The rumour is that the yet-to-be-formally-announced PlayStation 4 will not allow the playback of second hand games. As controversial as this view is going to be: I’m proud of Sony for taking a stand.
Before I get into why, I’ll just clarify: I don’t believe this is necessarily a smart thing for Sony to do in terms of any aspirations it had to claw back some market share. This is going to royally piss off a number of consumers. There will be some who will refuse to buy the console as a result of this, at least in the early days.
But I don’t necessarily think that’s a bad thing either. The key here is whether Sony can ensure that enough people still buy the PS4 to compensate for those that don’t. And it may well be. There are numerous business advantages this strategy would have that would mean it could get away with being in less homes.
Let me explain: By protecting the publishers, Sony can do two things: 1) it can charge higher licensing fees to publish on to the PS4 because, without the used games hanging over the publisher’s head like the Sword of Damocles, they can more accurately forecast sales of their games, and the proportion of games sold: total user base will be higher. 2) Pricing will be more protected. Again, without the second hand market, the downward pressure on retail pricing will be less, meaning everyone stays profitable longer.
If publishers are happy with a console – and a profitable publisher is a happy publisher – it is going to be more likely to produce exclusives for a console. With exclusives, people will be encouraged to buy a console even if they have some issues with it, and therefore I don’t believe, long term, the lack of second hand games will cause all that many lost PS4 sales.
I also suspect that Sony will approach the PS4 like it has the Vita. That is, that the digital download sales via the PSN will be more important than the boxed sales at retail. Again, while a small group of consumers get upset at this, if the publishers are happy, profitable, and producing more (and better) games, the majority of consumers will win out.
So I’m not worried about losing the second hand games on my PS4, since it means the new games I get will be better quality and there will be more exclusives. As someone who downloads most of my games anyway, I’ve already made that mental transition anyway. It’ll be interesting to see if this feature is confirmed by Sony, and just how many PS4 sales it will cost it.
Of course, once they implement this scheme they'll have successfully fended off both piracy and second-hand games, the two things the console makers and publishers constantly claim are killing their profits. With these two things gone, the price of games will inevitably plummet.
Or not. At which point we'll know they were full of shit all along.
Hi Clark,
If the price of games plummets, then the price of games would be killing their profits. So we'd be in the same situation as we were before. The point is to start earning reasonable profits on games, not replace one problem with another.
I'd be surprised it prices for games changed over the next generation. If there is a price cut to the base game, it'll be supplimented by DLC/ in-game purchases/ whatever you want to call it.
I think I may have a happy medium to this whole debacle. On each disc or update in each system, place a special code that would allow a one time trade in at gamestop or where ever used games are sold and processed.
Once traded that one time, if brought back to gamestop for a second time the security code would kick in and not allow the game to be played on any corresponding system. This would then force people to buy a new copy of the game thereby giving some residual profits to the publishers.
Of course no idea is going to be liked by anyone whose whole gaming life revolves around the used game market but I do believe something has to be done before all we have are social network games for people who are not hardcore gamers or a market of just used games with very little new content. Maybe thats what gamers want because if there are no profits for publishers then there will be no new games.
You're right. It will alienate a lot of people, including myself. I won't give Sony my money so I can continue to pay them for unfinished games. I realize that Sony doesn't put out all the games on its own system, but it's promoting the madness. DLC on launch day. On disc DLC. PATHETIC! I'm complacent to stick with Nintendo until shit changes. I own all 3 consoles this generation, and while I enjoy the HD games, I won't give my money to publishers who think that I should pay for a beta i.e. both Elder Scrolls games, and any other game that requires a patch to play.
I tend to sell all the games i have already played and I used that money for buying more games. If sony do this i don´t think i'll buy a ps4. Selling and buying second hand products is not a SIN like they try you to believe, so whats next, close EBAY, please…!
These are just stupid ideas, i don't think neither sony nor microsoft will do something like this. If one of them do it surely will be the loser in next generation
Hi Ticky,
Wow, what a response! Thanks for taking the time out to lend us your opinions!
I'll engage with a couple of your points. Though I don't necessarily agree with you, I do appreciate your opinion, and it's a very well-argued position:
1) iOS gaming has moved past that $0.99 price point. We did a piece on this site a little while back that Square Enix and Matrix Games are both successfully selling games at $20 on iOS. 2K Games' president came out a year or so ago and said he believes that premium iOS gaming will come. 2K now sells most of its games for around $10. So it's happening.
2) I never said I believed the price of games will come down. I know the costs involved in making games, and I know the margins game markers are making, and it's not sustainable, let alone profitable. Consumers will always complain about price, but there's not some grand conspiracy going on here – the guys making the really big blockbuster games are struggling thanks to price. When the publisher or developer struggles financially, the consumers miss out – projects are cancelled and innovation is stifled.
3) Escalating budgets have nothing whatsoever to do with profitability. That's a consequence of competition. Publisher A spends $100 million on a certain well known FPS franchise, and Publisher B needs to spend almost as much to make a game that has a snowball's chance in hell of competing for consumer mindset. If you look down into the second tier of developers and publishers – the guys like NIS America and the games they publish, or Marvellous and Harvest Moon, budgets are not increasing at all.
4) The problem with the used game market isn't with the dude that uses his trade in credit to buy a new game. It's with the next consumer that comes in and buys a second hand game over a new game. Anecdotally, I've seen on multiple occasions people buy second hand games rather than the new ones, because the second hand game is $10 cheaper. That's the problem.
Thanks for giving me some good points to debate with 🙂
"Maybe thats what gamers want because if there are no profits for
publishers then there will be no new games."
It really amazes me that so many gamers seem to either not understand, or not care about this simple fact. Gamers simply complain about price, DLC, measures to stop second hand games, but that money ends up benefitting them in the long term.
Thanks for your input! Interesting idea you have there 🙂
Hi Chalgyr,
Don't forget Sony is going to be making a massive push behind the PSN in the next generation of consoles, where there are lots of games released quite cheaply to go with the "full priced" stuff. 🙂
Allow me to respond as well. Im a pretty avid gamer but not an industry insider. I can only speak to what I see and what my life experience tells me.
I would agree that SOME iOS games are getting to a premium price, and some of them are even worth it. I've purchased quite a few myself but there is still a huge gape between iOS premium, which I would argue is 9.99 and not $20, and console game prices. Also, nearly every publisher on ios will put their games on sale for .99 including EA, 2K, and Gameloft. Making them still a no risk, throw away purchase.
Points 2 and 3 are intertwined and I believe your arguements are counter intuitive. Firstly the video make market has not only survived but it has thrived for the last 35 years while a used market existed. (I used the introduction of the Atari 2600 as my jump off point. Perhaps not scientific but I have personal knowledge). To say that used games are killing the market seeing the growth of the industry simply isn't compatible to what is happening in the industry. Along with the growth of the industry, regardless of the your keeping up with the Jones argument, no business is going to invest $100 million if there isn't a good opportunity for profit. Clearly, there is money to be made. Do some investments lose money? Of course. That is always a risk with any investment. But, again, it is the same risk that every industry makes and they don't have the same sense of entitlement that the video game industry has, or at least they aren't as vocal about it. Movies, CDs, etc etc. As I watch this I see an ad for play it again sports on the TV. Every industry has resale and continues to thrive.
Finally, if new games arent sold then there aren't used games to supply the used game market.
Most likely – but that part will remain to be seen. I think in many ways Sony got 'it right' better than anyone in terms of the online offerings this generation (Xbox 'gold' still bugs me on a few levels, and even then doesn't offer up as many deals as the basic PSN, let alone PS+ and let's not even talk about Nintendo's almost complete failure on the networked front) so I am optimistic on that point.
I still think, and I have a fairly long, semi-rambling blog post coming prolly tomorrow about this, but I'm afraid that there is the potential to do some long-term damage to the market. Part of my concern is I feel the next generation of consoles is coming along about 2 years too early across the board. I still have a lot of hope for them, but I have a lot of concerns too that a lot of what made gaming consoles so successful in penetrating the mainstream market this generation could be sacrificed with a few choices going forward. I think the talk of extremely heavy to complete digital would be one, completely cutting out the used game market could be another.
It all makes for fun speculation though, don't get me wrong. 🙂 that's all it is at this point anyway, but I think that given the nature of online communication now, this is the perfect time for the gaming community to voice their opinions. You never know who may be reading and taking it in. 🙂
Regarding iOS prices – the premium stuff from Square Enix is very rarely discounted far, but it sells well. There is a market for very high quality iOS games at inflated prices. Give it a year or two and I'll bet we'll see $30, $40 games that sell well there.
As for points 2 and 3. I think it's important to understand that a market in the early days looks different to a mature market. Let me explain. In the early days of any market, when it's dominated by early adopters, margin for the people who make the product is higher. Back in the era of SNES, NES, Atari, the teams of people making these games were far smaller, marketing campaigns were cheaper, and the organisations that put up the finance (publishers) were leaner. The price of the game at the end might have been less in raw dollar value, but it cost proportionally far less to make and then support. You certainly didn't need to pay $1.2 million to license the CryEngine
3. There were no servers. There was no need for tech support for those servers. Localisation was relatively cheap and easy. That's just three examples. I encourage all gamers to go and do an internship at a developer or publisher. You'll learn it's not just a bunch of people clicking and typing away at a game, and then printing it to a disc and shipping it out.
Now it's a commoditised market where margins are very thin. So, while you're correct that these businesses do a lot of analysis before greenlighting a $100 million project, the risk is still much higher, because the margins at the sales end of the cycle are smaller.
These guys would be lucky if they're making 10 per cent margin on each new, full RRP game sold. That's a frightening, high-risk business, which is why the publishers are being so aggressive with DLC and the like. In other industries that's called "value add." Value add just happens to be how the other industries deal with second hand sales.
It's an interesting topic, one that I've weighed in on several times in several places. I will come right out and say – I think it will damage the game industry could be huge. At a time when the consoles each generate get more expensive, and the games get more expensive, this creates a huge barrier for entry. Especially when you see tablets selling games for $1-$5 each, or Steam selling so many games at discounts much sooner than you see console titles drop in price.
And there are still a lot of unknowns, but the worst-case scenario ones are disconcerting. If the game 'writes' to a PSN account, does that mean only one person in that household can play that game? Or does it in fact write to a console? In which case does that present problems when a console goes down (as they do more and more frequently every generation now) or for people who want to buy multiples? Neither of these scenarios may be a problem – maybe the protective methods induced will account for this, but they could be deal-killers if not.
I really hope this doesn't go through. I think that publishers may see some short term gains, but I think it could spell a lot of trouble in the long haul as well, unless pricing models are adjusted as well. You can't sell a game to a person who doesn't buy the system.
I know I won't be buying a PS4 if that happens. I can't afford to buy games at full price, and even with used games, it takes forever for new game prices to go down, sometimes it never happens, actually. Also, the used game market keeps games from going in the trash. You know how rare some games would get if people couldn't resell them? Even if it helps the publishers, it's so anti-consumer, it's rediculous. I'm sure there are ways to deal with the used game "problem" than outright banning them. What they should do is find ways to make it so most people wouldn't want to buy games used, just as most people don't want to buy DVDs used, or electronics used.
I'm a father of three, Unlike this blogger or what ever he/she is, I don't still live with my parents and thus live in a society called the working class. Buying a $60.00 game is rare for me. The fact that the $60.00 dollar price tag last so long sucks too. Playstation is a good console but this little plan they have is not cool at all for people like me.
I own an independent games store. My customers rely on being able to trade in their old games in order to purchase the new ones. My business is entirely dependent on the income from second hand game sales to keep the store open. Before anyone can rabbit on about lack of profitability for developers, perhaps some thought could be spared for the profitability of the independent game stores. If the developers want to stop the second hand market, they need to increase the margin that the retailers get, my markup (and in line with RRP) is 21.8% on new games. Try paying all the overheads and costs of a store on that, i certainly couldn't do it. While I acknowledge that sony and microsoft would love to go digital download entirely, once the competition at the local level is eliminated, watch the prices for digital download soar aside from the usability issues indicated in other posts. I have discussed the rumoured limiting of second hand game sales on the new playstation and XBox with a wide range of my customers. They have all said that if this occurs, they will just skip the console. Perhaps by doing this, sony would be consigning the PS4 to the fate of the PSP GO.
The people who are complaining the most about the impact of second hand game sales are spinning for all their worth for the following reasons:
1. they have no legal right to prohibit the resale of the game nor has there been an adequate explanation as to why the gaming industry should recieve differential treatment
2. they eroneously assume that a second hand game sale is a foregone new game sale (a lot of people can't afford new, particularly post GFC)
Being someone who pretty much HAS to buy all the new releases so i can provide a range to customers, before i would even consider supporting used game restrictions, I would expect that I would be able to reclaim the full amount i have paid for any games not sold from the developer/publisher, particularly so if they are one of the half baked insultingly bad games they try to pass off as even halfway decent.
As it is, i won't be stocking any of the new consoles (the markup is a mere 3%) as I don't make any money from sales of consoles, have to wear consumer protection legislation and have to handle warranty issues if requested and am not likely to invest in PS4 games (with used game restrictions and are not backwards compatible) as I think only the hard core tech heads will be happy to accept the cons proposed for better graphics and processing speeds. Pointless having advances in tech if it further restricts the functionality and gaming experience