The Evolution of the Video Game Market -- Trading

For our next subject on how the video game market has changed over the years, we turn to a common practice seen in any physical goods market -- trading. The trading in of video games is what transformed GameStop into the juggernaut of the retail market despite the wishes of the Game Industry. 

Even though trading games have been a part of the industry for so long, it is similar to the rental market in how it's declining due to the rise of digital.

Trading:

Trading video games is a very simple act -- the consumer exchanges a video game or video game platform for credit or cash that they can use to buy something else. During the 80s and into the early 00s before online stores, this was the most popular way of getting rid of a video game that you didn't want anymore. And stores like Babbages, Electronic Boutique, Funco Land and more capitalized on that. Eventually those three were folded into GameStop who are the most recognizable game store in the US.

When it comes to trading, the majority of the advantages belong to the storefront's side.

Advantages:

Consumers only have one advantage when it comes to trading games in and that is being able to get money or credit for something else. The real benefactor of trading would have to be the stores themselves.

Gamestop's use of traded games is what helped cement it as the number one retailer of games.

The reason is that developers and publishers are entitled to receiving a portion of every game sold as part of the first sale doctrine with the store receiving a cut for being the middle man between studio and consumer. With trading, the store does not have to give any share of the profit from a transaction to the game makers as they were already compensated from the original sale of that game copy.

So when someone buys a $44 game used instead of a $50 new copy, GameStop or whatever store you're buying from keeps that entirely for themselves. And this has been something publishers have been complaining about for years. But as technology and the market evolved, trading in games has become less popular thanks to the advances in the Game Industry.

Disadvantages:

There are two things that have really hurt the used game market for stores like GameStop. First is that thanks to online sites like Amazon and EBay, people can now sell games directly to someone else and receive a greater portion of the proceeds compared to trading a game in. While developers still don't like this option, thanks to digital distribution they have a way to punish traded in copies of games.

Games like Call of Duty with DLC and continued support are less likely to be traded in due to the increased value they have to consumers.

Many titles these days are designed around ways to keep someone from selling their copy of a game, ergo no used copies floating around. The use of DLC and microtransactions mean continued development on a title and additional value that someone wouldn't want to sell their game and miss out on. And if you sell your game with DLC, then you wasted your money as you won't be able to make use of it anymore.

Then we have developers locking or restricting content to one time use codes for new copies. The idea is that if someone wants to access this from a used copy, they would have to spend additional money to unlock it. Microsoft originally planned to prevent people from playing used copies of their games but the negative reaction was so great that they rescinded. However this means the technology is possible and there may come a day where console games will go the way of the PC.

Digital platforms like Steam lock games to consumers' accounts which means no used copies to trade.

Speaking of the PC, with many developers turning to Steam, Origin and other clients to sell their games, "used" copies of PC games have all but disappeared. Stores like Steam specifically state that you're not buying a game copy but a game license that lets you play the title. The argument of PC game ownership is a big topic and one that's too much to talk about in this post.

Trading Down:

Trading in video games have declined in popularity thanks to digital distribution and adding more value to game ownership with stores like GameStop feeling the burn. As long as video games prices are still high, there will be a market for people wanting to sell their games so that they can afford something else. However with continued use of sales, it will be interesting to see if game trading will decline further or outright disappear.

For our next topic, we're going to talk about when stores went online and how that has impacted the Game Industry.

(Reprinted from the Xsolla.com blog)