Game distributors combating resale

Great article on the video game industry’s latest effort to fend off the deluge of video game resalers.    Discouraged with traditional physical media where are left out of any piece of the growing resale business, they continue to embrace digital distribution.  

Its a question of where they have more control:  Digital distribution or physical media. Unlike the movie and music industries, they are actively pushing digital distribution dispite piracy concerns.  

Read more: Game makers strike back at used game market

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Amazon Testing a Buy Used Box

Ron McCardle, DVD Hunt.com

On November 17, Amazon launched a pilot program of a new feature call the Buy Used Box.

Used goods have been available on Amazon for a while in the Amazon Marketplace, but it’s a very unfriendly, level of clicks to get there.

The “Buy Used Box” works much like, and is positioned just below, the Buy Box on a product detail page. It gives customers a quick way to initiate the purchase process by adding a “Used” media item to their shopping carts.

Only qualified sellers may compete for the Buy Used Box. Qualification is evaluated on the following criteria.

  • Only Pro Merchants who sell media and subscribe to the Fulfillment by Amazon (FBA) service can compete for the Buy Used Box.
  • Sellers can learn more about signing up for the FBA service in your Seller Account and on the amazonservices.com website.

I find the market prices for the FBA merchants are generally higher than the general Amazon Marketplace  because there are fewer sellers in that program.  No word yet if Marketplace merchants are ever to be included.

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Warners Buying Back Your Used DVDs

I can’t help but wonder what they are going to do with all these discs they collect.   For years they taughted the illegality of reselling used discs.  Now this.

From Home Media Magazine  Nov. 17, 2009.  Warner Site Exchanges DVDs for Blu-ray Discs.

Starting Nov. 17, owners of 55 DVD titles from Warner Home Video can trade in those DVDs for Blu-ray Discs by visiting a Web site and paying a small fee.

Visitors to DVD2Blu.com can upgrade their movies — including A Christmas Story, The Dirty Dozen and Training Day — for $7.95 or $9.95 per exchange, with free shipping on orders of more than $25. Users mail in their DVDs with pre-paid postage and receive Blu-ray Discs a short time later. Warner plans to add more titles in the coming months.

The DVDs sent to Warner will be destroyed, the studio said.

“DVD2Blu is a great way for consumers to start or expand their Blu-ray Disc collection,” said Dorinda Marticorena, Warner Home Video SVP of worldwide marketing and high definition. “We’re launching the program with a wide range of titles that will appeal to a broad audience.”

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DVD and Game stores are feeling the pinch of a low-margin business. Should we feel bad for them?

used media store

Ron McCardle, DVD Hunt.com

First off, I can’t see how preowned sales of dvds and games would ever go away. While publishers may always gnash their teeth at being cut out of the profit-stream of used games, there’s very little they’ll be able to do about it. I’m not worried used games would go away, Instead, I was wondering why we think brick-and-mortar gaming stores need to be saved.

Reselling games and DVDs is a low-margin business. I managed a game store for a few years, and it’s a grueling, penny-pinching piece of work. You get leaned on daily to make sure you’re selling the right things: high-margin used games and warranties. Rent is a huge expense. The only place that margin can be improved in this business is through used games, so of course the stores give the least possible amount for trade-ins, and sell them for as high as they can. You don’t know how brutal it can be until you give someone US$5 for a game, and then sticker it for $34.99 as they walk out. This is the business we need to keep alive? Why shouldn’t we be calling for the death of these places?

Find a place online, like Amazon or eBay, to sell your dvd or game, and price it at US$20. You get more than that US$5, and the buyer gets their purchase for less. Sure I understand why the used stores price the way they do, but why should we support their margins? If the business doesn’t work for you anymore, get out of it. I can do better buying or selling by cutting out the middleman of these stores. The more people do this, the more the emphasis will be placed on things like replacement plans, controllers, acessories and other high-margin items. The harder the sales pushes get, the more consumers will stay away, and soon the stores simply won’t be there. Going into a chain used media store is already asking for a bunch of high-pressure sales tactics.

While I like spending time in a game or dvd store while browsing and talking to other aficionados, the value just isn’t there anymore for purchases. Digital distribution is taking off, and often online retailers price less than their brick and mortar competition. I can buy my games from any place I please online, get it delivered to my door, and then when I’m done resell it for a fair price to someone who wants to save money and doesn’t want their cases covered in stickers.

We may be passed the point where used chain stores provide any service we really need. At this point, why fight to save them?

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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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