There have been all sorts of statements about so-called pre-owned games, and quite a lot of people spouting hyperbole. To be honest I have been one of those people, but that doesn’t mean there isn’t a truth to it.
We see more and more developers and publishers speaking out against pre-owned, while more and more retailers – even supermarkets now – are getting their wide-bore snouts deep into this trough. But, apart from speaking out, we are really doing very little about it.
Since I last wrote about it nearly a year ago, little has changed, other than my fear (a plethora of type-in codes and ‘memberships’) having largely come to pass.
The deck is sloping, the band is playing, and we are shouting and gesturing angrily to each other about the iceberg. One or two people are building rafts, but no-one is plugging the hole. We’re all waiting for someone else to move first.
If you don’t believe pre-owned is causing a huge dent in our sales, then look at the figures: In the US in 2008/2009 42 per cent of GameStop’s profits (as the biggest specialist retailer in the US) came from pre-owned game sales, and gross profit on pre-owned alone climbed to just under $1 billion. It is no wonder supermarkets and corner shops are joining in the plunder.
We need to look at it sensibly – we need to think not just of developers and publishers, but players and retailers too.
There is a strong argument that players want the prices of games to come down, which sounds obvious enough – and that is effectively what pre-owned does, if you return the game after playing it.
Our fragmentary response to the problem, one-time codes and so on, is in danger of reducing the incentive to keep them anyway, devaluing a collection if it is bound to numerous different accounts and codes, with no certainty that in the future these codes will continue to work.
High Street retailers were having a hard time of it before they started with pre-owned – new games are rarely sold for anything close to the RRP these days, going for not a great deal more than the trade price in some cases (especially online). So retailers’ margins are now very slim on new games. This process of margin erosion is starting to happen to pre-owned too, and will increase as the supermarkets get up to speed.
Such a decrease in the profit from pre-owned to retailers makes it less valuable to them, so may make them rather less resistant to change.
It is not completely bleak; pre-owned does – effectively – put some money back on the table, as the cost of goods is saved each time a game goes around the loop. But fundamentally there is now less money to go around as retailers have educated gamers to think that a lower price is what they should expect.
It would be possible for retailers to pay a slice of the pre-owned revenue to publishers and developers, but I can hear the calls already: ‘Why should we?’ Perhaps they are right. The inaction of our industry so far has essentially given them the go-ahead. There needs to be a real likelihood of things changing imminently right across the industry for any action to be taken.
There are six ways we can go:
1. Carry on with the array of ad-hoc one-time codes, online ‘passes’, DLC, to tilt players toward new purchases.
2. Introduction of cross-industry serial numbering of discs. This shouldn’t mean the complete freezing out of pre-owned – it would be up to developers and publishers what to do – but it does give the option of a whole range of possibilities, including ones currently covered by the one-time codes.
3. Industry participation in pre-owned sales. This has to be with the retailers’ agreement, but this may come, as long as there is an upside to them, and that upside could be as part of holding off on the worse excesses of (2).
4. Bring in ‘Not for Resale’ SKUs. Why is there no parallel with DVD sales? It is because they do not allow resale or rental – and in fact have special ‘for rental’ SKUs at a significantly greater price.
5. Make the discs just data discs costing say, £5, perhaps containing an extended demo, but requiring online validation to become a full game (eg by withholding the executable file), even for the first user.
6. Move to online-only. This is where the retailers seem to want us to go after all, so perhaps it’s time to make the jump.
Whatever the tactic, let’s do something soon, and stop all the shouting about the unjust iceberg.