Elephant in the Room: The Dangers of Pro-Consumer vs. Pro-Developer and the Used Game Market

How an argument spawning from E3 2013 sidesteps a major problem in the gaming industry, and shows the dangers of current gaming trends. By Terry Randolph I remember watching the both Sony and Microsoft’s unveiling of their newest consoles, the PlayStation 4 and Xbox One. With Microsoft being the first to introduce its newest creation,…




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How an argument spawning from E3 2013 sidesteps a major problem in the gaming industry, and shows the dangers of current gaming trends.

By Terry Randolph

I remember watching the both Sony and Microsoft’s unveiling of their newest consoles, the PlayStation 4 and Xbox One. With Microsoft being the first to introduce its newest creation, many gamers (including myself) sat there wondering what the hell Microsoft was thinking. Needless to say, Sony was able to immediately win the initial console war by doing the opposite of what Microsoft had done. Since the announcement of the Xbox One, Microsoft has had to wade through the crap it created for itself with the policies and protocols originally implemented into the system; 24/7 internet connectivity, inability to lend or borrow games and having players download t the content to lock it onto that console. All of these policies were received with opposition; after all, why go against the norm in console gaming that’s been successful for the longest time? Because of the backlash, Microsoft completely changed their policies to appease the gaming community. Yet, what was interesting about the chain of events wasn’t the unveiling, or the policies themselves, but the debate it stirred over the next couple of months for both developers, publishers and players. Most notably, the title of said debate touched on an issue console I believe gaming has had to face for years but truly examined.

Pro-Consumer versus Pro-Developer

Before I explore the brief, critical debate, I want to state an opinion I feel is rather obvious; what the debate focused on shouldn’t have been a point of contention. If anything, it sidestepped the real issue by placing attention on certain aspects instead of the main problem. After the sudden wave of flames flung at Microsoft’s E3 unveiling, Cliff Bleszinski, creator of titular titles Unreal Tournament and Gears of War, came out with a great blog post addressing gamers’ reaction to it. You can read his argument here, but I’ll attempt to summarize the point of his argument; Microsoft tried to do too much at once by introducing policies both revolutionary and necessary for console gaming. By having the player owning the content through downloading and being locked to that specific system allows the player to own the content while increasing profit margins for developers. That’s because if a game is returned or sold back to the store it was bought from, the content is “stripped” from the system and placed back onto the disc for sale; every time its bought back means more money to support the developers. It essentially wipes out the current used game market that’s “pro-consumer” and makes it into a “pro-developer” one.

Businesses like GameFly and GameStop would hurt from these models because of the content lockdown; games rented out wouldn’t be playable and if the content didn’t make it back to the disc players would be buying a blank disc. Cliff further argues that the reason it gained such a backlash was that the model was too far ahead of its time and restrictive. He noted that, understandly, one of the most successful aspects of console gaming is how easy it is to trade games, borrow them or rent them. This divide alone, with Microsoft being “pro-developers” was the reason why Sony was deemed the winner of initial console battles (including myself at the time); they targeted the things gamers wanted and won the initial outlook of the console wars by being “Pro-Consumer”.

Let’s face it gaming can be expensive to maintain as a hobby, especially console gaming. With a hefty price tag of $59.99 at launch for a standard retail edition, and a range of $79.99-$249.99 for a collector’s edition of a game, it’s nigh impossible to not ask yourself if the game will be worth it. From that initial question stems a myriad of questions I think many of us use to justify the full price purchase; is the campaign long enough? Is the gameplay fun? Did we enjoy the last game in the franchise? Even then, after all that, we read or watch reviews to further determine whether or not to get the game when the answer is subjective to our perception of what we enjoy and what we don’t in games. Usually, players either wait until the game goes on sale or they can rent the game. The downside to that method: games usually take a long time to go on sale to the point where current gaming trends have moved on to the next biggest release.

It’s easy to see the allure of buying used games from stores like GameStop or using rental services like GameFly; not only in price differential but also because of cost of living continually increasing while the average work wage has flat-lined into stagnation. Extra spending money is getting harder to come by, and harder to spend for the average consumer. People have to be careful in choosing carefully by weighing the options of where they can splurge while leaving enough breathing room to feel secure financially. That’s why deals like GameStop’s “Buy 2 Pre-Owned Games, Get 1 free” sales or GameFly’s “Unlimited Rentals (the exception being only one game at a time) for $15” a month are successful. If worse comes to worse, a friend might have the game and allow you to borrow it.

However, as the age-old saying goes, “Behind every choice, there is a consequence.” Just as used game sales are increasing, so is the alarming rate of developers shutting down as well. The most troubling part of that trend is several critically acclaimed developers have closed down. Frequently, we see articles from sites like Kotaku, IGN, and Joystiq showing a developer saying “We sold 4.5 million units of a game…but it still wasn’t enough”. Part of that problem, almost as frequently addressed are the dozens of articles and forums addressing lack of innovation in gaming with studios taking the safe route of using well-worn, established mechanics to sell the game. Some devs play word cookies in fact which is great. More often, the few that try to go against the grain to provide something innovative run a higher failure rate than success. In the end, the ceaseless discussion between developers and gamers has been cyclical fumbling around trying to find a middle ground that instead caters to one side or another. That’s because, while being only one of several major factors, the increasing sales of used games is creating this conundrum.

Think about it this way: whenever a game is purchased by a customer, the profit is divided amongst the several companies that make the product: the console creator, cover artist, box manufacturer, dvd and/or blu-ray manufacturer, publisher and the developer. Even though a collector’s edition costs more, it’s nearly the same amount of profit with all the extra vendors brought in to make the collectible items. If you want to see more specifically how it breaks down here’s a great visual representation of how a standard retail version’s profit is divided up percentage wise. So, if a game sells 4.5 million units at full price, the developer will make around $40.5 million in revenue at 9% revenue. The publisher, taking in 18% of the profit, would get $81 million. Seems like a pretty good margin of profit right? Not if the average budget given to a developer to create a game is usually at $100 million is true. That budget, from what I understand, doesn’t include the cost of AdInfusion, bug testing, marketing, and post-production patching that goes into the game.

Having that much money, and the pressure to make it back hanging over the head of a developer means that trying to create innovative gameplay or a new intellectual properties ( IP for short) is all the more riskier. There’s no real way to have assurance that giant tweaks in gameplay will pay off because focus groups, quality assurance and game testers can only give so much information. It leaves the developer with two choices; do they create content they know will sell? Or take the risk to try creating a new game that’s innovative? It’s easy to take a guess which route most companies will take.

So how does a used game affect the video game market? None of the money goes to the developers of publishers. As soon as the game is bought by the player, that specific copy of the game now belongs to the consumer. When a player is done with the game and goes to either return the game or trade it in for store credit at stores that provide, the store therefore becomes the new consumer and sell it for pure profit. It’s no wonder why those that work at GameStop are pushed to suggest buying the game used or frequently have sales. Because of the increase in demand for used games, more stores are attempting to vie their way into the market too like Best Buy.

Is there a solution to all of this?

The problem with this used game market dilemma is that there’s no clear-cut solution that seems to benefit both the consumer and developer right at the start. In my view, this is just a symptom of an underlying problem within gaming no one has been able to unravel just yet. Also, while I stand by my argument that the used game market is detrimental to game development, they’re also beneficial. Games that are on sale are more accessible to those who have limited funds and increase the likelihood of gaining both a new fan and word-of-mouth advertising. Essentially used games provide a larger reach to reign in a bigger audience that only selling brand new copies can’t. Plus, eliminating the opportunity to buy used games through things like DRM and content-specific lockdowns makes it hard for a friend to give another friend their copy to borrow. If the other friend likes the game, they might get their own copy; it seems like a win-win.

In some ways yes, but most ways no.

The Xbox One was attempting to use the same policies regarding content lockdown that Steam goes by. With my limited understanding of Steam since my Mac isn’t so friendly to it, there are games that support co-op…if each of you have a copy of the game. There’s no such thing as borrowing; the best that can be done is get a copy of the game as a gift from a friend.

Even though that sounds restrictive, there are plenty of reasons this is a great approach to selling games. First, it ensures that the games files aren’t just copied and sent to another user. That way, the developers and publishers are getting paid for the work they’ve created, not just for a few copies. Second, it also allows better metrics for developers and publishers to study to see what game variants players enjoy, what they avoid, and so on. Furthermore, it ensures that developers and publishers get a higher percentage of profit because it’s released digitally; this cuts out the cost of having to create the DVDs/Blu-Rays to put the data on and the boxes to protect those discs. All of this increases the chances a studio will stay open. Lastly, which I believe is huge, a lot of games being released as indie projects on Steam are striving more for innovation than money. Games like To the Moon or Bastion are some great examples that feel fresh and inventive in their gameplay. That’s because there’s less chance of those risks backfiring so bad that the studio gets dissolved. It’s great that we see games like these then make the jump onto the Marketplace for Xbox or PlayStation.

At the same time, the fault doesn’t rest on consumers only, but on developers and publishers too. Developers have to be willing to take risks even with the uncertainty of how it will sell. Sure, people are more comfortable buying games with elements they’re familiar with but it’s created a dangerous time where all genres are heavily saturated with games that play the same way with only aesthetic differences. Developers need to be willing to prove why players should invest in their work and the innovative changes in gameplay instead of falling back to tried and true mechanics. Otherwise the trend of used games increasing in sales and developers losing money will also continue to spin.

If console gaming is heading towards a digital era, the best way to do this is to provide the games at a cheaper price to enticing. Most games on the Xbox Marketplace or Playstation Network cost just as much as their physical copy counterparts. Even when they’re discounted at https://www.groupon.com/coupons/stores/jossandmain.com, the average is a measly $5 difference. How is that going to entice the player into buying it when for only $5 more they can just buy the disk? If games went down to, let’s say $44.99 at the start as digital instead of $59.99, I’m sure players would opt to buy the game that way if they aren’t trying to get the collector’s edition.

In the end, Steam’s thriving format was the model Microsoft based their policies on but had marketed them in a negative context. They should’ve doled out their policies in spades and not at once; throwing all of that at once while trying to sell a brand new console makes for a bad combination. Especially in an age where developers believe consoles are going digital, and others are uncertain if console gaming can continue to be a strong market.

I’ll admit that if Microsoft had followed through with their policies, they needed to keep the two staples of what helped boost console gaming to where it is today; local co-op play and ability to borrow games. While the latter may be tough to do considering it’s still a used game, it’s definitely helped to increase sales of a game or support of a developer. For example, had I not been able to borrow BioShock or Dead Space, I would not have bought the games and their successors nor been a supporter of Irrational Games and Visceral. Local co-op has been, and will always be, a staple of console gaming. There have been countless adventures I’ve had playing with friends that have been truly rewarding, and it would be a huge step back to lose that ability.

Overall, this is a complex situation that has a lot of pros and cons that need to be weighed heavily to see what needs to be done. While it the solution may not be the answer players and stores want to hear, it has to be done in order to see what can be done to improve the gaming industry. There really shouldn’t be a pro-developer versus pro-consumer debate, but rather a focus on the true issue here that has been the elephant in the room for the industry; the impact used games have made on development.