XBox One (or 3) and Used Games

First, need to get this out of my system: XBox One is a terrible name and whoever came up with that is a complete idiot. It makes the Wii’s name look well thought out, and Nintendo apparently forgot about the countless piss jokes that could be made! Microsoft, you named you system so that people could make “Who’s on First” jokes with it! Come on!

…but I digress…

As part of the clusterfuck of an announcement launch that was the XBox One’s debut, there was a large number of other questions that got posed to the Microsoft PR department, one of the biggest involving the question about Used Games.

For those that don’t know, Used Games are somewhat divisive in the industry. Consumers love them, because it’s a cheaper way of buying the games and they get money back for trading them in and you can loan games to friends without issue and all sorts of other fringe benefits on top of all that. Developers and Publishers tend to hate them, because they get no money from the used game sale, and unlike used cars, furniture, appliances and even books, there is little difference between a New copy and a Used copy of a game, assuming that the people that had the game before you didn’t take a grindstone to it, meaning that there’s little consumer-side reason to buy a game New if there’s a Used version.

And Gamestop REALLY loves them. In 2010, Gamestop pulled in $2.5 Billion in revenue from used game sales, and $1.14 Billion in profit. Compare that to $3.97 Billion of revenue from New sales but only $0.82 Billion in profit. No doubt 2011 and 2012 saw similar numbers (I could only find the numbers from 2010, thanks to an excellent analysis by Silverstorm at GameRevolution).

So, there was little surprise that Microsoft announced that there would be anti-used game restrictions for the X-Box One. Little surprise, but still a lot of outrage, because there are a LOT of benefits to Used Games, just as there are a lot of drawbacks to them. Microsoft’s plans are still very nebulous at the moment, as what little we’ve heard has been quickly retracted as only one possible scenario, and we have no idea if Sony will do the same thing, although it seems rather likely that they’ll have some plan in place as well. But for the moment, I seriously doubt that Gamestop’s current Used Game practices will be untouched with the new console cycle.

But you can’t forget that the industry does need Gamestop to sell new games. If Gamestop went out of business tomorrow, the industry would take a massive blow. That $4 Billion of revenue from new game sales is a pretty big piece of the industry’s pie, one that no one wants to see disappear. Any Used Game Solution is going to have to be made with Gamestop’s long-term health in mind.

…and as this is my blog, I have a few thoughts on the subject…

Not All Used Games are Created Equal

Basically, there’s, at minimum, four types of Used Games:

Type 1: I loaned Halo 4 to my friend!

This is a largely harmless practice, honestly. Most gamers have fond memories of taking an awesome game over to their friend’s house to play and how much fun it was. Or a game night at college in one of the common areas, or going wild at a LAN party. I don’t know anyone in the industry that really minds this practice, but it gets screwed over by most of the Used Game Solutions. If it becomes organized and monetized, then it might enter a gray area, but as it stands? It should be left alone, and it seems like Microsoft is aware of that to an extent (they’ve stated that, if you are logged in on a friend’s system, you can play your games there).

Type 2: Rentals

I love Rental games! I haven’t played any in a long, long time, but I love them! They should stay around! It’s a good industry that fills a need by people who want to play the newer games but can’t shell out $60 bucks for them!

But…

According to Gamefly’s own website, Publishers and Developers do not make money from Gamefly’s rental fees directly. They have to buy the game discs, sure, and maybe it evens out over time, but it might be a good idea to reexamine how that works. If Gamefly got “Rental” game disks for free, that could be tied to any user for a limited amount of time, and Gamefly kicks back some money to the publishers/developers/Microsoft, it would probably work out pretty well. Details would need to be massaged out, but it’s certainly workable.

Type 3: Old Used Games

This is what most people think of when it comes to Used Game Sales: Someone picking up last year’s Call of Duty on the cheap because they heard it’s good and want to give it a play, or buying a used copy of Final Fantasy VII on eBay because they never played it when they were younger and want to see what all the bloody hype is about.

And I have no problem with that.

My issue with EA’s Project $10 was always that it didn’t address this fairly legitimate Used Game sale scenario. They wanted that $10 from everyone that played their game, even if it was years down the line, past when people really cared about that game’s sale’s figures. And it becomes even MORE of an issue when you look at older, out of print games. That FF7 example was ME some odd years ago. It’s probably the only way I’ll ever actually be able to play Silent Hill 2, because good luck finding a disc for that in a Gamestop or Best Buy, new OR used.

This practice should not be hampered much, if at all. I can understand Microsoft wanting to squeeze a little money out of them, but it’s probably not worth it. Most modern games will have a few bits of purchasable DLC anyway, that’s still money you can get from them if they end up really liking the game (and you can throw up a bit of an advert about the available DLC during the install process anyway). More importantly, it’s a bone you can throw to Gamestop, so that you’re not completely wrecking their business model.

Type 4: New Used Games

This is the type of “Used” game that I outright hate. This is the “1 week after release, there’s a dozen Used copies in Gamestop that are $5 cheaper than the New price, and most of that is pure profit”. This is the practice that Microsoft, Sony, and the major publishers want to clamp down on, because it doesn’t feel right for a $5 discount to be taking away the $60 purchase from the people who made the game, during the sales period that means the most to a new game. It’s probably how Gamestop makes a lot of its profits honestly, but I’ve never liked it, I have never taken advantage of it (I’m pretty sure, at least, maybe excluding a couple times in College, if at all), and it’s something I’ve always steered my friends away from.

Have Gamestop Help

Look, Gamestop is a part of this industry right now. You want them to stay around and stay strong for the New Game and Hardware sales they give you, even if you wish their Used Games racks would die in a fire.

And Gamestop isn’t stupid, either. They have to know that they’ve been riding a wave that won’t be around forever, and sooner or later, well, THIS was going to happen. Microsoft and Sony need to go to Gamestop and ask them “We’re going to be shooting Used Games in the kneecaps with the next console generation, but lets try to find a way to keep you afloat. You can even leverage this to make things easier on the customers too! After all, people who buy Used games are going to have to unlock them somehow, and it’s a hell of a lot easier to do that with a card that can be scanned by Kinect, than by entering a 16 digit credit card, SVC code and address, especially since the user might not HAVE a credit card.

How Would I Do It?

Leaving aside Rentals and Borrowing scenarios and just going to the Used market, because I kinda already brought up how to deal with Rentals and Microsoft seems to be at least aware of the Borrowing scenario…

First, make the Used Game fee dependent on how long the game has been out for. I’ll throw out some numbers so you know what I mean, but don’t treat them as canon, ‘kay?

  • First Two Weeks of Release: 50% of MSRP ($30 for Halo 4, for example)
  • Weeks 3-4 of Release: 30% of MSRP ($18 for Halo 4)
  • Second Month of Release: 20% of MSRP ($12 for Halo 4)
  • Third Month of Release: 10% of MSRP ($6 for Halo 4)
  • 4th-6th Months of Release: 5% of MSRP ($3 for Halo 4)
  • After that: No Used Fee

This is, of course, done with the intent of cutting into, but not outright killing, the first month Used Games Sales, giving Microsoft, the publishers and developers a cut of the sales for the first 6 months of the game’s release. And, yes, those numbers should be negotiated with Gamestop (and maybe other used game retailers) to find a good scale.

Second? To make the process easier for the players, give Gamestop a discount on a variety of cards, that can be scanned by Kinect of course, that are the value of the various Used Fees (possibly that can be generated by Gamestop themselves). Microsoft and the Pubs/Devs would lose a bit of money from the discount, but it would be a good use of Gamestop’s physical stores, and might dampen the blow to Gamestop a bit.

I’m sure there are people that will say that there should never be any restrictions on Used Games, that selling licenses for permission to play the game that a player bought is a travesty, and anyone that supports such a practice is a money-grubbing asshole of a businessman…

…and they might be right. I understand the reasoning behind that claim, and I can’t exactly ignore it. You should have the right to play what you purchased without restrictions, games can be really expensive, and being able to sell back a piece of crap game can be quite cathartic, and at least make you feel like you didn’t lose all of your money from it. But I make my living from the video game industry, and while I thankfully don’t need to worry about Used Game sales for what I work on (Hell, I actually benefit from Gamestop’s presence 😀 ), I completely sympathize with the developers and publishers who HAVE lost money from the $55 Used Game Sales, because I know just how hard it is to make money in this industry.

Used Games are almost certainly going to take a hit in this next console generation, from both Sony and Microsoft. But it can be done properly, and not outright kill Gamestop and those trying to find and play the classics five years from now.

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