Here’s an article I wrote in 2010, in the very early days of the site. Apparently I was authoring up a storm, but not posting them. No, I don’t know why.
I am frequently surprised when video game publishers complain about used game sales. I worked on the front line of used game sales at “EB Games” from 2002 to 2006, and what I saw strongly suggests that the game publishers benefit from it more than they realise. Here are my unaltered throughs on the subject from November 2010 (complete with no real introduction, to speak of):
The margin (percentage of the shelf price that is not your cost of goods sold) on game consoles has been essentially non-existant since the days of the NES.
The margin on new games is also incredibly small, something like 15-20% (in retail, it’s not usually even worth getting out of bed for margins like that, because you haven’t paid your rent, power, staff, insurance, etc. yet and you’re already making virtually nothing prior to those expenses).
The only thing that’s even halfway decent margins are accessories, and even then it’s usually on the third-party accessories (Mad Catz, etc.) where the margin is even close to something that you could theoretically cover all your expenses and still possibly have a small profit at the end of the day.
The only reason department stores sell games is because of the traffic it brings in. To them it’s akin to a loss leader, something they have to have, but they hope to sell you game accessories and also things unrelated to gaming. Dedicated game stores don’t have that second luxury (high margin stuff in all the departments surrounding the video games area). If you’ve ever bought toothpaste (or whatever) when you bought a game at a department store, then you know why they have to have a gaming department even if they make very little on the games.
Every single store I’ve seen that focuses on games, and games alone, has survived on one (or both) of two things: used game sales and/or game rentals. I guarantee you that if game stores could neither resell used games, nor rent games, every single one of them would go out of business, from the entire EB/Gamestop chain down to the smallest Mom and Pop shop.
If the publishers want game stores not to sell used games, they absolutely must drastically increase the margins on new games, and console manufacturers would also have to more heavily subsidise hardware so that the stores can realise more margin selling them too. If project $10 succeeds at killing the used game market, it will take down a lot more than just Gamestop.
The game publishers like to complain about not getting anything from used game sales, but in a very real sense stores get virtually nothing from new game sales!
The article is incomplete. The mission portion is my belief that trade-ins push new game sales. The majority of games being traded in were towards hot new releases. They were currency for those who couldn’t/wouldn’t plop down the money for a $60 game. Time and time again I saw people get a new game right around its release by trading in a stack of games towards it, and in some cases they explicitly stated that without trade-ins they would have waited until the game dropped in price and/or was available used. I think most of us who trade in our games can think of several we got because we could “trade 3 and get it free”, meaning a sale for the publisher at $60, when we would have waited until it became a “Platinum Hit” and $29.99 or so otherwise. In that scenario, the publisher decidedly benefited from the used market. I think the existence of the used market helps new release games, and hurts the platinum hits… but the publishers get so much more on the hot new releases, that it’s a net benefit to them.
All of this is kind of academic to me now. I purchase all my games through digital distribution. Last I checked, and for some reason I can’t divine, “Halo: Combat Evolved Anniversary” never did come out on Games on Demand, and as a consequence I never did purchase it. Other games, like Halo 4 and Gears of War 3, I waited until they were available on the Dashboard before purchasing them.
Now everything is available day and date through Xbox Live for the Xbox One, so waiting for the game, or wondering if it’s ever going to come out online, is a thing of the past for people buying into that along with me. So are trade-ins. The day may come where trade-ins seem like a quaint element of a largely forgotten world. Time will tell.