GWJ Conference Call Episode 277

Conference Call


Video Games, Used Games & The Used Games Market, Your Emails and more!

This week the guys talk about video games and explore some topic or another. This description is amazing because I wasn't on the show and I've been on a plane all day. Hurray!

To contact us, email [email protected]! Send us your thoughts on the show, pressing issues you want to talk about or whatever else is on your mind. You can even send a 30 second audio question or comment (MP3 format please) if you're so inclined.

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Show credits

Music credits: 

Intro/Outtro Music - Ian Dorsch, Willowtree Audioworks

Coactive (BigBot Audio Drop) - SGX - http://sgxmusic.com/ - 25:02

And All That Between (BigBot Audio Drop) - SGX - http://sgxmusic.com/ - 43:32

Comments


This is the argument I simply do not understand. Yes, there was one profit. But someone else is profiting on the game multiple times -- sometimes hundreds of times -- over. And I'm sure that's revenue you don't think the publisher deserves.

You mean like every other product you purchase if kept in reasonably good repair? Do you not think it's ok to resell a table, a book, a lamp?


In fact, f*ck it. Buy all of your games second-hand, and never give another cent to Activision, Electronic Arts, Take-Two, etc.

And then let's see what happens.

I hope you never buy anything used, ever.

rabbit wrote:

Vastly smaller budgets. Contrary to what you may think, most videogame companies are actively bleeding money, EA in particular. It's very easy to say "its because they make sh*t games" but with the exception of bilzzard-fueled Activision and (we can guess) private-company Valve, its a freaking financial bloodbath in gaming right now.

I do have to wonder if the glut of games with so little time/room to attract and develop an audience is also not a factor. Maybe putting out less games like folks like valve and blizzard do would be a much better strategy given development costs. Or be willing to put out lower budget titles which have less risk.

Valmorian wrote:

This is the argument I simply do not understand. Yes, there was one profit. But someone else is profiting on the game multiple times -- sometimes hundreds of times -- over. And I'm sure that's revenue you don't think the publisher deserves.

You mean like every other product you purchase if kept in reasonably good repair? Do you not think it's ok to resell a table, a book, a lamp?


The book is the classic example, and the one which I believe the law is built around as an example. A more commonly resold item in modern times, though: the car.

Valmorian wrote:

This is the argument I simply do not understand. Yes, there was one profit. But someone else is profiting on the game multiple times -- sometimes hundreds of times -- over. And I'm sure that's revenue you don't think the publisher deserves.

You mean like every other product you purchase if kept in reasonably good repair? Do you not think it's ok to resell a table, a book, a lamp?

Interestingly enough, the goblins in Rowling's Harry Potter books consider the maker of anything its owner, and sale only extends to the immediate buyer. Once that buyer dies, ownership reverts back to the maker or his or her next of kin. This is why the goblins consider the Sword of Gryffindor stolen property.

wordsmythe wrote:

I think that's the real conclusion to the side discussion between Pyro and Demi. There's a question of rights, of the ethicality of various options within one's rights, and of cash. It's the cash part that really creates the stress, though. Everyone wants to get/keep more money.

I'm not sure whether shoptroll's comment is the definitive conclusion there. Demiurge and Jayhawker - they are talking about rights, ethics, morality. That's what Pyro and I refer to when we say that the conversation often gets bogged down in morality issues, and made-up morality issues at that (by which I mean that copyrights are relatively recently invented monopoly rights).

What Pyroman and what rabbit talks about here:

rabbit wrote:

Ultimately, the way to have people keep your game, however, is to make it a game worth hanging on to. You can make it super long. You can make it actually replayable. You can make it such a classic you never want to give it up. You can create a big multiplayer community with long long legs. You can create an ongoing stream of free or cheap DLC that will make you want to hang on to the game to see whats next. You can lean heavily on digital distribution and balance it with lower prices or convenience factors (steam).

is not about rights or ethics, but about economics, by which I mean the study of value incentives and people behavior in general.

It seems obvious to me that, as rabbit intones, the way to make people keep and value games more is to increase their value. This does not necessarily mandate an increase in development costs. More efficiently made and better made products can be more value to the market at the same production cost.

It does not make (economic) sense to me to charge the same price for a game while simultaneously reducing value, particularly through artificial means that also increase production costs! (like DRM). Presumably, those same costs could be better employed by adding long-term value to the final product in various ways.

Pyroman's particular take on this (as far as I understand it) is that locking away content in this manner may or may not penalize Gamestop (as the middle man, they always have the possibility of passing such costs to customers), but it definitely stresses the fringe elements of the gamer market - used game buyers and primary buyers who resell.

Insanely enough, the same practice does not, as far as I can tell, add perceived value to the good in the enthusiast market. The most common reaction I see is "It doesn't affect me so I don't care," not "Awesome, I get added free content!" It's telling that the predominant conversation revolves around justifying the practice rather than praising the company for valuing their enthusiast customers. Company releases, themselves, focus around the message of "Don't worry, primary customers, it doesn't affect you," rather than, "Hey guess what, guys, we made your purchase even more awesome!"

What's essentially happening is that the company is stressing its most sensitive customer base without adding perceived value and drawing added loyalty from enthusiast markets. It doesn't make economic sense, except as a questionable tactic to put the screws to the middle man. Even if successful in that goal, the overall cost of the move in terms of alienating nascent markets and the middle man itself makes it of questionable value.

So it's maybe break-even at best, killing your future markets to no purpose at worst.

rabbit:


Vastly smaller budgets. Contrary to what you may think, most videogame companies are actively bleeding money, EA in particular. It's very easy to say "its because they make sh*t games" but with the exception of bilzzard-fueled Activision and (we can guess) private-company Valve, its a freaking financial bloodbath in gaming right now.

There's also Nintendo, which has a substantial war chest from its successes with the Wii. I'm also assuming that PopCap is supporting its parent company after the buyout with positive profit margins.

I'm guessing here, but it seems to me that a substantial fraction of the current gigantic costs in many high-profile games right now are due to marketing, high resolution texture work, and actors. Both PvZ and World of Goo were made with shoestring budgets, but they are high-quality, high-fun, replayable, and profitable.

The key question seems to be in balancing predictable profitability with fixed costs on the front end. How do you know how much to invest in a title so as to make it profitable after projected initial sales?

One of the reasons why publishers spend so much money is because that's how they like to differentiate themselves and hold onto the market.

Publishers prefer the boutique model of consoles. One of the reasons why iOS is such a disruptive force is it's open and a meritocracy. There isn't a huge publisher's fee involved, one person can make a game and Apple has no interest in balancing the market itself.

On consoles, there is a lot less competition because of the high entry to enter and the controlling forces (Microsoft, Nintendo, Sony) try to maintain order so it's a bit more predictable.

But a way the publishers can keep away new competition is by creating a budget/quality expectation so high that it would be a risk for someone to try and compete.

You bring up PvZ and World of Good (both games I love) and how they are a ton of fun and didn't cost a lot to make. Ingenuity and imagination is something you can't buy. A huge marketing budget, fancy graphics, voice actors and other non-game qualities are stuff that you can buy.

Budgets continue to soar because it's beneficial for the publishers to keep control of the market. If the consoles had a meritocracy/open market like iOS, the landscape would be a lot more competitive and unpredictable which would mean the future for big publishers would be even more uncertain. Obviously this isn't the sole reason for large budgets but I'm sure it's definitely a factor.

I've used this example several times in recent memory, but it's more likely than not that the used game market actually helps the game industry, instead of hurting it as the conventional wisdom would suggest. There is a small-but-growing amount of research supporting this in the book market, for instance (abstract linked inside the NYT article). This is particularly true of week one/month one buyers, and the industry is hugely focused on those early numbers and the ensuing word-of-mouth. A significant number of $60 buyers (a majority) buy games early because they know they can recoup 80% of their cost immediately. You cut this market out? I think you see sales drop precipitously.

Minarchist wrote:
I've used this example several times in recent memory, but it's more likely than not that the used game market actually helps the game industry, instead of hurting it as the conventional wisdom would suggest. There is a small-but-growing amount of research supporting this in the book market, for instance (abstract linked inside the NYT article). This is particularly true of week one/month one buyers, and the industry is hugely focused on those early numbers and the ensuing word-of-mouth. A significant number of $60 buyers (a majority) buy games early because they know they can recoup 80% of their cost immediately. You cut this market out? I think you see sales drop precipitously.

And that's okay. It gives the publisher the ability to then strategically price their games to maximize sales. Right now, if they lower the price, they don't get a bump, because they are immediately undercut by the used market.

It seems counterintuitive, but the used market keeps prices higher, because publishers have to focus only on week one market sales in order to maximize profit.

The irony of this show is that the thing I thought I'd get the most hatemail about was calling LA Noire the most interesting rockstar game since Bully. Generally when I mention I liked Bully more than any GTA game, I get a mailbox full of "luzer."

Whenever the subject of used games comes up it seems like the conversation always makes it seem like the only place used games exist is at gamestop. And while I agree that gamestop's practices of buying used games for 30 dollars and selling them at almost full price is bad for publishers and consumers this isn't the only place the used game market exists. E-bay, Half.com and plenty of other ways exist for consumers to buy and sell to other consumers. This and the rental industry is what makes it possibly for many gamers, myself included, to be able to afford an expensive hobby like gaming. I would like it if my money could go to the people that created the game but if the only way that can happen is if I 60 dollars for ever game its never going to happen. Rather than try to develop new models or method to make it comically possible for me to buy directly from them they just seem to be focused on defending their existing business model and making no attempt at innovation with the exception of Valve in the PC market.

This is a case where the market will work. I truly believe that without a secondary market, whether it be Gamestop or Ebay, the number of $60 games sold will decrease.

But publishers still want your money! So they will be far more likely to either drop the price of new games upon release, or have an aggressive rate of decrease. You might be surprised how low publishers can go if they actually get the money.

Every guy buying at $60 and then selling for less is keeping the price higher. If you just bought the game at $40 (assuming that's what you get), then you would not have to sell it in order to hit your equilibrium price. And your buyer could also buy his game for $40. Both of you get what you want, but the publisher increased its revenue by 33%.

That's why eliminating the used market will lower prices. If a publisher sells for $40 now, you just play the same game, but sell it for $25 or $30. So the publisher gets 33% less revenue.

The reason so many of us include the moral part of the argument is that regardless, we don't get to tell businesses how to run their business. We either buy or don't buy their products.

Right now, I sell my games, and will often buy used. I am going to take advantage of the system that is in place. But if publishers alter that system, I will just alter my buying habits and move right along. As long as there are millions of people that want to play video games, someone will make and sell them. And the market will always dictate the price.

Jayhawker wrote:
That's why eliminating the used market will lower prices. If a publisher sells for $40 now, you just play the same game, but sell it for $25 or $30. So the publisher gets 33% less revenue.

But what's retail going to do? Shouldn't that hurt the profit margins depending on how low they go?

On the other hand, I'd be interested to see if the standard console demographic expands further with a lower barrier to entry. If game prices dropped by $10-20 along with a corresponding drop in the hardware price, could the audience expand to something more sustainable? One advantage other forms of media have over video games is that there's a much lower cost to entry.

Jayhawker:

There is one instance in which the market does not dictate the price, or at least a situation in which the controller of the product has disproportionate power compared to the consumer - a monopoly.

Yes, retail profit margins would drop in that case. Given the existence of Steam, Origin, Battle.net, etc., I'd guess publishers don't care much about retail or its profit margins.

I think those who are saying that the answer is for devs to just make better games that no one ever wants to sell are mistaken, on a number of points:

1) That's likely hard and expensive, although LarryC said that it's easy and has no increased cost. I don't know how that could possibly be the case. If it were, everyone would have already done it. Game design is a mix of science and art, and the art figures heavily into making the game "fun" and one that you'd never want to sell.

2) There must already be some games that are the suggested level of "good and long-lasting". If there aren't, then what's being called the answer is actually a revolution in game design that takes all AAA games to new heights, so I think we can discount that. Therefore, some of these games likely exist. Now, can anyone name a game that's so good and long-lasting that you can't go to GameStop and buy a used copy right now? I'd suggest the Gears of War games as a good mix of single player, co-op, and multiplayer that are worth keeping around for a long time. However, less than 6 months after release, every GameStop near me has used copies of GoW3 available - amusingly, for $10 more than a new copy from Amazon, which suggests that publishers are already trying to work with their primary market customers (aka their only customers) on pricing.

I'm forced to conclude that there is no game so good that it won't be traded in on a widespread basis. Also, any lack of trading in should tend to be self-correcting since the price of used copies would rise with their scarcity - in the case of Gears of War 3, the publisher/retail market has discounted the game below the used market, which I think is closer to the true answer to the used problem.

LarryC wrote:
Jayhawker:

There is one instance in which the market does not dictate the price, or at least a situation in which the controller of the product has disproportionate power compared to the consumer - a monopoly.

You got me there.

I don't recall saying it would be easy. It shouldn't be significantly more expensive, though, since the essential components of most excellent games do not necessitate gigantic budgets.

My bad, you didn't use the word "easy". You did say that it can be done for no more money than is now being spent.

Again, I would say that making a game as good as is being discussed (I assert impossibly good, in my GoW3 discussion) would have to carry some increased cost. What are we saying otherwise? That devs are all just stupid and lazy, and the majority of games should be much, much better for no additional investment?

Note that I'm not saying some devs aren't lazy and that many games couldn't be better. I'm saying it's probably harder than you think.

I would love to see the podcast guys get some input from AAA devs (or any) on this issue. I imagine they'd say that making a great game is hard as hell, more art than science, and never a sure thing.

During the listener-questions segment many games are discussed. Since these aren’t included in the show summary on the web site, here’s a list of the games mentioned in this episode.

PS Vita Question
Uncharted Golden Abyss
Wipeout 2048 (and Wipeout lore)
Hotshots Golf
Marvel vs. Capcom 3

Mass Effect 3: Combat, Story, Holodeck Question
Gabriel Knight
Day of the Tentacle
Heavy Rain
L.A. Noire
Bully
Star Wars: The Old Republic

rabbit wrote:
The irony of this show is that the thing I thought I'd get the most hatemail about was calling LA Noire the most interesting rockstar game since Bully. Generally when I mention I liked Bully more than any GTA game, I get a mailbox full of "luzer."

Bully was a hoot. Best Rockstar game I've ever played (still have L.A. Noire shrink-wrapped).

Minarchist wrote:
rabbit wrote:
The irony of this show is that the thing I thought I'd get the most hatemail about was calling LA Noire the most interesting rockstar game since Bully. Generally when I mention I liked Bully more than any GTA game, I get a mailbox full of "luzer."

Bully was a hoot. Best Rockstar game I've ever played (still have L.A. Noire shrink-wrapped).

I have this loaded up in Steam but haven't started it yet. Maybe soon.

Thanks, Gamestop, for making the point I made last week.

They're selling FFXIII-2, which was released less than 6 days ago(it was released on the 31st), for $54.99 used. It hasn't been a week yet, and they already have the option to pick up the game used at certain stores.

Again, this isn't about used games getting sold 6 months after release for $30. It's not about used games sold for $10 a year later. It's about brand new games getting sold as used immediately after release. For every other sector of the entertainment, used products sell for pennies on the dollar compared to new, and they're certainly not selling for 8% less than a week after release.

I'm failing to see any problem there, and certainly not as a consumer. Certainly, I still see nothing that justifies trying to kill the secondary market, either morally, or economically.

The conference call was so tepid on the Vita. Did you miss the fact that there will be a BIOSHOCK game on it?!

gorilla wrote:
During the listener-questions segment many games are discussed. Since these aren’t included in the show summary on the web site, here’s a list of the games mentioned in this episode...

There were a pile of iOS titles mentioned too; did anyone note those?

Minarchist wrote:
rabbit wrote:
The irony of this show is that the thing I thought I'd get the most hatemail about was calling LA Noire the most interesting rockstar game since Bully. Generally when I mention I liked Bully more than any GTA game, I get a mailbox full of "luzer."

Bully was a hoot. Best Rockstar game I've ever played (still have L.A. Noire shrink-wrapped).

Yup, Bully is Rockstar's best game in my opinion. LAN, though, I think is pretty poor and falls down on all the points that make Bully so great. That's the only issue I'd take with the podcast. There's a very enjoyable game at the core of LAN, but it's buried in half-baked bullet points that can't just be grafted on for the sake of action or brand coherence or whatever; but instead need to be an organic and believable pillar of the game experience—as with Bully!

foose wrote:
The conference call was so tepid on the Vita. Did you miss the fact that there will be a BIOSHOCK game on it?!

One game's probably not enough to change my usage habits. I feel so burned by the 3DS that I just can't muster any excitement for the Vita.

And on a market level, I think the Vita's still in a rough place. After the soft launch of the 3DS and, realistically, how little market share the PSP achieved, it's tough to be super stoked about the Vita's future. It's rad tech and there might be a game or two that sound interesting right now, but I can't see a big launch for it.

I hope it does succeed, though.

I think used sales definitely do cater to a portion of the market that is never going to drop $60 on a brand new game. Viewed that way, publishers are not actually losing out on a $60 when someone buys used, because that person was never going to spend $60 on the game anyway.

The problem is that the publisher would like to have that person's money too; maybe not sixty bones, but SOME of it. I don't think it's horrible and wrong for them to want that, but it's problematic for them to try to go after it.

If you price your game at less than $60, you run into the problem of perceived value. A large portion of the audience is going to look at a quote-unquote $60 game marked down to $40 because it's used as a screaming deal, but a game that enters the market at $40 new as less attractive. "Clearly," they think, "there must be something wrong with this game. Why else would they throw it in the bargain bin instead of charging what everyone else is charging?" And so they buy something that's sixty-turned-forty instead.

The current compromise with games that are likely to thrive at a lower price seems to be to release at sixty, then drop the price very quickly (within the first couple weeks). That seems to work okay, but the problem is that used can still undercut them. No matter what the price point, if the used version is five or ten dollars cheaper, there's not much incentive for the customer to buy new. We can talk about the dangers of scratched discs and missing manuals, but the truth is that (exception the relatively new case of Day One DLC codes) with return policies for actually damaged games the way they are, there's virtually no functional difference between an old game and a new one.

As far as digital distribution goes, Steam seems to have it right with its variable and easily-changed price points, but Microsoft has a long way to go to catch up, since they're still beholden to B&M retailers and seem just plain less flexible on pricing all around. I don't think we'll see a serious change on the console side until someone is finally willing to go download-only, which I don't see happening until the generation after next at the earliest.

Virduk wrote:
I do have to wonder if the glut of games with so little time/room to attract and develop an audience is also not a factor. Maybe putting out less games like folks like valve and blizzard do would be a much better strategy given development costs. Or be willing to put out lower budget titles which have less risk.

I think the "putting out fewer but higher-quality games" thing only works for Valve and Blizzard because they have other, steadier revenue streams (running the Steam platform and collecting WoW subscriptions respectively) that they can rely on to carry them between big releases. That's a rather large piece of the puzzle that publishers like THQ and Ubisoft are missing, and without it, the model sort of falls apart.

rabbit wrote:
The irony of this show is that the thing I thought I'd get the most hatemail about was calling LA Noire the most interesting rockstar game since Bully. Generally when I mention I liked Bully more than any GTA game, I get a mailbox full of "luzer."

FWIW, I think you're a "luzer," not because you like Bully (which is easily Rockstar's best game to date), but because you rate LA Noire (easily their worst that I've played, although I've not tried Table Tennis) as comparable. In fact, IIRC the way you worded it in the CC it sounded like you actually rated it higher, which is straight blasphemy. The Thought Police will be at your door shortly, sir. Good day. (-:

hbi2k wrote:
rabbit wrote:
The irony of this show is that the thing I thought I'd get the most hatemail about was calling LA Noire the most interesting rockstar game since Bully. Generally when I mention I liked Bully more than any GTA game, I get a mailbox full of "luzer."

FWIW, I think you're a "luzer," not because you like Bully (which is easily Rockstar's best game to date), but because you rate LA Noire (easily their worst that I've played, although I've not tried Table Tennis) as comparable. In fact, IIRC the way you worded it in the CC it sounded like you actually rated it higher, which is straight blasphemy. The Thought Police will be at your door shortly, sir. Good day. (-:

That's closer to what I really wanted to say, so I'll let hbi2k take the heat.

I think what I said, or meant to say, was "my favorite R* game since Bully, although flawed" but whatever, I can take the hate.

Oh, okay. You're still wrong, just not AS wrong as I thought you were. I can live with that. (-: