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August 4, 2011

Preowned Games – Who really benefits?

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Written by: PlayEject
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Walk into any store that sells video games and you will no doubt be faced with two options for each game – the New version or Preowned. Preowned Games tend to be a bit cheaper and you can pick up some real bargains if you shop around and get lucky. But who benefits from these ‘bargains’ and are they as much of a good deal as we first think?

If you’re given the option of paying £40 for a game or £20 then its a no-brainer which you’d go for – cheaper the better, right? But what about when you’ve finished the game and want to get another? Do you borrow it to a friend or let it gather dust or do you take it a high street store and trade it in for cash or another game? It would appear that most of us are now opting for Trade-In which are then sold at cheaper-than-new prices so others can benefit from the bargain.

But when you are on the other side of the fence and trading your game in you are more often than not left feeling hard done to. For instance, just a few weeks after LA Noire was released we had completed and wanted to trade back in. Having paid £39.99 from a well known retailer we went back to the same shop and was offered £16. Checking the shelves later we saw it was on sale as pre-owned for £32.99. By our calculations that 50% mark-up being added by the retailer.

Lets break that down for a minute and go through who benefits and whatnot:

The gamer has just gained £16 towards a new title. If they buy a game ‘As New’ then that could cost around £39.99. The retailer will get a small profit from that game and the manufacturers of the game will directly benefit as it would be a sale towards that gaming company’s profits.

preowned game the truth PlayEject

Preowned games – massive choice and discount

If the gamer decides to spend that £16 towards a pre-owned title (using LA Noire as an example again) then they are getting the same game at a cheaper rate, saving about £8 against the new version. However, the gamer will not be entitled to claim any pre-packaged DLC or codes that were included in the original version (as these are one-time claim codes). Also, the gaming company will receive nothing from the sale – not even a smiley face. The retailer, however, will recoup 100% of the money for that game. Sticking with the same example, if they gave us £16 for this game and someone else paid £32.99 then that retailer has earned a profit of £16.99. Not bad eh?

So at the moment the only people getting a raw deal out of this are the gaming companies and us for getting pittance for our LA Noire.

But this transaction has a knock-on-effect. As a direct result of LA Noire being sold as a pre-owned title, Rockstar/Team Bondai have lost out on a potential sale of an ‘As New’ title which damages their revenue and profits. Some of us might not shed a tear over this given that £40 a pop for a game is pretty steep as it is. But take into account what goes into making a game from start to finish and £40 doesn’t seem that bad.

There’s all the programmers, engineers, graphic designers, marketing & advertising, testing and manufacturing of the game/disc to be done. Games take months and years to create and even then some end up as a disaster so won’t sell as well. Add up all the costs to make 1 title, slice a bit off for retailer profit and £40 doesn’t go that far. Yes the games are sold worldwide and on many formats but distribution and coding for different platforms isn’t cheap either!

It might sound like we are sympathising with the manufacturers and creating a case for games to be more expensive – far from it!! We’re gamers as much as you.

preowned game the truth PlayEject

Ads like this crop up everywhere for Preowned Games

But if the trend of retailers taking the lion’s share of the profits by selling pre-owned games then the game manufacturers will have to start cutting back to compensate and this means the end result of the games could start to suffer as well.

We’ve already seen a number of decent gaming studios having to close due to the economy but how much effect the pre-owned sales market has had on these studios is unclear. Gamers don’t seem to be buying less games so if gaming companies are going bust or being forced to be swallowed up by the big boys (Activision and EA) then surely the finger must point at pre-owned games?

The upsides of the Preowned market is of course that we as gamers and consumers get to benefit from cheaper games. Also the high street retailers (who are struggling due to the recession and online retailers) benefit with the profit from pre-owned games and therefore remain strong in business giving us more options of places to buy games from which can only be a good thing.

Its also becoming easier to trade in your games. So many retailers now offer this service and HMV have even go so far as to launch a free iPhone and iPad app called HMV RePlay so you can scan a barcode to see how much you’d get from their store!

Games developers have already started to take action against the preowned sales of games by offering special content with the ‘As New’ games. This might be early access to weapons or cars or something a bit more appetising such as extra missions that would otherwise have been a DLC option. Indeed the original example of LA Noire, the ‘Naked City’ case was bundled with our new game but wouldn’t have been available to the gamer buying our preowned copy. As well as this certain companies have now started adding a one-time use code for access to multiplayer modes. EA are the main player in this with Tiger Woods and Buletstorm being just 2 that spring immediately to mind although the second-hand gamer can purchase the online pass from the Playstation network or Xbox Live marketplaces.

Its not necessarily enough to make gamers opt for the more expensive option but it does make us compare the contents and price before we slide over to the cashier. We’re sure it wont be long before the market moves towards online activation codes as the PC gamers market does (although we appreciate this is more for anti-piracy). This would open up an entirely different can of worms though as that could force the high street retailers to extreme measures before they suffer too much…!

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