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The Elephant In The Room

Another take on the rise of the second hand market.

 [this is a repost from my blog gameranting]

The second hand game market is thorn in the thigh of every developer.  Various solutions have been offered to fight this phenomenon, like better game play, deeper stories or online distribution.  But all these solutions avoid the big elephant sitting in the room: games are expensive.

The average retail price is 60 € for a brand new game.  Too put it in perspective: this represents 4 % of the average net income.  Yet for a kid with a monthly allowance of 30 €, buying a new game means saving two months.  So who would not buy second hand games (usually priced between 30€ to 40€) in such a situation?  And what better way is there then to fund the purchase of the latest game by selling the previous game you bought.

The second hand game market blooms because demand of games has no impact on the price.  The current market model for the game industry is that of a monopoly: 3 console manufactures dominate the market (Nintendo, Microsoft and Sony).  Since their game disks are not compatible they can impose their prices on the market.

Another reason why the second hand market blooms is the huge profits retailers can make out of selling second hand games.  A retailer has about 30 % margin on  a new game.  second hand games are taken back at low prices (5 € or less) and in return sold back at a whopping 80 to 90 % margin!  Furthermore, players who resell their games, usually are refunded in vouchers only valid with that retailer.  So second hand games present double benefits for a retailer: high profits and return customers.

Is there a real solution to stop the second hand game market: yes, but since the game industry is a monopoly only the console manufacturers can really influence that market, either by cutting prices or by taking over that market altogether.

But not until the manufacturers experience any impact from second hand games themselves, will they react to this phenomenon.

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