Luke Owen looks at Microsoft's war on pre-owned games...
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Since its announcement yesterday, one of the biggest talking points to come from Xbox One is Microsoft’s plan to charge people for playing pre-owned games. The point of contention being that even if you borrowed a game from a friend, you will be charged by Bill Gates for the privilege.
The question is – is this really fair?
Well ‘no’ is the obvious answer as it means gamers won’t be able pick games up on the cheap, borrow from their friends on a ‘try before you buy’ principle or trade in their old games to save money on new ones. From a consumer standpoint, it does feel like a slap in the face and a greedy business model. But from a business standpoint however, it does makes sense.
The entertainment industry has always suffered from second hand and borrowing, but in the last decade it has been hit with something harder - piracy. Now more than ever, music and films are being downloaded by the masses illegally. Some have argued this is one of the reasons Hollywood will only put money into guaranteed returns rather than take chances on new ideas (a point I don’t overly agree on). However what this new wave of piracy led to was the rise of iTunes, Netflix and LoveFilm Instant – why download it illegally where it might have Dutch subtitles when you can get it for a decent price and guaranteed quality? They couldn’t stop the beast, but they could at least give an alternative.
Video games on the other hand have not really had such problems. There have been times where people have hacked into a games console to do what they please with (like modded Xboxs to run emulators) and I remember my Uncle giving me a word document that detailed how to run pirated games on PSX that included disc swapping and springs, but the black market for pirated games has never been that big. However where movie studios and music execs lose money in a loss of DVD and CD sales, games manufactures have lost earnings due to the rise of second hand game shops like Game, Gamestation and CEX.
When I was a student, I worked for one of these shops when I wasn’t skiving off classes and my manager would tell us all the time that pre-owned was king. Our business practice was to take in as many pre-owned games as we could and push them back out to the masses – because those make the company money.
Microsoft, Sony, Capcom, EA, Team Ninja etc don’t see a penny from pre-owned sales. If a retailer buys a game for £17 and sells it for £25, they pocket every bit of the £8 profit. There isn’t as much as a margin when selling brand new. Even if we had new copies of the game in stock, we were told to push the pre-owned ones as those brought in the dough to meet the targets set.
So, now you can see why Microsoft et al are quite keen to stop this market. If someone else was making money off your product, wouldn’t you want to do something about it? Just as the Hollywood big wigs are putting more emphasis on downloading films through iTunes etc, games companies are trying to work out how to make sure they aren’t losing out on potential money from a market that they physically can’t stop.
When Sony was working on the PlayStation 3, there were plenty of news stories about how one of their ideas was to lock games to a system. That way, a copy of FIFA 2013 could only be played on the first machine its played on and no others – eliminating the threat of trade-ins. This was however thrown out when it was deemed (by the courts presumably) that this was unfair on consumers because a) it was essentially trying to monopolise the market and b) if the PlayStation 3 broke, the owner would also lose their library of games.
What Microsoft have done is actually quite clever (from a business point of view), they aren’t eliminating pre-owned but are instead actively discouraging it. You can buy pre-owned games all you want, but you’ll incur a charge so you may as well have just bought the game brand new. They can’t stop the beast, but they can at least offer an alternative.
My question however is – why didn’t Microsoft just release all games through Xbox Live? That way, there is no physical product to be traded in or sold pre-owned. We’ve already seen games being released through the platform and Capcom announced last week that Phoenix Wright: Ace Attorney: Dual Destinies is going to be released solely through the Nintendo eShop. In an age where buying DVDs and CDs from shops feels passé, why not move the games industry forward into the same realm?
So while it might not be fair to the consumer, you’ve got to see that, from a business point of view, it makes total sense. It sucks for us sure, but who are we to them but hamsters pushing buttons for food pellets?
The question is – is this really fair?
Well ‘no’ is the obvious answer as it means gamers won’t be able pick games up on the cheap, borrow from their friends on a ‘try before you buy’ principle or trade in their old games to save money on new ones. From a consumer standpoint, it does feel like a slap in the face and a greedy business model. But from a business standpoint however, it does makes sense.
The entertainment industry has always suffered from second hand and borrowing, but in the last decade it has been hit with something harder - piracy. Now more than ever, music and films are being downloaded by the masses illegally. Some have argued this is one of the reasons Hollywood will only put money into guaranteed returns rather than take chances on new ideas (a point I don’t overly agree on). However what this new wave of piracy led to was the rise of iTunes, Netflix and LoveFilm Instant – why download it illegally where it might have Dutch subtitles when you can get it for a decent price and guaranteed quality? They couldn’t stop the beast, but they could at least give an alternative.
Video games on the other hand have not really had such problems. There have been times where people have hacked into a games console to do what they please with (like modded Xboxs to run emulators) and I remember my Uncle giving me a word document that detailed how to run pirated games on PSX that included disc swapping and springs, but the black market for pirated games has never been that big. However where movie studios and music execs lose money in a loss of DVD and CD sales, games manufactures have lost earnings due to the rise of second hand game shops like Game, Gamestation and CEX.
When I was a student, I worked for one of these shops when I wasn’t skiving off classes and my manager would tell us all the time that pre-owned was king. Our business practice was to take in as many pre-owned games as we could and push them back out to the masses – because those make the company money.
Microsoft, Sony, Capcom, EA, Team Ninja etc don’t see a penny from pre-owned sales. If a retailer buys a game for £17 and sells it for £25, they pocket every bit of the £8 profit. There isn’t as much as a margin when selling brand new. Even if we had new copies of the game in stock, we were told to push the pre-owned ones as those brought in the dough to meet the targets set.
So, now you can see why Microsoft et al are quite keen to stop this market. If someone else was making money off your product, wouldn’t you want to do something about it? Just as the Hollywood big wigs are putting more emphasis on downloading films through iTunes etc, games companies are trying to work out how to make sure they aren’t losing out on potential money from a market that they physically can’t stop.
When Sony was working on the PlayStation 3, there were plenty of news stories about how one of their ideas was to lock games to a system. That way, a copy of FIFA 2013 could only be played on the first machine its played on and no others – eliminating the threat of trade-ins. This was however thrown out when it was deemed (by the courts presumably) that this was unfair on consumers because a) it was essentially trying to monopolise the market and b) if the PlayStation 3 broke, the owner would also lose their library of games.
What Microsoft have done is actually quite clever (from a business point of view), they aren’t eliminating pre-owned but are instead actively discouraging it. You can buy pre-owned games all you want, but you’ll incur a charge so you may as well have just bought the game brand new. They can’t stop the beast, but they can at least offer an alternative.
My question however is – why didn’t Microsoft just release all games through Xbox Live? That way, there is no physical product to be traded in or sold pre-owned. We’ve already seen games being released through the platform and Capcom announced last week that Phoenix Wright: Ace Attorney: Dual Destinies is going to be released solely through the Nintendo eShop. In an age where buying DVDs and CDs from shops feels passé, why not move the games industry forward into the same realm?
So while it might not be fair to the consumer, you’ve got to see that, from a business point of view, it makes total sense. It sucks for us sure, but who are we to them but hamsters pushing buttons for food pellets?
Luke Owen is one of Flickering Myth's co-editors and the host of the Month in Review show for Flickering Myth's Podcast Network. You can follow him on Twitter @LukeWritesStuff.