Thursday, August 13, 2009

Used and abused: The battle over used video games

When you pick up that used copy of "Halo 3," you probably don't think about much beyond the $5 or $10 you're saving by not buying a new copy of the game. But while you're being thrifty, the line of contention between the people who make and sell video games is growing wider.

Used video games are a hot button issue for developers and publishers. No one who makes games is happy about the practice. Some even call it a few steps short of theft, though their blame is targeted at retailers, not customers.

The problem, they argue, is that used game sales eat into new game sales – and that cuts into their bottom line. GameStop, the largest specialty video game company in the U.S., gets the majority of their ire. The company pockets roughly $2 billion in used game sales each year. Instead of sharing that revenue, like Blockbuster or Netflix do with DVD rentals, it keeps it – and that has game makers seeing red.

GameStop, though, says the practice helps the industry by actually driving sales of new games. Only four percent of used game sales at GameStop are for titles that have come out in the past two months, says the company. By letting people trade in games, it encourages them to try titles they otherwise may not. And the vast majority of shoppers, it says, use their trade-in credit to buy new games.

Publishers don't buy that, though they're reticent to express their rage on the record, since GameStop is a major retail partner. They do point out, though, that in months where the industry doesn't have a full calendar of major releases, they rely heavily on sales of older games for revenue – and new game prices will never be able to compete with those of used games.

They also note they have to pay to be in retail flyers, so their marketing budgets are being used to drive customers to the stores in the first place. When someone buys a used game, they see no return on that investment.

As GameStop profits more and more from used games, other major retailers have shown increased interest in the market. Amazon, Wal-Mart, Best Buy and Toys R Us have all launched pilot programs (some at limited locations) allowing people to trade in games for a credit.

It's an issue that is unique to the gaming world. By the time video rental stores like Blockbuster sell their used movies, studios have seen substantial income from that disc. The music industry wasn't a big fan of used CD sales, but doesn't mind as much now since digital downloads are its chief source of income. And the auto industry is just happy to have people on the lots these days.

Despite their objections to used game sales, publishers have so far found their hands somewhat tied. Attaching games to the first console they're played on is possible, but would be a PR nightmare, doing more harm than good. (Just look at the fuss Electronic Arts had to endure when it tried to limit the number of installations on each copy of the PC game "Spore.")

The most intriguing (and latest) attempt at finding middle ground, ironically, comes from a company that's also testing the sale of used games.

While select Best Buy locations around the country are letting people trade and buy used games, one store in West Jordan, Utah is letting customers buy new copies of a game for the same price that GameStop and GameCrazy (another game specialty retailer) are charging for the used equivalent.

It's a fascinating program – and one that publishers and developers are likely to endorse wholeheartedly should it spread wider. Customers get lower prices. Best Buy gets bigger sales traffic. And game makers still get their cut of the sale.

But to industry analyst Michael Pachter, Best Buy's innovative model is difficult to sustain and may well become just another victim in the ongoing pricing wars.

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