You're making the assumption that elasticity is important, but it is not because games are a one time purchase. You have a limited number of potential customers and they're all only going to buy the game once. Selling at a price lower than what a customer might have paid removes them from your potential market and you lose the profit you might have had if you'd kept the price high.
If you have 100,000 customers and you sell it at $1, you get a huge surge in temporary sales and you end up making $100,000 which seems great until you consider that 30% of them might have paid $2, in which case if you'd sat on the $2 price and waited for early buyers to pay it, THEN lowered it, you'd have made $130,000 instead. Your sales might continue at this point, but you've essentially lost $30k in profit because those 30,000 purchasers are not going to buy the game again.
Sales trends on video games ALWAYS go down, it's the entire reason why people lower prices in the first place. The best practice here is to only lower the price when sales start to decline to undesirable levels so that you can increase your demand quantity and maintain sales for as long as possible. And this is exactly what people do... DNF is $20, less than 4 months after launch, while Fallout 3 is also $20, 3 years later. Because Fallout 3 is still selling well, and DNF is not.
Also contrary to popular belief, digital distribution is not free. The distributor takes a very significant chunk of your sale that you would have otherwise had to spend on printing copies and shipping them out and selling them at retailer prices.
According to most statistics I've read:
Steam takes between 30-40%...
Retailers take about 30-40%...
If you assume it costs about five dollars (which is pretty close to accurate, might actually be less by now) to print, distribute, and market a copy of a game, you're saving about... five dollars. If you intend to make the same amount of money off of your digital sales as you would in a retail outlet then you can expect to reduce the price by, you guessed it, five dollars.
The biggest problem with printing copies of games is not that it's expensive, it's that the cost stays the same regardless of what the retail sale price is. Meaning if you have to sell the game for 5 dollars, and it costs 5 dollars to make... you make no profit. Because of this your profit margin rapidly shrinks because the cost of production doesn't decline with the sale price and eventually printing and shipping the game outweighs profit you made from the sale. Since you don't have this problem in a digital format, you can eventually take your game price all the way down to $1 dollar and still make money from it, where as console for example basically never dip below $15 because it becomes pointless to charge less.
I'm not sure how you came to the conclusion people won't embrace digital sales, because they already have. The retail market for PC games shrinks every year while digital distribution rises despite the fact that AAA titles launch for basically the same price on Steam as they do at retailers. The only reason this hasn't happened on consoles is because there's no one providing the service except for indie games and both sony/microsoft have done disastrous jobs marketing the service.
"You're making the assumption that elasticity is important, but it is not because games are a one time purchase. You have a limited number of potential customers and they're all only going to buy the game once."
Yes, only so many people will buy at the new release price ($60), but you can lower the price later to draw in the people that won't buy it at $60 while there's still public interest. You're assuming that you're loosing money by lowering the price, but you're ignoring the people who buy used. You're not getting their money, GameStop is. So you lower the price after used copies become available (six weeks seems likely) and you stand a chance of snagging new customers. There will be X number of customers willing pay $60, X number willing pay $30, and X number willing pay $15 for your game. You're not loosing money, you're gaining customers and increasing revenue despite the lower profit margins. If you don't lower the price, those people will just wait for used copies and then you get $0.
"Also contrary to popular belief, digital distribution is not free."
That's a strawman. I didn't say that. I said it was nearly zero and I was referring to those that do it on their own, not buy into a digital publisher like Valve.
"The biggest problem with printing copies of games is not that it's expensive, it's that the cost stays the same regardless of what the retail sale price is."
I'm fully aware of fixed and marginal costs, but you're using hyperbole to present a worst case scenario that is unlikely, if not impossible, to happen. The costs of physical discs are a very marginal fixed cost and it will never happen that prices will ever be forced to fall to cost without a suitable alternative to physical media to replace it.
"I'm not sure how you came to the conclusion people won't embrace digital sales, because they already have."
That's another strawman. I didn't say that, I said that you won't gain much ground if you keep doing things in the digital market like you do in the physical market. People won't go along with you trying to apply 1990 business models to 2011 markets. You can't sell digital goods to people at a "one size fits all" approach. You won't gain any customers that way.
Your whole take on the sales model tries to squeeze as much revenue out of those willing to pay $60 as possible and completely ignores the swath of people who would give you their money if you loosened your grip a bit or a lot. Your way of doing it leaves out a whole new source of revenue because you want to stick to $60 for as long as you can, but you're encouraging people to buy used copies. You might be loosing profit margins with my way, but you're missing out on customers doing it your way. You think in terms of being in control of your market, but you're not in control. Technology has changed the way people do business with digital goods. Old world models won't work anymore.
All GameStops needs to be put under pawn shop regulations with a minimum 1 week waiting period before trade in items can be resold. That is all.
This is pretty serious. I worked at Gamestop back when I was a teen, a few blocks away from an impoverished neighborhood. We would have a lot of questionable looking characters come in trading in a ton of random crap, even trying to see if we would take flash drives.
Always heard stories of people getting tons of their games stolen in the area too.
That's why I always label all of my games with my name.
Yes, only so many people will buy at the new release price ($60), but you can lower the price later to draw in the people that won't buy it at $60 while there's still public interest. You're assuming that you're loosing money by lowering the price, but you're ignoring the people who buy used. You're not getting their money, GameStop is. So you lower the price after used copies become available (six weeks seems likely) and you stand a chance of snagging new customers. There will be X number of customers willing pay $60, X number willing pay $30, and X number willing pay $15 for your game. You're not loosing money, you're gaining customers and increasing revenue despite the lower profit margins. If you don't lower the price, those people will just wait for used copies and then you get $0.
The standard sales model DOES take into account sales lost to used games.
When I say "keep the price high as long as possible" I don't mean "leave gears of war at $60 until the Xbox 1080 comes out, then reduce it to $55" You watch your sales and reduce it when your sales drop below a certain point. When you see not enough people are buying your game, you drop the price. People who are buying used are contributing to that decline in sales because they fall into that category of "people not buying the game" so yeah they are accounted for. They just get seen as zero dollars instead of negative dollars.
Your argument (as far as I can tell) is that you need to reduce it fast enough to keep up with the price of used games, that way you'll poach all their used sales and this increase in sales will mean you ultimately make more money. This assumes two really bad things:
1. That you can somehow compete with a company that is ALWAYS going to be able to undercut you because they're at the end of the supply chain... In order for this to work the price would need to be dropped so low that people are saving such a trivial amount of money that they would always opt to buy new instead.
2. That the market for your used games is so huge that having 100% of the used sales would justify the serious drop in price.
That's a strawman. I didn't say that. I said it was nearly zero and I was referring to those that do it on their own, not buy into a digital publisher like Valve.
Not a strawman and also not in response to the nearly zero comment. You claimed you could cut prices immensely, my argument is that if you want to make at least the same amount of money you cannot do that because you simply do not save enough on manufacturing and shipping. If you want to go ahead and crutch on the fact that you used the word "lots of money" instead of "at least the same" then feel free. To address what you thought I was responding to anyway: Even if you don't go through a distributor like Steam you need to do billing, distro, and marketing yourself so the cost is obviously no where near zero.
Your whole take on the sales model tries to squeeze as much revenue out of those willing to pay $60 as possible and completely ignores the swath of people who would give you their money if you loosened your grip a bit or a lot. Your way of doing it leaves out a whole new source of revenue because you want to stick to $60 for as long as you can, but you're encouraging people to buy used copies. You might be loosing profit margins with my way, but you're missing out on customers doing it your way. You think in terms of being in control of your market, but you're not in control. Technology has changed the way people do business with digital goods. Old world models won't work anymore.
The music industry had a similar but much worse problem which was piracy, like you and the gaming industry, everybody thought "well hey, music is elastic! We'll just lower the price, more people will buy it, and we'll make more money." The RIAA has cut the price of CDs by more than half over the last decade as well as increased availability by allowing any individual song to be purchased, they did this in an effort to adapt to the new age of technology. The result is that they've gained significantly more sales, and lost almost 2/3rds of their revenue.
The problem technology poses isn't at odds with the price reduction model, it's at odds with the entire concept of content ownership. The reason is because of what I mentioned before: Elasticity doesn't matter. No matter how much or how fast you drop your price, your sales are going to plateau, likely at the same point. This is why the music industry as a whole is migrating away from the ownership idea toward the concept of subscription service, because a subscription is a frequent purchase which means elasticity actually becomes a relevant factor again.
The gaming industry is lucky because unlike the music industry, it has well controlled platforms which means the typical sales model will continue to work fine until content availability forces it into either:
A. Accepting that they're just not going to be able to make as much mone yas they used to
or
B. Adopting a subscription model
By the way, just to clarify, I'm not at all in favor of high prices for video games. In fact the ridiculous pricing of games is what leads me to purchase maybe 1 game per year at launch price.
Like everybody else I wish games were cheaper (I still don't want to pay $30 for fallout 3 goty edition...), but I'm not going to pretend like that is going to make the publisher more money. They do it this way specifically BECAUSE it makes them the most money and they're not going to change unless they face a catastrophe like the music industry where they have no choice.
1.That you can somehow compete with a company that is ALWAYS going to be able to undercut you because they're at the end of the supply chain... In order for this to work the price would need to be dropped so low that people are saving such a trivial amount of money that they would always opt to buy new instead.
2. That the market for your used games is so huge that having 100% of the used sales would justify the serious drop in price.
They can't undercut you indefinitely. You're being hyperbolic. They have to pay the customers for their trade-ins/sales. At some point its just not worth it to the customer to sell. In fact, they'd be better off joining one of those swapping sites where they can swap games for games.
the cost is obviously no where near zero.
We're talking about distribution, not that other stuff. Those things are all the same whether you do retail or digital.
The RIAA has cut the price of CDs by more than half over the last decade as well as increased availability by allowing any individual song to be purchased, they did this in an effort to adapt to the new age of technology. The result is that they've gained significantly more sales, and lost almost 2/3rds of their revenue.
Adapt? The recording industry didn't do a thing to adapt. They flailed their arms and stomped their feet like spoiled children, suing and threatening people at will, while refusing to meet the customers demands. They didn't loose money because they lowered prices, they lost money because they made themselves irrelevant and unpopular. They failed to adapt by doing it all half-assed and that's what cost them. They didn't do individual tracks sales because they were adapting, they were forced into it out of pressure from iTunes and the like. The music industry is doing quite well. Artists are making good incomes using the internet to communicate with fans and earn a decent living. The recording industry is not doing so well because fans and artists have figured out that they don't need them as much as they used to thanks to better options provided by technology.
The gaming industry is lucky because unlike the music industry, it has well controlled platforms which means the typical sales model will continue to work fine until content availability forces it into either:
A. Accepting that they're just not going to be able to make as much money as they used to
or
B. Adopting a subscription model
"...well controlled platforms..." is part of the problem. The industry is so stuck on controlling things, limiting what customers can do with the stuff they paid money for. Technology enables, it doesn't limit and technology will overcome the controls put in place to give them the power to dictate to the market. You can't make money on games by limiting the ability to copy. It won't work, but you can make buying a better deal than copying.
I'm sorry, but both A and B are not realistic solutions to the problem. A assumes that it's inevitably going to fail to profit and B is just a last gasp grab for control because the industry doesn't know how to sell content without absolute control over it. The content industry at large is incredibly narcissistic and needs to learn to listen to what people want instead of thinking so inwardly. You don't build a business model around what you want and then try to make the customers fit into it. It has to be about the customers from the ground up and then you figure how you can turn that into a source of revenue, no plan is going to be a magic bullet either. My plan isn't iron-clad and air-tight. No one's is, because every situation is different and every audience is different. You have to find out what kind of exchange they want to have with you and find a place for them to support the continuation of that connection.
The job of a content company is to create opportunities for people to give you money for what you do, not try to brush them into a slot of your choosing. That's why people avoid buying games new or making infringing copies. They don't like the options they're given and technology has provided an alternative. It might not be right, legal, appealing, or fair to you, but it's the nature of technology. So, instead of looking for "...well controlled platforms..." it might be prudent to provide more amenable options for consumers to get what they want. The typical sales model doesn't apply in the digital market and all the control in world isn't going change that.
The problem I see with subscriptions models is the translation of value to usage.
When i subscribe for a year to a magazine, I get (for a monthly magazine) 12 issues delivered to my door for me to keep, regardless of the degree or rate at which I read them. Even if media licensing is apparent in this medium, in most circumstances I am free to do whatever I want with them provided I don't illegally copy and redistribute said copies, nor plagiarize or for any matter claim that the IP or order of contents to be of my creation.
But that will not be the case with digital platforms, you will pay the same amount no matter the degree to which you use it, and the copy of the content will never be considered yours. It is for this reason I avoid them and continue to buy hard-copies, I cannot imbibe the EULA system. (Please nobody start and argument with me on the matter that the EULA exists on hard-copy, I know this, and I willingly provide myself with the 'illusion' that I own what I have bought.)
On-topic for used sales though, I don't agree with Gamestop's harsh pushing of used over new, however I feel that the antagonism between publishers/developers and retailers/second-hand markets is pointless and will result in nothing but the harming of both parties bottom line. Personally in regard to second-hand sales I simply do not care. I'm willing to admit this and hope not to get lynched as somebody who admits piracy likely would around here. 80% off my games collection is used, and I am happy to see that so many of the games and developers I am a fan of thanks to the opportunity to afford them via that system. (Plus I hate seeing good games go to waste.)
The arguments for the high-price maximized profits system in place at moment I would find more favour with me. if a proper cultivation and royalty structure was used to pay developers. But instead it is based on 1-week to 1-month sales forecasts, with slower selling titles resulting in devs being cut or fired completely, with no share of profits being attributed to the creators hereafter. As said above, these games are single purchase, so you wont see people buying again, nor will you see the cheaper used sales becoming new sales. So if publishers etc want to have a "units sold in 1st week" dragnet on profits with less used sales, they could likely see improvement with lower prices.
Since they do follow that model, the vilification of used games and piracy have little relevance to me, since I rarely ever purchase games on release. I wait patiently until the game is cheaper in whatever physical form. By the time I buy a game, one of two things have happened: 1) The game sold well, the dev is still in business, they made their money and a clearly going to continue making games - my money (unless used) is helpful but is like a piddle in the ocean. 2) The game didn't sell well, the dev is likely fired and now is off looking for new opportunities - my money is now pointlessly going towards the publisher, who will probably just make another military FPS. In both these cases my contribution to the industry in negligible, I hope nobody thinks I am a bad person, but i ws simply looking for the value in my purchase.
In whatever way I played the game in any form before or after that purchase is now moot, what matters now is that I did. If I really liked it, I am now excited and encouraged to purchase more from that developer. As my desire to pay full new price for Skyrim Collectors Edition has become, since I have greatly enjoyed that series. Which brings me to my two most important thoughts for making more money.
1. Turn wants into needs.
Basically, make good games, market them properly. Plateaued sales haven't destroyed the Rolling Stones, haven't destroyed The Lord of the Rings books, or destroyed boxed copies of Diablo 2 (still full price at games store around here.)
If it's good it will sell, it will make money. Some of the most pirated and used game swapped games are also top new sellers. Make the game and buying it new so desirable that it becomes the best choice.
2. Increase custom, NEVER decrease.
I know this and other issues are brought up at business meetings, but this should always be on top. There are many ways to do this and what publishers are trying to do to combat used sales is one of them, BUT there is a caveat: If there is a risk of any decreased custom (even if small) DON'T DO IT. Don't do anything that makes the playing of your game in any form less desirable (I except the event of somebody playing a pirated multiplayer game.) Add DRM? The pirate copy is now better. Add online pass? The value of owning the game is now less even when you can only budget for a used copy. etc etc etc I could go on.
Snacuum, at this point I would probably just tell you to pirate most of your games, that way you could put that money you otherwise put towards cheaper used games to buying proper new games.
Then the industry and the game developers you like would get all that money that gamestop and similar stores just got from you.
I'd just like to quickly point out that regardless of the tone I may have inadvertently set, I'm not advocating piracy. I don't believe it is something that people should do (even though it is better at sending a message than not buying.)
I don't believe in buying games as a charity. I know all you guys here who are employed appreciate the ideology of supporting good work, but I have always traded my dollar value with the worth of the product, with the satisfaction of supporting the developer a good-feel bonus.
As to my point, I don't believe the second-hand market exists in a vacuum. Before it is second-hand it must be sold new, and the retailers are not given the games for free: It is they and not the customer that pays the publisher. Of course customer demand sees this event continue, and unfortunately Gamestop recycles that demand through their used market. This is not something I believe will go away, and since it is their principle means of profit, warring with them may not help, nay, will not help since the war is being fought that the end-user's level. That is not a good thing, the end-user is divorced from the ideas of business and profit, they made a trade of money for goods.
Anyway, my rant above can be ignored if desired: I have had those thoughts rattling in my head for a while, and it is my birthday, I felt over-entitled. I actually feel a bit bad now for 'using' a community I love so much for my own soap-box.
The industry and the game developers are likely to benefit way more from a pirate than from one who buys used games at a regular basis, as they will get nothing from people buying used games.
If you took that money you put towards buying all those used games, and bought a few new games and pirated the rest, you would be doing more good for the industry than before, and you wouldn't be supporting the used games industry.
In any case, it's fully possible to kill the used games market, just look at pc-games, and then look at where console gaming distribution is going.
In any case, it's fully possible to kill the used games market, just look at pc-games, and then look at where console gaming distribution is going.
*Shudder*
Not that I'm against small developers using a new distribution method since they can't afford to go full retail, I'm just not a fan of digital distribution.
I do agree with you eld, but at the risk of sounding like a prat, I don't see myself changing my buying patterns. I'm a fan of actually physically having boxed games in my collection, and that beats pirated games anyday. I don't agree with the pricing of completely new release games (at least in my country) and so I wait, I wait until the price of said desirable game is appropriate to me. If the retailer/publisher gets there first then it may be a new game purchase, or if a legitimately traded piece of 'goods' (as I feel games fall into) gets there first I am not discouraged.
I will always purchase new over used if the games pricing is comparably similar, and I'd say that almost every game I have gotten in the last 2 years is new. It may be seen as old world thinking but I still consider the 'newness' of a game a factor in its value; it being 'new' as something special I am getting, something that I am paying for. Used games I see as a hand-me-down, inferior in worth, but a sacrifice made for affording them all. Unfortunately buying used will be seen here as a sacrifice in peoples salaries. I do not wish to see it that way, I mean, I'd like to play your games people... Legitimately. Would it be preferred that I simply never at all?
We (including publishers) should not be leveling this war at the consumers level, we all want the consumers to care about our jobs but it is simply a fact that most do not. They care about the product, and the service; what we can do for them. I realise it is a tired and considered flawed comparison, but, in the case of used car sales: Nobody buying a car, used OR new cares about who gets the money. By extension at best, they may care about keeping the money local and not in overseas jobs, but in the case of new or used, every other factor comes into play.
Replies
If you have 100,000 customers and you sell it at $1, you get a huge surge in temporary sales and you end up making $100,000 which seems great until you consider that 30% of them might have paid $2, in which case if you'd sat on the $2 price and waited for early buyers to pay it, THEN lowered it, you'd have made $130,000 instead. Your sales might continue at this point, but you've essentially lost $30k in profit because those 30,000 purchasers are not going to buy the game again.
Sales trends on video games ALWAYS go down, it's the entire reason why people lower prices in the first place. The best practice here is to only lower the price when sales start to decline to undesirable levels so that you can increase your demand quantity and maintain sales for as long as possible. And this is exactly what people do... DNF is $20, less than 4 months after launch, while Fallout 3 is also $20, 3 years later. Because Fallout 3 is still selling well, and DNF is not.
Also contrary to popular belief, digital distribution is not free. The distributor takes a very significant chunk of your sale that you would have otherwise had to spend on printing copies and shipping them out and selling them at retailer prices.
According to most statistics I've read:
Steam takes between 30-40%...
Retailers take about 30-40%...
If you assume it costs about five dollars (which is pretty close to accurate, might actually be less by now) to print, distribute, and market a copy of a game, you're saving about... five dollars. If you intend to make the same amount of money off of your digital sales as you would in a retail outlet then you can expect to reduce the price by, you guessed it, five dollars.
The biggest problem with printing copies of games is not that it's expensive, it's that the cost stays the same regardless of what the retail sale price is. Meaning if you have to sell the game for 5 dollars, and it costs 5 dollars to make... you make no profit. Because of this your profit margin rapidly shrinks because the cost of production doesn't decline with the sale price and eventually printing and shipping the game outweighs profit you made from the sale. Since you don't have this problem in a digital format, you can eventually take your game price all the way down to $1 dollar and still make money from it, where as console for example basically never dip below $15 because it becomes pointless to charge less.
I'm not sure how you came to the conclusion people won't embrace digital sales, because they already have. The retail market for PC games shrinks every year while digital distribution rises despite the fact that AAA titles launch for basically the same price on Steam as they do at retailers. The only reason this hasn't happened on consoles is because there's no one providing the service except for indie games and both sony/microsoft have done disastrous jobs marketing the service.
I tried this last night with Titan Quest to no avail. Found the .exe in the "common" folder, but double-clicking it prompted me to sign into Steam.
"You're making the assumption that elasticity is important, but it is not because games are a one time purchase. You have a limited number of potential customers and they're all only going to buy the game once."
Yes, only so many people will buy at the new release price ($60), but you can lower the price later to draw in the people that won't buy it at $60 while there's still public interest. You're assuming that you're loosing money by lowering the price, but you're ignoring the people who buy used. You're not getting their money, GameStop is. So you lower the price after used copies become available (six weeks seems likely) and you stand a chance of snagging new customers. There will be X number of customers willing pay $60, X number willing pay $30, and X number willing pay $15 for your game. You're not loosing money, you're gaining customers and increasing revenue despite the lower profit margins. If you don't lower the price, those people will just wait for used copies and then you get $0.
"Also contrary to popular belief, digital distribution is not free."
That's a strawman. I didn't say that. I said it was nearly zero and I was referring to those that do it on their own, not buy into a digital publisher like Valve.
"The biggest problem with printing copies of games is not that it's expensive, it's that the cost stays the same regardless of what the retail sale price is."
I'm fully aware of fixed and marginal costs, but you're using hyperbole to present a worst case scenario that is unlikely, if not impossible, to happen. The costs of physical discs are a very marginal fixed cost and it will never happen that prices will ever be forced to fall to cost without a suitable alternative to physical media to replace it.
"I'm not sure how you came to the conclusion people won't embrace digital sales, because they already have."
That's another strawman. I didn't say that, I said that you won't gain much ground if you keep doing things in the digital market like you do in the physical market. People won't go along with you trying to apply 1990 business models to 2011 markets. You can't sell digital goods to people at a "one size fits all" approach. You won't gain any customers that way.
Your whole take on the sales model tries to squeeze as much revenue out of those willing to pay $60 as possible and completely ignores the swath of people who would give you their money if you loosened your grip a bit or a lot. Your way of doing it leaves out a whole new source of revenue because you want to stick to $60 for as long as you can, but you're encouraging people to buy used copies. You might be loosing profit margins with my way, but you're missing out on customers doing it your way. You think in terms of being in control of your market, but you're not in control. Technology has changed the way people do business with digital goods. Old world models won't work anymore.
This is pretty serious. I worked at Gamestop back when I was a teen, a few blocks away from an impoverished neighborhood. We would have a lot of questionable looking characters come in trading in a ton of random crap, even trying to see if we would take flash drives.
Always heard stories of people getting tons of their games stolen in the area too.
That's why I always label all of my games with my name.
When I say "keep the price high as long as possible" I don't mean "leave gears of war at $60 until the Xbox 1080 comes out, then reduce it to $55" You watch your sales and reduce it when your sales drop below a certain point. When you see not enough people are buying your game, you drop the price. People who are buying used are contributing to that decline in sales because they fall into that category of "people not buying the game" so yeah they are accounted for. They just get seen as zero dollars instead of negative dollars.
Your argument (as far as I can tell) is that you need to reduce it fast enough to keep up with the price of used games, that way you'll poach all their used sales and this increase in sales will mean you ultimately make more money. This assumes two really bad things:
1. That you can somehow compete with a company that is ALWAYS going to be able to undercut you because they're at the end of the supply chain... In order for this to work the price would need to be dropped so low that people are saving such a trivial amount of money that they would always opt to buy new instead.
2. That the market for your used games is so huge that having 100% of the used sales would justify the serious drop in price.
Not a strawman and also not in response to the nearly zero comment. You claimed you could cut prices immensely, my argument is that if you want to make at least the same amount of money you cannot do that because you simply do not save enough on manufacturing and shipping. If you want to go ahead and crutch on the fact that you used the word "lots of money" instead of "at least the same" then feel free. To address what you thought I was responding to anyway: Even if you don't go through a distributor like Steam you need to do billing, distro, and marketing yourself so the cost is obviously no where near zero.
The music industry had a similar but much worse problem which was piracy, like you and the gaming industry, everybody thought "well hey, music is elastic! We'll just lower the price, more people will buy it, and we'll make more money." The RIAA has cut the price of CDs by more than half over the last decade as well as increased availability by allowing any individual song to be purchased, they did this in an effort to adapt to the new age of technology. The result is that they've gained significantly more sales, and lost almost 2/3rds of their revenue.
The problem technology poses isn't at odds with the price reduction model, it's at odds with the entire concept of content ownership. The reason is because of what I mentioned before: Elasticity doesn't matter. No matter how much or how fast you drop your price, your sales are going to plateau, likely at the same point. This is why the music industry as a whole is migrating away from the ownership idea toward the concept of subscription service, because a subscription is a frequent purchase which means elasticity actually becomes a relevant factor again.
The gaming industry is lucky because unlike the music industry, it has well controlled platforms which means the typical sales model will continue to work fine until content availability forces it into either:
A. Accepting that they're just not going to be able to make as much mone yas they used to
or
B. Adopting a subscription model
Like everybody else I wish games were cheaper (I still don't want to pay $30 for fallout 3 goty edition...), but I'm not going to pretend like that is going to make the publisher more money. They do it this way specifically BECAUSE it makes them the most money and they're not going to change unless they face a catastrophe like the music industry where they have no choice.
We're talking about distribution, not that other stuff. Those things are all the same whether you do retail or digital.
Adapt? The recording industry didn't do a thing to adapt. They flailed their arms and stomped their feet like spoiled children, suing and threatening people at will, while refusing to meet the customers demands. They didn't loose money because they lowered prices, they lost money because they made themselves irrelevant and unpopular. They failed to adapt by doing it all half-assed and that's what cost them. They didn't do individual tracks sales because they were adapting, they were forced into it out of pressure from iTunes and the like. The music industry is doing quite well. Artists are making good incomes using the internet to communicate with fans and earn a decent living. The recording industry is not doing so well because fans and artists have figured out that they don't need them as much as they used to thanks to better options provided by technology.
"...well controlled platforms..." is part of the problem. The industry is so stuck on controlling things, limiting what customers can do with the stuff they paid money for. Technology enables, it doesn't limit and technology will overcome the controls put in place to give them the power to dictate to the market. You can't make money on games by limiting the ability to copy. It won't work, but you can make buying a better deal than copying.
I'm sorry, but both A and B are not realistic solutions to the problem. A assumes that it's inevitably going to fail to profit and B is just a last gasp grab for control because the industry doesn't know how to sell content without absolute control over it. The content industry at large is incredibly narcissistic and needs to learn to listen to what people want instead of thinking so inwardly. You don't build a business model around what you want and then try to make the customers fit into it. It has to be about the customers from the ground up and then you figure how you can turn that into a source of revenue, no plan is going to be a magic bullet either. My plan isn't iron-clad and air-tight. No one's is, because every situation is different and every audience is different. You have to find out what kind of exchange they want to have with you and find a place for them to support the continuation of that connection.
The job of a content company is to create opportunities for people to give you money for what you do, not try to brush them into a slot of your choosing. That's why people avoid buying games new or making infringing copies. They don't like the options they're given and technology has provided an alternative. It might not be right, legal, appealing, or fair to you, but it's the nature of technology. So, instead of looking for "...well controlled platforms..." it might be prudent to provide more amenable options for consumers to get what they want. The typical sales model doesn't apply in the digital market and all the control in world isn't going change that.
When i subscribe for a year to a magazine, I get (for a monthly magazine) 12 issues delivered to my door for me to keep, regardless of the degree or rate at which I read them. Even if media licensing is apparent in this medium, in most circumstances I am free to do whatever I want with them provided I don't illegally copy and redistribute said copies, nor plagiarize or for any matter claim that the IP or order of contents to be of my creation.
But that will not be the case with digital platforms, you will pay the same amount no matter the degree to which you use it, and the copy of the content will never be considered yours. It is for this reason I avoid them and continue to buy hard-copies, I cannot imbibe the EULA system. (Please nobody start and argument with me on the matter that the EULA exists on hard-copy, I know this, and I willingly provide myself with the 'illusion' that I own what I have bought.)
On-topic for used sales though, I don't agree with Gamestop's harsh pushing of used over new, however I feel that the antagonism between publishers/developers and retailers/second-hand markets is pointless and will result in nothing but the harming of both parties bottom line. Personally in regard to second-hand sales I simply do not care. I'm willing to admit this and hope not to get lynched as somebody who admits piracy likely would around here. 80% off my games collection is used, and I am happy to see that so many of the games and developers I am a fan of thanks to the opportunity to afford them via that system. (Plus I hate seeing good games go to waste.)
The arguments for the high-price maximized profits system in place at moment I would find more favour with me. if a proper cultivation and royalty structure was used to pay developers. But instead it is based on 1-week to 1-month sales forecasts, with slower selling titles resulting in devs being cut or fired completely, with no share of profits being attributed to the creators hereafter. As said above, these games are single purchase, so you wont see people buying again, nor will you see the cheaper used sales becoming new sales. So if publishers etc want to have a "units sold in 1st week" dragnet on profits with less used sales, they could likely see improvement with lower prices.
Since they do follow that model, the vilification of used games and piracy have little relevance to me, since I rarely ever purchase games on release. I wait patiently until the game is cheaper in whatever physical form. By the time I buy a game, one of two things have happened: 1) The game sold well, the dev is still in business, they made their money and a clearly going to continue making games - my money (unless used) is helpful but is like a piddle in the ocean. 2) The game didn't sell well, the dev is likely fired and now is off looking for new opportunities - my money is now pointlessly going towards the publisher, who will probably just make another military FPS. In both these cases my contribution to the industry in negligible, I hope nobody thinks I am a bad person, but i ws simply looking for the value in my purchase.
In whatever way I played the game in any form before or after that purchase is now moot, what matters now is that I did. If I really liked it, I am now excited and encouraged to purchase more from that developer. As my desire to pay full new price for Skyrim Collectors Edition has become, since I have greatly enjoyed that series. Which brings me to my two most important thoughts for making more money.
1. Turn wants into needs.
Basically, make good games, market them properly. Plateaued sales haven't destroyed the Rolling Stones, haven't destroyed The Lord of the Rings books, or destroyed boxed copies of Diablo 2 (still full price at games store around here.)
If it's good it will sell, it will make money. Some of the most pirated and used game swapped games are also top new sellers. Make the game and buying it new so desirable that it becomes the best choice.
2. Increase custom, NEVER decrease.
I know this and other issues are brought up at business meetings, but this should always be on top. There are many ways to do this and what publishers are trying to do to combat used sales is one of them, BUT there is a caveat: If there is a risk of any decreased custom (even if small) DON'T DO IT. Don't do anything that makes the playing of your game in any form less desirable (I except the event of somebody playing a pirated multiplayer game.) Add DRM? The pirate copy is now better. Add online pass? The value of owning the game is now less even when you can only budget for a used copy. etc etc etc I could go on.
Then the industry and the game developers you like would get all that money that gamestop and similar stores just got from you.
I don't believe in buying games as a charity. I know all you guys here who are employed appreciate the ideology of supporting good work, but I have always traded my dollar value with the worth of the product, with the satisfaction of supporting the developer a good-feel bonus.
As to my point, I don't believe the second-hand market exists in a vacuum. Before it is second-hand it must be sold new, and the retailers are not given the games for free: It is they and not the customer that pays the publisher. Of course customer demand sees this event continue, and unfortunately Gamestop recycles that demand through their used market. This is not something I believe will go away, and since it is their principle means of profit, warring with them may not help, nay, will not help since the war is being fought that the end-user's level. That is not a good thing, the end-user is divorced from the ideas of business and profit, they made a trade of money for goods.
Anyway, my rant above can be ignored if desired: I have had those thoughts rattling in my head for a while, and it is my birthday, I felt over-entitled. I actually feel a bit bad now for 'using' a community I love so much for my own soap-box.
The industry and the game developers are likely to benefit way more from a pirate than from one who buys used games at a regular basis, as they will get nothing from people buying used games.
If you took that money you put towards buying all those used games, and bought a few new games and pirated the rest, you would be doing more good for the industry than before, and you wouldn't be supporting the used games industry.
In any case, it's fully possible to kill the used games market, just look at pc-games, and then look at where console gaming distribution is going.
*Shudder*
Not that I'm against small developers using a new distribution method since they can't afford to go full retail, I'm just not a fan of digital distribution.
I do agree with you eld, but at the risk of sounding like a prat, I don't see myself changing my buying patterns. I'm a fan of actually physically having boxed games in my collection, and that beats pirated games anyday. I don't agree with the pricing of completely new release games (at least in my country) and so I wait, I wait until the price of said desirable game is appropriate to me. If the retailer/publisher gets there first then it may be a new game purchase, or if a legitimately traded piece of 'goods' (as I feel games fall into) gets there first I am not discouraged.
I will always purchase new over used if the games pricing is comparably similar, and I'd say that almost every game I have gotten in the last 2 years is new. It may be seen as old world thinking but I still consider the 'newness' of a game a factor in its value; it being 'new' as something special I am getting, something that I am paying for. Used games I see as a hand-me-down, inferior in worth, but a sacrifice made for affording them all. Unfortunately buying used will be seen here as a sacrifice in peoples salaries. I do not wish to see it that way, I mean, I'd like to play your games people... Legitimately. Would it be preferred that I simply never at all?
We (including publishers) should not be leveling this war at the consumers level, we all want the consumers to care about our jobs but it is simply a fact that most do not. They care about the product, and the service; what we can do for them. I realise it is a tired and considered flawed comparison, but, in the case of used car sales: Nobody buying a car, used OR new cares about who gets the money. By extension at best, they may care about keeping the money local and not in overseas jobs, but in the case of new or used, every other factor comes into play.
and I used waaay too many commas.