From its earliest beginnings, the pre-owned videogames market in the UK was a boon for consumers who were eager to get their hands on the latest titles but lacked the necessary funds to feed what is, for many, a very expensive hobby. As a result, it has become as much a part of the games industry as any other aspect. Spearheaded by multi-nationals like GAME and Gamestation, the buying and trading of pre-owned videogames has fast become a massive, multi-million pound industry in its own right, one that is used each week by millions of consumers across the UK and in Europe. In more recent times, however, various facets of the videogame industry have begun to question the validity of the pre-owned sector and feel that by allowing it to grow to such gigantic proportions it has, in fact, begun to do the industry more harm than good.
Following some strong comments from Electronic Arts’ UK MD Keith Ramsdale, in which he criticized retailers for “deliberately extending the reach of their pre-owned offers” and “making brand new product look worthless”, many publishers seized the opportunity to question the pre-owned market. One major publisher commented, saying “we are all conscious of the need to forecast correctly and not overload the market. We are also told that retail does not have flexible walls, but the space being taken by pre-owned restricts new releases. If consumers can buy new games at knock-down prices, how will the market grow? We’re not sure what can be done, but we are making it a priority to look into it.”
Sony also entered the fray with a statement that firmly laid the erosion of High Street software pricing squarely at the feet of this secondary market. “The blame for heavy discounting of current releases can be put down to the pre-owned market,” said SCE UK’s commercial director Kevin Jowett. “When consumers see pre-owned titles for £10 or £15, this fosters the perception that this is the realistic price for all games, and the new release roster looks unrealistically priced.”
With consumers regularly shelling out as much as £39.99 each month for the next AAA title, it’s somewhat unrealistic to suggest that consumers think that a much lower price point is the average, acceptable RRP for all games because of reduced pre-owned titles. However, what is evident is that some publishers feel they’re unfairly losing sales of new titles to the pre-owned market. Consumers are opting to wait for new games to filter back into the system at a lower, used price before making their purchase thus cutting out the publisher altogether; a train of thought that many a High Street retailer disagrees with. “What publishers fail to realize is that more than 50% of our customers trading in old games are doing so to help toward the cost of purchasing new ones,” says Darren Greening of Cheltenham based independent games retailer Game On, “and as such we, the retailer, then have to purchase extra stock from the distributor. So regardless of how the stock is sold at store level the publisher will invariably see a healthy return on their IP.”
Walking into any High Street retailer and seeing the sheer amount of used copies of Call of Duty: Modern Warfare sitting on the shelves that have obviously been traded in by gamers desperate to get their hands on the sequel, it’s hard to find fault in Darren’s comments. “Pre-owned does represent a large proportion of our total business (around 30%) and while it’s crucial to our business margin it’s also crucial for the sell-through of new games. Not everyone can afford to spend as much as £40-45 a game and while some games are worth the current RRP many more simply are not-people want value for money”.
One argument for pre-owned is the current cost price set for retailers from the distributer. Surprisingly a large amount of games-at factory level-actually have an RRP of £49.99, compared to the widely accepted figure of £39.99. This lower price itself has come about through constant price wars between the independents and the specialists; Darren, however, is quick to point out that retailers are still charged on a price structure based on a £49.99 RRP. “Margins on a lot of new releases are anywhere between 8 and 10 percent at a shelf price of £39.99. Trouble is with distributers is that they’re still charging us a cost price which reflects a £50 RRP, yet a £50 RRP doesn’t exist. It’s a myth. Personally, I think by removing pre-owned and the ability to trade games will do more harm than good and, ultimately, the industry will suffer as a result.”
It seems that it’s not just the publishers and retailers have an opinion on the pre-owned market and its position within the industry; consumers have also been flexing their vocal chords in the debate, such as veteran gamer Phil Jenkins. “Personally I don’t think the lack of a pre-owned market would affect my game buying in any major sense, but I do enjoy having the option of being able to trade my games to subsidies the payment of new titles. Where cost is the real implication, then I do believe that removing the pre-owned sector will affect those who invest in video games and want a return on their purchase”
Chris Debonis, 17. “I generally tend to keep my games because if I’ve played through them I know I’ll go back over them again. I do sometimes trade in my games, particularly those which I haven’t enjoyed. I don’t think I would buy less new games if there wasn’t a pre-owned market, but I can see why people use it as it is cheaper.”
Even serious games collectors like Alex Manthorpe, 18, who never trades in his games and predominantly always buys new has, on the rare occasion, taken advantage of lower price offered by pre-owned video games. “I tend to buy new when I can, but I do sometimes buy pre-owned games”
When asked if they thought an industry where there was no longer a pre-owned market would see a reduction on the current RRP of new titles both Alex and Chris agreed that price would actually go up.
Chris: “New games would probably go up in price because less people would be buying games through not being able to trade-in and so publishers and retailers would want to recoup that overall loss”
Alex: “I think new games would have the opportunity to go down in price with digital distribution, (which could eventually remove the pre-owned market), but I feel publishers might actually put prices up”.
Clearly pre-owned is big business and everyone wants a slice of what is a very profitable pie, but if this current state of tug-of-war is to continue what measures can be implemented that sees publishers and retailers alike both benefiting from the sector? One suggestion put forward was for publishers to garner a small percentage of each pre-owned sale thus seeing a return on games that they otherwise may not have seen during the initial release period. Unsurprisingly this was met with hostility by retailers who felt that publishers had no right to eat into their profits being as they had already seen a large return on their IP through sales via distributors. “Ford doesn’t see a percentage of the profits generated by the sale of second hand cars, so why should video games be any different?” being just one of the many arguments directed toward publishers seeing a return on the sale of used games.
More recently a move by publishers, who are trying to counter what they see as the threat posed by the pre-owned market, came into play with Electronic Arts releases Mass Effect 2 and Battlefield: Bad Company 2, both of which came with a redeemable code which was required to access free DLC for consumers who bought these titles new. For consumers who bought either of the two titles pre-owned they had to pay extra for a new code or go without. Naturally this was met with disdain by some consumers, but for many retailers it was considered fair game, as Darren of Game On remarks: “If people are paying £40 or more for a new game and as a result have access to content that’s exclusive to them then I think that’s fair enough. If people want to save £10-20 by purchasing a pre-owned copy then, really, they shouldn’t expect extra content. If they want extra content then they should expect to pay for it, so in complete honesty I’m all for it”
Even with mounting pressure from publishers to address the pre-owned market, companies, like GAME, continue to be adamant that the second hand market still has its place within the industry and is hugely beneficial to the very consumers it relies on. In a statement addressing the pre-owned market last year, GAME COO, Terry Scicluna had this to say: “People are passionate about their games and there is a real desire to get the next release. In terms of affordability of new games there are people who might struggle with that, so the opportunity to trade in your games for the latest release is a fantastic weapon for them.”
“It just ticks a whole number of boxes and allows avid gamers to stay with gaming for life.”
Clearly then, as long as the demand is there, the buying and trading of video games will continue to be a major part of the games industry. How this industry continues to thrive in an environment in which publisher pressure is clearly becoming more apparent is, perhaps, a decision that ultimately lies with the consumer.
When I'm not doing my regular day job I enjoy spending time with my Wife & two children, painting plastic Space Marines and playing and writing about video games. Oh, and eating curry. Lots of curry. "
