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6 Reasons Why Blocking Used Games Will Never Work

By Radford C. On Feb 12, 2013 4

A whole shelf of pre-owned and used games

Digging In

Game development studios and publishers have whipped the debating post of blocking used games for a long time. It’s a contentious topic: gamers want to be able to buy and sell their games as they see fit. After all, they did buy them and developers realize the same game is often sold multiple times without any of the additional revenue generated going to those who made the game. GameStop’s entire business model rests on buying and selling used games. And the latest rumor over Microsoft’s upcoming XBox 720 made a sharp hit on the stock of the top used game reseller. In another rumor, Sony filed a patent that would possibly tie  individual game discs to one Playstation account using RFID chips.

We’re sort of in the that weird part of the console cycle where everyone knows new hardware is imminent, but no one really knows what to expect. That means every rumor, report, and speculation is ripe for headline news as gamers hunger to absorb every piece of information about the next PlayStation and Xbox home game consoles. They also make battles between two loyal communities that really love their products.

While the idea and rumor of blocking used games sounds like the sweetest tune of most developers, it’s a swan song for a legion of business owners who bank on the used game business. As a long time game collector, I used to be divided at the issue because I have always believed in supporting the aspiring (and proven) products of game developers. Then, I learned basic economics and realized it just didn’t make sense business-wise. Looking from the outside, it may seem like it makes sense but, ultimately, it will never happen. Here are the 6 reasons why blocking used games will never work:

1. Simple One-On-One Trading

1. Simple One-On-One Trading

This is more obvious than anything. Imagine that you’ve purchased your shiny new XBox 720 or Playstation 4. Only, this time, both consoles are equipped with mechanisms to block used games. Let’s say these mechanisms were created exactly in the same way they are currently anticipated by today’s overly-recycled rumors.

Under the Playstation 4, Sony’s “Electronic Content Processing System” would act as a more sophisticated DRM system where each optical disk (which is now given a unique identifier), would be tied to a single PSN account. On the XBox 720, the game would be tied to your XBox Live account, which would have to be “always on“. In both cases, telling your friend that he/she has to experience “the best RPG ever” will have to include missing your console and perhaps your account login.

2. The Game Collecting Market

2. The Game Collecting Market

Although it’s debatable that game collectors may focus on older retro consoles like the Atari 2600 and NES upcoming consoles, there is a large population of people who purchase collector’s versions of high-profile franchise games. Many of the collectors editions get passed from person-to-person as gamers often “downgrade” or “upgrade” from their current versions to say, for example, a “collector’s” version. Comb any video game collecting site and you’ll read the annoyances of these rumors on used games. Upgrading, for instance, would rely on eBay or other auction sites and if the rumors were held to be true. You can bet that gamers will hold on to their XBox 360’s and Playstation 3s for years to come.

At that point, the only thing left to collect would be sealed games (particularly those with VGA ratings) which would probably reach astronomical prices – mostly because no one wants to open a game that will lock them into a particular console. Although some may consider this crowd to be small, they’re considered influential and have helped a legion of gamers look for diamonds in the rough.

3. Thousands Of Small Businesses Depend On The Used Game Market

3. Thousands Of Small Businesses Depend On The Used Game Market

GameStop, WalMart and Best Buy are not the only brick and mortar companies to trade in and sell pre-owned games. Up and comers Glyde and SecondSpin are only a few the businesses that depend heavily on the pre-owned game business. Outside of those guys, there are thousands of small businesses and mom/pop shops that depend on game trade-ins. In Japan, gamers get a high buy back and many used games that are in that country have DLCs and bonuses that haven’t even been cracked open.

Amazon and eBay alone carry with them a gamut of third party stores that hinge on the sales of used games.

Although it can be argued that a large majority of these small businesses are run by owners with full-time jobs, pre-owned games help diversify their revenue.  On a larger scale, a quick search on google will find you plenty of these businesses with a high throughput of feedback suggesting that these companies are fulfilling orders that would’ve otherwise require a CEO working on their store full-time. If used games were blocked, you can bet that these business would either have to adjust with the times or move away from the industry completely.

4. Blocking Used Games Would Stifle New Game Sales

4. Blocking Used Games Would Stifle New Game Sales

In 2005, The New York Times did a study on how the used book market on Amazon helped the sale of new books and how it continues to help authors widen the marketshare of their products.

The case study found that an active used book market helps newer books by providing them a higher resale value. In essence,  the resale model allows people to estimate how much it costs to “rent” a book. So, how is this all related to the used game sales?

A healthy resale games market increases the market sales of new games. It allows buyers the reduced risk of buying new games knowing that there is a trade-in value. Think about it. If you can buy a $60 game, knowing that you can sell it back later, that reduces the risk and the real “cost” to you. That increases sales. Separately, a strong resale market has other secondary benefits, such as hooking people on a long standing franchise like Final Fantasy, Zelda or more contemporaries like Assassin’s Creed. Pre-owned games helps widen a fanbase that would’ve had otherwise been considered non existent in a ecosystem where used games are blocked. Imagine what would happen to franchise like Mass Effect if the XBox 360 and PS3 had mechanisms to block used games.

5. Hackers, Modders And The Cost Of Support

5. Hackers, Modders And The Cost Of Support

If, by some miracle the rumors would hold true where the next generation consoles will block pre-owned games, it won’t be long before the top console hackers would provide a solution just to trade games with themselves.

In October 2012,  a hacker group calling themselves The Three Musketeers found a secret set of codes that can decrypt the PlayStation 3’s Level zero security layer allowing modders to do whatever they want to any of the PS3 models. The point? Nothing stops the hackers. Companies will only spend more resources not only to block used games but to support another spec that should otherwise be transparent.

And what about new games being wrongfully blocked by its console? That possibility is there too. Hell, even PC gamers had a taste of something similar – and that was back in 2004.

6. Only A Digital Market Can Replace It

6. Only A Digital Market Can Replace It

If the used game trade goes away, a fairly-priced digital market must replace it. No one complains about how you can’t buy or sell used games on a PC, an Android phone or an iPad. That’s because people are still getting good deals. Sale prices or even giveaways are common for older games on phones and tablets, and prices are much lower in general. On PC distribution services such as Steam, players can save money buy purchasing bundles of games, or by pre-ordering a popular title. Weekly and seasonal deals entice shoppers to make impulse buys. An anti-used game system on consoles won’t work if it’s just a way to lock people into $60 price tags.

Conclusion

Quite frankly, what these industry execs and publishers are complaining about is that they just don’t like a free market where they can’t artificially inflate the market price of games even higher. The used market acts as a check on the primary market to keep it realistic. It’s just the way it is. As a result of a more efficient market, you actually have a bigger market. Those who assume that demand is totally inelastic think this is bad, but they don’t recognize that game buyers have choices, and one of those choices is not to buy games that are too expensive. It’s not fraud. This is just typical of a healthy market.

Killing the used game market wouldn’t bring down prices. It wouldn’t solve the problem of too few good games carrying the responsibility of paying for an ocean of crap – and it would require consumers to give up their right to sell property they previously purchased or agree to a digital-only distribution system with draconian lockdown methods.

Anyone who thinks that curbing secondhand sales has a fundamental misunderstanding of basic economics. It’s been proven that having a pre-owned market works better with a variety other similar industries.

  • dirkradke

    I would add a possible #7. Blocking used games might be illegal for the console manufacturer anyway. For Microsoft, Sony, or Nintendo to design there systems to only accept new purchased games is protectionist. If Microsoft can be regarded as a monopoly due to Windows despite other choices then it can certainly be a monopoly because of its game console where it created the primary software AND hardware. They were convicted of anti-trust violations in the US for Internet Explorer and in Europe for Media Player. Even your retail copy of Windows can be transferred to another person. You just have to call them and let them know. The whole online pass and such could be considered value adds so they wouldn’t qualify as protectionist. Time will tell.

    • http://www.lazytechguys.com Radford Castro

      Very possible. Although other factors would have to include console marketshare and game portfolio. Maybe publishers will be forced to go multiplatform because of the sales risk behind an exclusive release.

  • http://twitter.com/LTGVictor VJ Bognot

    Do you think this would accelerate or not make an effect on the notion that yearly games w/ incremental updates such as the Madden series should go to a subscription type of pricing model instead of purchasing a disc every year?

    • http://www.lazytechguys.com Radford C.

      I don’t think so. Mostly because I think the demographic behind Madden still likes the idea of bringing the game to a friend’s house and start playing. A subscription model would suggest a complete download, patch, roster updates and save slots when, in most cases, you’ll just want to throw the disc in and play in exhibition or versus mode.