Game Biz May Combat Used Sales1 Jul, 2006 By: John Gaudiosi
Speculation is Sony may register games to a particular PS3.
The video game industry — in an uneasy truce with rental dealers making money off its product — is now up in arms over used-game sales hurting new-game sales.
Retailers from Gamestop to Amazon.com to Blockbuster Inc. and Movie Gallery have been selling used games for some time.
Now, industry observers believe Sony Corp. may be trying to spoil their fun. Speculation is Sony may combat used game sales with a new technology on PlayStation 3 this fall. Sony has a patent, granted last November, that allows it to create a registration for games. This would allow the game to be played only on the PlayStation 3 to which it is registered. This is similar to technology PC software makers use for PCs. Sony has publicly said it has no intention of using the technology for PS3, but that hasn't ended the talk.
In another potential move to limit used-game sales, analyst Michael Pachter of Wedbush Morgan Securities thinks retailers and game makers could agree to an unofficial window of one or two months before games may be sold used.
American Technology Research game analyst PJ McNealy also believes a compromise window in which a retailer can only sell a previously owned game after a set time period will come into play.
“This would provide software publishers an exclusive time period to push new game sales without competing against a pre-owned copy of the same product,” McNealy said. “But anything short of an industry-wide solution will likely not work and will have broad implications for gamers.”
The used-game sales market generates about $990 million in annual revenue, chiefly through sales at GameStop and on eBay worldwide, McNealy said. Sony used games generate approximately $620 million.
McNealy believes the market for pre-owned software will accelerate approximately three to five months after a new console launches. He saw the best-selling Xbox 360 game Call of Duty 2 flood the used-game market last February and March as many early adopters had played through the game. Still, the impact of used games is much smaller at a game console's launch, when fewer hardware units are available and there is a smaller audience. It becomes more dangerous, according to McNealy, with a system like PS2, which has a huge gaming audience.
Unlike the rental business, which can drive sales of games through the try-it-before-you-buy-it strategy, consumers who purchase used games are getting a discount. While used game sales could potentially open up new consumers to sequels, those cost-conscious consumers likely aren't going to pay full price for a sequel.
Despite all the uproar, Pachter doesn't believe used games are all bad. “Used games provide currency for new game purchases,” he said. “As a practical matter, not many hot games get traded in right away. It's a tempest in a teapot.”