it comes to get your money. Should I spent money on food? Should I pay the bill? Should I buy a game? Producers know this. They also know that different people have different values attached to particular video games. They respond by raising and lowering prices.
That's all it takes to get to my argument above. When a game isn't selling a lot, game developers cut prices. If the trade-in effect is real, then we should see the macro effect (reduced demand) manifested through a micro-effect on a series of specific games. As a result, through the price mechanism you and I CLEARLY agree upon ("Individual game prices fluctuate because each individual game has a certain, unique level of demand to it. Once that demand is filled, they must cut the price to appeal to other demand levels. "), prices for games affected by the so-called trade in effect will adjust accordingly.
Am I misunderstanding something here? It seems like maybe we agree on more than it seems. I agree with you that this shouldn't impact TOTAL demand in the gaming economy. My basic view of the gaming economy is this:
Total Gaming Spending = Used Game Spending + New Game Spending
I'm not making any arguments about online passes increasing or decreasing total gaming spending. If anything, I'm actively arguing the opposite. Anti-online pass people often argue that online passes could result in a gaming crash because trade-ins fund primary purchases. I am arguing that this isn't true, and that game companies will instead respond by adjusting prices (post-release initially, maybe initial price as well in the long-run).
The result is that
Total Gaming Spending1 = Used Game Spending + New Game Spending
Total Gaming Spending2 = New Game Spending
Total Gaming Spending1 = Total Gaming Spending2
Which means less money for GameStop and more money for game development.
See this point:
"Let me put it this way.
Let's say the trend is increasing: 1, 2, 3, 4, 5, 6, 7, 8, 9, 10, etc.
Let's say that some exogenous shock hits that reduces price by 5 units. That doesn't effect the general trend. It just sort of creates a different intercept from that time on.
1, 2, 3, 4, 5, 6, 7, 8, 9, 10, SHOCK, 5, 6, 7, 8, 9, 10, etc. "
It doesn't even have to be drastic as all that. It would could also look like:
1, 2, 3, 4, 5, 6, 7, 8, 9, 10, SHOCK, 10, 11, 12"
"Individual game prices fluctuate because each individual game has a certain, unique level of demand to it. Once that demand is filled, they must cut the price to appeal to other demand levels. But that demand is not the same as the demand for games as a whole. "
Agreed. Agreed. Agreed.
"Which demand do you think is higher right now? Demand for Gears of War 1, or Gears of War 3? "
Gears of War 3
"Then you finally understand why your entire argument is silly. "
Umm, what?
"Game prices drop because they are old and because there is less demand for that particular title. They do not cut prices to try to be competitive, per se."
Umm, yes. That's EXACTLY what they do. Video games, like all items, compete with EVERYTHING when it comes to get your money. Should I spent money on food? Should I pay the bill? Should I buy a game? Producers know this. They also know that different people have different values attached to particular video games. They respond by raising and lowering prices.
That's all it takes to get to my argument above. When a game isn't selling a lot, game developers cut prices. If the trade-in effect is real, then we should see the macro effect (reduced demand) manifested through a micro-effect on a series of specific games. As a result, through the price mechanism you and I CLEARLY agree upon ("Individual game prices fluctuate because each individual game has a certain, unique level of demand to it. Once that demand is filled, they must cut the price to appeal to other demand levels. "), prices for games affected by the so-called trade in effect will adjust accordingly.
Am I misunderstanding something here? It seems like maybe we agree on more than it seems. I agree with you that this shouldn't impact TOTAL demand in the gaming economy. My basic view of the gaming economy is this:
Total Gaming Spending = Used Game Spending + New Game Spending
I'm not making any arguments about online passes increasing or decreasing total gaming spending. If anything, I'm actively arguing the opposite. Anti-online pass people often argue that online passes could result in a gaming crash because trade-ins fund primary purchases. I am arguing that this isn't true, and that game companies will instead respond by adjusting prices (post-release initially, maybe initial price as well in the long-run).
The result is that
Total Gaming Spending1 = Used Game Spending + New Game Spending
Total Gaming Spending2 = New Game Spending
Total Gaming Spending1 = Total Gaming Spending2
Which means less money for GameStop and more money for game development.
@Killias
"but they also get a fair amount of insurance against the publisher lowering prices significantly."
This isn't mentioned on the $60 game article, I'm sure there's gotta be some agreements on that, but most of the time the lower prices are more competition inspired (BB does it, amazon price matches, etc), or at least they feel that way. The article also doesn't say what happens with the unsold games, I mean, it says they could be returned, but then why do we still find really old games at times on stores? If it was as easy as just returning them, then that would happen instead of sales, and besides this, even if they had 100% warranty of getting their money back for unsold copies, that's a lot of money that could've been used elsewhere.
As for why Steam can manage to do 75% off (or more) sales, in part it's what
Revuhlooshun already mentioned, after a while the people willing to pay full price will have already bought it, and doing a sale creates a time limited opportunity for the consumer to get the game for less, which is better than just doing a permanent price reduction.
We're also missing the physical retailer perspective, we don't know how that 40% cut gets distributed, we don't know what policies they have on earnings per bulk/game or how they have to respond to stock holders.
Sorry if it's not that understandable, kinda juggling tasks at the moment but wanted to reply before I forgot or the comment section got even longer :P
"but they also get a fair amount of insurance against the publisher lowering prices significantly."
This isn't mentioned on the $60 game article, I'm sure there's gotta be some agreements on that, but most of the time the lower prices are more competition inspired (BB does it, amazon price matches, etc), or at least they feel that way. The article also doesn't say what happens with the unsold games, I mean, it says they could be returned, but then why do we still find really old games at times on stores? If it was as easy as just returning them, then that would happen instead of sales, and besides this, even if they had 100% warranty of getting their money back for unsold copies, that's a lot of money that could've been used elsewhere.
As for why Steam can manage to do 75% off (or more) sales, in part it's what
Revuhlooshun already mentioned, after a while the people willing to pay full price will have already bought it, and doing a sale creates a time limited opportunity for the consumer to get the game for less, which is better than just doing a permanent price reduction.
We're also missing the physical retailer perspective, we don't know how that 40% cut gets distributed, we don't know what policies they have on earnings per bulk/game or how they have to respond to stock holders.
Sorry if it's not that understandable, kinda juggling tasks at the moment but wanted to reply before I forgot or the comment section got even longer :P
@killias2
Sorry for the late response. I don't know if you were expecting one, but here it is anyway. I've read only your post, so I apologize if I repeat any argument that might have been raised by another person.
[b]"I understand this argument, and, on face, it seems to make sense. Unfortunately, it's wrong. Why? Because of something I call the 5 dollar effect. Essentially, used games, at places like GameStop, are typically prices around 5 dollars less than new games. No matter what.
This creates two disincentives for companies to respond to used games by lowering prices."[/b]
I always forget how the difference between new and used games prices is rather small in America, especially when it comes to GameStop. I guess you're right about used games being an incentive not to lower the prices.
"There's also one other reason why used games are bad for overall prices. Let's imagine you have all the money spent on gaming in a year. Let's ignore a bunch of complications (retail outlets, delivery, etc.) and focus on three potential sources for this money: GameStop, the consumer, and game publishers. The more money that goes to GameStop means less money that goes to the consumer and/or the game publisher. Like I said in the main article, every dollar that goes to GameStop is a dollar not in your wallet or not paying for game development from your favorite companies."
I can see how you think a lot of money is wasted on GameStop instead of going to companies or consumers, but I still cannot see how online passes would help in that matter. More money circulating between game companies does not necessarily means benefits to the customers like cheaper games or companies taking more risks. After all, the used games market will never cease to exist, it can only become thinner. So the 2 billion dollars profit GameStop currently harvests would not go all or directly to game companies. And even if it did, the distribution of that money is of utmost importance. Activision, for example, is not really a company that needs that money. More money going to them wouldn't mean cheaper or more innovative games. Also, underground companies like, say, Grasshopper Manufacture, probably wouldn't receive much at all of that 2 billion dollars, since many of their games don't even have multiplayer and can be rented. Even if they blocked single player content, the reluctant people that buy their games used or rent them probably wouldn't like to buy them new when they could get another game (maybe a more popular/mainstream one) that they know is 'good'.
So, even if your scenario became true and online passes really did move a lot of money to companies, I don't see this money going to companies that actually needs them. Personally, I don't suport online passes because I don't think they will help anything. I guess it will really depend on how they're used. Let's hope for the best.
Sorry for the late response. I don't know if you were expecting one, but here it is anyway. I've read only your post, so I apologize if I repeat any argument that might have been raised by another person.
[b]"I understand this argument, and, on face, it seems to make sense. Unfortunately, it's wrong. Why? Because of something I call the 5 dollar effect. Essentially, used games, at places like GameStop, are typically prices around 5 dollars less than new games. No matter what.
This creates two disincentives for companies to respond to used games by lowering prices."[/b]
I always forget how the difference between new and used games prices is rather small in America, especially when it comes to GameStop. I guess you're right about used games being an incentive not to lower the prices.
"There's also one other reason why used games are bad for overall prices. Let's imagine you have all the money spent on gaming in a year. Let's ignore a bunch of complications (retail outlets, delivery, etc.) and focus on three potential sources for this money: GameStop, the consumer, and game publishers. The more money that goes to GameStop means less money that goes to the consumer and/or the game publisher. Like I said in the main article, every dollar that goes to GameStop is a dollar not in your wallet or not paying for game development from your favorite companies."
I can see how you think a lot of money is wasted on GameStop instead of going to companies or consumers, but I still cannot see how online passes would help in that matter. More money circulating between game companies does not necessarily means benefits to the customers like cheaper games or companies taking more risks. After all, the used games market will never cease to exist, it can only become thinner. So the 2 billion dollars profit GameStop currently harvests would not go all or directly to game companies. And even if it did, the distribution of that money is of utmost importance. Activision, for example, is not really a company that needs that money. More money going to them wouldn't mean cheaper or more innovative games. Also, underground companies like, say, Grasshopper Manufacture, probably wouldn't receive much at all of that 2 billion dollars, since many of their games don't even have multiplayer and can be rented. Even if they blocked single player content, the reluctant people that buy their games used or rent them probably wouldn't like to buy them new when they could get another game (maybe a more popular/mainstream one) that they know is 'good'.
So, even if your scenario became true and online passes really did move a lot of money to companies, I don't see this money going to companies that actually needs them. Personally, I don't suport online passes because I don't think they will help anything. I guess it will really depend on how they're used. Let's hope for the best.
Online Passes are wrong for a different reason. Because the current trend for success is about 'growing a community' around our game. In the YouTube-attention-span era, with so much content easily available, we're fighting for the consumer's attention. It's all about exposure and lowering the 'friction' or 'cost of entry'. Once a gamer is a fan of our brand, then we're ready to sell him a diversified array of products and services, from collector's editions to comic books and digital content such as DLC, in-game consumables, etc. Having a big community of fans also has the benefit of making the investment in a sequel less risky and investors like that. So anything that is a barrier to growing a community around our brands is a problem. And Online Passes are doing just that, adding a barrier. The combined markets of used games and pirated games is in most cases bigger than the retail market. So preventing that audience from being exposed & engaged in our brand is cutting ourself from a huge market of fans who were interested enough in our brand to get there but might rapidly bail out at the first barrier.
This comic strip sums up my whole argument quite nicely:
http://xkcd.com/956/
http://xkcd.com/956/
This comic strip sums up my whole argument quite nicely:
http://xkcd.com/956/
http://xkcd.com/956/
