Do Used Games Hurt The Industry?

Do Used Games Hurt The Industry?

When it comes to development, the closest analog the games industry has is the film industry; many different people come together to create an entertaining product that's then put to market, to be enjoyed by many. At the very least, though, it's all about profit margins and making back the initial investment. But where movies (and in fact, most other forms of entertainment) have at least chosen to ignore used sales, the games industry seems to be unable to find a way to work with it- and rumors coming out that the next Xbox might find a way to block used games from being played really puts a fine point on it. Are used games sales really this unholy blight on the sales for the industry, or is it being totally blown out of proportion? As a quick history, this isn't even a new thing that's been going on. Nintendo famously decided that they weren't a fan of companies that rented games to use on their consoles, and even went ahead and sued Blockbuster over it. This is especially weird since a lot of movie companies developed a strong relationship with the rental companies, mostly thanks to hefty kickbacks on each rental, but Nintendo has always been very draconian about these things, so perhaps that was no surprise.

Now there is absolutely no question that used games sales are eating into new games sales- it's what they're there for, the cheap, still legal way to get a game they want at a price that better fits a budget. A lot of people don't just have $60 to spend wherever they want when they see a cool game, so they spend less a few months later and still get to enjoy the game. Gamestop and other companies with used markets- though I'm mostly using Gamestop as the example, as they are the largest example- have really set themselves up with a great business model, with used games being nothing but pure profit for themselves. It's why Gamestop earned itself almost $10 billion in sales, with used games being around 41% of their profit.

Used Games at a Game Store
Used Games at a Game Store

Yet used games only accounted for 22% of the total net sales. Which means another 78%, over 3/4 of that total sales number, was from new sales. The 41% profit of course comes from the fact that used sales are nothing but pure profit for the company- even if less than 25% of net sales are from used, they're still making huge margins off of them. Independent research consulting company Interpret LLC even went a step further and broke these numbers even more, showing that most of the used games sold are from people who are exploring a back catalog- meaning that it's not even necessarily that they're buying up NEW games, but instead that they go in and see a copy of Dead Space for $5 and realize they never played it before. Of course, that's not everyone, and some people ARE going in and getting something a couple of months old used, but it's not that bad. Remember, a game has to have been sold first to become 'used', so people are clearly still fond of buying a game new, and then returning it for some reason.

Which raises a point brought up by Gamestop CEO Dan DeMatteo: a lot of the trade-ins they get are used to then go and buy new games again, thus just turning it into a cycle of people finishing their games, returning, and trading for something new. This, of course, helps drive new game sales by making them cheaper on the consumer; Gamestop takes the hit on the difference, but they make it up through the used sales from the trade. It's almost a beautiful cycle, and just makes games that much easier to get into gamer's mitts.

Of course, Gamestop can abuse the system by pushing used games extremely heavily- there's a never-ending Buy 2, Get 1 sale on used games there, it seems, and promote them as best as they can. It is the power they have over the consumers, more so than a company like eBay or Amazon; we've all had the experience of the Gamestop employee who tries to push everything he can on you at the register. The website can even do a little pushing as well, listing the used and new games separately, possibly hoping to confuse someone who may not be paying attention. Plus, it's easy to accidentally wander into used without realizing it, as I have on a couple of occasions, since it does take up a lot of space (more so than the new shelf). It does obfuscate which games are which sometimes, but it's still on the consumer to make the choice as to which one to get.

Still, game companies are getting much better at being able to fight these used sales with more direct lines into our homes, with things like Steam, Origin, and downloadable games from the XBL and PSN marketplaces. The use of online passes is also getting more popular, as a way of getting a little extra dough from people who want to play online after buying used, but we'll have to see where it goes. Online markets still need to compete with brick and mortar, or online retailers like Amazon, which is why something like Steam works- the constant sales on it drive people to buy things they don't even want, but Games on Demand rarely does these kinds of sales, which is a bit of a detriment to the quality of the service. Pre-order DLC also gives a good reason to buy new- you get something extra, be it a costume or a new weapon or whatever it is. Developers have even come full-circle, embracing rentals over used simply because they can get a good, hefty rental fee for it.

So do used games spell doom and gloom for the industry? Based on everything I've found (which, admittedly, some of the data is a little old), no; they're eating some sales, but it's a lot more for older games that no one really pays attention to anymore, and it helps some people be able to afford games that they want. As long as developers and console manufacturers are smart with their services, and give a little more incentive for buying new, it's a market that can peacefully coexist, and allow their games to reach a wider audience. besides, with games like Modern Warfare  3 still selling several million copies on day one, it's pretty clear- things can still work out just fine for a newly released game.