GAME/Gamestation in trouble?

[Famous Mortimer]

The second hand market has a real distorting effect on games industry. The focus on massive budget and massively hyped triple-A titles and the encroachment of multiplayer[nb]multiplayer has the dual effect of encouraging people to buy at launch before everyone else gets good, and keeping people playing and holding onto games for a long time- CoD being so successful in sales isn't just down to it being a good game[/nb] into everything can both been seen as direct reactions to the second-hand market.

Now, I'm sure there's a very good reason I just can't think of because I'm tired, but how is this any different to the DVD market, which has survived perfectly well with a second-hand market for many years too?

[buntyman]

Another possible benefit of the second hand market is keeping an older game in the spotlight. If people are seeing games that are a year old or more on Ebay or 2nd hand sections of game shops, it's surely good advertising for a particular franchise. I'm sure it'd also makes a certain number of people want to buy the game and for a few quid more than a scratched up, wanked on second hand one, they could buy it new making the game company more money. With digital only games, I think after a while, games would become more easily forgotten about and disappear into a hidden area of someone's hard drive/cloud

[Still Not George]

Now, I'm sure there's a very good reason I just can't think of because I'm tired, but how is this any different to the DVD market, which has survived perfectly well with a second-hand market for many years too?

Movies aren't really comparable - they have multiple income streams, first from cinema, then rental, then DVD, then TV rights. When was the last time you saw someone actually go out and buy a movie DVD? So the only really comparable area is box-sets of TV shows, which are premium time-limited items that fall in price really rapidly after release. Pretty close to the games market, in other words.

[Consignia]

And while there is a second hand market for DVDs, it's much smaller and less prevelent on the high street. I can't really think of a place where you can buy second hand dvds, Cex maybe, whereas every video game shop has pre-owned stuff lining the shelves.

[MojoJojo]

Now, I'm sure there's a very good reason I just can't think of because I'm tired, but how is this any different to the DVD market, which has survived perfectly well with a second-hand market for many years too?

For the most part, buying a DVD is a statement more than anything - you don't buy a DVD just because you want to watch the film. You can rent or record it off TV or borrow it for that. People buy DVDs of films they have seen, liked, and have some affection for[nb]obviously generalising a bit, but I'd say it's true for most DVD sales[/nb]. Films are a lot more timeless than games. People talk about their DVD collection is a way no one talks about having a games collection.

The consequence is that a lot less people are willing to trade in their DVDs - they bought them to keep, not just to watch. So it's hard to establish a big market of DVDs. Another side effect is second hand DVDs are a lot less appealing, and things like a battered case matter a lot more than they do with games.

[MojoJojo]

Another possible benefit of the second hand market is keeping an older game in the spotlight. If people are seeing games that are a year old or more on Ebay or 2nd hand sections of game shops, it's surely good advertising for a particular franchise. I'm sure it'd also makes a certain number of people want to buy the game and for a few quid more than a scratched up, wanked on second hand one, they could buy it new making the game company more money. With digital only games, I think after a while, games would become more easily forgotten about and disappear into a hidden area of someone's hard drive/cloud

The point is though, that if the publishers/developers got any money from it, they'd still be pushing games a year later; the only reason they don't now is someone buying the game a year later gets them nothing at all.

And with second-hand market getting people on to franchises - you don't think publishers might not realise that it's a useful promotional tool? You see it book series - the first book in a fantasy trilogy is often a lot cheaper than the others because they want to reel people in.
What you actually get now is slightly perverse - second-hand prices from the beginning of a franchise often go up when sequels are released, due to the sequels hype increasing demand. (citation needed, I know, but I'm sure I've had personal experience of this).

[Famous Mortimer]

When was the last time you saw someone actually go out and buy a movie DVD?

On my floor of my office, at least three people have done so this week.

So the only really comparable area is box-sets of TV shows, which are premium time-limited items that fall in price really rapidly after release. Pretty close to the games market, in other words.

*goes and waits for "The Wire" box sets to be reduced in price*

And unless the TV-box-set market is in similar trouble, I'm not sure the analogy holds. Look, I appreciate this is an argument I'm not going to get very far with, given how many of you seem to work in the industry, but I still don't see why the games industry is a precious and unique snowflake that needs to be protected from the second-hand market. I'm trying to wrack my brain to think of another thing you buy, and when you buy it, you're told that you're the only person who'll be able to use that thing, ever.

I'll try and phrase it another way. The second-hand market has been around as long as video games have. What is it about now that means it's suddenly a bad thing? Why should the multi-billion dollar gaming industry be treated differently to any other product?

And while there is a second hand market for DVDs, it's much smaller and less prevelent on the high street. I can't really think of a place where you can buy second hand dvds, Cex maybe, whereas every video game shop has pre-owned stuff lining the shelves.

No, CEX definitely, where every one I've ever been into has just as much space devoted to selling DVDs as it does games.

[MojoJojo]

I'll try and phrase it another way. The second-hand market has been around as long as video games have. What is it about now that means it's suddenly a bad thing? Why should the multi-billion dollar gaming industry be treated differently to any other product?

Because -

1) The physical product is the only income stream (which is where the TV series analogy falls down for me - the boxed product is of minor importance to making TV shows).
2) There is no prestige or value in owning a game after it's been played.
3) For all practical purposes, the second hand product is identical to the brand new product[nb]well, until the recent "Exclusive content" stuff started appearing, but that's sort of what we're talking about[/nb]

I can't think of anything else that has all those problems.

[MojoJojo]

Oh, I'm not in the Games industry. I work in an office above where some of Frontier Developments work. Making games seems to be much like every other development job, except it doesn't pay well and you get treated far worse.

Can anyone explain what they have against single-use games? It seems to be the default position, do you all work for CeX or something?

[Famous Mortimer]

Because -

1) The physical product is the only income stream (which is where the TV series analogy falls down for me - the boxed product is of minor importance to making TV shows).
2) There is no prestige or value in owning a game after it's been played.
3) For all practical purposes, the second hand product is identical to the brand new product[nb]well, until the recent "Exclusive content" stuff started appearing, but that's sort of what we're talking about[/nb]

I can't think of anything else that has all those problems.

Yes, the physical product is the only (well, not the only - in-game advertising, arcade versions of games, rentals, but I get your point) revenue stream, but it's an extremely profitable one. I don't think there's a lot of prestige to owning DVDs or blu-rays either, given the only people who see my collection are the two people who live in my house and the occasional friend who pops round and goes "you own this shit?" And there are enormous numbers of products where a pre-owned thing is effectively identical to the new thing.

Can anyone explain what they have against single-use games? It seems to be the default position, do you all work for CeX or something?

Because if I pay a large amount of money for something, I'd like to be able to sell it on, should I choose.

[buntyman]

I'd be fine with it generally as long as they'll be sold by lots of different retailers with competitive pricing. Xbox live digital dowloads are crap because it's only the one place that sells the games and prices on old games remain fixed for ages. My only other reservations about digital games is that full retail games would take my xbox ages to download as I only get about 0.5mb/s of internet speed.

[MojoJojo]

Yes, the physical product is the only (well, not the only - in-game advertising, arcade versions of games, rentals, but I get your point) revenue stream, but it's an extremely profitable one.

For a few massively funded titles. If you don't have the rights to a franchise or the marketing money for a worldwide TV campaign, don't bother selling retail games.
And as I said before, I really don't think it's about getting extra money from consumers - it's non-essential spending, people aren't going to start spending 4 times as much on gaming if they lose the ability to sell games second hand and prices don't come down. They'll buy less, or possibly give up on gaming altogether and get another hobby. If publishers don't know this, they'll learn quickly.

I don't think there's a lot of prestige to owning DVDs or blu-rays either, given the only people who see my collection are the two people who live in my house and the occasional friend who pops round and goes "you own this shit?"

Why do you buy DVDs then? It's a different thing to buying a game - I used "prestige" as a word to try and explain why people buy DVDs although I know it's not quite right.
Do you trade in your DVDs as much as you trade games in? People don't, in my experience, and I don't think the reason is as simple as the cost. People tend to have seen the films they buy on DVD, and they want to own them. People buy games just to play them.

And there are enormous numbers of products where a pre-owned thing is effectively identical to the new thing.

Really? Hmmm, books are the closest I think. I've already tried to explain why I think DVDs are different, and I think the same thing applies to CDs (ignoring the way CDs are dying on their arse).

Because if I pay a large amount of money for something, I'd like to be able to sell it on, should I choose.

Yeah, that is a fair point. Brad Wardell, who is the spokesperson for Steam wannabe StarDock, did make a big announcement that were going to let people "return" games - give up their key for some fraction of the current retail price. And then it all went silent, as I assume no developers wanted to sell under that model.

[bitesize]

I'll try and phrase it another way. The second-hand market has been around as long as video games have. What is it about now that means it's suddenly a bad thing? Why should the multi-billion dollar gaming industry be treated differently to any other product?

  The videogame industry is, as far as I know, the only one where all the major high street retailers actively try to push second hand copies instead of new ones, due to the fact that they make much much more profit on them. It's only in recent years that this has started happening in a major way. You don't go into HMV to buy a DVD to be told "We've got this pre-owned for a fiver less, why don't you buy that instead?", but that's exactly what happens when you try to buy a new game in Game (or at least it was, before they closed half their stores).

[Famous Mortimer]

  The videogame industry is, as far as I know, the only one where all the major high street retailers actively try to push second hand copies instead of new ones, due to the fact that they make much much more profit on them.

Well, there's a cast-iron business model, then. Oh, wait.

For a few massively funded titles. If you don't have the rights to a franchise or the marketing money for a worldwide TV campaign, don't bother selling retail games.

And changing the way games are sold won't benefit those small titles any more than the current system does.

Why do you buy DVDs then? It's a different thing to buying a game - I used "prestige" as a word to try and explain why people buy DVDs although I know it's not quite right.

Because I might want to watch them again? Special features? Fond memories?

Hmmm, books are the closest I think. I've already tried to explain why I think DVDs are different, and I think the same thing applies to CDs (ignoring the way CDs are dying on their arse).

Clothes; any solid state electrical device; furniture; board games; books, DVDs and CDs, like you said; jewellery; kids toys; all things where the second-hand version can be pretty much identical to the brand new version.

I'll shut up now, as I'm unlikely to say anything new that's going to change peoples' minds. But it's the way that some people are trying to frame this argument that this hugely profitable industry is under threat from people wanting to buy and sell second hand games that's annoyed me.

[Shoulders?-Stomach!]

On my floor of my office, at least three people have done so this week

Likewise, I see my friends and family buying DVDs all the time.

[bitesize]

Well, there's a cast-iron business model, then. Oh, wait.

  Well, it may not have kept Game from going under but that's more down to other factors - their massive over-ambitious expansion overseas, far too many stores. Pre-owned games has been what's kept them afloat the last few years.

  You asked why the game industry was different to any other regarding second hand, and that's my answer to your question. Are there any other industries where second hand goods are aggressively pushed instead of new by most of the major retailers?

[MojoJojo]

And changing the way games are sold won't benefit those small titles any more than the current system does.

Yes it will, because smaller titles will be able to compete on price, and they'll be able to use word of mouth. Being able to sell a game for more than a week makes a lot of stuff profitable that wouldn't be otherwise.
Currently the only way to make money at retail is to hype fans into such a frenzy that they don't apply common sense and wait a week to buy it pre-owned.

I'll shut up now, as I'm unlikely to say anything new that's going to change peoples' minds. But it's the way that some people are trying to frame this argument that this hugely profitable industry is under threat from people wanting to buy and sell second hand games that's annoyed me.

Well, you've got annoyed for no good reason, because no has said that.
I've said that the second hand market has distorted the retail market towards multiplayer[nb]perhaps a side issue that doesn't need to be got into, but I'm peeved about ME3 so I'll mention it[/nb], long running franchises and a few limited genres (mostly 3rd person shooters, at the moment). Because they are easiest to hype, and hype is the only way to succeed at retail.

You're not going to change any minds if you don't read what people say.

[madhair60]

Are there any other industries where second hand goods are aggressively pushed instead of new by most of the major retailers?

Charity shops! :D

[Famous Mortimer]

Yes it will, because smaller titles will be able to compete on price, and they'll be able to use word of mouth. Being able to sell a game for more than a week makes a lot of stuff profitable that wouldn't be otherwise.

http://store.steampowered.com/
Exactly like the system that exists now, you mean? The new way that will allow these smaller titles to mysteriously be able to compete with mega-budget AAA titles will, of course, force many games shops to close, so there will be fewer outlets for those indie games.

How will the "hype of retail" be less if no-one can re-sell games? What will that change?

Well, you've got annoyed for no good reason, because no has said that.

Apart from the boss of Digital Knights, you mean? That was the first link I found, I'm willing to bet there are plenty more from other people.

You're not going to change any minds if you don't read what people say.

I've read the entirety of the thread, I just disagree with you. Your ideas that making games single-user-only will allow for some level playing field where the indies will be able to complete isn't backed by a shred of evidence, and goes against pretty much every retail experience in this country. Actually, looking back over the last few pages, I noticed this went uncommented-on:

People always assume stopping second hand sales is about extracting more money from consumers, but really it's about getting the money that goes to CeX or GAME to go to publishers and developers.

I think it's obviously, definitely, an attempt to extract more money from consumers. And I just don't see the business model of selling computer games to be as unique as you do, and don't see why it deserves special protection in the form of getting rid of the entire second-hand market. And I'm repeating myself.

[Still Not George]

The fundamental problem has been a power imbalance in the industry. I've been mostly staying out of this discussion as I could hardly be considered unbiased, but...

I think I'll write a bit about how the games industry actually works. I'm going to go over everything in detail, so apologies to anyone who already knows all this. I'm not intending to patronise anyone, just being thorough.

The games industry consists of a number of very distinctive layers, and unlike most industries maintains all of these layers in all the worldwide territories - although there's some cross-ownership, most of the parties remain separate. These layers are as follows:

(Contractor) -> Developer -> Publisher -> Distributor -> Retailer

(Not all projects involve contractors, but most do. Middleware comes under the same heading too, although it's an easier sell than contractors for reasons which mainly have to do with reputation.)

The vast majority of the cost of a game sold in a B&M store is spent on marketing and development costs, with retailer costs coming just after them. Virtually all of the profit is taken by the Distributor and Publisher segment, with the Retailer getting a small (but still significant) fraction and the Developer getting a tiny sum, typically a pre-agreed bonus over development costs depending on Metafilter rating or sales (more typically the former).

Why does the system look like this? Because of sweetheart deals between Distributors and Retailers, and because any Developer that looks to be gaining an advantageous position is immediately bought by a Publisher (or becomes one).

Until about 4-5 years ago, it was still possible to see budget-label PS2 or PC games on sale in various outlets such as supermarkets, Woolworths or occasionally WH Smith. These titles never appeared in GAME/Gamestation/GameStop, though, and this was for a very simple reason; these chains long ago signed deals with distributors granting them better margins in return for exclusivity to those distributors. This is also the secret reason (shhhh, don't tell anyone) why PC games vanished from game retailers during that similar period - all distribution has been centralized to a very small number of distributors.

In turn, these distributors have been able to wield control over the retail chain in the US/EU/UK over the publishers and platform holders alike - some may remember I explained a long while ago that this is the reason for the artificial disparity between UK/US/EU/JP titles on most consoles, as specific regional distribution networks demand it. The end result is that the business model of B&M retail games is not in any way controlled by actual games companies of any kind.

The next problem is of course that virtually all of the money made in games goes to the publishers, as they're the investors. They retain the IP, the lions share of all profits and in turn bear the "risk" and pay for all distribution and marketing costs, although they offset that against any deal made with the developer for royalties.

What this means, then, is that we have a double layer of parasites afflicting this industry. The publishers parasitize the development chain, and the distributors parasitize the retail chain. The two then engage in a deeply incestuous relationship that makes something of a mockery of any concept of a "free market".

Now, developers have little other choice, especially if they want to work in AAA. It's near-impossible to even gain access to console markets without publisher backing, and the funding needed for AAA development is simply unavailable to developers - no-one wants to invest in games. No-one. So developers have two options - abandon AAA entirely, go indie and hope like hell for an underground success, or offer up their polished anuses to the publishers. As well-hyped as the first option presently is, it's not a business model that can sustain a large studio. So, ass-raping it is!

Retailers on the other hand have the option of second-hand sales. This offers a completely uncontrolled revenue stream, and unsurprisingly it's big business. Amazingly, games make a lot of money when you're not constantly feeding an entire industry of giant bloated tick-like monstrosities.

And these giant bloated tickmaggots don't like having their control taken away from them. That's what all of this is fundamentally about, make no mistake - it's not about developers not getting their cut, developers don't get anything remotely resembling a fair share of profits anyway. It's about 10,000 coke-snorting assholes in suits that appear in the credits bearing titles like "Second Unit Executive Producer" or "Middle-Line Distribution Manager" and their interests.

It's true that this situation is fairly unique. I've never seen any other industry where there is no functional difference between used and new goods and yet used goods are sold in the same shop. That just doesn't happen anywhere else I've ever seen. But in all honesty, the current games industry model is utterly broken and needs to cease to exist ASAP.

And it's happening. But unfortunately the first people under the bus will be the people with the smallest margins and the least ability to absorb losses - namely, the developers.

[MojoJojo]

http://store.steampowered.com/
Exactly like the system that exists now, you mean? The new way that will allow these smaller titles to mysteriously be able to compete with mega-budget AAA titles will, of course, force many games shops to close, so there will be fewer outlets for those indie games.

How will the "hype of retail" be less if no-one can re-sell games? What will that change?

Sigh - I'm not sure what point you're making with the Steam store. Single-owner games distribution system has AAA titles and indie games on it's front page? Great for PC users.
Of course console owners don't get that. I've argued that single-owner games might produce that for console games, and as evidence have pointed out that every single-owner games distribution system has a greater variety of games at (generally) lower prices. There are other factors at play, obviously, but you're just sticking your fingers in your ears.

And again, the problem publishers have now is that buying a game new is essentially an irrational act. Anyone rational will save a couple of quid and by second hand. The only way round this is hype games so much that people are irrational and buy new. There is no point competing on price, because anyone rational enough to consider the price will buy pre-owned.

Apart from the boss of Digital Knights, you mean? That was the first link I found, I'm willing to bet there are plenty more from other people.

First of all, googling to find someone making an argument you've attributed to me or someone else in this thread is a bit twatty, isn't it?

And secondly, if you actually read the article, it isn't someone simply saying the extremely profitable games industry is going to implode, for example:

The upshot of all this will be, as many predict, the removal of a middle-tier of games.

And then goes on to say that AAA titles make enough money to keep going.

I've read the entirety of the thread, I just disagree with you. Your ideas that making games single-user-only will allow for some level playing field where the indies will be able to complete isn't backed by a shred of evidence, and goes against pretty much every retail experience in this country.

Except, for example, PC games and Steam, you mean?

I think it's obviously, definitely, an attempt to extract more money from consumers.

Any evidence to back that up? Obviously they'd like to get more money from consumers, but people aren't going to suddenly spend more money on games just because they cost more.
At the moment gamers are paying for games development and the nice profit HMV etc.. get from second hand games. And it's those profits the publishers want.

And I just don't see the business model of selling computer games to be as unique as you do, and don't see why it deserves special protection in the form of getting rid of the entire second-hand market. And I'm repeating myself.

Do you trade in anything as much as games? There is undeniably something different about games that has lead to their second-hand market being so large and damaging, even if it's hard to pin down exactly what. That's the real problem.

[edit]Interesting post SNG[/edit]

[bitesize]

Jeez, that makes depressing reading SNG. Don't think I'd ever stopped to think about the distributor step in the chain, I been aiming all my ire at the publishers + retailers without stopping to think there might be some even bigger leeches somewhere along the line...

[bitesize]

  GAME/Gamestation websites back on line! With fabulous sales! "Spring Clean - 1000s of prices slashed"!

  First thing I see in the sale - Gears of War 3 for £35. palmface.

  Everything still more expensive than everywhere else...

[Shoulders?-Stomach!]

GAME Update

Dear GAME customers,

Here's some important news about us. GAME Group plc (the parent company of GAME in the UK) is now in administration. We want you to know that the Administrators' aim at this time is to continue trading while they seek to find a new owner for the business.

In the meantime, we've had to make some changes, which are summarised below. Some of them are temporary, some are permanent.

1.Online Sales: We expect some disruption to our online services over the next few days while we make some changes. We apologise for the inconvenience this causes.

2.Refunds and Exchanges: Until further notice, we will not be able to offer refunds or exchanges for products purchased either before the administration or for products purchased from the date of the administration.

3.Preorders: No new preorders can be taken until further notice. No refunds can be given for any preorder deposits which have been paid. We are reviewing this over the next week.

4.GAME Reward card: We have had to suspend use of GAME Reward Cards. This means that points can be earned but NOT redeemed until further notice.

5.Gift cards: We have also had to suspend GAME gift cards. The value on these cards cannot be redeemed. If this changes, we will let you know. We apologise for the inconvenience this causes.

6.GAMEWallet: The value stored in GAMEwallet accounts will be suspended until further notice following the appointment of administrators.

7.Preowned Software: You can still buy preowned products at great prices in your local store or online. If you trade in a preowned software item then you will still be able to earn Reward points and use your trade in to exchange for another item. You will not be able to trade in preowned software for cash. If this changes, we will let you know. We apologise for the inconvenience this causes.

8.Preowned Hardware: We have had to suspend trade in for preowned hardware at this time. If this changes, we will let you know. We apologise for the inconvenience this causes.

9.Click and Collect titles: We have had to suspend this service. We apologise for any inconvenience this causes.

MJA Jervis and SD Maddison have been appointed as Joint Administrators of The GAME Group plc, Game Stores Group Limited, Gameplay (GB) Limited, Game (Stores) Limited, Games Station Limited, Game (Retail) Limited and Gamestation Limited on 26 March 2012 to manage their affairs, business and property as their agents and without personal liability. MJA Jervis and SD Maddison are licensed in the United Kingdom to act as insolvency practitioners by the Institute of Chartered Accountants in England and Wales.

[Utter Shit]

What is the legality of them not redeeming gift cards? I can imagine they would have a leg to stand on with the reward points but the gift cards are essentially IOUs that they are refusing to pay out on.

[MojoJojo]

Well, the point is they owe money to lots of people as well as people with Gift cards, and who out of all people owed money gets some is something that has to be worked out.

Note the list could basically be rewritten as "you're not getting any money out of us".

[Still Not George]

I've occasionally thought of using one of my infrequent visits to trade shows to arrange a bunch of interviews with non-development industry figures to try and work out exactly what it is most of them actually do. Possibly under the guise of writing a book or something.

[Shoulders?-Stomach!]

What is the legality of them not redeeming gift cards? I can imagine they would have a leg to stand on with the reward points but the gift cards are essentially IOUs that they are refusing to pay out on.

I think there may be small print on the gift cards that gets them out of having to honour them in these/similar circumstances.

[REVEEN!]

I've never seen any other industry where there is no functional difference between used and new goods and yet used goods are sold in the same shop. That just doesn't happen anywhere else I've ever seen.

Most musical instrument shops operated like that before ebay came along and swallowed up 99% of the second hand market. 

[chand]

And while there is a second hand market for DVDs, it's much smaller and less prevelent on the high street. I can't really think of a place where you can buy second hand dvds, Cex maybe, whereas every video game shop has pre-owned stuff lining the shelves.

The games market is a lot different to anything else really. I expect the second-hand profit for retailers on DVDs is pretty negligible compared to games. Thinking of the size of the DVD section in, say, HMV, you couldn't imagine a comparable pre-owned section existing alongside. And retail DVDs are pitched at people who want to own them forever; if you want to watch a movie once on DVD you just rent it. With games people play them and trade them in.

Went into a game shop the other day and MW3 was £44.99 new and £42.99 pre-owned. That's got to equate a shitload of profit for the retailer. The reality is that with games, the selection is pretty small. Niche titles pretty much only exist on download stores now. Any game you can think of from the past 6 months is probably in GAME. That's not necessarily the case in other industries like, for example, music. You can have indie record stores selling entirely different stock to HMV to a totally different market. With games that's not really applicable, which is why there's no point in  GAME/Gamestation having three stores in the same shopping centre selling the same stuff to the same people at the same prices. The games retail market is pretty unique; when a DVD or a CD comes out I don't know that I'm going to be able to hunt down a cheap used copy later. With games people know they can walk into a high street store six weeks after release and find several pre-owned copies of most titles there at a discounted price.