As many noticed a recent comic by Penny Arcade ignited some very silly discussion about the morality of the used games market. Apparently, there are a lot of misconceptions about how the market works. Let me address some of them.
First of all, the comic implies that if you bought a game used, you aren’t a customer. This is pure, condensed bullshit. By purchasing a copy of a game you also purchased all rights of a genuine customer. The original customer gave up said rights in return for your money. He transferred his customer status to you. This should be a perfectly valid and acceptable transaction. It was one for decades. Yet suddenly it isn’t?
The argument that PA uses is that by buying a game new, you give money to the developers. Back in the real world, it rarely works this way. There are at least two middle-men between a developer and the customer in the store. The most important players here are the publisher and the retailer. The publisher pays for a game UP FRONT. So the developer gets their money even before the game hits the shelves and regardless how it sells. In most industry contracts the developer only gets an additional cut of the sales revenue after a certain threshold of sales has been reached. The publishers often make sure that threshold is high enough so that they never have to share any profits with developers. This is how they make profit on their initial investments. This is also how they ensure that developers stay dependent on a publishing contract.
Of course, when a game flops this usually means that the publisher makes loss on that particular game. This is the downside and the risk they are taking. That’s why publishers invest in many projects in paralell. The extra revenue on some games should pay for the loss on others. When developers get closed down by publishers it’s not necessarily because that particular developer’s game didn’t make any profit. It often just means some of the publisher’s other, previous projects didn’t make enough profits to sustain the current projects. When a game makes less profit it can even be the publisher’s fault. After all, it’s the publisher who takes care of marketing and PR. The studios that get closed aren’t necessarily the unprofitable ones either. They may just as well be the most expensive ones or the ones where the next release is furthest away. That’s why you sometimes see studios get closed right after they release a successful game. If sales went directly to developers this shouldn’t happen.
As you can see this is a very complex equation. Yes, loss of profits for used games play a role in this but the connection is very indirect. Don’t think that the money you pay for a game will go straight to that developer’s pocket. It fuels the entire system. A system that does benefit the developer but quite far down the line.
So what about GameStop? Well, they are the retailer. They are part of that system just like publishers are. Without retailers, developers would also make much less money. Retailers get games from the publishers, put them in their stores to re-sell them to customers. Actually, they don’t even buy them from publishers. There is a complicated contract going on. They basically borrow them and split the revenue when they manage to sell them. That’s why there can be so much price variation over time. The problem with video games in particular is that the profit margin – the fraction of the money that the retailer is allowed to keep in order to pay for the staff and the rent – has become very, very low. Retailers have to give most of their revenue back to publishers. I know this because I know an owner of a mid-sized toy store chain. Some time ago I was invited to a German congress of toy store owners that dealt with exactly this problem. Most other goods in toy stores have twice the profit margin. In order to run a game store successfully you need to be selling a lot more items than other stores. What GameStop did was a very aggressive but a smart move. Used games have much higher profit margins. For many game stores this is the only way to stay alive these days. Internet shops and digital delivery basically made sure that this situation is going to get only worse.
Considering all this, this discussion of badmouthing used games is an attempt of publishers to re-claim their part of the profit. Sadly it doesn’t really benefit developers or customers. The ugly part is that they exploit the emotions of game enthusiasts. If you love games you are emotionally attached to the people who make them. Propaganda like this is trying to guilt you into giving up your rights as a customer.
For a long time now the industry has been trying to have their cake and eat it too. In an attempt to suck out more money out of customers they are transforming physical products into intangible licenses. They want to arrive at a point where basically rent air. It’s a business utopia – infinite scalability with arbitrary profit margins. In case of games this started by reducing the elaborate boxes of the past into compact, empty DVD cases we have now. This paved the way for digital distribution. What they forgot is that they created a product that is easily duplicable and doesn’t age. As a customer, don’t let them persuade you into taking away your rights. You will lose them soon enough when everything moves on-line. Until then enjoy them and do with your games whatever you want. You paid for them. You own them. You are the reason why all these other people have a job.
Disclaimer: I rarely buy used games. I have only sold a couple of games and regretted it afterwards. I never used a store like GameStop for selling used games. But I have a steady income and I turned playing games into my job so don’t expect other people to behave like this.
