How much do industry CEOs hate used games? A whole, whole lot

Silicon Knights chief Denis Dyack says that if used games continue to wreak havoc on the gaming business, "there's not going to be an industry."

GameStop offers a host of pre-owned games at a discount.
GameStop offers a host of pre-owned games at a discount. Screenshot by Don Reisinger/CNET

Developers can't stand used video game sales. Just ask Silicon Knights chief Denis Dyack.

"I would argue, and I've said this before, that used games are cannibalizing the industry," Dyack told GamesIndustry International in an interview published yesterday. "If developers and publishers don't see revenue from that, it's not a matter of hey 'we're trying to increase the price of games to consumers, and we want more,' we're just trying to survive as an industry. If used games continue the way that they are, it's going to cannibalize, there's not going to be an industry."

Used game sales are viewed among some developers as the industry's silent killer. After consumers play a game they bought new, they return it to the store and turn it in to receive some cash back. The retailer that bought the game then puts it back on store shelves for a reduced price. When the next customer comes in and buys that game, all the revenue goes to the retailer; the developer is only able to generate cash from new sales.

That reduced revenue opportunity has dramatically affected how developers try to profit off games, says Dyack, whose firm has developed everything from Metal Gear Solid: The Twin Snakes to X-Men: Destiny. Whereas developers used to generate cash from games for years, now, they're getting the majority of their sales "within three months of launch," Dyack told GamesIndustry.

In some cases, developers have taken huge steps to cut down on used game sales. Electronic Arts, for example, offers its Online Pass service, requiring customers who buy its sports games used to pay a $10 fee to access its online content.

"In order to continue to enhance the online experiences that are attracting nearly five million connected game sessions a day, again, we think it's fair to get paid for the services we provide and to reserve these online services for people who pay EA to access them," EA Sports vice president of worldwide development Andrew Wilson writes on his company's Online Pass page. In return, we'll continue to invest in creating great games and offer industry-leading online services to extend the game experience to everyone."

For their part, retailers have made it no secret that they want to sell as many used games as possible. GameStop's homepage, for example, shows a large image enticing customers to come in the store, trade in titles, and buy other pre-owned games. Best Buy and Amazon are also making a push for used titles, realizing that they present a major revenue opportunity.

Whether the current state of affairs is really as worrisome as Dyack says is up for debate. NPD analyst Anita Frazier told CNET last week that new physical game sales were down just 3 percent year-over-year in the fourth quarter of 2011. Meanwhile, major developer Activision Blizzard saw its revenue and profit figures jump in 2011, joining a number of game companies that enjoyed similar results.

Still, as for-profit companies, the developers want to make more cash. And each time someone buys a used game, they're losing $50 to $60 in possible revenue. Consumers, possibly unaware of the effects on developers, see a better deal and choose the used option.

So far, developers haven't come up with a good solution. But earlier this year, gaming news site Kotaku cited a source who said that the next Xbox will come with technology that will prevent owners from playing used games . Microsoft hasn't confirmed that report, of course, but if true, the industry could be in for some sweeping changes in the coming years.

 

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