I hadn’t intended to, but like many things on the Internet, it just sorta happened.
For those of you who aren’t familiar with him David Jaffe is one of the guys behind a number of popular titles on the Playstation consoles including the Twisted Metal series and, most notably, God of War, a game I enjoyed immensely. He also blogs (see link above) and is known for having a big mouth in the industry, which is something I can respect being a blogger blow-hard myself. He’s not, apparently, very good at people disagreeing with him. Which is something I did this evening.
The topic is one he’s ranted on before and it’s a topic I’ve touched on myself: The resale of used games by companies such as GameStop. GameStop makes a shit load of money off used games. Some used titles make them a 50% profit over sales of a new title. That’s caught the attention of several developers and publishers who have gone on to opine, and David Jaffe is one of them, that GameStop is somehow ripping them off and should cut them in on part of the profits from used game sales.
I’m going to repost the back and forth I had with Jaffe in Twitter below the fold in part because it’s lengthy and in part to spare those of you who don’t really give a flying fuck. I’ll also post some of my thoughts on why his argument doesn’t wash with me.
First I’m going to start with Jaffe’s tweets that prompted me to get involved in the first place. This will be a bit lengthy, but here they are:
Eventually someone is gonna have to provoke the wrath of Gstop. They can’t have it both ways. Either cut game makers in on used games and rentals or suck down digital distribution.
As I’ve said often, it’s not the consumers problem/business. But if Gamestop wants games to sell they need to play ball w/game pubs or soon the shoe will be on the other foot. Better to get in bed together now or be pushed out of business sooner than later.
@ArtGreen U are rite. BUT the practice hurts my industry and so my industry is find ways to get around it. Gamers suffer the most n meantime
People like u think this is a legal issue. Of COURSE you can resell your own property. But that is not what is at stake.
Used games hurt devs/publishers. Hurt devs/publishers go out of biz or find ways (dig dist; all content only on first sale) to stay in biz.
Gamer suffers. IF gamestop cut game makers into the deal, Gamestop could stay in biz much longer than they currently will.
It’s a pointless discussion tho. History is on game dev/pub side. Just look at music biz. We’ll laugh it was even an issue in 5 years.
@Joelvamp yes games are too much. And a player has EVERY right to get the best deal, including used. I would as well.
But again-all I can say is: look @the music biz. Games will follow suit. 4me, end of discussion. Stuff to do. 5 years it is all Dig Dist.
The above struck me as something you might hear from Tony Soprano. Say, that’s a nice side bidness yuse got wid the, shall we say, previously handled merchandice. It’dbeashame if something were to, say, happen to it.”
We can already see a couple of assumptions being made here that may not necessarily be true. The most obvious being similar to an assumption made about piracy: That every used game sale represents a lost sale that otherwise would’ve benefited the publisher. That’s not necessarily true. It’s quite possible that many purchasers of used titles may not have bought the game at all if a new copy at full price was the only option. I obviously can’t speak for all gamers, but the only titles I tend to buy used are ones that I’m not sure I’m going to like. If my only option was to buy such a title new at full price then I probably wouldn’t buy it. And, no, the $5 difference between a new and used copy of a popular title wouldn’t be enough to make me choose the used over the new. If there isn’t significant savings over a new copy there’s no point in buying it used. Are there gamers out there who always go with the cheapest copy? Probably, but is that the majority of used games sales? I would doubt it based on my experiences, though I can’t back that up with hard data.
The other assumption Jaffe makes is that the popularity of digital music is a reaction to used CD sales. At least that’s what he appears to be suggesting. I don’t know what planet he’s been on the last decade and a half, but as I recall the music industry had to be dragged kicking and screaming into the digital age. They started putting out digital downloads not because B&M music stores were making a killing on reselling old CDs, but because their customers pretty much decided they were going to get their music in digital form whether the industry liked it or not. And while it’s true that the popularity of digital music sales is growing all the time it still hasn’t surpassed the revenue made by physical media. It’s estimated that’ll finally happen next year in the U.S. and the rest of the world by 2016. The music industry is far from being digital distribution only so using them as an example for his argument is pretty silly. Is it possible that the games industry could go to distributing only via digital downloads in five years? Sure, it’s possible, but I’d be very surprised if it were to come to pass. After all the first legally authorized digital music providers hit the net back in 2001. If digital sales do surpass physical next year that’ll be almost nine years before it comes to pass, and even then it probably won’t mean the end of physical media for many more years.
So that’s what prompted me to dash off a reply. Here are the resulting tweets:
Les: @djaffe What you say is a possibility. If it comes to pass then I may stop being a game consumer.
Les: If enough others do the same then Devs still lose.
Jaffe: if the main reason you game is to own a cd, then you prob should stop gaming, yes?
Les: That’s a helluva assumption to make. There are select few games I’ve bought digital. Only things I know I’ll play continuously.
Les: Most games do not fall into that category, God of War was one of them. I played it once, it was great, I’ve not touched it since.
Les: Luckily, I can sell it. Can’t do that with digital so if that was only format it was in you’d be out a sale.
Jaffe: Ah well, c’est la vie. If not being able to sell games keeps you from playing, don’t let door hit u on way out….
I was quite surprised by that reply. Jaffe basically told me to fuck off, which seems an odd thing to do to your customers. Things went downhill from there:
Les: I’ll be sure to remember that when you announce your next title. Thanks for making my decision easier.
Jaffe: dont buy it- you’d just resell the fucker anyway.
Les: So you think getting no cash at all is better than some cash even if I resell it? It’s your own wrist you’re cutting there. Smart.
Jaffe: I think ur philosophy&unwillingness 2 Cthe bigger picture implies that all games- mine included- can fuck off. It is what it is.
Les: I see the big picture just fine. I see is a dev who wants to limit people’s freedom to resell stuff they no longer have a use for
Jaffe: then u do not see big pic. I am always customer first. Resell all u like, I support it. I am saying stores need to cut in pubs
Here Jaffe repeats something he’s said before. He claims that he’s not against customers reselling their games, but he also wants to either make GameStop cut him in on the action or he’ll try to drive them out of business by going all digital and thus eliminating not only one avenue for customers to resell their games, but the customer’s ability to actually do so altogether. How is that customer first? Answer: It’s not.
Les: For the record I should point out that I’ve never sold to Gamestop myself, but I have sold stuff I didn’t need anymore.
Les: [This is in response to his Customer FIrst claim] Except you just stated that you’d rather I fuck off than buy your game if I’m going to sell it. Contradict yourself much?
Jaffe: No I mean YOU should fuck off- not the concept. You simply seem like an asshole.
Les: Why, because I disagreed with you and had the audacity to say so? You don’t even know me. Great way to treat your customers.
Jaffe: No, not that u disagreed. The language you used and the attitude you used
I think this is a first for me. Being directly told to fuck off by a game designer that I actually admire. What I find funny about that is the fact that he’s the one that started in with the asshole-ish comments right from the beginning. I made two statements of a possible outcome of going all digital and his reply was antagonistic right from the start. Somehow that makes me the asshole?
For the record, yeah, I can be an asshole, but that wasn’t my intent in my original tweet. I suppose it takes an asshole to know an asshole, though, so I’ll take it as a compliment.
Les: What cracks em up is I’m a long-time fan of yours. Loved GoW and I even bought Calling all Cars. Still play it too.
Les: Language I used? I believe you were the first to start swearing. Wow, your hypocrisy is amazing.
Jaffe: I took your tone and attitude as rude, yes. If it was not meant to be, then I apologize. hard 2 tell at times on twitter.
Les: I think it’s pretty rude to try and blackmail retailers, which is essentially the argument you’re putting forth. Pay up, or else.
Les: Well, this has been very eye opening. I see you in a different light now. At least it’ll make for a good blog post.
Jaffe: I think it’s pretty rude to resell a game I worked on with 0% degradation between used and new and not cut me in on the deal.
Les: So what’s the difference between Gamestop and, say, eBay or a Garage Sale then? Who’s next for the mafia tactics?
It was at this point that Jaffe decided he’d had enough. Can’t blame him, he was taking it from more than just me during this time as several other folks were also on his ass about it. He tweeted that he was going to do a video blog about it, but appeared to have some trouble getting it to upload to YouTube as the video wouldn’t play and the post has since been removed.
Oddly enough a fellow by the name of Robin Clarke, who appears to be a video game writer of some sort, decided to take up the argument on Jaffe’s behalf at this point answering my last tweet directly:
Clarke: Scale, organisation and a biz model based on of aggressively diverting gamer $$$ from buying new to spending in their system.
Les: So because they’re successful at it they should be punished? WTF?
Clarke: Nobody’s saying that. Just that retail giving pubs a raw deal encourages pubs to cut retail out altogether.
Les: How is it a raw deal? How is it any different than a used car salesman selling a used car for close to retail if it’s not that old?
Clarke: Bad analogy.
Les: How is it a bad analogy? Because it refutes your argument or because one is a game and the other a car?
Clarke: Because they are businesses that work in incomparably different ways. Comparing one aspect in isolation is meaningless.
Les: Do they now? A used car dealer buys used cars and sells them at a profit. A used game dealer does the same. How is that different?
Clarke: Gamestop isn’t a “used game dealer” for one thing… Anyway, we’ll see who’s right one way or the other in five years.
I have to admit this last tweet made no sense to me. GameStop sells used games. That makes them a “used game dealer.” Yes, they also sell new games. Most used car dealers are part of a dealership that also sells new cars and, yes, I’ve had the used car dealer direct me away from buying a new car to one of their used ones. That’s how we ended up with the 2004 Honda Civic.
Les: So, in other words, lacking an effective argument you’re just going to pull the “wait and see” approach. OK, I’m good with that.
Clarke: No, but I can see that you’re convinced that you know better than ppl who’ve worked in games for years, so stepping back. gg
Les: Ah, argument from authority fallacy. That’s an oldie but a goodie. In short, I don’t agree with you and you know better.
Clarke: I don’t presume to, but I’m assuming DJaffe has better data on how well the publisher/retailer relationship is working out.
Les: Perhaps he does, if so he hasn’t shared it, and it’s very presumptuous to assume I have no knowledge of the situation.
And that’s how I managed to piss off two game developers in one evening.
So you may be wondering just what my point is with all of this nonsense. It’s simple really: Video games are subject to the same First-sale doctrine as music, books, and movies. As such I fail to see what it is about a video game that makes it special compared to other forms of media and/or merchandise that can be legally resold as used. Jaffe apparently agrees with me on that point as he claims he’s all for people being able to resell the games they’ve bought, though it appears you should fuck off if you’re just going to resell one of his (or at least I should).
Where we disagree is over whether or not anyone should be able to make a profit in the resale process, which is essentially what GameStop is doing by using the old adage of buy low and sell high. I don’t see what GameStop is doing as being any different than car dealerships selling used cars or used book stores selling used books. The issue Jaffe and other publishers seem to have is that GameStop is making a decent chunk of their revenue from the practice and, quite honestly, it’s got them feeling a little greedy.
The folks over at Gamasutra did three articles on GameStop back in April of this year which attempt to shed some light on just how much the company is making from new versus used game sales. The first looks at GameStop’s revenue and gross profits, the second new and used software sales and the last how much of the market they control. All three are worth a read.
There is no doubt that GameStop is a force to be reckoned with in retail video game sales. As of fiscal year ending 31 January 2009 they had global revenues of $8.8 billion of which $2.3 billion was gross profit. The perception in the game industry seems to be that most of that can be attributed to their used game sales which GameStop aggressively promotes to its customers.
According to the Gamasutra articles it breaks down like this:
Depending on the year, used product accounts for somewhere between 41 and 46 percent of GameStop’s gross profit. In the last fiscal year, gross profit on used product almost reached $1 billion for the first time in the company’s history. (The exact figure was $974.5 million, or 42.9% of the company’s total gross profit.)
The next largest segment of GameStop’s gross profit comes from new software sales, which totaled $768 million in the fiscal year ending 31 January 2009, up from $582 million in the previous year. Gross profit on new software was 33.8 percent of the company’s total gross profit.
Because margins on hardware are razor-thin, the gross profit in that segment is tiny in comparison to the software segments. The gross profit on new hardware was only $113 million in the last fiscal year, or 5 percent of total gross profit.
This shouldn’t be at all surprising. Used products (GameStop lumps software/hardware/everything used in one category) have a much higher profit margin than new for a retailer. The average wholesale price for a new game is just $6 to $10 less than the retail price and hardware is even worse. Used games can have as much as a 50% markup if they are particularly popular or rare. Is it any surprise that GameStop would encourage folks to buy their used games? It’s pretty difficult to make a profit on sales of new games alone as is evidenced by this 2007 Kotaku article about an online retailer dropping game sales because the industry is, in their words, “dumb and greedy”:
Online retailer DVD Empire has announced that they’re getting out of the video game retail business, citing an inability to make a profit selling games under the current business model. In their explanation to current customers, they outline seven reasons why current business practices make it, in their words, “impossible for us to make money selling video games.”
The reasons? High wholesale prices on software—“they set the retail price at just $5 above the product cost (buy it for $54.99, sell it for $59.99)”—and hardware—“take a $400 console; we only make $5 on the sale—that is a .01% gross margin.”
Worst of all? Lack of price protection and rampant price drops on bad or stagnant titles.
The game industry releases many bad games, and word of mouth spreads fast to the consumer. All of those bunk games sit on our shelves. If we do end up selling them, we lose more money, due to the lack of price protection. They won’t let us return the bombs. Of course, if the video game industry produced quality games, we wouldn’t have this issue.
The only good news here is that DVD Empire is clearing out its entire video game stock at 20% off. Enjoy, cheapasses. Michael McWhertor
The fact remains that over the past several years 37% to 42% of GameStop’s revenue comes from sales of new software whereas the used market accounts for 22% to 28%. Yes, they make a good chunk of their profit from used products (41% to 46% versus 33.8% on new software), but that shouldn’t be a reason to threaten to drive them out of business unless they pay protection money. Especially when they’re not doing anything wrong.
OK, I’ve wasted enough electrons and time banging this out. I did it more because of my bemusement at being told to fuck off than anything else, but it was also a good excuse to write up my thoughts on the issue.