Wednesday, August 25, 2010

Used Games

So Penny Arcade started a thing about used games and that entire industry. I figured I might as well post my thoughts.

Back when games were first introduced, the game market was like any other goods market. You make X number of units, you sell Y number of units. If Y is very close to X, that's great, and you don't care (or shouldn't care) about the secondary market. Any secondary market that exists doesn't benefit the manufacturer directly, but as a rule indirectly benefits the manufacturer. Those that buy new can sell and buy more new; those that buy used get exposed to more options than they would have otherwise and have incentive to eventually buy new.

This is how secondary markets work, for cars or appliances or games.. The games industry isn't in any way exempt from this...

...except when it is.

The difference between a game and a machine is that the game is data. It's not a CD, DVD, or a box. It can be used and sold an arbitrary number of times without degrading, which is not true of a machine. This isn't enough to condemn the secondary game industry (though their business practices may be).

The comparison breaks down beyond all hope when you consider downloadable content and/or online capabilities. When a company sells a game with an online feature, they are alloting a tenth of a cent (or whatever) of their profits from each game they sell to host and moderate the online presence of that account. When games are resold (and a new account made, etc), the company has either the choice to essentially lose money, or cut off multiple transactions.

For many modern games, it's much closer to a subscription or service lease than owning a physical copy and all rights thereto - but intuitively, if you own the box of a game, you should get everything it entails. This isn't an issue with digital distribution games - intuitively, you don't feel you should be able to sell bits of your Steam account. It's also not an issue with MMOs - they're subscription add-ons, not physical goods.

So the problem is a couple conflicting things. The old brick-and-mortar, games-as-goods model, and the new, digital, games-as-subscriptions model. Most games are sold via the former, but work via the latter, and the difference between how it should work intuitively and how it needs to work economically creates an issue.

In truth, I think that old-style brick-and-mortar is a problem to begin with. All games are priced at $50 or $60 with few exceptions. Not so on digital distribution, where you can find a range (especially if you include indie games), and where prices can be discounted at any time under (in theory) the control of the content creators. Additionally, without the costs of physical boxes and distribution, the prices should be lower.

Because here's another angle on new vs. used games: in general, people will pay what they think is a fair price, but no more. For many people, in buying a game, they feel overcharged, especially if they finish the game in a few hours and are unsatisfied. So they resell it to recoup their perceived losses, and it goes on the secondary market. A game may really be only a $40 game. Or a $20 game. But you can really only sell at one price point in brick-and-mortar stores if you're a new release.

If developers had the freedom (as they to with digital distribution, though how many take advantage of it?) to say, "yes, this is really a $35 game, so we'll price it there," how many more primary buyers would they get (and thus, how much more money would they make) over an overpriced $50 game getting resold eternally?