Are digital distribution systems like Steam going to be the death of the used game industry?
We’ve come to the end of our look at used games, which means it’s time to look forward. As we’ve noted, GameStop takes the lion’s share of used game sales as they sit on their mountain of money raking in more and more profits. Last month, however, Amazon announced that it will begin to buy back used games. On the day of the announcement GameStop’s stock dropped 13% showing stockholders feared new entrants into the used games market (though the stock has since recovered).
The question remains, will other players in the used game market affect GameStop? Or is there another threat – digital distribution – to GameStop’s dominance over the market? In the final part of our discussion on used games, espion4ge and I discuss what we predict will be the end of used game sales, and maybe GameStop. Without further adieu, we present to you Part 3!
Part 3: Will the new players in the used game market (Amazon, Toys R Us, etc.) be successful and/or affect the used games industry? Can the used game industry even survive with full digital distribution seemingly imminent?
It’s interesting to see new players like Amazon and Toys ‘R Us trying to get into the used game market. They have a good reason for trying: the profits can be immense. If you are deal in used merchandise, your business simply revolves around customers stocking your shelves, and other customers buying them. But I honestly don’t expect these new stores to succeed. Look at Blockbuster and Circuit City, two retail stores that tried to enter the used game market but ultimately failed. With these big stores that don’t specialize in gaming trying to incorporate the used game industry into their store, it just won’t work. What can they offer that GameStop does not already?
From my experience, stores that participate in the used game industry just aren’t knowledgeable enough to keep up with the latest trends and price drops. With Circuit City selling Call of Duty 2 used for $55, is that really going to help contribute to their bottom line if no one buys it? So the barriers to entry for these stores that want to tackle the used game market are:
a) not being able to stay on top of the gaming industry
b) having promotions that rival or are even better than GameStop’s promotions, and finally
c) being as easy to access as the hundreds of GameStop stores around the country.
GameStop is the World of Warcraft for used games. I just don’t think any other stores can compete with the insurmountable lead and setup they have.
My name is GameStop and I am a Level ?? Lich King. Do you dare take me on?
Yea, I tend to think the other companies aren’t going to be able to compete with GameStop in the used game market either. It was kinda shocking that GameStop’s stock dropped 13% after Amazon announced their used game thing. Amazon is a powerful online retailer, but do stockholders really think that people would rather box up their games instead of getting cash in hand immediately? Maybe more savvy consumers would but they are the minority. And like you said, these other retailers aren’t focused only on games, so the amount of energy and money they are going to need to keep up is not going to be worth the minimal profits.
What I think will ultimately kill GameStop is the move towards digital distribution. Already, some analysts are predicting that there won’t even be a next generation console; everything will be streamed or downloaded instead. The announcement of OnLive at GDC is only fueling that kind of speculation. What are your thoughts on how soon games will be fully digital?
I personally think a couple console generations down the line all gaming will be digital. That should pretty much kill off the used game industry altogether, which would be good for developers. I think that the reason why developers don’t make enough money today is because the publishers take a large chunk of it due to what it takes to publish the title. But digital distribution will change all of that. Look at Steam, or even Xbox Arcade. In a couple console generations, game publishers and the used gaming industry will probably be dead just because we will no longer have the need for physical media. That’s what’s happening now with the music industry, and I feel that the film industry is not far behind. Growing up we had used CD shops, but those have pretty much gone extinct and used DVD shops are currently on the chopping block since more and more movies these days are going digital. Blockbuster is toast – I don’t expect to see them around much longer. And with technology constantly improving, our hard drives getting bigger, and bandwidth getting faster, digital distribution of games will take over just like it did with the music industry. I don’t think the used gaming industry will survive at that point. Imagine consoles further down the line – they may not even have disc drives at all!
You can already download Left 4 Dead from Steam, will everything be downloadable in the future?
Maybe the used games business will become something akin to the record business, a niche industry composed of small independent shops. That would be kind of fun, actually. Of course, if companies stop making consoles, then there will be nothing to play these used games on, but maybe there will always be a market for the old school games.
I agree with you though, unless GameStop keeps completely up to date with changes affecting the gaming industry, it can’t survive. I’m not even sure it would survive even if it does keep up to date. Right now GameStop is riding an amazing wave, I read somewhere that they are planning on opening up another bunch of stores. Amazon, Toys R’ Us, and Best Buy combined are not going to have much of an effect, it’s digital distribution that will be GameStop’s Waterloo. I guess we’ll find out in a few years or so.
That about wraps it up for for this discussion. What do people think about digital distribution in general? Are espion4ge and I wrong, will there always be some kind of physical media? Or is everyone ready to download their games? Let us know!
