Every couple months, an industry veteran comes forward and decries used games sales as a huge issue that is ruining the industry. I certainly agree with many of the arguments – the less money developers get from sales of their games, the harder it is for them to take risks further down the road, let alone stay in business. Nonetheless, a few words should be said in defense of used games.

Gamestop IS part of the games industry

An odd thing about the typical used sales debate is the assumption that the industry is not getting a cut of the profit from pre-owned games. Of course, Gamestop is an actual part of the games industry. One has a hard time imagining how the overall games market would be healthier without a strong retail chain dedicated purely to gaming. How many pure music retailers are still around? I’m sure I’m not the only one who misses Tower Records. If used games are a core piece of the puzzle for Gamestop, so be it.

Market segmentation helps our industry broaden its base

Our industry is notoriously poor at market segmentation. Being able to sell essentially the same product at multiple price points for different groups of consumers is an important tool for maximizing revenue. Think of the “Home” and “Professional” version of Windows or lower airline prices on weekends (for non-business travelers). Or consider the movie industry, which segments the market into full-price tickets, matinee tickets, pay-per-view, DVD rentals, and broadcast rights, each with a progressively lower price point per session. Used game sales are the primary method by which the retail games market is segmented. For quite a few gamers, especially younger ones, used games are their only option for buying games instead of renting them. Keeping these price-sensitive consumers – who will often be tomorrow’s full-price customers – in the retail system and away from piracy is a good thing all around.

The more players the better

By opening up retail sales to a larger segment of the market, used game sales mean that more people are playing our games than would be in a world without them. Beyond the obvious advantages of bigger community sizes and word-of-mouth sales, a larger player base can benefit game developers who are ready to earn secondary income from their games. In-game ads are one source of this additional revenue, but the best scenario is downloadable content. A used copy of Rock Band may go through several owners, but each one of them may give Harmonix money for their own personal rights to “Baba O’Riley” or “I Fought the Law”. Further, a move is currently underway by companies such as Epic and EA to give special bonuses only to consumers who buy the game new. For example, every new copy of NBA Live 09 will include a code redeemable for the NBA Live 365 service, which provides daily stat updates for players over the course of the season. Purchasers of used copies need to fork over $20 for the same feature. This situation actually means that the more times the game is resold, the better it is for EA’s bottom line.

The used games market increases the perceived value of new games

Many factors come into play when a consumer decides if a specific game purchase is worth the money, and one of those factors is the perceived value from selling it back as a used game. In other words, people will pay more for a new game because they know they can get some of that money back when they trade it in at the local Gamestop. Importantly, this perceived value exists whether the consumer actually sells the game or keeps it. Wizards of the Coast has long admitted that the existence of the secondary market for Magic cards has long helped buoy the primary market because buyers perceive that the cards have monetary value.

Of course, the greatest threat to the used games market comes from digital distribution. Games purchased over Steam, Impulse, PSN, or Xbox Live are tied to personal accounts, which means they cannot be resold. However, game publishers need to take an important step for digital distribution to finally matter. Games purchased digitally need to cost less than their boxed, retail counterparts. A digital version of Civ 4 currently cost $29.99 on Steam, yet the boxed version costs only $24.25 at Amazon . Thus, with various volume or loss leader discounts, the retail version can often be cheaper than the digital one! Because the ability to resell my boxed copy of Civ 4 increases its value to me as a consumer, digital distribution has limited appeal unless publishers are willing to give me an appropriate discount to make up for that difference in value. Obviously, part of the problem is that publishers don’t want to offend their retail partners. Sony tried crossing the Rubicon by pricing the PSN version of WarHawk at $40, which was $20 cheaper than its retail counterpart (which did, at least, include a headset) but eventually retreated to a single price point.

Given their inherent lesser value, digital downloads should be priced to compete with used retail games, not new retail games. If publishers want to solve the used games problem, the answer is not to bluster about it in public and hope things change. The answer is to bite the bullet and lower the cost of digital game downloads.

(Of course, the real answer may be to ditch sales altogether for a free-to-play, service-oriented approach, but that’s a different story altogether…)