ShackNews on Used Games (Full Response)

I was interviewed last night by Chris Faylor over at ShackNews regarding used game sales.

Most of my responses were either removed or edited out due to space constraints, but here is the original response I sent to Chris:

Let's start with my personal stance on sales of used anything...I don't have a problem with it. As long as you no longer have any remnant of what you are selling, you're well within your rights under the First Sale Doctrine to resell whatever you own. That, I have no problem with.

I also have significantly less of a problem with the sale of used CD's and DVD's, as CD's and DVD's are merely one income stream available to MPAA and RIAA members. Record labels receive royalties from broadcast radio and music videos and have contracts with artists that make game industry contracts seem fair and equitable in comparison; the movie industry has theatrical releases (domestic and international), cable and broadcast rights to fall back on. In contrast, games have the income from their initial release and extremely limited alternative revenue streams (GameFly/Steam/compilation packs/etc.)

While delaying used console game sales for two to four weeks after the initial release would help in a small way as far as the bottom line for game sales (especially since the first thirty days are most crucial for sales of any title), the percentage of sales ceded to used sales during the initial thirty days is severely muted by supply constraints. That said, used games are more likely to significantly impact sales after the first trimester.

It isn't hard to see the attraction that game retailers have for used games. With a new console game, their margin is usually under 10%, while their margin on a used game can be over 50%. However, there has been growing developer and publisher discontent with chains that sell used product. After all, the publishers (and because of the "Market Development Fund" (MDF) clauses in most contracts, the developers) are paying for ad circulars, shelf space, in-store contests and promotions, point-of-purchase advertising, subsidized special editions for certain chains, and more...just to bring a customer into their store who is going to buy a used copy and not help recoup any of that money.

Laws like the ones in Utah and Florida won't significantly impact sales of new or used product. The most sure-fire way that publishers could "stem the tide" of used sales would be to eliminate MDF support for chains that sell used product, but given the quantity of new product that goes through those outlets as well, that would be throwing the baby out with the bathwater.

So, the tl;dr: Used console game sales do hurt, but not to any significant degree. Delaying the launch of a used title can help, but I'd rather see a market-driven approach than a misguided legal approach that could affect legitimate commercial ventures.