Examining the Economics of Used Games

A detailed analysis examining the business model for retailers, publishers, and more.

Gamasutra recently published a blog that takes an in-depth look at the economics of used games. There’s been a lot of valid concerns on its impact on the gaming industry and how its impact benefits retailers like Gamestop who resell the products to earn a profit margin. The article illustrates several scenarios to help illustrate which could be potentially considered more ideal, recommended path in the ever-growing complex market.

Based on Microsoft’s initial move to push for DRM, leading to the massive blacklash that followed thereafter, perhaps companies should find a better business model that could satisfy resellers, developers and gamers. Below is a small excerpt:

It turns out that there is actually enough information publicly available to build models of the industry that allow comparisons to be made between different scenarios. Armed with market level revenue totals from NPD, average pricing from Gamestop and stakeholder splits from multiple sources we can see how consumer spend is allocated among licensors, retailers and publishers/developers. These breakouts allow us to evaluate the efficiency of the market and determine when a scenario will upset one of the stakeholders. It is important to stop the discussion at that point to keep it productive. The detail around how publishers spend their money is a separate topic. Game budgets and marketing spends are outside the scope of this discussion. We’re just looking at the efficiency of the market of returning consumer spend to the developers/publishers that make the games.

Although Microsoft reversed its stance on supporting used games, thus pitting the Xbox One on a similar playing field as the PlayStation 4, several publishers remain undecided if they’ll circumvent the game restriction policy which has been left “up to the publishers”.

IGN approached several publishers who didn’t reveal a great deal of info, suggesting that things could go either way. Meanwhile, it’s business as usual for Gamestop, a retailer that would be see a significant loss if restrictions are implemented in the near future. According to Forbes, Gamestop’s gross profit margin exceeds 45%, whereas new game sales only yields 20%.

Source: Gamasutra

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