There seems to be a general unease in the industry about the second hand games market. Publishers dislike it intensely. Some even go as far as claiming that it leads to less investment in research and innovation, and as consequence, more sequels and movie tie-ins. According to the same publishers, it also leads to higher prices…not realizing the higher prices themselves drive the growth of the second-hand games market. Mind you, publishers are not pissed off at the retailers for actually selling second hand games. They’re upset, and jealous that they can’t share in the massive profits of this market.
Of course if you’re an employee in the games industry, all this actually means very little to you, and should have even less impact on you, unless you are one of the few who actually receive decent royalties based on game sales. In which case, you shouldn’t care so much, since you are already working for a more than decent employer, which is very rare in this industry.
In a recent three-part series (here, here, and here), Mark Friedler from GameDaily BIZ proclaimed that the video games business is broken, and one of his offered solutions was that new games should be sold at a price point between $10 and $20. Yes, that’s a fairly extreme shift in price point, but he’s not the only one arguing for a change. Nintendo has argued that different games should be priced differently, and have followed through by offering Touch! Generation, a cheaper line of games for their DS (with regular DS games being already much cheaper than standard console games).
The fact is second-hand games essentially create another price point, $10-30 cheaper than newly released games. It creates the secondary price point market because consumer pressures demand it. Not every consumer wants to pay $50-$70 for a new console game. It’s simply not going to happen, especially for avid game players, who have very little hope being able to afford every new quality game which comes out.
Every now and again, a rumor crops up that the latest consoles won’t allow the consumer to play games which have been previously played on another console (through some complex locking scheme, which would be sure to irritate game players everywhere). Of course, the rumor always turns out to be completely unfounded.
That’s not to say that somewhere, high up in some dark tower, a few evil Sony/Nintendo/Microsoft/EA executives haven’t actually tried to find a way to make this happen, or at least explored the possibility. It’s not impossible to create a mechanism, which could enforce this (we are already half-way there with region locking, another shady protection method). However, it would be suicidal for any console manufacturer to try and apply such a scheme. Any such system would have to call home to a server database. I’m sure some readers can recall the DIVX player, the short lived ill-fated DVD competitor which actually required the machine to be connected to a phone line at all time (so it could call home and verify you were allowed to play the movie you wanted to watch). Of course, some would argue that we are already reaching the point where most consoles will be connected up to the internet already.
However, I digress from my main point, which is: None of this is very important. It’s not important, because it won’t matter in a few years time. The industry is moving towards a digital distribution system. Actually, it’s not just our industry, but the movie industry as well (the music industry is already far along). Love it or hate it, more and more games are beginning to be traded through digital means. A few years from now, perhaps at the next console iteration, perhaps the one afterwards, a majority of games will be distributed through online means. This is inevitable.
It doesn’t mean the retail market will ever disappear altogether. There is still something intangible and satisfying about unwrapping the cellophane of game box, and going through a beautifully drawn games manual (a parallel can be drawn to CDs and the joy that some people experience going through the liner notes as they listen through the CD the first time). However, the second hand games market will inevitably come crashing down, and won’t remain a billion dollar business for the GameStop/EB/Game/GameStation retailers out there (in the UK alone, the second hand market is estimated to be £100 million, or roughly 10% of the overall games market). The publishers will be able to once again rejoice that they are able to squeeze every last penny out of consumers.
This article is a first in series taking a look at digital distribution. Later this week, I will examine why the move to digital distribution is inevitable.
