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Used Games: Bad For Business, Great for the Industry?

In the book Free: The Future of a Radical Price, author / Wired Magazine editor-in-chief Chris Anderson quotes Warner Music chairman Edgar Bronfman, referring to the disruptive impact of the Internet on record sales, as saying ”The music industry is growing. The record industry is not growing.” The point? The Internet, with its incredible facility for piracy and viral distribution, has created a lousy environment in which to sell records according to the traditional models that helped turn the major labels into juggernauts. But it’s also helped obliterate the barriers to entry for independent artists and labels, and it forced participants at all levels to innovate (and at every angle, from songwriting to distribution to concert ticket sales and merchandising) or perish.

Fans, as a result, have more music choices to enjoy now than ever before. Music is cheaper (if not free — whether through piracy or legitimate means like Pandora) to acquire. The artist Amanda Palmer commented of her own experiences touring recently that, “Ticket prices are getting slashed and a lot of artists are playing to half-empty rooms due to the economy and the overgutted market since EVERY band and their moms are hitting the road to make up for the shortfall in record sales.” So: not a great time if you’re a musician relying on retail record sales or stadium gig ticket sales to make a living. A GREAT time, though, if you’re a music fan who wants a constant flood of new, good music and to see your favorite bands playing small gigs for not much money. (Palmer, incidentally, has done a phenomenal job on the innovation front, releasing her last record — an e.p. of all ukulele covers of Radiohead songs — via the self-publishing site Bandcamp. She juiced physical sales by offering packages accompanied by limited edition, often handmade, items… t-shirts, hand-decorated ukuleles, even a customized iPhone).

In the last week, with both Target and Best Buy announcing their entries into the used games market, I’ve begun to wonder if the unstoppable secondary market isn’t going to trigger something similar for gaming. It will allow more people to play by offering lower price points, inspire innovation by encouraging game creators / publishers to monetize differently – and, ultimately, will help to upend the top-heavy retail model around which most of the big guys have built their businesses.

Things have been heading this direction for a long time. The Internet had a radically different impact on the games industry than on the music industry because game developers, unlike musicians, can gracefully and seamlessly interweave games with functionality and service models that incorporate online connectivity (that’s the whole reason GameSpy Technology even exists). No one ever thought to fight the internet in the gaming space. They embraced it. And while the Internet certainly facilitates a deleterious volume of game piracy, it also presents a means of salvation that the industry has gradually awakened to. Steal the game, maybe — but get access to online-dependent features to enjoy the vast majority of the game? No one will flip that bit until you pay.

Used games, though, make publishers gnash their teeth just like Napster once did to the music industry, perhaps finally kicking into high gear the inferno of disruption that other phenomenon (first the Internet, then the iPhone, then the rapid deployment of cheap, off the shelf game creation tools, then social platforms) have been stoking for several years. Everyone complained, lots of people sued, few people embraced the sea change that was happening all around them. The same thing is happening now with used games. If you look at the arguments that the major publishers levy against used games, they almost mirror the comments made by major record label executives and fearful musicians at the dawn of the Internet music revolution. And, similar to that era, if the entry of two retail giants into the used games arena doesn’t clue someone into the fact that the world has fundamentally, irrevocably changed, we’re in for a frustrating era of real pain amongst the major publishers.

We’re also potentially in for a great time to be an independent,”garage band” game creator or a voracious consumer of gaming content. That dam is already breaking, with start up developers creating a glut of new content on every platform (some of it truly amazing, most of it dirt cheap). Local gatherings like Toronto’s Hand-Eye Society or the recent Babycastles event in Brooklyn are even giving developers and fans alike chances to congregate in small, welcoming, highly participatory settings. It’s only a matter of time before a developer or studio unaffiliated with a major publishers achieves success akin to Arcade Fire’s recent #1 album debut on the Billboard charts. It could also very well be that more and more major publishers will embrace or obviate the used games market by further embracing digital distribution, dropping up-front price points in favor of charging for service-based access to some content or finding ways to innovate as much with business models as they have with graphics, player engagement and storytelling.

So, while I agree that used games may indeed be a terrible thing for the games business (as it currently exists) – it’s potentially a great thing for the games industry.

About Sean Flinn

I am the Marketing Director for GameSpy Technology. I love video games, music, tacos, beer, and long distance running - pretty much in that order. View all posts by Sean Flinn →

Categories: Commerce, Other

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