Sony’s announcement of the PSN Pass comes at a time when not having some sort of insurance scheme against preowned sales would be peculiar. All the big publishers have noticed that, not only does a one-use code in the box with new copies compensate them for preowned sales, it can boost profits. But are they missing the subtle way it potentially changes the landscape of gaming?
For all their talk of adding value, ensuring online services and providing for developers, the online pass is about one thing: making money for the publishers. I don’t make that accusation with any particular amount of negativity. We all like to make a little money. The only issue I have with that particular aspect is the general dishonesty that surrounds it (as outlined so eloquently by Ben Parfitt of MCV this morning).
I’m not stupid. I know that publishers are in the business of making money. I’ve often defended their right to do so in the face of the current fashion for ranting about publishers with business models. I also tend to agree that the preowned market is, probably, generally a negative thing for developers. Oh, it’s fantastic for retailers who can double down their profits easily and not have to worry about paying the publisher’s cut. Perhaps that’s why there’s a GAME store on every street corner near me while the developers at Black Rock Studios, the people who made the best arcade racer since Project Gotham, are job-hunting? Actually, so are the people who made Project Gotham, aren’t they?
[drop]Is the growing trend for studio closures and workforce reductions by big name publishers something that can be blamed entirely on the preowned market? No, certainly not. Publishers seem happy to see consumers take the blame for failures that rightly belongs at the feet of their own marketing departments or development studios.So, what impact will online passes have on the preowned market? Retailers will not stop selling games preowned, they’ll just promote Microsoft Points and PlayStation Network cards at the point of sale. They’ll remind you when you get to the register than in order to get the full functionality out of this game, you also need to buy credit for the respective stores. What that might do is reduce the price of the actual preowned game slightly but only so much that it remains under the price of a brand new copy after the additional purchase of online store credit.
Retailers will work the online pass as a method of selling points and credit for the PSN or XBLA. Publishers are benefitting from the online pass because it means two separate people (or more) have now paid for one place in their online infrastructure and they effectively get a little slice of the preowned profit. Developers are probably getting a tiny slice of the profit from that too, although I’d guess that it’s much less than we’d like to pretend. And don’t forget that platform holders, too, make a bit of cash on everything bought from their stores.
With all of these people making a bit extra on online passes (and the preowned market that necessitates them), where does that come from? Who is losing on the deal? Well, you are.
Firstly, if you buy new games you get a code in the box. So new game buyers only suffer the inconvenience of having to decipher and input those code strings and download the unlock key to get access to everything their game has to offer. That’s not a huge inconvenience for those that only ever buy new games and never trade them in.
If you’re the sort that likes to trade in the games you’ve finished with, most likely to help fund the purchase of a new game, you’ll likely see less value offered by the retailer. They’ll tell you it’s because the code is used and they can’t sell the preowned copy for as much. That’s technically true, although slightly disingenuous as they’ll also be pushing hard to sell online store credit at point of sale. Retailers will do all they can to ensure they don’t lose money in the deal, you can be sure of that.
So if you trade in to buy new, you’ll likely lose a little on each title. New games, of course, aren’t getting any cheaper so it could be argued that giving you less trade in value means you’re less able to fund that new purchase. Margins are unlikely to be that wide though, you’ll probably stretch your funds a little bit and make up the difference.
[drop2]If you buy preowned games as a way of stretching your budget that little bit then you’ll likely be saving slightly as they’ll be cheaper in order to leave room for that online store credit. So, if you buy preowned games and have no interest in online services, there’s every chance you’ll get a better deal. That is, until it’s time to trade in again and fund your next purchase. In reality that better deal you got, buying preowned with no interest in online services, is negated when you try to trade your copy back in with the retailer who won’t offer you as much because the online services are missing. So you’re probably just about breaking even in the long run.If you buy preowned and still want to play online, though, you’ll probably end up paying slightly more for the product. You’ll get the preowned disc a little bit cheaper but have to top that cost up yourself with a purchase of store credit to download the online pass. This will, most likely, end up costing your slightly more than the preowned games would if they had all features available without an online pass. And then, when you come to trade it in again, you lose all the value of the store credit you bought to fund the online pass.
Perhaps unsurprisingly, it’s the consumers who are being worked in this system. On top of the small increases in cost and the decreases in trade in value, they will lose out on experiences. The kids who can only afford a preowned copy of FIFA, several months after release, won’t experience the online side of that game. Casual players will no longer dip in to the deathmatches and capture the flag to-and-fro of first person shooters, just to see what it’s like. Online experiences, very soon after release, become something that’s only for the hardcore, making them even less welcoming to newcomers.
Online passes aren’t simply about taking money out of your pocket, although I’d guess that’s the only side that the money men at publishers and retailers are looking at. Online passes represent a change in the way we experience games. Yes, that experience is built on a system of buying and selling that isn’t entirely beneficial to publishers but it’s one which has encouraged gamers to try new things, get the benefit of different ways of playing and expand their enjoyment of their pricey pastime. Online passes put a fence around that freedom and charge us at the gate. Sure, that’ll make money but at what cost?
teflon
I’ve never quite understood the philosophy behind buying preowned. There’s only a tiny handful of games in my collection that are second hand, and even fewer that are from a retailer, and second hand.
Simply, after 4 months, a game’s new retail price has plummeted to such an extent (in the UK) that it’s a budget title anyway. At that point, as soon as you walk in to Game, you’re likely to throw up on the displays when you see them wanting to charge £35 for preowned and £40 for brand new…
My point is, what’s the point of buying preowned, when that’s the case? Trade ins, I can understand, but purchases I cannot.
All of this is, of course, totally subject to living in the UK. In the EU and US retail games maintain their value much longer, and as such trading in and second hand are both much more valid systems.
teflon
Also, it’s completely unclear to me what the actual margins are.
As far as I can tell, most games wholesale to retailers at £25-30, of which £7-8 goes to the platform manufacturer, and £2-3 to manufacturing. So the Publisher gets maybe £20 from each game sold. The retailer manages to get around £10, if they’re not in price slash mode.
Now look at pre-owned. On the day of release, many retailers are currently offering a £35 trade in vs. a £40 new purchase for very, very recent games. So they make £5, when they would have made £10, and have to sell that pre-owned game at £40 in order to top it up to what they would normally have received. That’s just sheer idiocy. More likely they’ll get £1-2 back again.
Who loses from that scenario? Well everyone, really.
Pre-owned makes absolutely no sense to retailers within the first 2-3 months, if my figures are even just vaguely in the ball park.
Moving on down the timeline to 2-3 months later. A game hasn’t sold very well, and so is being flogged by retailers. Enslaved, for example. They’ve got a ton of stock left, which was ordered at £30 close to launch. Except it’s Christmas, so now they’re going to plonk it in a sale for £15, and scrape a little cash back on it.
Pre-owned, here they can say it’s not a high demand game and give just a few quid to the customer, lets say £5. Now they can charge £15 for the pre-owned game in 2 weeks time when the sale is over, and say it’s a fantastic deal. They get £10 back, and are close to breaking even again.
Who loses out here? Well the retailer completely loses out. The Publisher can’t legitimately give a crap, since their game hasn’t sold well, and ended up costing the retailer. Actually, they’ve got their pound of flesh on this one, and made more money out of it than the market has warranted.
On the other side of the scale, there’s the CoD4’s of the wold. That game held value for well over a year, and was selling for new at £40 when WaW was launching. It’s like the game is brand new for this entire time. It’s selling plenty copies new, but there’s also a healthy trade-in market, where retailers might offer up to £20 for it, and then sell for £30 to £35. Here they’re raking in the cash hand over fist. Everyone is, but for retailers it’s particularly important, as they have to cover the cost of games like Mirror’s Edge that don’t sell too well in their launch window.
Believe it or not, pre-owned plays a big, big part in keeping retailers afloat, when not every game can be a AAA Gangbuster of a launch, with a huge long tail. They could try slightly different tacks, but when a game is successful everyone wins. When it isn’t successful, everyone in the chain loses out.
Burgess_101
Pre-owned for me just helps me widen my gaming horizons without taking a massive risk for example bayonetta i was never really sure on saw it for a tenner i think and i thought why not and i loved it and it then makes up my mind on those sort of games ill go and buy DMC when it comes out brand new not sure if publishers will make more money this way but there cant be that much difference
bigdon23
Preowned for me means i can enjoy my hobby but without going bankrupt, of course some games i buy new but only when i really want them.
Publishers are hardly losing money, they are still making a massive profit even with the preowned market, they are just greedy! and they would still be sacking devs regardless just to save money.
Maggot666PL
Luckily there are online retailers for us in the non-UK EU. I’m recently browsing all the deals I’m sent, able to pick up NEW games at sweet prices. And the shipping is free, how cool is that? Every game bought that way is at worst as expensive as the cheapest pre-owned one. And I’m not risking a scratched disc/case (I’m soo OCD when it comes to my collection).
That being said online passes should come together with an overall game price drop. As it was the case with Skate 3, which was a good deal cheaper that other new releases. That’s the way to go.
The_Iron_Man666
Skate 3 was different… It was a DLC pack allowing players to share their content…
nofi
Nice to see something about the scheme in general, and not just about what Sony are doing.
It’s an interesting one – I can certainly see why publishers are doing it but it’s not doing them any favours. I’m not hugely put off by online passes but if these migrate more towards affecting my offline play like Codemasters did with the car pack for DiRT 3 then I’ll not be too enthused.
I don’t play new games enough (at least, those not for review) to justify the cost, so often pick them up quite happily second hand months later. I don’t care if I get a game after everyone else if it’s an entirely offline experience – not one iota.
If this dramatically affects the price of second hand trade-ins then I can see a lot of upset people. But then I understand why this is happening.
All it took was one publisher to try it – by next gen it’ll be for every game, I’m sure.
Deathbrin
I don’t sell anything. It’s simply impossible here unless you hang out on some forums and meet in strange places. The only change i see is having to input codes each time you get a game, which is rather irritating, but yet if it helps…
Delriach
Good read. I’m not a person that cares much if a game has an online pass, but you make some very good points.
I don’t often think about who bought the game used or new when playing online. Makes me curious now.
Sad Panda
If you have kids who share a PS3 but have their own account for trophies etc. You have to buy an online pass so they can both play online, or they have to choose 1 profile to play on.
If you want to take your brand new game round to a friends house, they need an online pass so you can go play it online.
Yet again, the life blood of the industry, the gamer, gets shafted.
I’m buying fewer games because of the current financial squeeze, and fewer still now that I cannot share my games with my brothers.
I’m buying games new and I’m the one being punished!!! People will take fewer risks on what they buy, meaning publishers will take fewer risks with what they release and pretty soon the only games that will be released will be the same old franchises each year and very little choice for the consumers.
Tuffcub
Im going to have the same problem when I move in with hubby – we’ll have two playstations but only be able to play games on one of them.
Useless.
The_Iron_Man666
Ever heard of Gamesharing?
nofi
“You have to buy an online pass so they can both play online, or they have to choose 1 profile to play on.”
Never even thought about this. Yes, this sucks.
Forrest_01
Yep, i have friends with more than two children who like to play the same games & they have already been hit by this.
Only solution being to buy an additonal pass code from the store, which adds to the cost of the initial outlay. Which for a parent, is not always something you can afford.
Youles
Good point. It’s definately bad news for playing on the same system – assuming you need a Pass per user.
Interestingly, if the Pass was for the system (which wouldn’t be too bad) it might increase the value of second-hand consoles….providing they haven’t been wiped!
As for going to a friends house, you could just sign in under your PSN.
KeRaSh
Good point. A point I would like to address, which I already posted on the other article is that the server maintenance costs should not be affected by the pre-owned market. People always defend the devs that they have to maintain their servers for us to play on but there is always only one player playing online for each copy that was sold. The person who sold the game will not play online again because he has no copy of it. Why would the maintenance costs be affected by the fact that someone else will be playing online with the old copy.
I understand that a percentage of pre-owned buyers would buy the game new if there were no pre-owned copies which would increase the income for the devs but it has nothing to do with pre-owned games causeing more maintenance costs for the servers.
Flash
Make a good game with good online re-playability and consumers won’t WANT to sell your game. Simples.
Tuffcub
Ah but then they wont by your NEXT game as they are happy with the first!
Deathbrin
Well you can make a re-release, or just sell heaps of Platinum copies. :)
Deathbrin
Besides, DLC!
Flash
Just close the servers on the old game. I believe they can do this with 30 days notice? If the consumer likes your game that much they will buy the new one then.
This way they keep online play truly free, I mean it still is with the online pass but how miffed would you be if you bought an online pass for them to shut the servers down a month later!
hazelam
doesn’t seem to have stopped COD selling millions of copies every year.
oh wait, he said a good game.
never mind. ^_^
cc_star
After working in a GAME store a few Christmas’ ago, pre-owned does prop up the retail model which suffers from selling product with almost zero margin because no one can sell at anything near RRP
Who’s buy games at £54.99 (£57.99 in the case of Red Faction) even GAME are selling this at £22.99 this week in an effort to shift copies. where would the devs & pubs be if this was commonly available for £57.99?
They’d probably be even more going out of business than there already is.
I’m not sure the mention of Black Rock is relevant to this point, they made two great games this gen which the public just didn’t buy in high enough volumes to make the publisher take notice and continue to back them. Retailer choosing to make money from new sales would have pushed the price up of those titles further meaning probably even less sales.
Pre-owned is a way for the retailer to remain competitive on ‘new’ pricing & still turn a profit at the end of the year… The pubs have obviously been looking at this section of profit and see they want a slice of it (maybe quite right, there’s certainly an argument I understand for it) but is the flip-side of this that retailers make less off old games and start to approach RRP for new titles?
I think a £54.99 pricepoint for new games is far more dangerous for devs & pubs than some retailers propping up the business model of heavily discounted ‘new’ sales with a healthy pre-owned market.
The real problem with taking a slice out of the pre-owned market is that trade-in value could plummet further this will have an impact on new purchases as less people will be able to afford the latest blockbuster the publisher wants to push on us.
It is an unavoidable fact that pre-owned profits have helped retailers slash new pricing which in turn has massively helped new sales, its also an unavoidable fact that 90%+ of trade-ins result in the purchase of another game, with the majority of the time that being the ‘latest big thing’. eBay is the real enemy here, because a pre-owned game doesn’t mean the money is staying within the gaming industry, the seller can do what they want with the money, unlike trading-in at their local gaming retailer.
I don’t buy games weekly or anything, in fact far from it, but I am a gamer who spends far too long a week gaming and it will impact my purchases of new games massively if trade-in values go down further because publishers want to not only sell you the pie, but they want to charge you per mouthful too.
How do people feel about the bottom dropping out of the pre-owned market but new games retailing for much nearer their rrp, which is around £55, instead of the £35 to £40 they’re commonly available for now?
no wonder there is such a rise in lo-fi gaming on mobiles and browser based games.
Also, PC games which can’t generally be resold are much cheaper as a result, with new releases costing £29.99 at the most.
And if publishers (excluding Activision) have attached a £10/$10/whatever charge to multiplayer gaming, then how about having a discount off the purchase price by that much? There are very few games that gain multiplayer traction, with the mode only being there for them to try and cash-in on DLC.
I’m sure Dead Space 2 & Bioshock 2 have a committed niche of fans but people don’t have time to commit to a ‘me too’ multiplayer mode.
It’s also short sighted not to aid one of your main distribution channels, everyone knows that the overwhelming majority of games (overwhelming majority of gaming industries profit) is made in the Oct-Dec period and anyone’s who’s ever been in a gaming retailer during that period will notice its mainly parent & grandparents filling the queues, no bricks & mortar retailers will greatly damage the industries core method of shifting games & turning a profit if these parents & grandparents don’t have anywhere to go to make their purchases, they’ll probably just buy a pair of jeans or something.
There are so many points to this, but I think the charge is wrong, sure it will aid the publishers in the very short term but in the long-term it will damage new sales rather than aid them.
teflon
If games launched closer to their RRP, I would not be buying even 1/3rd the number of games I do at launch.
In the last few months, that would mean no Dirt 3, no Brink, and no LA Noire. (Bought at £32, £32 and £30 respectively) Portal 2 and inFamous 2 would have been my purchases. (At £30 and £30)
beeje13
That boils down to there being too many games then surely?
cc_star
Too many games? The alternative is to make less (there is a strong case for this) but that also means fewer developers
basically developers can’t win
TURRICAN-808
Good read. You’ve picked up on the point int eh last two paragraphs i was going to make. It might in turn hurt the retailers. Don’t the retailers make their money from pre-owned games?
In-turn, less people buying more expensive games. Lack of pre-owned games – in the long run it could affect jobs.
mcwildcard
I used to only buy new games until about a year ago, when I decided that I was going to rent all my SP campaign games and only buy the games I planned to keep for at least a year.
It’s worked out really well tbh, and it has the benefit of not being affected by the online passes.
I think it’s a big fuss about not a lot, if you want a game that much you’ll buy it new, if you don’t then it’s no big deal to wait for a couple of months for the game to come down in price anyway.
I mean really, how many games these days are out more than 3 months before you can pick them up for £17.99 new?
Maybe FIFA and COD are the only real ones that shirk the trend.
Forrest_01
Very eloquently put Peter – What you have written here pretty much sums up my feelings on the matter, as i used to be a big fan of pre-owned & i have to say that i am definitely not a fan of the pass system.
The fact is that i fall into the category of being one to sell on games to help fund new purchases – A mortgage doesn’t pay itself you see. I of course do buy new to help devs out where i can, but sometimes that just isn’t an option for me.
All that aside, a bigger incentive for me to buy new though is when i get a code that adds to the experience (such as free dlc or whatever) rather than obtaining a code that in the long run screws someone else over.
Youles
I know stores such as GAME do deals to get exclusivity of DLC, and sometime are able to offer pre-order DLC with their pre-owned games.
So….do you think some stores may try to strike a deal with developers and buy a large amount of on-line passes, to sell with their pre-owned games? They could protect some of the loss from their pre-owned revenue, whilst guaranting sales of their on-line passes when a) the number of passes the retailer buys exceeds that of the games sold; and b) the buyer never intended to buy an on-line pass or use the game on-line anyway (but gets the pass anyway).
Youles
*Should have said: “They (the retailer) could protect some of the loss from their pre-owned revenue by buying the Passes cheaper than the gamer can and giving them away with the pre-owned games, whilst the developer is guaranting sales of their on-line passes when….”
cc_star
Great idea… having the retailer sell the pre-owned pass too, that way they get a slice to make up for falling pre-owned revenues & the publisher is more likely to get the sale of a pass, that way the distribution is supported without the devs or pubs feeling they’re missing out on someone else’s revenues