EA Prepares Assault on Used Games Market

The used game market, for quite some time, has been a thorn in the side of developers and publishers. There is a huge market for used games: GameStop derives 23 percent of its annual revenue from used game sales—an enormous $2 billion.

Not accounting other used game outlets like eBay, Amazon, Best Buy and Blockbuster, it is easy to see from GameStop alone that used games are big business.

But developers and publishers are not seeing a single dime from used game sales, and a number have spoken out against the practice.

“The pre-owned market is a serious problem, because there is no benefit to developers or publishers,” Eidos life president Ian Livingstone told the BBC in a recent interview. “A shop makes a bigger margin on a pre-owned title, and can sell them six or seven times, so there is no incentive for them to reorder and the content creator gets no slice of the action.”

Indeed, profit margins are high for used game retailers. GameStop reported second quarter earnings today, reporting nearly 46 percent margins on every used game sold, and even that is slightly down from their normal 48 to 50 percent.

It’s no wonder why plenty of developers and publishers, from Livingstone to Epic’s Mark Rein, have complained about the effect used games have on their respective businesses.
What are developers and publishers doing about it? Enter Electronic Arts.

Last week, EA announced one of the most ambitious attempts to curtail the used game business by offering “The Stone Prisoner” pack in all new copies of Dragon Age Origins. The content offered is not insignificant.

BioWare, the developer of Dragon Age: Origins, has said that the download pack will include hours worth of additional gameplay, exclusive items, and its own unique story arch. If players choose to buy it used and wish to receive this content, it will cost them $15. Factoring in buying the game used and then shelling out the additional $15 for The Stone Prisoner pack, it will likely cost them more than it if they were to buy the game new.

This is not the first time Electronic Arts, or even another game developer has used this strategy to curtail used game sales.

Epic Games, back in 2008, packaged in a download card for five “Flashback” multiplayer maps for Gears of War 2, which consisted of some favorite multiplayer maps from the original Gears of War.

Electronic Arts, for its part, have used Sims 3 and Madden NFL 10 as its testing grounds. In Madden, for example, an unlock code in the manual grants you access to the online franchise mode.

This strategy has been controversial to some gamers. They alleged, particularly in the case of Dragon Age: Origin, that EA simply was removing content from the game to curtail used game sales. EA denied this was the case, instead framing it as a gift to their fans.

“We’re including The Stone Prisoner DLC as a reward to fans who purchase an original copy of the game,” BioWare’s Senior PR Manager Matt Atwood told EndSights. “We are doing this to show gamers the type of amazing downloadable content they can expect for Dragon Age: Origins.”

Will the strategy work? Wedbush Morgan Securities analyst Michael Pachter seems to think so.

“Really smart,” Pachter said of EA’s used game pushback initative.

Pachter believes that despite complaints in some segments of the gaming community, it will prove successful.

“The plan to monetize this content sounds like it will appeal to gamers, with little griping from new buyers, and irrelevant whining from used buyers,” Pachter told me in an e-mail conversation.

GameStop would not comment on what it impact it believed this strategy could have on its business.

But with GameStop reporting a 19 percent rise in used game sales in their fiscal second quarter, the used game market continues to grow, and it’ll likely take more than Electronic Arts to hamstring the booming used games industry.