New vs. Used: How Everyone Can Win

Posted: March 18, 2011 by Tim Utley in Editorials

It is no secret that videogame industry has a problem with retailers such as Gamestop reselling their products (usually at a discounted price) and they don’t see a cut of secondary or tertiary sales.  From a business perspective I can see how this could be irritating to the videogame industry, but Gamestop and other retailers are using the same model for reselling that EVERY other retail sector utilizes (cars, books, movies, music, etc.).  I would like to propose a solution to this problem, so bare with me.

This is the current model and I believe it is the source of the problem.  The videogame publisher sells its product to the retailer at a wholesale rate.  The retailer then sells it to “us” the consumers for the MSRP.  Average wholesale price on a brand new game is about $52-53.  So retailer X is only making a $7-8 profit.  In great volumes that little amount will add up to a lot, but retailer X isn’t satisfied with that margin so here enters used game sales.  You bring in a game that you bought brand new and sell it back to retailer X and get a portion of what you paid for it (nowadays it is less than half).  Retailer X takes your game and sells it as “pre-owned” or “used” for slightly less than the MSRP of the same game new.  The idea is that you save a few bucks and they make a much larger profit off that sale than the one previously.

I am sorry if I am boring you, but this model isn’t full proof anymore.  With companies like EA instituting “online passes” for their games used games are exceeded the price of their new counterparts.  So when you buy that EA game used for $2 cheaper than the new one and you decide you want to play it online, you better be ready to shell out an additional $10 for those features.  Your used game just became more expensive than a new game, which makes a lot of sense right?  It is pretty obvious the online pass was created to protect new game sales and discourage the purchasing of used games.  I understand that, but when an implementation such as the online pass inconveniences the consumer you begin to have a problem.  Here is what needs to happen.  Retailers that sell used games that require an online pass (which will be most games in the coming years) need to either reduce the price to compensate for the price of the pass or need to purchase additional codes from the publisher and include them with the game.  An online pass is a required component to access online features and used games don’t have redeemable codes included with them.  That is like buying a used car without a transmission.  Pre-owned games used to represent value, but now the represent an incomplete product.  The consumer shouldn’t be punished over these fiscal disputes.

The solution is simple and it really comes down to collaboration between the retailer and the publisher.  Retailers are not going to stop selling used games and publishers know this, so why not get in on the action.  Even if a publisher sold online passes at half price they would still see a taste from used game sales.  This would mean a little less money for the publisher and retailer, but in the end the consumer is benefiting and that is the final component to a winning solution.  If you have any thoughts about this topic feel free to share in the comments section.

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