Will Microsoft and Sony kill the used-game market?

Back in January, Kotaku reported rumors of the next Xbox, and just recently reports of the next PlayStation 4, codenamed Orbis, surfaced, but nonetheless, stuck in the realm of rumors. If there is one common thread to both reports, it’s how both approach used games. It is rumored that the next Xbox will restrict used titles in some form, one way being to have titles attached to your Xbox Live account.

With rumors that Microsoft’s and Sony’s next consoles could altogether prevent consumers from playing used games, what would happen to retailers such as GameStop and Gamefly, and what would it mean for you?

 

Why even do this?

For publishers, GameStop is public enemy #1. Whereas brick and mortar stores such as Borders and Blockbuster collapsed, GameStop is able to thrive, thanks to used game sales and lack of digital distribution. When you walk in a GameStop and buy a used game, 100 percent of the reward is reaped by GameStop. If you choose to buy a new $60 game, on the other hand, GameStop only reaps about $10 to $15. In other words, when you buy a used game at a GameStop, publishers and developers get nothing from the sale.

Yes, there are other industries that deal with used item sales, such as movies and books, but at least they are moving their products online. For the movie industry, there are services such as Netflix, which aided in Blockbuster’s downfall, and for books, there’s the Kindle, which aided in Borders’ downfall. There is no equivalent for console games, and so for used games, GameStop is still the place to go (not everyone thinks so, but in general, it’s the consensus). In an age when GameStop should be obsolete, it still thrives, thanks to used games.

 

What would happen to retailers who operate in the used games market?

As far as GameStop goes, it’s pretty simple: GameStop, as an entity, would be cannibalized. GameStop thrives in the used games market, and with Sony and Microsoft potentially cutting off used games for their future consoles, GameStop will be severely crippled. It’s not such a farfetched idea to think that GameStop would refuse to carry their consoles. It might sound like an exaggeration, but the GameStop we know and love (or brutally hate) would be on the edge of the abyss.

As far as GameFly and other video game rental services are concerned, they will still be around. Of course, much like with old DVDs, the plan would be to have specially licensed games released with new licenses that would be dedicated solely for rentals.

 

What can be done about this?

The way I see it, there are two roads the industry can take to handle this discussion. One road leads to an all-digital intersection. Using Steam as a possible foundation, no used games would ever be purchased. In its place would be older games put on sale. Steam can have weekend sales, pricing games like Deus Ex for $7, when a company might price it at $30. Consumers would never have to physically buy a boxed copy of a video game, with a possibility of finding old games at lower prices than the cost of used games. The only one that suffers is GameStop, which will fade into obscurity as consumers move on to the all-digital future. Still, broadband is still not widely available here in the United States, the largest market for Sony and Microsoft.

The second road, a road seen in a favorable fashion by big companies such as EA and Activision, involves these big companies forcing additional payments with used games or selling them digitally. That way, these companies can price all new games at $60, while being able to keep prices for old games constantly high, but still lower than new games. Sure, companies would save $10 to $15, as well as money that would go into GameStop’s pockets — companies would pocket the difference rather than pass off the savings to consumers. As a result, GameStop would die, and consumers would have no choice but to pay more since there would be no option to buy used or discounted games.

 

Microsoft and Sony will be making a big mistake if they try to go down the second road.

Developers are understandably upset that they are not getting a share of the pie when GameStop sells used games. Still, instead of eliminating consumer choice, the industry should learn from the Steam model. Just match the price of used games, and at the very least, not only would companies still make money, but the cost of entry for consumers would be reduced. By completely ignoring the Steam model, price will be at the full disposal of publishers. Whichever road these big game companies choose to walk, it is obvious which direction the industry wants to go. However, eliminating consumer choice will not solve anything, and will only satisfy publishers and developers. Still, from their perspective, should anyone else benefit but themselves?

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