Friday, September 10, 2010

Retro Repost: THQ IS Wrong - How Used Game Sales Help The Industry

Note: This article was originally published as part of my time as an Associated Content Featured Contributor to the Video Games Section. Associated Content was later bought by Yahoo! and renamed Yahoo! Voices. Yahoo Voices shut down in July of 2014. This article is being republished here on The Code, backdated to its original date of publication to remain as a record of my writing.

The tension between video game publishers and the used games market boiled over last week. THQ creative director Cory Ledesma said in a CVG interview that "...when the game's bought used we get cheated," and further declared that THQ didn't "...really care whether used game buyers are upset because new game buyers get everything. So if used game buyers are upset... I don't really have much sympathy for them." Jerry Holkins, one half of the popular web comic Penny Arcade that has spawned a charity, two gaming conventions, merchandise and even a series of video games, went even further. Commenting on the controversy, he said "I honestly can't figure out how buying a used game was any better than piracy. From the perspective of a developer, they are almost certainly synonymous." With video games commanding billions of entertainment dollars, and the US recession still showing no signs of reversing, purchasing used games versus buying them new seems to be an increasingly polarizing issue. However, there is a strong case to be made that buying used video games is not only a morally sound practice but also a boost to the video games market.
Buying Used Games Is A Legal And Moral Right
Once you have purchased a video game, you own the game you bought. The rights of the creators of a copyrighted work, such as a video game, stop once the work has been sold (with the exception of making unauthorized copies). You have the right to the give away or sell property that you own to someone else if you want. It's called the "Right Of First Sale", and it's been a part of property law in the US for 102 years. In the more recent case of Vernor v. Autodesk, Inc. the court held that a retail purchase of a computer or console game has all the physical and commercial aspects of a sale, not a license. If if looks like a sale, walks like a sale, and quacks like a sale, then your have the same rights of first sale doctrine. That means that you can even resell it if you want; you're not infringing on any other rights.
A Customer Who Buys A Used Game Is Still A Customer
When a customer walks into a store and pays money to purchase a used game, they are already doing two out of three things a game company wants them to do. A sale is still being made, a game is still being purchased, monetary value is still being assigned. All a game company has to worry about in that case is providing enough of a value to the customer that the customer will decide to buy a new game instead of a used one next time.
Someone pirating a video game is not engaging in a sale, or assigning a monetary value to a game. A video game or software pirate is downloading an unauthorized copy for free. There is little a video game company could do from its end to change a pirate's behavior.
Sales of Used Games Fuel The Purchase of New Games
GameStop CEO Dan DeMatteo spoke to industry publication Gamasutra in 2008, saying that he expected the retail chain to give out approximately 800 million dollars in used video game credits, pointing out that these "... trade-in credits will go toward the purchase of new video games... [T]he consumer oftentimes.. needs that residual value from those games as a trade-in to be able to afford a new video game". Steve Perlman, speaking at the Design Innovate Communicate Entertain Summit in Las Vegas recently, established that the average price for a new video game is $60. With a recession that is showing no signs of reversing anytime soon, consumers are looking to stretch entertainment dollars even further. And sixty dollars is three times the average new release DVD or CD.
Industry analyst Micheal Pachter of Wedbush Morgan Securities says that the relationship between used video game sales and new game sales isn't parasitic, but mutually dependent, asserting that when customers get credit for used games, consumers buy more games, "Sometimes they buy new games. If, instead, they buy used games, so what?" he said in article for the Holywood Reporter. He continued, "In creating more demand for used games, it keeps the price of used games up, which means there is less cannibalization of new game sales."
Selling A Used Game Is Inherent In The Value Of The Game Itself
This value extends past the legal right of first sale. There is actual monetary value inherent in physical media that you own and can later give away or sell if you wish. When a company strips away the ability to re-sell, rent, or even lend out a game, that company is now delivering less of a value to its consumers.
For a salient example, one need look no further than conducting a Google search for "PSP Go" and "expensive". The PSP Go is similar to Sony's previous hand-held gaming console, the PSP, except it does not use physical media at all. All games are sold through a digital download system. These digital downloads are non transferable. These digital downloads are also priced at the same cost as traditional physical media. This, in essence, makes the consumer pay more for video games with less value. It's not hard to see why sales have been lackluster and consumers feel the PSP Go is an expensive proposition. It turned out that lots of people noticed they were paying physical media prices for digital media that can't be loaned, re-sold or lent out. There's always a market for the the latest and and coolest design, and PSP Go is a smaller and sleeker design than the original PSP. But the video games for the PSP Go weren't just the same price as comparable hand-held console games and other media. The games cost more while offering less value because they are not transferable.
Used Game Sales Help Video Game Retailers Large And Small Stay In Business
Wilm Stocks, the Executive Vice President at Atari acknowledged in a Hollywood Reporter interview that video game stores are balancing on very thin profit margins. saying "[I]f you talk to anybody in the used [video game sales] business, they'll tell you that they don't make enough margin on sales of new releases and that, in the large, expensive environments in which these guys operate -- in the mall-based stores -- that a three- or six-month delay becomes a problem for them." Customers playing a game and trading it it towards the purchase of a new game generate additional revenue for the store and video game publishers. As Patcher said, even customers who just buy used games end up reducing and internalizing market churn.
Used Game Sales Help Minimize Consumer Risk While Creating Potential Fans
While intense competition for entertainment dollars, being able to re-sell a game offers a built-in incentive to try a video game they might be unwilling to buy new. If a consumer is unsatisfied with the purchase, the customer can partially recoup their losses by selling or trading the game in. If the buyer of a used game likes the game, they may be more likely to purchase the next video game in the franchise, or other video games from the publisher.
The Video Game Industry Is Doing Just Fine
According to market research firm The NPD Group, Infinity Ward's Modern Warfare 2 sold 550 million dollars worth of video games in just five days. After 2 months of being released Modern Warfare 2 achieved sales of a billion dollars. Rockstar's Grand Theft Auto 4 sold over 3 million copies the first week it was out, and as of Spring 2010, it had sold a total of 17 million copies.
In conclusion, while video game companies may have issues with retails that sell used video games, there is nothing wring with a consumer choosing to purchase a used video game. It is a legal right, and in a period of increasing costs and shrinking disposable income, a legitimate choice.

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