Insight

‘Used’ game rumours bite GameStop

If you walk into a GameStop or EB Games, the stench of inevitability is in the air. Once upon a time, the chain's – Texas-owned GameStop owns EB – sold only video games and their assorted hardware.

Now, more and more floor space is being devoted to anything but. There are toys, iPods and iPads, even muscle creams, for those aches and pains incurred by marathon game sessions. With the Internet devouring the likes of BlockBuster and HMV, GameStop sees the writing on the wall – video games are digital products, which means the brick-and-mortar stores selling them won’t be needed much longer. And so the rapid conversion into physical goods.

Shares of the company, which operates 6,650 stores worldwide, took a hit this week as the latest batch of rumours that the upcoming, new console from Microsoft won’t play used games. GameStop is the main player in the used game market, which has been estimated at $2 billion in the United States alone. The company gets more than a quarter of its revenue and nearly half its profit from customers trading in games.

The latest Xbox rumours, circulating on games sites, suggest that Microsoft will require its console to be connected to the Internet to play software, as well as a one-time activation code that cannot be reused. The move, which would effectively kill off used games, would be an extension of the current system, where many titles require an included code to access online multiplayer options. Such games can still be traded in, but players typically have to pay an extra $10 to purchase a new online code.

Rumours about Sony instituting similar measures against used games with its upcoming PlayStation 4 resurfaced in January. The company is widely expected to announce the new console at a press event in New York on Feb. 20. Both devices are expected to launch this year, although neither Sony nor Microsoft are commenting on potential availability or capabilities.

Game makers generally hate used games, since they don’t see a dime from their sales. Moreover, many quietly begrudge GameStop and other resellers because they devote so much floor space to used games, despite the huge marketing dollars spent by publishers on new products.

One industry insider, who asked not to be named, suggests that Sony and Microsoft could pass the buck on the issue to publishers. While the consoles themselves may not block games outright, they could include a function that would let each individual publisher require Internet connections and activation codes on a game-by-game basis.

“That way, the console makers address the problem without looking like the bad guys,” the source said.

GameStop, for its part, polled its loyalty program members and found that gamers would rebel against any such efforts.

“We know the desire to purchase a next-generation console would be significantly diminished if new consoles were to prohibit playing pre-owned games, limit portability or not play new physical games,” spokesman Matt Hodges told Bloomberg.

Gamers on Twitter were even more vocal in their displeasure.

“Enabling such foolishness is enough to guarantee I'd never buy it,” said @RunByNumbers. “Don't mess with first sale doctrine.”

Industry analysts dispute the rumours because, like gamers, they don’t see the logic in blocking used games. The used market likely results in more games being purchased outright. With titles costing $60 to $70 a pop, gamers are likely to buy fewer of them if they’re unable to resell them for discounts on new titles. And with fewer games being bought, publishers stand to make even less on downloadable content tied to them.

Some day, video games will be distributed and played solely online, which would be something of a dream come true for publishers since it will eliminate copies, piracy and the used market. But with big games being comprised of tens of gigabytes of data – and growing – Internet speeds and monthly usage limits are nowhere near where they must be for this sort of system to be implemented.

The writing may be on the wall for the likes of GameStop, but as gamers and analysts believe, the used market is going to serve a purpose for some time yet.