shrike4242
06-05-2009, 12:52 PM
Sounds like they're more than a few years late on trying to get their cut:
http://www.sfgate.com/cgi-bin/article.cgi?f=/c/a/2009/06/04/BUDA17R8RG.DTL
Video game manufacturers have long tolerated the practice of retailers reselling used games without any of the secondary sales going back to publishers and developers.
But the tough economy and the increasing number of retailers in the used games business are bringing a sore subject to the fore and contributing to a migration toward more downloadable content and full digital distribution of games.
At the E3 video game expo in Los Angeles, it's hard to get industry leaders to talk openly about the issue or its effects on future distribution plans, for fear of hurting relationships with retail partners. But more and more, developers are getting fed up with what they see as an unfair secondary market and they're looking at ways to maneuver around the issue.
"We would prefer to participate in the sale of our products, especially when we spend years putting one of these things together and we have to continue to provide support for all these new customers without creating any new revenue from it at all," said Pete Hines, vice president of Bethesda Softworks. "We're not big fans of that."
Retailers like GameStop, the largest seller of video games, new and used, have been buying and selling used games for years. The practice involves buying used games from customers and awarding them store credit, something GameStop has turned into a science.
Customers appreciate the practice because it allows them to sell back a used game, even just a couple days after buying it, and receiving 50 percent or more in store credit, which they can use toward another purchase.
After cleaning up the game, GameStop can resell the title, sometimes for just $5 less than the original price. On this sale, GameStop enjoys all of the profit after factoring in the cost of store credits offered in return. Game publishers do not see a cut of the secondary sale because it falls under the first sale doctrine, which allows consumers to resell software.
"It's a real problem right now and it's a loophole that people are using, and we're getting cut out of that model," Denis Dyack, president of developer Silicon Knights, said at a gaming conference in the spring.
Heavier scrutiny now
It's a subject that has long irked publishers and has gotten more scrutiny in the last year, in part due to the worsening economy, said analyst Colin Sebastian of Lazard Capital Markets. Sebastian said the fact that other retailers like Best Buy, Amazon, Wal-Mart and Toys R Us have thrown their hat in the used game ring earlier this year is also heightening the frustration.
"The game industry is doing good, but there are definitely losers and some of them are feeling the impact of the economy," he said. "In periods like this, it forces companies and executives to look at their cost structure and the retail channel is very costly."
GameStop denies that it's hurting its content partners and said its practice of selling used games actually promotes the sale of new games and opens up games sales to more price-sensitive consumers.
Tony Bartel, senior vice president of marketing and merchandising for GameStop, said internal studies found that 70 percent of store credits for used games are used for purchase of new games, enabling close to $2 billion of new sales each year. He said in the first 60 days of a new game's release, only 4 percent of sales are for used games, while 14 percent of new games are paid through used game credits.
"We feel it's a virtuous cycle," Bartel said. "The simple point is our trade policy helps make games affordable."
Bartel said the average selling price for used games is $14 compared with about $40 for new games, suggesting that used games appeal to a different type of consumer, while leaving intact most of the new-game market.
He said GameStop went on a road trip three months ago to visit most of the top publishers and share that data in an effort to address this growing "friction point." He said he believes the disclosure has helped prevent the friction from growing.
GameStop has an important stake in the issue because it enjoys a 48 percent profit margin on used games, which drives the company's overall profit.
Skepticism for GameStop
Some industry execs are still not buying GameStop's claims. One marketing executive, who did not want to be identified for fear of angering GameStop and other retailers, said the used game sale market is still depriving publishers of money because it gives consumers an all-too-easy alternative to buying a new game.
"If they stopped selling used games, I guarantee our sales would go up," he said.
Video games are different from movies or CDs, which often hold more sentimental and replay value over games, which can be played through in 10 hours and then discarded. The challenge for the industry is to get consumers to buy games they'll want to hold on to.
Pushing for downloads
As a part of that effort, publishers are pushing more and more downloadable content - delivered on a timely basis - that extends the life of a game through map packs, weapons and new episodes and levels but requires the original physical disc.
Some like EA have included bonus perks in games that can be used once with an online code but must be purchased for a second time use. NBA Live 09 offers consumers dynamic information provided through NBA Live 365, but using the feature on a second console costs $10.
Others are pushing more multiplayer options for games, which require gamers to hold on to the game so they can play online with others. The upcoming Bioshock 2 includes a multiplayer mode, though its predecessor was hailed for its single-player campaign.
The final step is full digital distribution of new console games, something that's been done on the PC for several years but has been barely pursued on gaming systems. At E3, Microsoft moved the ball forward by announcing a new feature called Games on Demand for the Xbox 360, which will allow players to buy titles that are at least a year old, such as Bioshock or Assassin's Creed.
Other possible venues
On a different front, OnLive, a Palo Alto startup, showed off a streaming service in March that would allow players to play a video game on a simple PC or TV without the need of a console. Both digital downloads and streaming would prevent users from reselling their games.
All of these efforts, however, aren't solely designed to prevent used-game sales. But their effect on that market is something that pleases publishers.
GameStop's Bartel said he welcomes new features that make games more compelling. And he said GameStop is looking at digital distribution in the future. He expects GameStop to survive with or without used game sales.
"We have a great relationship with customers and we'll continue to leverage that relationship, whether in a boxed product world or a digital world," he said.
E-mail Ryan Kim at rkim@sfchronicle.com.
This article appeared on page C - 1 of the San Francisco Chronicle
http://www.sfgate.com/cgi-bin/article.cgi?f=/c/a/2009/06/04/BUDA17R8RG.DTL
Video game manufacturers have long tolerated the practice of retailers reselling used games without any of the secondary sales going back to publishers and developers.
But the tough economy and the increasing number of retailers in the used games business are bringing a sore subject to the fore and contributing to a migration toward more downloadable content and full digital distribution of games.
At the E3 video game expo in Los Angeles, it's hard to get industry leaders to talk openly about the issue or its effects on future distribution plans, for fear of hurting relationships with retail partners. But more and more, developers are getting fed up with what they see as an unfair secondary market and they're looking at ways to maneuver around the issue.
"We would prefer to participate in the sale of our products, especially when we spend years putting one of these things together and we have to continue to provide support for all these new customers without creating any new revenue from it at all," said Pete Hines, vice president of Bethesda Softworks. "We're not big fans of that."
Retailers like GameStop, the largest seller of video games, new and used, have been buying and selling used games for years. The practice involves buying used games from customers and awarding them store credit, something GameStop has turned into a science.
Customers appreciate the practice because it allows them to sell back a used game, even just a couple days after buying it, and receiving 50 percent or more in store credit, which they can use toward another purchase.
After cleaning up the game, GameStop can resell the title, sometimes for just $5 less than the original price. On this sale, GameStop enjoys all of the profit after factoring in the cost of store credits offered in return. Game publishers do not see a cut of the secondary sale because it falls under the first sale doctrine, which allows consumers to resell software.
"It's a real problem right now and it's a loophole that people are using, and we're getting cut out of that model," Denis Dyack, president of developer Silicon Knights, said at a gaming conference in the spring.
Heavier scrutiny now
It's a subject that has long irked publishers and has gotten more scrutiny in the last year, in part due to the worsening economy, said analyst Colin Sebastian of Lazard Capital Markets. Sebastian said the fact that other retailers like Best Buy, Amazon, Wal-Mart and Toys R Us have thrown their hat in the used game ring earlier this year is also heightening the frustration.
"The game industry is doing good, but there are definitely losers and some of them are feeling the impact of the economy," he said. "In periods like this, it forces companies and executives to look at their cost structure and the retail channel is very costly."
GameStop denies that it's hurting its content partners and said its practice of selling used games actually promotes the sale of new games and opens up games sales to more price-sensitive consumers.
Tony Bartel, senior vice president of marketing and merchandising for GameStop, said internal studies found that 70 percent of store credits for used games are used for purchase of new games, enabling close to $2 billion of new sales each year. He said in the first 60 days of a new game's release, only 4 percent of sales are for used games, while 14 percent of new games are paid through used game credits.
"We feel it's a virtuous cycle," Bartel said. "The simple point is our trade policy helps make games affordable."
Bartel said the average selling price for used games is $14 compared with about $40 for new games, suggesting that used games appeal to a different type of consumer, while leaving intact most of the new-game market.
He said GameStop went on a road trip three months ago to visit most of the top publishers and share that data in an effort to address this growing "friction point." He said he believes the disclosure has helped prevent the friction from growing.
GameStop has an important stake in the issue because it enjoys a 48 percent profit margin on used games, which drives the company's overall profit.
Skepticism for GameStop
Some industry execs are still not buying GameStop's claims. One marketing executive, who did not want to be identified for fear of angering GameStop and other retailers, said the used game sale market is still depriving publishers of money because it gives consumers an all-too-easy alternative to buying a new game.
"If they stopped selling used games, I guarantee our sales would go up," he said.
Video games are different from movies or CDs, which often hold more sentimental and replay value over games, which can be played through in 10 hours and then discarded. The challenge for the industry is to get consumers to buy games they'll want to hold on to.
Pushing for downloads
As a part of that effort, publishers are pushing more and more downloadable content - delivered on a timely basis - that extends the life of a game through map packs, weapons and new episodes and levels but requires the original physical disc.
Some like EA have included bonus perks in games that can be used once with an online code but must be purchased for a second time use. NBA Live 09 offers consumers dynamic information provided through NBA Live 365, but using the feature on a second console costs $10.
Others are pushing more multiplayer options for games, which require gamers to hold on to the game so they can play online with others. The upcoming Bioshock 2 includes a multiplayer mode, though its predecessor was hailed for its single-player campaign.
The final step is full digital distribution of new console games, something that's been done on the PC for several years but has been barely pursued on gaming systems. At E3, Microsoft moved the ball forward by announcing a new feature called Games on Demand for the Xbox 360, which will allow players to buy titles that are at least a year old, such as Bioshock or Assassin's Creed.
Other possible venues
On a different front, OnLive, a Palo Alto startup, showed off a streaming service in March that would allow players to play a video game on a simple PC or TV without the need of a console. Both digital downloads and streaming would prevent users from reselling their games.
All of these efforts, however, aren't solely designed to prevent used-game sales. But their effect on that market is something that pleases publishers.
GameStop's Bartel said he welcomes new features that make games more compelling. And he said GameStop is looking at digital distribution in the future. He expects GameStop to survive with or without used game sales.
"We have a great relationship with customers and we'll continue to leverage that relationship, whether in a boxed product world or a digital world," he said.
E-mail Ryan Kim at rkim@sfchronicle.com.
This article appeared on page C - 1 of the San Francisco Chronicle