TWICE reported today that Toys ‘R’ Us is rolling out its game trade-in program nationwide and will begin promoting the program on September 13th in their circular. Used game sales remain a hot topic of debate as they don’t give the creator or publisher any incremental revenue from additional people consuming the content. While the issue of game trade-ins and reselling games could be easily fixed through technology, and in some ways digital distribution will handle the problem over time, there are a lot of traditional brick and mortar retailers trying to make money off of the segment.
The difference in Toys ‘R’ Us’ approach is that they will be taking in games from legacy systems including Atari 2600, PlayStation, PlayStation2, Xbox, Nintendo Game Boy, Nintendo 64, Nintendo NES, Intellivision and Sega Genesis, in addition to the current generation systems. While there aren’t publishers and developers putting out new versions of most of these titles (yes there are new PS2 titles being released still), meaning new game sales of the same products aren’t being cannibalized. The argument then arises as to what would be a legitimate collectible, meaning the resale market would be justified in the eyes of the publishers and developers as well. Every publisher has a back catalog of games, although the platforms are no longer current and most titles would need significant work to get them on the current platforms. I think morally, you can make a case that you’re not taking money out of the pockets of the publisher or developer by buying a game that is “out of print.”
Then again, if the developer is still in business, they did create the game and there should be some compensation for an additional consumption of the content. It’s a complex debate that doesn’t have an easy answer. What is easy is to understand that the market for used game sales is incredibly lucrative and games are treated more like books than movies. Movies get a theater experience or a first-run opportunity and then they switch to a purchased physical good, DVD. Books and games miss the first run opportunity and the revenue associated, where with movies you monetize each instance of consumption before it gets pirated and resold in the DVD market.
GamesIndustry.biz has an article regarding used game sales which cites Wedbush Morgan Securities Analyst Michael Pachter and data on the used game sales market. He estimates the market at 100 million units per year. This is:
One third of all games sold in the US
Accounts for $2 Billion annually
The article goes on to defend game resellers including GameStop saying the trade-in value is low (usually around 20% of the original purchase price), and stating that the company doesn’t push customers to buy used games. It ends by estimating that used game sales stimulate 6% of new game sales.
Ultimately, the retailers make out where publishers and developers don’t see any incremental revenue after the initial purchase price. With Half-Life 2, Valve put a stake in the ground to curb PC game resales since it required an online connection and a registered Steam account to play. Online games such as EverQuest and World of Warcraft have also had single use registration keys for almost a decade, again eliminating the possibility of game resales. GameStop doesn’t resell PC games anymore, and shelf space is shrinking, but online and digitally distributed titles with key systems and account requirements have lower piracy then any other form of entertainment.
While there are many possible solutions for developers and publishers to deal with the resale issue, the industry has been reluctant to upset its major retailers by implementing similar online key registration and account-based content locks for console titles. Hopefully OnLive is a solution, but it may take the industry proposing a resale percentage on titles to get everyone involved and satisfied with the practice.