The Secondary Market

It was April 9th of this year.  I went down to the bookstore at the first opportunity I’d had to pick up the latest of Jim Butcher’s Dresden Files books.  At the store there was a shelf right inside the door with about three or four dozen copies of the hardback.  I picked one up and flipped it over to make sure I had enough cash to buy it when suddenly I saw a second rack of books.  Above it was a sign for “Previously Owned Books” and on that shelf was a copy of the book I had in my hands, only instead of being $26 like the one I was holding, it was $20.  Sure, I had $30 on me and could afford to buy the new copy, but who doesn’t want to save $6?  I put the new copy down and picked up the used copy, bought it, and marched home with my new book to read.

The preceding paragraph isn’t true.  I’m not sure it could be.  Yeah, you can buy used books, but the number of times you’ll have the opportunity to buy a used copy of a hardcover book just three days after release is so small as to be non-existent.  But what am I getting at?

I posted a couple weeks ago about the issue that blew up the gaming sphere of the Internet.  Discussion has continued, and many people keep on trying to equate the sale of used games with the sale of used… well… anything else.  My book example above, I’ve never seen that happen.  I’ve also never seen someone buy a $30,ooo car, drive it for 2 or 3 days and then go sell it to CarMax for half the value so that CarMax can sell it for $28,000 (if anything, they’d return to the dealer and try to undo the sale and get a lot more of their money back).  Now, I’ve seen that happen with music CDs, but that’s because people buy, rip and then resell since they don’t need the CD anymore to enjoy the music, but that is a whole different issue.  We aren’t talking about people making illegal copies of games.  But speaking of games, I’ve known plenty of folks who will buy a game new, play it for 3 days, either finishing it or disliking it, and then sell it to Gamestop or some other used game reseller.  I have walked into a Gamestop just 2 or 3 days after the release of a new game and found used copies $5 to $10 cheaper than the new one sharing shelf space with the new copy.

The fact is, in most products with a healthy secondary market, that secondary market doesn’t have a large impact on the initial release and first month (or two) of sales, and that is really the meat of the matter.  Video games, in some respects, have such a short shelf life (except for the occasional blockbuster that bucks the norm) that anything which hurts that hurts the industry.  To combat that you have companies trying to offer multiplayer experiences that encourage the consumer to retain the game instead of reselling it, and one-time access codes that reduce the value of the game on resale.  And of course you have digital distribution models that prevent reselling altogether.

I think secondary markets are great, even vital, but I also think that the creators of a product need a reasonable amount of time to make their money before the secondary market kicks in and takes that away.  I don’t like the idea that game companies are looking for ways to eliminate or hamstring the used games market, but I also hate seeing places like Gamestop selling used games within that first month of release, knowing that’s it’s contributing to less profits for the creators (and more for the secondary market).

Eventually, I think the game companies will win, and destroy the secondary market with unlock codes and digital distribution.  Imagine a future where you buy a game for $60 and inside is a one-time code that you must enter to play the game.  If you buy the game used, it’s little more than a demo, giving you 30-60 minutes of play unless you buy an unlock code from the marketplace for $60 (perhaps a bit less… $50?  $40?) to open the rest of the game.  Suddenly, the used game would only have a limited value (the disc being needed in the drive to play), which kills the resale value.  Your $60 first purchase becomes a $5 resale that Gamestop can sell for $10… or maybe Gamestop can sell you the disc AND the unlock code for $60.  Who knows…

Luckily for me, I only buy games that I know that I’ll keep, and I don’t buy used games (if I want an older game, I’ll just buy in new when it drops to $20 on Amazon or at BestBuy).  But I do occasionally lend a game to a friend, or borrow one, and whatever they do will impact that as well.  We’ll just have to wait and see what they decide to do…

To Stop GameStop

StopGameStopThe Internet exploded last week (in the gaming sphere at least) beginning with an article and a comic.  It was followed by tons of articles…

So, lets talk…  First, the guy from THQ isn’t wrong.  Anytime you buy anything second hand, the original creators see nothing of that sale.  This is true of video games just as it is true of books and DVDs.  I’ve got one friend who is all up in arms about this, that we need to stop second hand video game sales, to help protect the industry, but he’s also a comic book collector.  So I asked, “When you sell a comic, do you sent the author and artist their cut?”  He doesn’t.  I asked him if this needed to change, he didn’t think so.  He couldn’t explain how the two were different.

And of course, no one really bats an eye at second hand DVD sales.  But then, a DVD retails for under $20 in most cases.  Buying it for $10 might be saving you 50% but it’s only saving you $10.  A video game, however, might be $60 new, and $30 used.  Still 50% but now it’s $30 of savings.  Really though, the guys in the industry aren’t upset at the $30 sale of a year old game.  Their ire, which they don’t specifically state, is leveled at games less than a month old that places like GameStop are selling for $55.  In this case, someone bought it for $60, then sold it to GameStop for $20 (might be more, might be less – it varies), and GameStop turns around and sells it for $55.  People are saving $5 here and bilking the game company out of any cut at all.

If THQ really wanted to stop GameStop, you know what they’d do?  Drop their price to $55.  They’d garner a few new customers, the ones willing to pay $55 but not $60.  GameStop would probably drop to $50, and THQ could decide if going to $50 is worth it.  Games that come out for consoles currently tend to retail at $60.  If the same game is available on PC, they tend to retail at $50 or even $40, so clearly there is room to move the price around, especially since the console version often has less packaging than the PC version (who knows… perhaps producing a cardboard box and a jewel case is less expensive than the DVD case console versions get).

Or, they can do what they are planning to do, which is to put a one-time code in the game that unlocks some content (levels, online play, etc).  Their solution is fine, in my opinion, so long as they never hamstring the game so that it is unplayable.  I have no problem with them putting a code on online play since often online play means that they run servers, and they can always sell online play as DLC through the systems their games appear on, so that a player who buys used will still have to pay a small fee if they want online play.

Personally, I’d love to see prices drop.  I know I’d buy more games sooner if I could afford them, but as it is I wait usually six months or more so that I can pick them up for $40 or less (often a year or more later when I can get the Platinum Hits edition for $20).  That is less likely to happen than the one-time code hostage situation that is developing.  Oh well… I’ll just have more time for watching TV and reading books.