Gamestop and the 70%

gamestop

In a recent Gamasutra article, Gamestop CEO Paul Raines came out swinging at industry insiders that have decried his company’s used game market as a blight upon the business by announcing that 70% of the money paid out to gamers in exchange for used games is reinvested in brand new titles. Supposedly that’s $1.8 billion–or about 900 million Madden 2007 trade-ins.

If that’s true–and it must be, because fancy businessmen never lie, especially when talking about their fancy businesses–then Gamestop’s trade-in service is subsidizing over 19% of the market (based on last year’s estimated $9.3 billion in retail game business). That’s a significant chunk, and that business is surely helping many lesser studios remain viable. This kind of spending makes sense; if a store hands me money in exchange for something I enjoyed but don’t want anymore, it’s extremely likely that said store will have something else I’m going to want. Why bother going through the effort of trying to cram that money into a wallet that’s all ready stuffed with receipts and useless rewards cards when I can use it right then and there?

For the consumer, constant trade-ins make good sense. Play a game, finish it, and trade it in quickly, and you’ve got about $20 on your hands. That’s a solid 33% off your next purchase of a brand new title (not considering state and local taxes, of course). Do this four times, and one of those games is essentially free, minus the time you lost fending off suggestions that you pre-order something. eBay can turn an even larger profit on older niche games, turning the second-hand market into a power source of sorts for brand new sales.

Combine this information with phegan’s recent article about how MMO’s should adopt the unique pricing structures of Team Fortress 2, Tribes: Ascend, and League of Legends, and you’ve got one writer that’s spent a lot of time pondering console game pricing this week. It’s no secret that console developers have been doing their damnedest to circumvent the used game market with day-one DLC and one-time-use codes included with new game purchases, and it’s possible that such tactics are encouraging the trade-in culture–but I can’t help wondering if there’s a market here ripe for console developers to exploit.

DLC is any console studio’s greatest weapon against the used game market. It allows a modicum of control over an environment in which the customer can buy, sell, or trade a game for whatever he thinks is a fair price. It’s fair to speculate that future consoles may make their entire libraries download only; it’s convenient, for one, and it also stabs the used game market in the kidney with a homemade prison shank. Good luck selling a downloaded game without ripping out your console’s entire hard drive. Unfortunately, this tactic would short change both consumers and developers; consumers can’t possibly get anything in exchange for a downloaded purchase they’re finished with, and that inability to recoup lost income hurts the sales of other games.

Which brings me to the PC space, and specifically games like League of Legends and Tribes: Ascend. Both titles are free-to-play games wherein advancement is available either by spending time playing the game or by paying a premium to purchase equipment, experience, or whole new characters. This is where future console markets need to look. Think about the recent proliferation of achievements, those seemingly silly badges that yell “hey, look, I killed ten thousand sheep!” and don’t do much else. Maybe future download-based consoles could offer discounts to players that rack up certain high-level achievements. In principal, this is no different than helping out the player that constantly trades his used games in to Gamestop: you’re rewarding the people that spend the most time and effort on your games. If anything, it’s a purer means of measuring a gamer’s value to your community than simply judging him on what titles he’s dropping off at a brick-and-mortar because it uses his actual gaming activity as a measuring stick. Whether fancy businessmen like it or not, those are the people that facilitate that extra weekend in the Hamptons or dictate whether or not they can get the yacht with the helipad, and so that core audience should be encouraged.

Herein lies the thing I’m not sure the games industry gets: business is not about charging the most money possible for a product. Business is actually about maximizing the product of buyers times price. Check out the poll on our front page; it’s a small sample size, but most respondents agree that $60 for a new game is too fucking much. How many more new titles would our audience purchase every year if brand new games were only $40? If the answer is as few as two, then that’s a huge increase in overall profit.

I’m not just looking for a handout here; I’m looking at economic realities. Your customers have more money to spend if you find some way to allow them to convert a previous purchase into money they can, in turn, spend on more of your stuff. It’s not socialism; it’s capitalism being a clever girl.

In conclusion, I’d argue that console developers better be damn careful about getting what they wish for in regard to restricting the used game market. They might be shooting off their own damn feet.


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