So in the next 12 months, we are likely to see the release of new consoles, most likely the tentatively titled PS4 and the XBOX 720. The hype train is barreling down and rumors are flying faster than a hailstorm of bullets.
One of the biggest rumors that could have the largest impact on the game industry from the consumer and retailer perspective is the story that the next XBOX will not allow users to play used games. In a recent article from Edge-Online, they suggest that the next XBOX will require the system to be online at all times. This suggests that there will be less of a chance for the ability to play used games. The theory doesn’t rule out used games completely but it does imply that many games are going to need this connection to be played which could possibly lock games to the console that they are played on.
You may take all of this with a grain of salt, but it is interesting to take a look at what it could lead to if consumers are not allowed to purchase used games. From the perspective of a collector, this can be damaging in that older, hard to find games will be near impossible to play and find unless they are brand new. Good for sales of collectible games in that aspect but it would do nothing more than increase the prices in the grey market. People will have to purchase two copies, one to play and if it is a niche title, one to sell. Of course it will be bad for the average consumer that simply has to buy games used because they are too expensive. Recent pricing on newly released games is about ten dollars less than the original retail price. If you would have to purchase something like an online pass to play said used games, that will put the price back up to its original price and thus eliminates the value of used games entirely.
With the potential absence of used games in conjunction with a new system launch, that can drastically eliminate the adoption prospects of the new system. Games are expensive for consumers. Yes, great games can cost millions of dollars to complete and they do give a great value for the content. If lower priced options do not exist, you can expect the initial install base to be much smaller. With the PS4 rumored to come out at the same time, pricing will be a issue that just might push customers to Sony’s next system.
If you remember the Diablo 3 launch last year, it was a game that required it to have a constant online connection. You might also remember the game breaking error that happened due to the instability of their servers. If problems like this happen with the online-only XBOX, we might have another reason to be wary of purchasing the system. As great as consistent online may sound to them, it is nothing more than another obstacle for consumers that would want to purchase the new system. The best way for them to succeed with this scenario would be to release all their games back under the 49.99 price point.
There is also the perspective of the retailers and how this may affect the relationships that have been forged between Microsoft and these companies over the last decade. Right now, looking at Gamestop’s Annual report from last year, used game sales totaled roughly 2.6 Billion dollars. Of that, 1.2 Billion was profit. Now Imagine if you are a company like Gamestop with over 6000 stores and over 50,000 employees what this may do to their business. The numbers are not specific to how much of that is from Microsoft games, but if you were to go into a store, you can see that most of their XBOX section takes up a third of prime real estate on their walls. This is a very rough estimate but if you were to take away a third of their net profits, that would not only be a huge hit to their bottom line but also to their shareholders and could lead to the company cutting back on things like employment, new store growth, and in the most extreme case, the lack of carrying any Xbox product. If this worst-case scenario would happen, Microsoft would have to increase the profit margin for their products for Gamestop to carry them or they will be forced to charge higher prices in order to make up for the potential losses that they would incur. Also, If you take into account all of the other major retailers that are dealing with used games like Target and Best Buy, we have even more money on the line that have even larger macro economic implications.
Gamestop issues aside, I don’t believe that there will be an elimination of used game sales. What would most likely happen is that there will be something similar to online passes that people will have to purchase used games will have to buy. It doesn’t make it appealing to all consumers but those of you who like to play online games on the first day will probably buy new anyway.
Microsoft has been tight-lipped on any information or teasers about their new system so far and that means that they still have time to make sure that they don’t take such a serious gamble on one of their next console release.