Kantar Worldpanel consumer insight analyst Jules Williams examines the opportunities and challenges involved in this lucrative market...
Some gamers love them; some hate them. Either way, pre-owned games are an important part of the market. They make up 10 per cent of the UK games market and had a strong showing over Christmas, growing at 4.9 per cent, compared with the 1.2 per cent rise in the mint game market. But while this is good news for some, it isn't universally supportive of the industry.
The pre-owned market is based on gamers looking to make a saving. Shoppers can be put off by a 40 price tag, but pre-owned offers an average saving of 4.40. This might not seem like much, but the opportunity to purchase second hand games at a reduced price is clearly a draw for those unable to justify the expense of a brand new release.
The average price of a pre-owned game is
10.61 – an indicator as of why so many
customers opt for pre-owned – allowing
retailers to bring home 79m per year.
Not only is it attractive to gamers, but it is lucrative for retailers. Stores are able to make significant margins on pre-owned. It's especially helpful for brick and mortar stores as a way to compete with digital. 31 per cent of gamers – or 3.1m people – have purchased a pre-owned product in the past year. On average these shoppers are spending less than gamers that purchase new releases. The average price of a pre-owned game is 10.61 – an indicator as of why so many customers opt for pre-owned – allowing retailers to bring home 79m per year.
While the potential gains from pre-owned for retailers are substantial, increasingly stores focus on promoting new triple-A titles. With over 50 per cent of spend in the past year going on new release games it is easy to see why. But retailers should make sure that pre-owned games are in consumers' minds, too. With almost two in every three pre-owned games sold in 2013 being over two years old, there is a significant appetite from consumers wanting to gain access to older products. Pre-owned games offer an opportunity to rediscover older games or tap into a ‘retro' market.
It isn't just retailers that need to strike a balance. This market represents a threat to publishers as there is no profit in it for them after the original sale. A strategy employed by the likes of EA to try to maintain margins was to collect money from consumers who bought pre-owned games by locking them at a certain level, which couldn't be bypassed unless the players paid $10. This didn't go down well and publishers had to quickly drop this tactic. However, the move to digital games offers publishers the chance to profit from pre-owned.
Companies can tempt gamers into purchasing DLC by offering new content such as maps or weapons as DLC at an additional cost. This enables publishers to re-coup money otherwise lost in the resale of games. If companies make it appealing for gamers to spend on DLC, pre-owned players are likely to also pay out for it, too.
Publishers can, and should, defend themselves
by developing robust DLC plans for new release
titles. Over a quarter of pre-owned shoppers
have spent money on digital games over the
past year and have, on average, purchased
them 3.5 times per year.
Publishers can, and should, defend themselves by developing robust DLC plans for new release titles. Over a quarter of pre-owned shoppers have spent money on digital games over the past year and have, on average, purchased them 3.5 times per year.
Publishers win out on titles with DLC, and the digital market isn't slowing down. Digital games sales now account for over 10 per cent of spend in the video games market – more than pre-owned sales. To cash in, publishers need to make sure titles have digital extras so that older titles are available through digital channels.
But until games go fully digital consumers will continue to buy affordable pre-owned titles. There are many options, including new, pre-owned, catalogue and digital games. With such myriad choice it isn't likely that digital will surpass physical games in the near future, making pre-owned obsolete. The best strategy for retailers and publishers is to ensure that they continue to attract gamers using multiple channels. Retailers should continue to promote pre-owned games while making sure that they include a digital strategy to protect themselves. Publishers need to incorporate DLC into titles to secure future revenue streams. Pre-owned games can be a profitable friend if both use channels to their advantage.