Gamestop and the digital marketplace

The “used” digital game is not a new idea, by any means. There have been several attempts at offering a service to purchased used digital games, which in all honesty sounds awkward. The idea of a digital “used” game. When thinking of games as a product, purchasing a game disc and the idea of using and wear and tear on a physical copy of that game disc the idea of used isn’t far-fetched. Mainly because we can think of a physical copy of the game being possibly scratched or have other signs of use. With this in mind the idea of a “used” digital copy of a game doesn’t really have the same meaning.  Now why do I bring up Gamestop along with this idea, its no real secret that Gamestop gains from used sales much more than new sales and that they have been quite upset with PSN and XBOX Live giving away free games here and there as well as game bundles including free digital copies of a game.  In a recent conference call referenced by gameindustry.biz  Gamestop believes “gamers now expect to pay about $35 to buy a recently released full game through digital channels.” and with this expectation comes a lower perceived value of goods which may continue to drop and make the video game industry less profitable as a whole. Coming to the conclusion that the presumption made by video game consumers of a lower price on digitally distributed games is “due to the inability to sell it back to places like GameStop when players are finished.” With this lack of service as part of the price drop in digital game downloads, Gamestop has looked to fill in this gap as well as work with the industry to ensure that they ” ‘price goods in a way that sustains profitability and encourages a great innovation that this category needs.’ ” – Bartel via gameindusty.biz.

 

Now lets start with the notion of gamer price expectation, while I have heard many arguments for buying physical copies so they can at least trade them in later and the argument of games being priced lower if its a digital download. The idea that people expect that a digital copy should be priced lower because we can not trade in a game is pretty new to me. While I can see cutting the price of making physical copies, distributing these physical copies and return of these physical copies that go unsold to the manufacturer out of a new game purchase. The idea that publishers and developers include the used game sales and trade ins as part of the price simply doesn’t make sense. While I understand how a consumer can choose a physical copy of a game to reduce perceived cost of a game by being able to trade in the game once they are finished with it, publishers would never consider this part of the cost new game sale and in all honesty I would not expect a lowered price of games just because I can not trade it in. While this is personal belief, this also has to be looked at from a publisher stand point. The publisher sells a triple A title at $59.99, whether this is digital or physical, for example Far Cry 4 purchased by any means (sales marking down price by distributor being withheld) PSN Store, XBOX Live marketplace, Steam, physical copy from any brick and mortar store is $59.99. This $59.99 physical copy does not include the fee of a consumer being able to purchase the game and sell it back to any retailer with a trade-in program. The publisher sees no percentage of the sales from a retailer selling a used copy of the game. Considering these factors I would not expect publisher to lower the price of a digital game just because I cannot trade in the game. ” ‘We want to help ensure that our industry does not make the same mistake as other entertainment categories by driving the perceived value of digital goods significantly below that of a physical game,’ Bartel said.” as well as “Bartel said that the $20 to $25 price break gamers expect when going digital is largely due to the inability to sell it back to places like GameStop when players are finished.” are both from the earlier referenced gameindusty.biz article. Which brings into question the survey which Gamestop gets their consumer expected cost of recently released games through digital retailers.

What did they really ask in this survey? Of course this is also after the recent news of Gamestop being upset at free digital downloads with console bundles. Which in itself is a confusing concept as well, since free games bundled with consoles is not a new idea. Especially from the days of the Sega Genesis and Nintendo Entertainment System. However the newer part of this is a game the consumer gets for free, but are now unable to sell to a trade in program for the retailer to sell at a marked up price (below MSRP of the new game of course). Did the survey ask consumers if they expected game prices to be lower, why they expected them to be lower, or were the survey questions worded in a way to get the results which they now report. I have no idea because I did not take it. I also do not know how they are referencing this survey to make why they are saying seem reasonable. Such as “GameStop has previously said it wants to work with publishers in creating a second-hand market for downloaded games”. A second hand market in downloadable games may seem somewhat of a viable notion on PC in some respects but let’s look at who they were mad at to begin with, consoles. A second hand market for digital download in consoles would mean digital retailers such as the PSN Store and XBOX Live Marketplace to allow retailers to access the licensing rights and revoke and grant access from one player to another. This does not seem like a possibility if we look at the model from retailers selling used games in the past, which means no profit for the publishers. Not only no profit for the publisher but decreased profit as a sold used game means that a new game was not sold. This leaves no incentive for the console digital distributor to allow retailers to access licensing rights for individual consumers. The only reason I state that this can be viable through PC in any way is a site such as Green Man Gaming, STEAM, etc. can acquire their own licensing distribution rights, and revoke/grant access as they wish. However gaining access to video game licensing codes or serial numbers that have been used would be a much trickier process on console. Which was also a reason Gamestop never accepted the trade in of used PC games even in the days prior to digital distribution and once the internet became a way to track serial numbers that have been used. You can still sell the physical copy of the game, but after the serial number was registered once no one else could access the game content as they had not purchased the licensing rights for that serial number. Of course this didn’t stop the sharing of games as many PC gamers know, especially with keygens, work arounds, cracks, etc. Which is a totally different topic, but also brings to question what you were really buying when you bought PC games.

In the vain of looking at PC digital game distribution, when it started we never ran into the idea of “Well I’m still buying the physical copy because I can trade it in later.” Rather many people wanted the physical disc, because they like having the physical disc. An argument I still respect for any purchases. PC digital distribution was accepted easily because the stigma of trade ins was not part of the PC gaming world. You bought a game, you had the game and Steam actually made it convenient because if you uninstalled and lost your serial number you were no longer screwed. At this point were the games a digital good that you were purchasing or are you purchasing the licensing rights to play these games? Platform wars aside, PC and console both basically offer the same service, especially when it comes to digital distribution. Also not all games are $59.99, there are plenty of awesome games out there for lower prices, which kind of makes an average expected price for games being around $35 sound normal. Seeing as at release some games can be $15 (mostly indie titles sure, but still recently released digital distributed games on PC, PSN Store and XBOX Live Marketplace) and some can be as expensive as $60, without thinking about special editions which can be anywhere between $70 and $100. All in all at this point Gamestop’s worry about the erosion of the value of “digital goods” and pricing of goods within the video game industry seems moot. Understandable as to why they are up in arms and question digital distribution, seeing as they stand to lose a profit margin from digital downloads and loss of trade-ins and used sales, but still moot.

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