Are pre-owned sales killing gaming?

A look at both sides of the argument.

"Parasitic." "Abusive." "A huge issue." "A critical situation." "Extremely painful." "Thievery."

Strong words. You might expect those kind of comments about piracy, drug dealers or baby-snatchers. Or drug-dealing baby-snatchers. But those are direct quotes from senior publishing executives about the second-hand games market. And that's just a small sample - the well of discontent over pre-owned sales goes much deeper.

We're all used seeing news stories about publishers commenting on used games. The calmer executives shrug, sigh and admit they're a reality of the market. Those who had a little too much coffee before the microphones were turned on are apt to directly compare second-hand sales to piracy or theft.

Even if you don't sympathise with their point of view it's easy to see the source of their ire. Walk into any games shop in the UK - indeed, in almost any nation - and where once you'd see a group of optimistic kids with limited pocket money trawling through a grubby second-hand bin, today you'll find an enormous, well-lit display of second-hand games in pristine boxes.

In some stores it can be hard to tell whether you're looking at new or used copies of games, the difference indicated only by small stickers on the boxes' spines. The displays look the same and the pre-owned selections are often more prominent than the brand new offerings.

The content of the shelves is the same, with used copies of top games popping up just days after launch. Even the price tags are similar - used copies of recent games often sell for only slightly less than their box fresh counterparts.

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A common sight in most Japanese towns. Less commonly seen - publishing executives giving them the finger as they drive past.

The big difference, from the industry's point of view, is that not a single penny from the sale of a used game makes its way into the pocket of the creators or publishers. The retailer pays a certain sum (usually quite low) to the customer who traded in the game. The remainder - a pretty significant margin - goes into the retailer's coffers and stays there.

From the consumer's point of view, the issue is a bit more complex. Videogames are expensive. You can make all the arguments you like regarding value for money - and I frequently do - but the reality remains that ours is a seriously pricey hobby. For many gamers, the ability to trade in their old titles or buy cheaper copies second-hand is the only way they can afford to keep up with new releases.

Comparisons with piracy fall flat from the consumer's perspective. Being able to sell on something which you bought legitimately seems like a pretty basic right, and industry figures do themselves no favours by tarring such people with the same brush as pirates or thieves. More moderate executives are anxious to make it clear that their dislike of second-hand sales doesn't extend to gamers themselves.

"I'd hate to say my players are my enemies - that doesn't make any sense," Epic Games' president Dr Michael Capps has been quoted as saying. SEGA Europe boss Mike Hayes has described second-hand goods as a "market reality" which he doesn't like much, but wouldn't campaign actively against.

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One attempt at cutting out the middle-man. On the downside, involves direct contact with the great unwashed.

Yet there's clearly an impasse here - a gulf between what gamers want to do and what the industry believes they should be doing. For evidence of this, look at the efforts the industry has made to change the realities of the market - not one of which has worked.

The first reaction, depressingly, was to try to change the law. Just as other media industries have relentlessly lobbied governments to roll back long-standing consumer rights in order to protect their profit margins, the games industry hasn't been above a bit of legal wrangling.

This is particularly the case in Japan, where the second-hand market is even more deeply embedded than it is in the UK. Every major town and city district sports enormous second-hand stores selling games, DVDs, CDs, electronic equipment, toys and so on.

It's not suprising that a nation with famously small homes, and a notoriously throwaway approach to perfectly functional items, would cultivate a thriving second-hand market. Nor is it a shock to learn that Japanese game makers tried to shut it down.

That battle was lost a little less than a decade ago, when the Japanese courts finally ended a lengthy series of claims and appeals which had flown between retailers and publishers. The verdict? Selling second-hand software is legal, and games publishers just have to live with it.

Today Japan's shopping districts are overflowing with second-hand goods - glorious for the savvy gamer, but the cause of some serious teeth-gritting amongst industry executives.

Any attempts at changing the law outside Japan are equally unlikely to succeed. Second-hand sale is protected in the US by something called First Sale Doctrine, and elsewhere by a grab-bag of similar consumer rights.

Regardless of where you, are the principle is the same - if you paid good money for it you own it, and you can sell it. Even legal systems prepared to make exceptions for vastly expensive corporate software packages are unlikely to give the same leeway to game publishers trying to stiff individual consumers out of a few quid.

Where the stick failed, the games industry is trying the carrot. The past 12 months have seen a host of new initiatives designed to take the wind out of the sales of the second-hand market.

At their best - like the better executed versions of EA's Project Ten Dollar - they add extra value to a brand new purchase, by including a code that gives you access to future DLC for free. At their worst, they strip regular features out of games unless you have a code from an original copy.

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The world's biggest car boot sale is, unsurprisingly, a popular place to sell unwanted games. More effort than a trade-in, but you get the full value of your game.

Have these incentives worked? The answer is a resounding maybe. There's no sign of second-hand sales abating - if anything they're surging, with more retailers starting to include trade-ins as part of their business model.

But comments from publishers who have experimented with such systems have mostly been positive. At least they're making some money from consumers who previously only filled retailers' pockets. (Although you could argue that if DLC was compelling enough to be worthwhile second-hand buyers would purchase it anyway, without publishers needing to resort to cheap tactics like Project Ten Dollar.)

In the meantime the industry is pinning its hopes on a change in the business model. According to this vision of an all-digital future, we'll pay for subscriptions to games rather than buying them outright. Or we'll play them for free but make in-game purchases.

Or none of us will own anything - we'll just buy licenses for software that resides on a remote server. Or we'll all be plugged into giant computer systems which harvest our bio-electricity in return for letting us play in a simulated reality where leather trenchcoats are actually fashionable. Or something.

Is there a third way?

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Ah, the days of the GAME 10-day returns policy.

One path out of this trap might be to consider that the real enemy here, as far as publishers are concerned, isn't the gamer buying a second-hand title. It's the retailer who skims off enormous profits from the pre-owned market, and who actively promotes second-hand product ahead of brand new games.

It was rare to hear developer complaints about the grubby second-hand bin in the corner a few years ago. That game creators have grown more disgruntled as game retailers have become more brazen is hardly surprising.

If the middle-man is the real problem, what happens if we cut him out? Plenty of savvy gamers have realised they can make more money selling their games on eBay than by handing them to GAME in return for a paltry trade-in fee. It's more hassle but it's much more lucrative - and it's not so much the trading of games as the profit margins of the retailers that seems to enrage the industry so much. (Although there's a particular brand of executive who believes we shouldn't even be allowed to lend games to our friends. Like most raving lunatics, they're best ignored.)

We could go a step further and take money out of the equation entirely. An idea which has been attempted a couple of times is using the internet to hook up gamers who want to trade games, so they can swap titles directly.

One ongoing attempt to make this work is GaBoom.co.uk, a site founded by British entrepreneur Jess Ratcliffe - whom telly addicts may recognise from an appearance on Dragon's Den.

Ratcliffe's site allows gamers to list games for swap or sale, then matches people against each other to make the transaction. Interestingly, speaking to her about GaBoom reveals a degree of displeasure about the retail second-hand market you normally only find amongst game publishers.

Pre-owned sales "don't give the consumer the fair value of their game", she told me. "When you have traded a game with a high street retailer, they then sell that game on for a large profit, which shows the game is worth more than what they give to the consumer who has traded the game in."

In contrast, services like GaBoom - or indeed eBay and Amazon Marketplace - give consumers the real value of their games. Even if developers aren't making any money directly off those sales, they can rest easy knowing nobody else is profiteering from their hard work.

Besides, we all know from experience that if you put a bit of money in a gamer's pocket, there's only one place he's likely to spend it. (No, not the pub. The other one.)

Yet in their desperation to crack down on the second-hand trade, the games business may end up eliminating this option as well. Ratcliffe notes that initiatives like Project Ten Dollar and Online Pass harm all kinds of second-hand consumers - and, by extension, the first-hand buyers who want to trade in their games.

"I very much hope we are not seeing a move towards using online functionality to 'punish' second-hand consumers," she said. "I believe that is wrong. Consumers, whether first or second-hand, should never be 'punished' for purchasing a legal item."

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Who wants to just horde their old games?

It's all too easy to sneer at games industry executives when they make attacks on the second-hand trade, but look closer and it seems unfair to paint them as evil masterminds. Indeed, if any one group emerges as the pantomime villain, it's the retailers.

Considering the economics of how games are made, distributed and enjoyed, the enormous displays of last week's new releases being sold second-hand for a fiver less seem distasteful. The gigantic Book Off stores which dominate so many Japanese street corners, fantastic though they may be, are blatantly thumbing their noses at the publishers who once tried to shut them down.

If anyone is going to make this much money from games, shouldn't it be those who had a hand in their creation?

Yet even this aspect of the debate is complex. Less than six months ago, the boss of GameStop Sweden told the audience at the Develop Conference that "if we hadn't got the used business, we wouldn't be there".

In blunt terms, he cited the used games business as being the difference between GameStop continuing to open new stores and expand games' presence on the high street - and not being there at all.

Some time earlier, SEGA's Mike Hayes had alluded to that same dichotomy. No matter how much he may dislike the second-hand trade, Sega has "a successful business working with the retailers that offer that service."

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Ratcliffe's appearance on Dragon's Den earned GaBoom a huge spike in traffic.

The bottom line is that game creators have a deal with the devil - if their efforts to cut down on second-hand sales are too successful, they might end up killing off the very retailers upon whom they rely so heavily.

(In fact one Japanese publishing exec gave me a hatful of vitriol for this article, only to retract the whole lot a few days later - having realised it annoy his retail partners. It's clear who still wears the trousers in many of these relationships.)

So they watch, wait and complain bitterly - all the time hoping for the moment when digital distribution technology will allow them to do what present business reality won't permit. And pray, presumably, that national governments don't wake up to the enormous erosion of consumer rights this represents, and step in to legislate against it.

For GaBoom's Ratcliffe, that day seems a long way off. Even while acknowledging the rise of digital distribution, she argues that a move in that direction won't be catastrophic for game swapping or second-hand sales.

"I am confident the second-hand game market has a long term future and will continue to be successful in the coming years," she said. "When you take into account the fact that 12.4 million people in the UK play second-hand video games, I think it firms up the market's future."

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