GameStop CEO Says Restricting Used Game Sales Is Bad For Everyone

GameStop CEO Dan DeMatteo says the industry crackdown on used game sales actually has a negative impact on new releases as well, as customers can no longer use the "residual value" of their old games to help them afford new ones.

Despite the nearly-universal negative reaction from consumers, many leading figures in the videogame industry have made no secret of the fact that they are trying to find ways to curtail the pre-owned market. Epic President Michael Capps recently equated the legal sale of used games with piracy, while in July Microsoft's Alvin Gendrano said the advent of downloadable content could be used to help "defend against the used games market." Install limits built into games like Spore, meanwhile, effectively render the games worthless for anyone but the original buyer.

But for specialty retailers like GameStop, pre-owned game sales represent a significant profit opportunity, particularly in the current economic climate, and according to DeMatteo, the industry attitude toward game sales is becoming a problem for both sellers and buyers. The high prices of many new games tends to mask the fact that profit margins are minimal, and it's not unreasonable to conclude that if game retailers are forced to carry new games only, their selection will be cut considerably as they focus exclusively on games that are sure-fire moneymakers.

"I think it creates contention not only for us, yes, but also for the consumer," he said in a recent interview with Gamasutra. "Anything that limits the transferability of a game from consumer to a friend of theirs, to selling it on eBay, to exchanging it and trading it with one of their friends, or selling it back to GameStop -- I think is a bone of contention with the consumer."

Rather than harming new game sales, DeMatteo claimed that new game sales grow alongside trade-ins, as consumers use the "residual value" of their old games to help purchase new ones. "The consumer has been trained that there is a residual value to their video games," he said, adding that that value to customers is typically held at around $20 per game.

"We will give out approximately $800 million in credits this year - trade-in credits that will go toward the purchase of new video games," he said. "The consumer, oftentimes and especially now, needs that residual value from those games as a trade-in to be able to afford a new video game." He also implied that publishers could find themselves without the good graces of the biggest game retailer in North America, warning that if they continue to fight used game sales, it will "eventually get the customer upset, as well as GameStop."

Permalink

"Why would they buy new games if their playing old ones?"

Why buy used games if you can pirate new games?

Malygris:
GameStop CEO Says Restricting Used Game Sales Is Bad For Everyone

"Anything that limits the transferability of a game from consumer to a friend of theirs..."

Is he simply referring to the Spore install type game or all games that you let your friends borrow? I would personally love to see the Video Game Industry Against Borrowing Task Force patrolling neighborhoods, looking to crack the skulls of 12 year olds who let their friends borrow their old ps2 copy of Prince of Persia.

Everything industry heads don't agree with they simply link to piracy in the same connotation that a certain administration linked every violent transgression to act of terrorism.
And what about people who rent games? Did they start cracking down on Blockbuster yet?

Permalink

"We will give out approximately $800 million in credits this year - trade-in credits that will go toward the purchase of new video games," he said.

I'm sure most of those credits will go towards buying more used games though...still doesn't help game developers.

EDIT: Also, people see value in their games at $20 a pop, huh? The only way you'd get $20 for trading a game to Gamestop is if it's still selling for $60 new.

A very delicate subject.

But I guess both sides have their reasons.

I just have trouble picking sides, because one part of me knows I'll be a developer some day and want to make the most out of it, but the other is certain that the consumer must not be treated like crap and has every right to own a game and then sell it.

calelogan:
A very delicate subject.

But I guess both sides have their reasons.

I just have trouble picking sides, because one part of me knows I'll be a developer some day and want to make the most out of it, but the other is certain that the consumer must not be treated like crap and has every right to own a game and then sell it.

I know what you're saying (and it doesn't just apply to this industry), but with so few games actually turning a profit I have to side with the developers on this one.

Well, I'm just going to say that of course Gamestop's CEO is going to be arguing for the sale of used video games, that's where his company's money comes from. When I see a used game selling for only $5 less than it's new price, and realize that essentially means the store is selling the same game twice but only paying the creator's once, I get pissed off. Isn't that essentially stealing from the publishers?

xitel:
Well, I'm just going to say that of course Gamestop's CEO is going to be arguing for the sale of used video games, that's where his company's money comes from. When I see a used game selling for only $5 less than it's new price, and realize that essentially means the store is selling the same game twice but only paying the creator's once, I get pissed off. Isn't that essentially stealing from the publishers?

This is also why the auto industry is going out of business we need to stop the sales of used cars, and oh lets shut down goodwell because they are only selling used items. Next they will be going after the renting industry and if the gaming industry gets it way, they will destroy themselves.

I'm conflicted. On the one hand, restricting the sale of used games only serves to encourage piracy as customers don't like being shit on by companies trying to control how we use the media we've purchased. On the other hand, buying a game used when the new copy is still available for sales is, from the publisher's point of view, exactly the same in terms of economic impact as if the game had been pirated, so I understand where they're coming from.

I like Microsoft's approach personally. Make DLC available only to the game's original registered owner and you significantly reduce the value of the game in the secondary market without killing it entirely. It's a you get what you pay for situation; buy the game new, at full price, and get the DLC and everything else to make the game experience complete. Buy it used, at a discount, and you get less of the game for less money. It won't stop piracy (both of the game and of the cracked DLC), but it'll at least be logically consistent.

Gamestop makes most of it's money for used games, so of course Dan would defend the process of having used games. For people on a budget, it is nice to save a few bucks or to have the chance to get someone else's trash to become your treasure.

SimuLord:

I like Microsoft's approach personally. Make DLC available only to the game's original registered owner and you significantly reduce the value of the game in the secondary market without killing it entirely. It's a you get what you pay for situation; buy the game new, at full price, and get the DLC and everything else to make the game experience complete. Buy it used, at a discount, and you get less of the game for less money. It won't stop piracy (both of the game and of the cracked DLC), but it'll at least be logically consistent.

I agree. I thought what they did with Gears of War 2 was a great idea. What I don't like though is when they give exclusive DLC for preorders. I ordered The Last Remnant yesterday from Amazon and just found out that people who preordered got a code for 3 new formations that aren't in the regular game...I feel robbed :(

Then again, I have no idea how much this would affect my game since I haven't played it, but it sounds like a more tangible change than something silly like a Golden Lancer.

I don't like pirating games unless it's a game I wouldn't bother buying (which is rare)or if I just want to test a game out before buying. Personally I like buying the game not only to support the developers and what not but I like owning the box/manual etc. It's strange, but I like owning something physical I guess, even when I download a game through steam I still feel like I'm missing out.

Buying used bothers me a little because most of the time the game is only a little cheaper and I'm supporting a store that often gives me trouble.

Most of my difficult choices comes from "what do I get it for".

Snotnarok:

Buying used bothers me a little because most of the time the game is only a little cheaper and I'm supporting a store that often gives me trouble.

Yeah, I think Gamestop only shaves off 10% from the price (I think you get more if you have an Edge card or whatever). I'd rather pay a little extra and support the developer rather than a store that has all of it's employees hounding me for preorders. I try to avoid Gamestop altogether but that's usually the only video game retailer in our malls and sometimes I just need to kill some time.

I had one employee lock into "friendly conversation" with me and no less than five times tried to get me to preorder Castlevania: Curse of Darkness like it was going to be sold out on day one. Of all the games to preorder, I couldn't understand why he would push that one so hard.

You think that's bad? I walked out and checked my receipt and the moron put a preorder on for madden without asking me, it didn't even come up in a convo. I've got lots of dumb gamestop stories from friends.

The one thing I hate about gamestop is one of the benefits the employees get, they can "take out" a game and play it at home for a week or so then bring it back and it still goes on the shelf for new. After watching two gamestop employees kick a used game around behind the desk makes me wonder how well they treat..anything.

I use to trade in but nowadays i just rent as games don't have the lasting appeal to be worth £40 with exception of a few PC titles. Think sooner big names go along lines of valve (only one think top of my head) and sacrifice how shiny and realistic there steaming pile of crap is and focus on the things what matter (like plot ,dialogue, longevity, enjoyment)the better it will be for all.

As production cost would drop substantially meaning could sell them for a lower price meaning more appealing and affordable and making tradings less worth it since be getting about £5 for them what not much. More not be tempted to pirate games as in their budget so that tired old excuse is gone and everyone happy as getting more bang for their buck and don't feel cheated (in ideal world anyway.)

Snotnarok:
You think that's bad? I walked out and checked my receipt and the moron put a preorder on for madden without asking me, it didn't even come up in a convo. I've got lots of dumb gamestop stories from friends.

The one thing I hate about gamestop is one of the benefits the employees get, they can "take out" a game and play it at home for a week or so then bring it back and it still goes on the shelf for new. After watching two gamestop employees kick a used game around behind the desk makes me wonder how well they treat..anything.

Wow, that's horrible...I hope they didn't charge you for a $5 down payment or whatever (not sure if that's required at Gamestop).

And yeah, I've heard some stories about their "gutted" games that they sell for new. That shit should not be legal and makes me not even trust buying new games there. It's rediculous!

How I read it: "See, used games sales are great for the gaming industry... please don't kill them!"

I don't even get this. I thought the right of resale was a given to consumers. Why do game companies not only get to shit on the law but then have people defend them for it?

While I can see where people are coming from when they say resale hurts the game industry, Gamestop and EB Games are hardly the paragons of resell or the saviors of that particular avenue. They have horrible horrible price gouging methods. How many games do they buy back for maybe 10 to 25 dollars then resell for basically full price?

As for DRM, complete load. I'm at the point where if I have to upgrade my computer again, which I'm going to have to, I'm going to have to pirate Spore so I can legally play the game I purchased without paying any more by going on their stupid little line. Unless they actually got around to finally upping the amount of installs I get, which I still wouldn't agree with because I shouldn't be restricted like that. It's like giving you a set number of user activations for your car, which seems fine in theory until you realize if a part craps out and needs to be replaced or if you just do manual check ups you have to burn one of your user activations.

TGLT:

As for DRM, complete load. I'm at the point where if I have to upgrade my computer again, which I'm going to have to, I'm going to have to pirate Spore so I can legally play the game I purchased without paying any more by going on their stupid little line. Unless they actually got around to finally upping the amount of installs I get, which I still wouldn't agree with because I shouldn't be restricted like that. It's like giving you a set number of user activations for your car, which seems fine in theory until you realize if a part craps out and needs to be replaced or if you just do manual check ups you have to burn one of your user activations.

I agree with you. Why should we have to pay 50 bucks for a few installs? I can understand what steam does where it locks the game to your account. That's fine, at least you can recover it even if the disc is smashed. It kills the resale option but it's way better than DRM and SecurROM.
I was nervous to buy Fallout 3 because I heard it had some sort of "protection" like DRM or something but I heard it's clean. I only hope that's true since this is something I put on my xmas list.

There has to be a compromise. Publishers need retail channels, and retail can't survive on the margins on new games. Consumers, meanwhile, are growing increasingly tired of being bent over by both sides of the equation.

I have no idea what that compromise is, of course, although I expect that for the foreseeable future it will be something akin to the compromise we've reached regarding software piracy, ie., both sides will keep fighting tooth and nail from completely unreasonable positions and detente will emerge from the stalemate that results.

No, gamestop makes most of their money on used games. Stop the used games and watch gamestop fail.

The fact there's a CEO of something that's basically a jumble sale makes me wonder a lot about Gamestop.

The numerous reports about them everso slightly 'flexible' with the law also helps.

But I guess we have CEX over here that do similar.

My guess is that the games publishers like their high margins, but are disappointed by lower and lower sales volumes. It's not rocket science, guys: when high margins aren't creating profit, you need to increase volume and vice-versa; you can't have both anymore. Now STFU and stop with the DRM already, it's not working, it will never work

triorph:
I don't even get this. I thought the right of resale was a given to consumers. Why do game companies not only get to shit on the law but then have people defend them for it?

This. I personally think that companies like Epic are just being whiney vaginies, they've already made money off of the initial sale of a game, what goddamn right do they have to make money off of said copy more than once? According to U.S. law, none at all.

Rankao:
This is also why the auto industry is going out of business we need to stop the sales of used cars, and oh lets shut down goodwell because they are only selling used items. Next they will be going after the renting industry and if the gaming industry gets it way, they will destroy themselves.

Quoted for great justice. And its good points.

Anyway,I buy used games all the time, but, I'm also poor. Frankly, given the choice I do buy used, and I really don't care/don't think about the money I'm 'stealing' from the developers when I checkout. The Gamestop near my house has some pretty cool people at it actually and I've never had problems there. I've picked up many fun games that are a lil old from there, games I would've missed otherwise

Malygris:
There has to be a compromise. Publishers need retail channels, and retail can't survive on the margins on new games. Consumers, meanwhile, are growing increasingly tired of being bent over by both sides of the equation.

I have no idea what that compromise is, of course, although I expect that for the foreseeable future it will be something akin to the compromise we've reached regarding software piracy, ie., both sides will keep fighting tooth and nail from completely unreasonable positions and detente will emerge from the stalemate that results.

Really? I would say that the "war on piracy" is still in the "tooth and nail" cycle.

Magnikai:

Anyway,I buy used games all the time, but, I'm also poor. Frankly, given the choice I do buy used, and I really don't care/don't think about the money I'm 'stealing' from the developers when I checkout. The Gamestop near my house has some pretty cool people at it actually and I've never had problems there. I've picked up many fun games that are a lil old from there, games I would've missed otherwise

I'm pretty much in the same boat as you, buddy. Most of my dealings with Gamestop/EB have been rather positive, although it really depends on the people working there. Another great thing about buying used from GS? You can return it for ANY REASON within 7 days with the receipt. Can't do that with a brand new game.

i think it's pretty stupid really. they already made money off the sale of the game, they want some of the resale, next they will want money for the trade in. this will lead to ppl not trading in games and in turn not buying as many new games cause they get hosed by their trade in values

game publishers are soon becoming the new metallica