Used is a Four Letter Word
It seems like used games have suddenly become the hot-button issue in the gaming spectrum, which is interesting considering that used games have been widely available for going on a decade. The problem is that the used game market has not only redefined the direction of the specialty retailer, but it has attracted the attention of the big box stores, and the success of limited test markets might eventually reshape the landscape of the gaming retail industry as a whole, edging publishers and developers out of a significant cut of the action. This as next-generation systems send development costs skyrocketing put developers in the position spending more than ever just as the biggest retailers are considering keeping more of the profits for themselves.
What this retail conflict means for consumers is the guess of every self-proclaimed professional analyst in the market. The only thing that can be said with any certainty is that should used games continue to eat up larger percentages of the marketplace, developers and publishers will be faced with the potentially difficult issue of trying to either adapt to or subvert the new retail experience. There's no promise that the results will be good for consumers in the long run, though there's also no promise that it won't. The question is what should consumers do now? To buy used or new, that is the question.
The sale of used games is something upon which I have some degree of knowledge. I've spoken at painstaking and largely cathartic length in the past on why retail outlets want you to buy used games, so I will assume you have a basic handle on the situation. Used games mean that retailers pay less for the same product, and don't have to share their usually more significant profits with anyone. Which, as it turns out, is exactly why publishers and developers think it's a pretty bad idea.
On the flip side, the arguments against used games are equally sound, particularly from a developer standpoint. The houses that actually make the games we play usually see only around 20% of the revenue from royalties on their products, and as development costs rise the amount of that revenue that actually becomes profit is increasingly smaller. There's no coincidence that as the next generation of games demand larger resources to move from concept to product, these houses have to resort to being completely bought out by larger publishers. The truth is there's already virtually no room for smaller developers to produce next generation content, and even medium sized houses are often struggling. So, in the face of these mounting problems, how are they supposed to survive a consumer base that is playing their product but paying someone else?
And, standing outside of all this is the consumer that finds themselves in an environment where developers and publishers are financially forced away from taking chances, where there is no room to experiment without the virtual guarantee of market success, and where products must be forced to market quickly to recover revenue lost in large development costs. There's increasingly less time for developers to make it innovative, or even right, a problem that's only going to get worse as the PS2 and Xbox go quietly into that good night. So, consumers are left with a general library of games that are rehashed and increasingly tired from a gameplay standpoint, and increasingly feature incomplete from a technical standpoint.
With educated consumers frustrated at the stagnant quality of games, and uneducated consumers happy to buy whatever has the lowest price-tag, retailers find themselves in a market where even spending $5 less for the same game seems like a perfectly reasonable, if not desirable, idea. Thus leading to fewer revenues for the developers and publishers; thus leading to an industry even less likely to be innovative; thus exacerbating the frustration of consumers. Fear leads to anger, anger leads to hate, and hate leads to guys like Mark Rein coming out angrily bashing the retail industry for stealing food from his mouth. Which, all finally begs the million dollar question: are the sales of used games at least partially to blame for a perceived decline in gaming quality?
The argument is not whether developers are correct in their complaint that retailers are dipping into their supposed cut. Virtually no one is disputing that. But, of course, the retailers would respond that the margins they make on new games are so small as to make business, particularly for the specialty retailers, virtually untenable. And independent retailers can't even get their foot in the door with a distribution model that is entirely geared toward large scale operations, where even if they have the resources to get current titles, they must buy a host of other titles they are never likely to sell. So, the current industry has put retailers into a position where they simply must make money wherever they can.
There is evidence, however, that the problem vexing traditional outlets is opening up new methods and avenues for content delivery, ones that, in the long run, may see more money going to the right people. And, here lies the possible solution to the problem, at least for the gaming industry and consumers. Though the model is largely in its infancy, digital distribution is an enterprise that Valve, and more recently Microsoft's Live Arcade, has shown can be very successful. Even as companies like Electronic Arts eat small developers whole only to regurgitate them later as bland, cookie-cutter games that are woefully overpriced you have games like Geometry Wars and Marble Blast Ultra becoming the killer app for the Microsoft's new 360.
The phenomenon has taken the industry and consumers by surprise; after all, who was talking about Live Arcade and Geometry Wars last November?
I hear a lot of people criticize the 360 as inferior evidenced by the popularity of Live Arcade presuming it to be the sign of a poor launch, but that thinking strikes me as a bit narrow and overly simple. The criticism that these games aren't "next-gen" is entirely wrong. It's just that "next-gen" might have more to do with a new model of business, better systems of distribution, and an expanding online marketplace than it does with texture mapping. There's nothing technically wrong with the 360 retail launch titles like Call of Duty 2, Project Gotham Racing 3, Ridge Racer 6, or Quake 4 per se, but don't mistake them for next-gen titles. They are last-gen titles with a facelift; games that could not afford to do anything daring or particularly noteworthy because the cost effectiveness of the risk was unacceptable.
The truth is that in the retail model of business, games can't afford to be truly next-gen from a gameplay perspective until much later in the system's lifecycle: see games like Guitar Hero, Katamari Damacy, Ico, and Shadow of the Collosus for examples on the aging PS2.
But, the 360 is not likely to develop into that truly next-gen system that plays a significant part in both furthering the game experience while opening up the new model of content delivery. No, Valve remains the closest to the mark on dictating their own fate and recapturing the market that has moved toward used games, a fact evidenced by their expansion of Steam into delivering 3rd party content, and the PC remains the best frontier for digital distribution.
The Valve/Steam model may be the most significant, and in the long run, best threat against the current publisher dominated market. What we may eventually see is larger developers with the resources and capital follow Valve's lead and pull away from publishers by distributing their own works, on their own terms, and cutting themselves a larger slice of the retail pie. These developers would still work with publishers on limited terms to get boxed copies of their game into retailers, after all, regardless of the used threat, developers will always want to have a store front presence in the Best Buys and Wal Marts of the world, but that might eventually be considered a secondary delivery method. Further, as Valve has shown, these larger developers with proper systems in place can act as limited publishers in their own right by giving online distribution access to small developers without the resources to digitally sell their own product. And they can price these independent titles competitively.
What this may ultimately mean is a crash, or at the very least a plateau, for retail outlets and the massive game publishing houses we've come to know and often distrust. As more games are sold online, following the general trend of increasing online sales, with direct download and immediate access at (hopefully) reasonable prices, there will be fewer games actually sitting on store shelves, and both the new and used retail market might actually begin to diminish.
While this doesn't solve the problem of rising development costs, it does mitigate the issue by cutting out the expensive process of distributing games, circumventing the threat of a retail dominated used market, and returns a higher percentage of revenue directly to the developers. It also allows for games like Geometry Wars, where development costs can stay low allowing for professionally produced and distributed budget titles on next-gen platforms. It will ultimately make the gaming experience broader, more convenient, more robust, while funneling dollars back to the developers.
What this is all meant to suggest is simply this. The turmoil created by the used market is an indicator that the industry itself might very well be entering a changing marketplace. The demand and recently exponential success of the used market is evidence that the prices for games have exceeded what people are willing to pay. It is, in essence, a warning shot across the bow of the current publisher based model, and those companies experimenting with online distribution models are banking on a historically growing market and a sense that the times they are a changin'. Microsoft's Live Arcade's immediate and remarkable success has gotten the company's attention, and you should expect to see more games and games of a higher quality begin to make their way to the online service. Nintendo's similar service for the Revolution may prove even more successful.
In the end, the answer to the question of whether to buy new or used is probably immaterial. There is a change in the industry that is already underway, and the question may be completely irrelevant within the next generation's cycle should direct download distribution take off in the manner which it threatens. The reason the question has flared so recently has more to do with an industry being forced to recognize a monumental shift in customer attitudes than anything else, and with luck the end result will be better for both developers and consumers.