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Used Games: Not as harmful as you think

Used games are the devil, or at least many developers, publishers, and even some gamer's think so. Money that should go to developers and publishers when a used game is purchased instead goes to retailers like GameStop. Some argue it is killing the industry.

All of this may be true, at least to some extent. However, as is often the case, reality is much more complicated, intricate, and confusing than at first glance.

Taking the used game industry at face value brings obvious conclusions; developers and publishers are losing money, and lots of it. GameStop and retailers like it buy old games on the cheap, bump up the price, and then sell it for huge profits. They cut out the middle-man - developers and publishers. It only seems logical then that game creators would want to eliminate the used game industry, and it looks like their voices might have been heard. If current rumors about Xbox One and the blocking of used games turn out to even be remotely true, it may signal the end as we know it for used game retailers and even game rental services.

Used games must be bad then, right? They just take money from the hard working developers who painstakingly craft our favorite form of entertainment.

Not exactly. I'm here to make the point that the used game industry is far less harmful than many would have the industry believe, and while it definitely has its own problems, used game retailers like GameStop provide much needed services and value to both consumers and the industry as a whole.

One way is easing the financial burden. As we all know, gaming is far from a cheap hobby. New games and consoles put huge dents in our wallets and often times we save up cash months and months in advance in preparation for our favorite new games. This is where used games come in. By selling or trading old games to retailers such as GameStop, gamers can lower the cost of acquiring the latest and greatest titles. Though far from an unbiased source, GameStop president Tony Bartel said 16 to 17 percent of new games are fully paid for by trading in of older titles, with 70 percent of money returned to consumers through the selling of their games going back at least in part to the purchasing of new titles.

GameStop President Tony Bartel

"It's a recognized way to make these games more affordable. All three new platforms understand that," Bartel said in an interview with Forbes magazine. He went onto explain the importance of the ability to trade and sell older games, which influences how console makers like Sony make decisions with their new consoles.

"As people upgraded to PS3 they traded in their old systems and libraries, which is why Sony made the move to not support backwards compatibility with later iterations of PS3," he said. "That's why the 'buy, sell, trade' model works well. It enables people to purchase new games by trading in their old ones."

Wedbush Securities analyst Michael Pachter, who often chimes in on the game industry, estimates the company pays out around $1 billion yearly in the form in-store credit for trade-ins.

"That billion dollars is used as a currency to buy new games," Pachter said. "Most people who trade in used games don't turn around and buy used games. They trade in used games so they can buy new games."

Still, 17 percent of new games being fully paid for by older titles doesn't seem like a large enough reason to essentially cut developers out of making additional money when their game is sold, and sold, and then sold again.

So how much does GameStop actually make off used games?

GameStop sold $2.4 billion worth in used games in 2010, equaling over $1 billion in profits, as opposed to selling close to $4 billion worth in new games and bringing in only $819 million. Those are some big numbers, and it would seem to game developers are losing millions upon millions of dollars while GameStop profits.

There is however an important distinction that is often overlooked - many games that are purchased used are titles that would not have been purchased new.

I know this personally to be true. I rarely buy used games as it is; I have the money to be able to purchase new and I want to support the developers who make the great products I love. When I do buy a used game, it is usually for one of two reasons:

  1. It is a game I'm mildly interested it, but not enough to buy at full retail price which is often 10+ more dollars than the used version.

  2. Or it is a game (often a last generation title) that's hard to find new or is ridiculously expensive new.

Unfortunately, I can't find any hard numbers and this is simply an educated conjecture on my part, but I suspect game developers and publishers in actuality lose much less than the grand total of used game sales would seem to indicate. Money conscious gamers buy used games for a reason; because they cannot afford new. If there was no used option, the new game very likely wouldn't have been sold at all.

The inverse could be said as well. Popular mainstream titles aren't cheap enough to encourage gamers to purchase used over new. Go to GameStop.com and look at the majority of popular titles; Let's take Call of Duty Black Ops II for an example. The used copy of the game is only $5 cheaper than the new version. If I find I can't live without the new Call of Duty, I'm not going to buy it used.

In many ways the criticism leveled at the used game industry its no different from many of the misconceptions associated with internet piracy. Movie and music industry leaders have complained for years that piracy is robbing them of huge amounts of money, and they have done everything in their power to prevent it. None of it has worked, and now research has shown that piracy, while maybe morally questionable, may not be near as financially destructive as people have believed. Pirates often download music, movies, or games they wouldn't have purchased to begin with, or products that are hard to find legally. Worth of mouth is another positive associated with piracy. Large numbers of pirated copies of a show or game mean there is large interest, but for whatever reason pirates are not obtaining the product legally.

Eliminating the used game industry often brings up questions about infringing on the rights of consumers to sell or trade property they rightfully purchased. The counterpoint often pointed to in gaming circles is digital distribution, Valve's Steam platform in particular. Games bought and installed digitally through Steam, EA's Origin or Blizzard Entertainment's Battle.net distribution service can't be sold or traded. Many publishers, as EA has shown, are interested in fighting the used game market by selling games directly to consumers.

So what's the difference? Millions use Steam and download games digitally, despite being unable to sell or trade their game after purchase. The reason is simple; services like Steam serve the same purpose the used game market and GameStop does.

Steam regularly and routinely offers huge discounts on a huge variety of games. Prices are often slashed on new and popular titles by 33 percent or more, while older and/or less popular games can see discounts of 50, 75, or even 90 percent.

I have several friends who have Steam library's of hundreds upon hundreds of games. The vast majority of these games have barely been touched. Why? Because my friends, like many others, buy most of the games when they are heavily discounted and aren't financially invested in them. My own Steam Library is filled with several dozen indie games that I've purchased for under $3. We buy them simply because they are cheap and might be fun. Would we have taken a chance on the same games if they were at full retail price? Heck no.

It runs directly parallel with the used game industry. GameStop sells discounted titles for cheap, games that otherwise may not have even been purchased. Without GameStop, there would be no place to purchase cheaper physical games. The result would hurt the industry for all the reasons outlined above, resulting in fewer gamers and fewer game purchases all around.

Used games serve an important purpose. Trading older games for the latest and greatest new titles is a critical part of affording games today. Games that may not have been played otherwise are bought through the used game market, and cheaper prices bring in more gamers than ever before. Are game developers and publishers losing some money as a result of the used game market? Certainly, but the industry is so blinded by their belief that used games are bad that they fail to see that pre-owned games might not be dealing near as much damage as believed, and may actually help both developers and consumers.

 

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