The Next-gen Situation discussion *spawn

[ERP]

Well that's what we're discussing, whether people who've bought console games will have a choice or not.

May not be the same experience but these kinds of policies as well as other popular digital entertainment may prod some gamers to seek out other alternatives.

The question is do those alternatives exist?

They certainly could, but do the economics make sense and IMO right now they don't.
It only takes one must have game to sell a console. If your friends are playing Modern Warfare 7 then Angry Birds 9 is really not all that appealing regardless of how powerful the hardware it runs on is.

As successful as a very small number of iOS games have been it's still difficult to justify large development expenditure in the space, and the successful games aren't those that appeal to the traditional console market.

I do see in the longer term hardware becoming irrelevant, and what are "consoles" today becoming software platforms and services, available across a range of devices. But I think we'll see a transition to primarily online purchases and rentals in the space before that move happens.

 

[fearsomepirate]

This:

Consumer dollars invested into gaming potentially increase by the sale of used games

and this:

but the publisher revenues decrease by the amount for which those used games are sold which is the consumers gain plus the stores mark up on used games.

are mutually exclusive statements. If used games increase consumer spending on games, you can't say that every dollar spent on used games would have gone to the publishers otherwise.

The first statement is true. You also need to add that being able to sell games back increases both total consumer spending on games and the sticker price they're willing to pay. There's no way of knowing whether publisher revenues would increase by eliminating used sales. They may very well decrease. All you can know is that, absent a price cut, it would decrease the total spending on games.

 

[AlphaWolf]

This:

and this:

are mutually exclusive statements. If used games increase consumer spending on games, you can't say that every dollar spent on used games would have gone to the publishers otherwise.

The first statement is true. You also need to add that being able to sell games back increases both total consumer spending on games and the sticker price they're willing to pay. There's no way of knowing whether publisher revenues would increase by eliminating used sales. They may very well decrease. All you can know is that, absent a price cut, it would decrease the total spending on games.

No they aren't mutually exclusive. They just might not have a 100% relationship, just like the money the consumer gets from selling used games might not increase his spending on used games by 100% of the amount, he could buy DVD's or whatever other products that vendor offers, netting the games publishers 0.

Market forces can put the pricing of the product where it needs to be without the presence of a used market. And there's certainly little reason to think that the absence of a used market would cost publishers anything as they get nothing from it. The fact that total spending on games goes down isn't relevant to the publishers because the money spent on used games isn't a positive for them. You can claim publishers would get less without a used market, but that would require some sort of voodoo economics. Those people can wait 6 months or whatever and buy the game when it's discounted rather than buying it used 2 weeks after launch. The vocal forum minority not withstanding.

 

[steviep]

The writing is on the wall for the used game market. All 3 console manufacturers are going to lock it out next gen. Sorta Steam-like, but with the possibility of a $10-15 unlock code from the publisher to play the used game you just bought or borrowed or whatever.

 

[fearsomepirate]

No they aren't mutually exclusive.

You claimed a strict equality; that's what makes the two statements exclusive.

Market forces can put the pricing of the product where it needs to be without the presence of a used market.

That doesn't mean eliminating secondhand sales will have no effect on the size, shape, or overall growth of the market.

And there's certainly little reason to think that the absence of a used market would cost publishers anything as they get nothing from it. The fact that total spending on games goes down isn't relevant to the publishers because the money spent on used games isn't a positive for them.

Yes, but the money spent on new games is. If people can't sell a new game back, its value goes down. If the value goes down, producers will have to cut the price to move the same volume. The problem is by how much. If it's only a little, then roping in some gamers who would have otherwise bought the title used will offset the loss. If it's a lot, then they may find themselves losing money overall.

You can claim publishers would get less without a used market, but that would require some sort of voodoo economics.

No, it requires applying the concept of marginal utility. That's not "voodoo economics;" that's "textbook economics." By the way, I didn't say "would." I said "could." It depends on what the marginal utility curve looks like. And in general, increasing monopoly privilege often reduces the total amount of whatever it is being sold rather than the other way around.

Those people can wait 6 months or whatever and buy the game when it's discounted rather than buying it used 2 weeks after launch.

Wait time also decreases the value of a product.

There are lots and lots of ways eliminating used sales could result in drastically decreased publisher revenue. You cannot simply assume that enough buyers will be retained to offset the necessary price cuts. They could be, but you can't assume it. I can pretty easily concoct some realistic marginal utility functions that go either way.

 

[AlphaWolf]

You claimed a strict equality; that's what makes the two statements exclusive.

Yes those were the words I used, I remember it now 'strict equality'. /sarcasm.

That doesn't mean eliminating secondhand sales will have no effect on the size, shape, or overall growth of the market.

Yes, but the money spent on new games is. If people can't sell a new game back, its value goes down. If the value goes down, producers will have to cut the price to move the same volume. The problem is by how much. If it's only a little, then roping in some gamers who would have otherwise bought the title used will offset the loss. If it's a lot, then they may find themselves losing money overall.

No, it requires applying the concept of marginal utility. That's not "voodoo economics;" that's "textbook economics." By the way, I didn't say "would." I said "could." It depends on what the marginal utility curve looks like. And in general, increasing monopoly privilege often reduces the total amount of whatever it is being sold rather than the other way around.

Wait time also decreases the value of a product.

There are lots and lots of ways eliminating used sales could result in drastically decreased publisher revenue. You cannot simply assume that enough buyers will be retained to offset the necessary price cuts. They could be, but you can't assume it. I can pretty easily concoct some realistic marginal utility functions that go either way.

You can concoct a lot of things if you want, but the reality is the used market is going to be diminished and the likely result is that the about the same amount of dollars will be spent on games. Gamestop will just be looking at a smaller piece of the pie.

 

[BRiT]

The writing is on the wall for the used game market. All 3 console manufacturers are going to lock it out next gen. Sorta Steam-like, but with the possibility of a $10-15 unlock code from the publisher to play the used game you just bought or borrowed or whatever.

Its not the console mfg that's doing this. Its the publishers.

 

[AlphaWolf]

To be fair, all 3 console manufacturers are also publishers.

 

[steviep]

To be fair, all 3 console manufacturers are also publishers.

Yes, but I believe the DRM infrastructure will also be in the OS level on all 3 next gen consoles.

 

[dobwal]

Its my belief that the used market both enhances and distracts from the new game market. The selling of used games allows gamers to partake in the purchases of new games but those used games also serves as competitors to new games sales as well.

The problem for publishers is not that a used game market exists, its that its not as ubiquitous in term of retailer participation as it should be. The publishers shouldn't want to get rid of used market, its should encourage participation by all retailers.

If every retailers became dependent on used game sales then it would easier for pubs to actually reduce the margin that retailers see on new games sales thus increasing their own profit margins. The used game market would then become beneficial for pubs because they could get retailers to carry new game titles for practically nothing.

Right now, GameStop dominates the used game market, which is problematic for multiple reasons. First, GameStop dominance inhibits pubs from thinning margins across the board. Pubs don't have the leverage to force retailers who don't compete or poorly compete in the used game market to accept really thin margins. There is no benefit for Walmart, BestBuy or Amazon to accept the thinning of their profit margins. Second, its problematic for pubs to force only GS to accept lower margins on new titles. GS would probably sue for being singled out and the pubs practice would be labelled anti-competitive.

Put it this way, the revenue generated by that $10 dollars pubs try to pry out of used game buyers by limiting online features or game content is peanuts to a reality where pubs gets an extra $8-10 dollars on every new game sold into the market.

sorry for being off topic.

 

[AlphaWolf]

Digital distribution systems are going to give publishers all the leverage they need.

 

[dobwal]

Digital distribution systems are going to give publishers all the leverage they need.

That won't become a reality for a long time.

 

[AlphaWolf]

They are already a reality. Recent PC games are already shipping more than 50% of their sales digitally.

 

[fearsomepirate]

You can concoct a lot of things if you want, but the reality is the used market is going to be diminished and the likely result is that the about the same amount of dollars will be spent on games.

Why is that likely? The end of CDs and the rise of digital distribution didn't see customers spending the same amount of money on music; they've been spending dramatically less. DVD sales have declined by about $5 billion dollars since Netflix started up; Netflix revenue doesn't even begin to make up the difference. Video game revenue has been shrinking rapidly since 2009. Physical software sales have been steadily declining since 2008, proportionally much more so than they did during the same period last gen.

There is literally no reason to believe that a major change in content distribution (and eradicating the secondhand market would be an enormous change) will have no effect on the total amount of money consumers spend in a given entertainment industry. You need a better reason than just your say-so behind that kind of assumption.

 

[AlphaWolf]

Why is that likely? The end of CDs and the rise of digital distribution didn't see customers spending the same amount of money on music; they've been spending dramatically less.

You might want to check some 2012 data.

DVD sales have declined by about $5 billion dollars since Netflix started up; Netflix revenue doesn't even begin to make up the difference. Video game revenue has been shrinking rapidly since 2009. Physical software sales have been steadily declining since 2008, proportionally much more so than they did during the same period last gen.

Back catalog accounts for a lot of drop in DVD sales, you can only re-release something so many times before people stop caring. Netflix is far from the only digital content provider.

There is literally no reason to believe that a major change in content distribution (and eradicating the secondhand market would be an enormous change) will have no effect on the total amount of money consumers spend in a given entertainment industry. You need a better reason than just your say-so behind that kind of assumption.

It's not a major shift, the market has been moving towards it for a long time. Gamers aren't going to quit playing in droves because they can't resale their titles. Some might be forced to buy less (although that doesn't mean the publishers take in less), some might just have to wait for the publishers to discount the titles (again this doesn't necessarily mean the publishers take in less), others like me will be completely unaffected because I've never sold or bought a used title in my life.

 

[Shifty Geezer]

They are already a reality.

A limited reality. I was getting one megabyte every twelve seconds while trying to download the Dragon's Dogma demo at 1.7 GBs. And like most, my internet is capped to 40 GBs a month. the workarounds aren't really ready for completely adoption by next-gen, hence the existence of physical media for another generation at least.

 

[AlphaWolf]

I was never suggesting that physical media would be gone. Merely that digital is a big weapon for publishers if they want to get rid of the used market.

 

[Gerry]

A limited reality. I was getting one megabyte every twelve seconds while trying to download the Dragon's Dogma demo at 1.7 GBs. And like most, my internet is capped to 40 GBs a month. the workarounds aren't really ready for completely adoption by next-gen, hence the existence of physical media for another generation at least.

I think download speed will be far less of a problem in 2-3 years time as 90% of the (UK) population will have access to something like BT Infinity or Virgin. Download caps are a real issue, but even then I can get BT Infinity with unlimited downloads (or whatever their fair usage policy is) and 78Mb/s. That's theoretically two orders of magnitude faster than your example and doesn't exactly cost the earth.

Now not everyone has access to that or ever will to be honest, if they're living somewhere rural. I guess the problem is how to not exclude that segment of your customer base whilst still fulling embracing downloads.

 

[Shifty Geezer]

Again with the rural comments. I live in Surrey, surrounded by Virgin fibre connections, and cycling distance from Guildford, arguably the game development captial of the UK. Yet we have no cable and we're not on any schedule to get cable. It has nothing to do with being rural, but how the government has a lousy infrastructure policy and it's left to the private sector to chase dollars, where they'd rather get their existing install base to pay more for faster BB than pay the expense of connection new customers.

The forecasts for 90% superfast BB by 2015 seem optimistic to me. Certainly no IT business can assume it'll happen, so any attempts to curtail second-hand sales are still going to need to look at handling sales of physical media.

 

[Gerry]

Again with the rural comments. I live in Surrey, surrounded by Virgin fibre connections, and cycling distance from Guildford, arguably the game development captial of the UK. Yet we have no cable and we're not on any schedule to get cable. It has nothing to do with being rural, but how the government has a lousy infrastructure policy and it's left to the private sector to chase dollars, where they'd rather get their existing install base to pay more for faster BB than pay the expense of connection new customers.

The forecasts for 90% superfast BB by 2015 seem optimistic to me. Certainly no IT business can assume it'll happen, so any attempts to curtail second-hand sales are still going to need to look at handling sales of physical media.

Well I wasn't really talking about you personally, but generally. It's clearly try that if you live in a rural environment then the likelihood of getting superfast broadband gets remote, as the economies of upgrading the cabling to the junction box to fibre become increasing suspect.

Have you checked when (if?) you're getting BT Infinity?