Are used video games good for the industry? I have had many conversations about this topic, and with the spate of recent poor earnings from video game publishers (and the bankruptcy filing of Midway), the debate seems to be heating up. Video game developers and publishers feel (off the record), that used games are equal to piracy; they argue that used games cannibalize new software sales and reduce their profits. On the other hand, allowing consumers to sell their old games puts more money in their pockets, which often gets funneled back into the video game industry (leading to higher sales).
Before we tackle the issue of how much damage (or lack there of) used game sales cause, there is the question of legality. Some in the industry have proposed that, since they get no revenue from used games (similar to piracy) they should be illegal to sell. The lost revenue is a concern and there is some violation of the developer/publisher’s intellectual property rights (when used games are sold), but they pale in comparison to the basic property rights of the consumer. Violation of consumers’ property rights (through DRM software) is never good and usually leads to lower overall sales (why does Spore score a 2/5 stars on Amazon??). Enforcement of a used sales ban would be difficult at best; what if someone legally bought a game and lent it to a friend (for say 2 weeks) should that be illegal; again, this is technically a violation of the developer’s IP (potential lost sale). One might say that 2 weeks is not OK (too long) but 1 week is fine, or maybe only a day (is acceptable); where do you draw the line (classic slippery slope). Further, opening the door to making used game sales illegal, brings up questions about other media (music CDs, books, movies, comics, …) and how would you handle used sales of those products and why is there so much animosity towards used video games but not so much so for movies or CDs? Do movie studios handle their products differently to negate the effect of used sales (a question for another time perhaps)?
The primary industry argument against used video game sales is that they cannibalize new game sales, which therefore costs developers/publishers money. The cannibalization argument is valid, but the questions remains, to what extent; the publishers would have you believe that it is 1:1 (or 100%), or in other words every used game sold deprives them of a new sale. In reality the cannibalization rate is nowhere near 100% since many people purchase used games due to their lower cost (and would forgo the purchase of a new game if forced to spend the extra $$) and the fact that they are returnable (how often have you purchased a new game only to find you do not like and are now stuck with it); I would put the cannibalization rate closer to 60% (due to these 2 factors). Also, a good portion of used game sales goes back into the industry; often used trade in credit is used for new product, which directly benefits the publishers. If the average gamer could only spend $1000/year on games, they can only buy 20 new games (@ $50/piece); but if they traded each used game in for $18 credit they could buy 27 (and increase of 35%). Combine the lower level of lost sales and the higher level of spending they generate, and used games may actually turn out as a benefit for the video game industry.
The bottom line is that used game sales are legal and to make them otherwise would either be impossible to police or create a consumer backlash that would tend to lower sales (see the DRM argument for the PC version of Spore as an example). In reality used game sales are probably a slight positive to the video game industry, since not all people would necessarily buy the game new and you are increasing the cash gamers have to spend. In the end, used sales are clearly not the threat (can we say scapegoat) that many developers and publishers are making them out to be. Maybe if publishers embraced the idea and tailored their offerings to better suit the market, used products would cease to be an issue; most publishers do a poor job with their IP (both content and old code/games = evergreen), but this is a discussion for another week…
