Archive for August, 2009

Pricing of used video games.

Great article here on how used Video Games are priced by retailers. A very interesting topic to do an in-depth behind the scenes report on.

I’ve been wondering what the deal was with used game pricing since I bought the 360 version of Guitar Hero II for $35 a little while after GH3 came out. Naturally I thought it would have been recently marked down, so I peeled off the pricing sticker to check the ones behind it to see how much the game used to cost.

Lo-and-behold, the game was actually marked UP. It had been $29 before GameStop raised the price by $6. Needless to say I was not happy and returned the game immediately.

Note to those who work at Gamestop: when you mark UP a used game, peel the cheaper sticker off the case. It just may save you a pissed off customer, which nobody likes to deal with.

Ron McCardle, DVDHunt.com

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The battle over used video games

usedgames_300When you pick up that used copy of “Halo 3,” you probably don’t think about much beyond the $5 or $10 you’re saving by not buying a new copy of the game. But while you’re being thrifty, the line of contention between the people who make and sell video games is growing wider.

Used video games are a hot button issue for developers and publishers. No one who makes games is happy about the practice. Some even call it a few steps short of theft, though their blame is targeted at retailers, not customers.

The problem, they argue, is that used game sales eat into new game sales – and that cuts into their bottom line. GameStop, the largest specialty video game company in the U.S., gets the majority of their ire. The company pockets roughly $2 billion in used game sales each year. Instead of sharing that revenue, like Blockbuster or Netflix do with DVD rentals, it keeps it – and that has game makers seeing red.

GameStop, though, says the practice helps the industry by actually driving sales of new games. Only four percent of used game sales at GameStop are for titles that have come out in the past two months, says the company. By letting people trade in games, it encourages them to try titles they otherwise may not. And the vast majority of shoppers, it says, use their trade-in credit to buy new games.

Publishers don’t buy that, though they’re reticent to express their rage on the record, since GameStop is a major retail partner. They do point out, though, that in months where the industry doesn’t have a full calendar of major releases, they rely heavily on sales of older games for revenue – and new game prices will never be able to compete with those of used games.

They also note they have to pay to be in retail flyers, so their marketing budgets are being used to drive customers to the stores in the first place. When someone buys a used game, they see no return on that investment.

As GameStop profits more and more from used games, other major retailers have shown increased interest in the market. Amazon, Wal-Mart, Best Buy and Toys R Us have all launched pilot programs (some at limited locations) allowing people to trade in games for a credit.

It’s an issue that is unique to the gaming world. By the time video rental stores like Blockbuster sell their used movies, studios have seen substantial income from that disc. The music industry wasn’t a big fan of used CD sales, but doesn’t mind as much now since digital downloads are its chief source of income. And the auto industry is just happy to have people on the lots these days.

Despite their objections to used game sales, publishers have so far found their hands somewhat tied. Attaching games to the first console they’re played on is possible, but would be a PR nightmare, doing more harm than good. (Just look at the fuss Electronic Arts had to endure when it tried to limit the number of installations on each copy of the PC game “Spore.”)

The most intriguing (and latest) attempt at finding middle ground, ironically, comes from a company that’s also testing the sale of used games.

While select Best Buy locations around the country are letting people trade and buy used games, one store in West Jordan, Utah is letting customers buy new copies of a game for the same price that GameStop and GameCrazy (another game specialty retailer) are charging for the used equivalent.

It’s a fascinating program – and one that publishers and developers are likely to endorse wholeheartedly should it spread wider. Customers get lower prices. Best Buy gets bigger sales traffic. And game makers still get their cut of the sale.

But to industry analyst Michael Pachter, Best Buy’s innovative model is difficult to sustain and may well become just another victim in the ongoing pricing wars.Bookmark and Share

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Redbox sues Fox, vows to keep DVDs at popular kiosks

Discount DVD rental company Redbox has sued 20th Century Fox over the studio’s attempt to cut off new DVD releases. Fox demands that the rental price be higher than $1, but Redbox says it will keep offering the DVDs, even if it has to go out and buy them at stores.

As expected, Redbox filed a lawsuit against 20th Century Fox this week after the movie studio tried to keep its new releases out of Redbox’s DVD rental kiosks. Redbox says that the lawsuit aims to protect consumers’ rights to have access to new release DVDs, and that it plans to continue offering all major new releases—including 20th Century Fox’s—at its 15,000 rental locations.

Redbox took legal action less than a week after Fox ordered wholesalers to stop supplying Redbox with Fox DVDs until 30 days after release. The Redbox kiosks, which each house more than 600 DVDs, rent out movies for $1 per day and sell used movies for $7. The company has more kiosks than Blockbuster has stores, and each kiosk rents out an average of 50 movies per day.

Fox believes that outlets like Redbox are ruining its business. “Having our [movies] rented at $1 in the rental window is grossly undervaluing our products,” News Corp COO Chase Carey said at the time.

Fox also said that it was prepared for a lawsuit from Redbox, and the studio now has what it asked for. In a complaint filed on Tuesday, Redbox said that “Fox seeks to strangle” the low-priced rental market in order to maintain its own “artificially high” pricing scheme. Redbox emphasizes that it has a contractual relationship with the two suppliers in question, Ingram and VPD, but that the two will be forced to stop filling Redbox’s orders for Fox DVDs due to coercion from Fox.

As a result, Redbox accuses Fox of copyright misuse by violating Ingram and VPD’s first sale rights, violating the Sherman Antitrust Act’s Quick Look Doctrine by “restraining trade,” and misuse of the Copyright Act by trying to meddle with the distribution rights of third parties. Additionally, Redbox accuses Fox of engaging in unlawful boycotts—”Fox has orchestrated this boycott to artificially restrain output, raise prices and give Fox a bigger cut of rental revenues, or in the alternative to force Redbox out of business,” reads the complaint. Redbox demands a jury trial in order to resolve these issues with Fox.

This pattern follows one set by Universal last year when it decided to order wholesalers to stop supplying DVDs to Redbox until 45 days after their release. Redbox promptly sued Universal for engaging in anticompetitive behavior and abusing copyright law, as well as trying to use coercive tactics to get Redbox to shell out 40 percent of its total gross revenues in exchange for new releases. Universal responded by countersuing; a decision on the case is expected to land soon.

While Fox and Universal declare war on Redbox’s business, other movie studios are embracing the kiosks. Both Sony and Lions Gate have entered into five-year deals to allow Redbox to distribute their DVDs at release time. Meanwhile, Redbox plans to continue offering new releases from all studios, even if it means employees have to buy the DVDs at retail price the old-fashioned way.

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