Analyst: Industry Will Disintegrate Without Used Games

According to industry analyst Michael Pachter, if the next generation of consoles doesn’t support used games, the ramifications will affect the video game industry as a whole.

In the latest episode of Pach Attack, Pachter explains why used game sales barely take any money away from console manufacturers and that eliminating them from the market can have disastrous consequences.

Pachter said:

“I think the industry will disintegrate; I think there will be no more video games if next-gen consoles don’t support used games. You hear that, Sony and Microsoft? You have to support used games.

“Why would the next-gen consoles not support used games? Sony doesn’t sell that much software; maybe 10% of sales are Sony products. Everything else, the other 90%, is third-party. Sony isn’t going to help its overall sales that much – let’s go with 1%, 2%.”

Pachter continued to crunch his estimated numbers to clarify how little money is lost to used game sales:

“What does it actually cost [publishers] if people trade in used games and some people buy used games instead of new games? My guess is 5% of software sales, probably.

“Because most people don’t finish new games in a week. Most people take thrtee weeks to a month to finish games. Not everybody buys a game the first day. You probably don’t get that many games traded in; in reality about 40% of games get traded back in.

“So what’s the cannibalisation? I’d say probably 5%. I’d say about 5% of the time somebody buys a used game instead of a new game, that costs the publisher a new sale.”

I wonder where PC gaming fit into this picture, given that with the advent of digital downloads and DRM, there are undoubtedly far fewer used game sales. Is Pachter implying that if consoles don’t support used games, PC gaming will suffer as well?


via VG247

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3 Comments on Analyst: Industry Will Disintegrate Without Used Games

ViceKeridan

On May 21, 2012 at 2:24 pm

I wouldn’t say that the gaming industry will “disintegrate”. While it is an interesting issue to consider next gen consoles being exclusive first-hand-purchases, the fact is that used games primarily affect game vendors and not the industry itself. What this guy and his projections are really going after, is a fundamental restructuring of the industry.

Before, the cycle would be: 1) company makes game; 2) company contacts vendors A, B, and C to sell said game at “Set Price” so that it can recoup the capital spent to develop Game; 3) Vendor agrees to carry and sell game at set price + profit margin within industry standards; 4) dude buys game, plays a bit, then sells used copy back to vendor; 5) vendor adjusts price to compensate for buyback of game; 6) cycle ensues for however long the game hard copy survives exchange of hands.

With the loss of “used-game” support, basically point 5 and 6 etc., will no longer exist. The purchasing of used games has little to no impact on the developing company itself and while the loss of “used-game” support is regrettable as it is unnecessary, the projections voiced by the cited individual of this article seem largely unfounded. We’re already seen the effect of this arrangement with the PC Game community. In many respects, with the advent of Direct-to-Drive/Digital downloads, developers have already anticipated this restructuring (or at least I hope this is the case) by allowing exclusive content that is vendor specific. Buy “Game A” at Gamestop to receive “Special Content A”. Buy “Game B” at Best Buy to receive “Special Content B”. How feasible is this bonus content system? This remains to be seen as the industry continues to transition.

What should really be more alarming is if there is no longer a market for used games on consoles, the advent of more stringent DRM could spell a dark days ahead and the increased development of multiplayer-content dependent narratives. Developers could argue, “why retain an offline component to video games when there won’t be second-hand purchases?” An all-digital marketplace platform could very well make DRM/online gaming standard fare in order to combat the increase/accessbility of piracy from a digital marketplace or, it might very well cause a rise as more people become frustrated with the imposed exclusivity.

If ANYTHING, the removal of used games and the advent of the digital age of gaming should decrease the price of gaming software as developers drop the responsibility of recouping necessary manufacturing costs. Granted, I do not know the cost/benefit analysis of subtracing the manufacturing costs of hard-copy game (servers can be expensive); more so, such a system would require a system-wide update to the internet infrastructure if developers want retain whatever share low-assesability markets hold.

Just some thoughts

-VK

Anathemize

On May 21, 2012 at 2:32 pm

This does not make any sense. He says that buying used games is such a small market that it really doesn’t effect the publishers bottom line. He also is “guessing” on all these numbers. How will this kill the gaming industry? All he is saying is that used games aren’t as bad for publishers as they think.

I think gamefly is what sony and microsoft are trying to combat. For an affordable price people can play many games. That’s why they came out with the online passes so that they could support their servers and make some extra cash.

I think all this will do is make brick and mortar stores obsolete as well as gamefly. If people weren’t going to buy the game because they could rent it they probably aren’t going to buy the game anyway.

My guess is it will piss off gamers for a year or so and then they will just deal with it. Its their hobby and they will continue to do it. I think its stupid for sony and microsoft to go this route but I really do not see it affecting the industry that much.

Trevor

On May 21, 2012 at 3:59 pm

I want to get sponser reallybad can any one help me my ps3 name ExtraLif3_2 plzz sponser me