Used Games - yeah lots of people buy them but not me.

As a consumer I tend not to buy used video games - it's actually one of the small areas in my life that I would never consider used product as it is related to an industry that I love and unlike things like houses and cars - it really does cannibalize sales of new products (usually due to the fact that the used games hit the market within days of the launch of a new product)

I purpose two radical (and very controversial solutions)

1) No new release can be sold used by a retailer until at least 6 months has past

this would make it so a new release has time to earn the developer some money before used games cannibalize sales at the retailer.

2) Tie games to the console in which they are first played by some serial number/game id scheme.

This one is a bit more extreme as it would remove the used console game market entirely and game rentals (and might create a rise in actual piracy) but it opens some doors to developers that most people would not see initially
a) they could tie special rewards to the purchase of games
b) developers could cut retailer costs due to a more guaranteed sales environment.
c) it would invigorate developers in that they could reinvest more money into projects.




used game retailers:

http://next-gen.biz/index.php?option=com_content&task=view&am
p;id=8697&Itemid=2


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Publishers lose money:

http://www.mcvuk.com/news/29878/Revenues-down-and-losses-grow-for
-Take-Two

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hurts the industry:
http://www.next-gen.biz/index.php?option=com_content&task=vie
w&id=8632&Itemid=50

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Development costs and actual profit margin - if no used sales (used sales change this sales equation for the worse)

to show developer's require at least 60$ a game on the x/ps and a min of 500,000 games sold to break even and over a million to make money on a normal development budget:

http://www.igda.org/columns/lastwords/lastwords_Jan07.php

500,000 copies to break even at 60$ a game on developmental price of 8.6 million

Development cost ~ 17.20/unit
Publisher Overhead ~
Marketing ~ 10/unit
Cost of Goods ~ 6/unit
Sony Platform Fees ~ 15% gross or 7% if exclusive
Amortization of cancelled projects ~??? depends on each company

No royalties paid until all of the $8.6 million in development costs had been recouped at the developer's effective royalty rate.
Even if that rate, net of all reductions, is a generous $8 per unit, over 1 million full price copies must be sold for the developer to recoup
And that is why 60$ a game is and will be for this generation the normal price for a PS3 game.



Profit margin ~ 1-3% to publisher, 1-3% to developer, 1-3% Distributor , 11% Retailer

(many titles cost much more then 8.6 million to develop)

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information as per the IGDA (International Game Developers Association)
http://www.igda.org/


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Dec. OXM, the breakdown for a 360 game that sells 500,000 goes like this.

Retailer Cut: $12
Microsoft licensing and manufacturing: $12
Marketing: $7
Development: $20
Publisher overhead: $9
= $60.



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Do you know publishers only make 1 dollar per game? *linked by many sites*

How come Uncharted and Assassin’s Creed cost 60 dollars, while Super Mario Galaxy cost 50 dollars on the Wii? The first answer jumps to mind is “lower development” cost, but what does that mean? Do you know that when Konami publishes a game like MGS, they only make 1 dollar per game? In this special segment, we take a look at where your dollars go! We’ll break it down for you in a nice pie, because it’s always nice to know who’s taking a bite out of your pocket pie this Christmas.

Art/Design: 25% (about $15)

The rippling oceans, expressive faces and explosive action sequences gamers want to see don't come cheap. Publishers pay millions for computer-generated graphics, animation and motion-capture talent. "It's just like making a movie," says ABI Research's Michael Wolf.
Programming And Engineering: 20% (about $12)

This expense includes the gaming "engine"--the software equivalent of a game's guts--which can be bought, developed in-house or licensed, such as Epic's Unreal engine. Also included: artificial intelligence programs, online game-play systems, video compression software and "localization" for international markets. Engineering and development costs can quickly escalate when publishers agree to port a game title to an additional platform--and most of them now have to do so, notes ABI Research's Wolf. Some third-party developers secure deals to receive a cut of royalties based on how well a game sells.
Retail: 20% ($12)

Most games wholesale for about $48, giving retailers like EB Games, or Best Buy $12 of markup; at best, a dollar of that may drop to the store's bottom line.
Console Owner Fee: 11.5% (about $7)

This is why Sony, Microsoft and Nintendo are laboring so mightily to make their machines to success: Each gamemaker that wants to roll out a new title has to fork over a fee for each unit sold. This may vary per console maker--some publishers say creating games for the PlayStation 3 is more expensive because of fees Sony charges to use its Blu-Ray DVD standard. "But that number can get smaller depending on the publisher's status," says Peer Schneider, vice president of content publishing at IGN, News Corp.'s gaming portal. "The fee can be waived for exclusivity to a platform--that will buy you a kickback."
Marketing: 7% (about $4)

The game marketing budget is smaller if a game belongs to a well-known franchise, such as one of Activision's Tony Hawk titles, or can benefit from the marketing extravaganza tied to a movie budget (like Activision's Spiderman games). But good luck trying to market a brand new game concept. "To say, 'This is our new universe that you've never heard of,' that'll pile on additional marketing costs," says Luke Smith, news editor of Ziff Davis Media's gaming site 1up.com.
Market Development Fund: 5% (about $3)

It's not just enough to end up on a retailer's shelf--if you want good placement, or a spot in a retailer's advertising, you'll have to pay up again. This includes paid placement for print circulars, banner ads and highlights within a retailer's TV spot.
Manufacturing Costs, Packaging: 5% (about $3)

Blu-Ray discs might cost more, and so will collectible "special edition" sets. Otherwise, this amount covers the blank DVD media, the game imprinting, the sturdy plastic case and the included instruction manual.
Licensing: 5% (about $3)

From athletes and sports leagues to Marvel characters and movie studios, if a game title takes its name and plot from a well-known pop culture icon, publishers can expect to pay top dollar for the licensing rights. Headlining voice talent, such as Marlon Brando in Electronic Arts' The Godfather game, may even receive a percentage of retail revenues; unnamed voice actors and musicians get a flat fee. Costs vary widely here. For original-concept games, this cost is zero.
Publisher profit: 1.5% (about $1)

After all other parties--including the in-house or outsourced development teams--have been paid, the publisher collects about a buck toward the bottom line. As these pricey consoles become more mainstream, those dollars will add up.
Distributor: 1.5% (about $1)

If a small publisher wants to reach mass audiences, or a large publisher wants to sell to a small-time retailer, they'll need help from a game distributor, such as Ingram Entertainment.
Corporate Costs (quantitative analysis, management overhead): 0.3% (about 20 cents)

Number crunching is cheap, says Sega of America president Simon Jeffrey. Lawyers are not. But publishers need to pay all of them. And if they find themselves in legal trouble--as Take-Two Interactive did when it had to defend its Grand Theft Auto game's racy content in federal court--this number will shoot way up.
Hardware development costs: 0.05% (less than 3 cents)

Before a game developer can begin its craft, it must have access to the hardware the game will run on. For Xbox 360 and PS3 games, engineering teams pay tens of thousands for access to developers' kits and demo units--some of which get destroyed in the process.

[Harry190]

lots of interesting stuff in there.

[LJWooly]

That was a good blog to read. Well done.

[evilbubble]

Since gaming start when people are young, then essentially gamers are normally quite poor. There are so many games but so little cash to buy those games. This was true for me, when I was young, and imho true for most gamers out there.

Thus the ability to lend and borrow games from your friends are essential. It is a god given right for gamers.

And for the second hand market, you have to understand the market economy. As long there is suppy and there is demand, there will be a market. And of course as long it is legal, which second hand market is. We have ebay, craiglist, independent retailers and many more, how do you propose the game publishers to control them all?

As for the cost, that is why you have merger and take over, it will create a better synergy in the long run that hopefully will keep the cost down. And console makers, like Sony for instance, has been trying to extend the console lifecycle. So instead of gaming producers releasing only 2-3 games per cycle, they now can release 3-4 games per cycle using the same basic engine.

Engine makers, like Epic, help to keep the development cost down, as game developers do not have to develop their engine from scratch. And allow them to focus more importantly into the gameplay and the art.

[JoelR]

Only have one question:

Why do you believe it is a right to be able to trade your games?

[evilbubble]

Well it is my right to do whatever I like (within the boundary of laws of course) with items that I own. For example with a book, I can read it, read it in toilet even burn it if I like to. Trading something that I own fall within the same criteria.

[lbartley]

I buy used games when I can't jutify the full retail price for a game based on the amount/quality of content contained within.

The new game market would be FAR more active if only games were priced accurately.

A 3 hour game should not cost $60, a dull game should not cost $60.

The issue isn't with the used market, it's with the new market being unwilling to accomodate the consumer.

[JoelR]

Thanks for the feedback all
unfortunately as a developer it is a major concern that within days of releaseing a new product it is basically reduced in value by stores marketing it showing the new and the used side by side. Like I said I have no issue with people selling used... just selling used during the initial launch period

Speaking as a developer the next games we release may just go to companies like Walmart (where we have to pay 2,000,000$ just to get wall space) because of this... they at least don't compete with us with our own product.

I don't have an issue with people selling their stuff direct to others but my boggle is that we have companies who are supposed to support the gaming industry actively acting as vampires on the same. So sell on ebay, sell on craigs - but companies like Gamestop need to be halted. (you'll get a better return on your investment as well on ebay or craigs anyway)

(heck in the case of out of print games etc used is the only place to get them so unless you think you can get the publisher to rerelease it buy it used)

Ibartly I understand your point but look at this way as well. that price point is picked so that the company should break even on a console game at around the 500k mark. If you don't like the game don't buy it and the company will lose money and not make games like that again if they survive. But if you like it and it is to short buy it and give them your feedback on it about the length - that way they have a chance to better satisfy you the next time around. If they don't then burn em at the stake. I find that most games people claim are to short are games that a) - they didn't do everything in the game or b) - they played it on easy

[Mc187]

great blog. keep'em coming . we as gamers need to here more from developers like you in th industry.
thanks

[JoelR]

Publishers will be and are starting to get tough on this issue - see the following:

http://multiplayerblog.mtv....

"Was this deal too good to be true? It certainly was too good for a major publisher to tolerate. An offer like the one in the flyer would have a) allowed gamers a no-risk, week-long trial of a full-priced game and b) ensured that many subsequent Canadian EB sales of the game involved copies traded in by early-adopters who were done with it. Those subsequent sales of the traded-in games would in no way would have benefited the publisher of the game.

Sorry, Canadian gamers. You had to know that wasn’t going to stand."