How game companies can make money off used and pirated games

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posted 5/15/2009 by Charles Husemann
other articles by Charles Husemann
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There's been a lot of talk lately about how the second hand game market is killing the game industry. While opinions from the game industry vary from hard core whining to more sedated conversation, the core argument is simple. Game companies don't make any money when you sell your used game to Gamestop who then turns around and sells it to someone else. This lack of pass through cash is even harder for companies to take now that the economy has turned south.

The music industry has been battling this for years but with the music industry being mostly digital right now they don't have to worry too much about secondary sales. While the game industry is moving in that direction, fully downloadable games on the console are still years away (despite what the OnLive people say). Personally I don't think we're going to see a completely digital market until 2013 at the earliest but I think the next generation of consoles will take a bit step in that direction.

The problem can be broken down into two segments, supply and demand. Managing supply means keep games in the hands of their original buyers to prevent them from selling their used games to stores. Demand in this case is creating an incentive for the consumer to purchase a new copy of a game over an older copy.

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Most view DLC as the key to managing the supply side for a number of reasons. The first is that DLC extends the life of the game by promising gamers a new experience if they hold onto the game. Burnout Paradise and Fallout 3 are great examples of this as they've done a good job of adding new content to the game which expands on the experience of the original game. Army of Two took the idea in a different direction by an alternative "director’s cut" ending to the game which provided a bit more closure for those who were disappointed by the easy Darth Maul like death of one of major villains in the game.

To attack the supply side of the argument Stephen Totilo and others have advocated giving people a one time use coupon in the game box so they would get free DLC with the purchase of a new game. The hope is that the promise of free content people will entice people to purchase new copies of the game because the additional free content would more than make up for the money saved on a used copy of the game.

While this is a great concept but it forces developers to sink money into DLC and hope that it appeals to a wide audience and it also assumes that customers are going to know about this content in advance and are actually interested in the DLC.

The problem is that developers need to attack both sides of the equation at the same time. You need to get people to hold onto their new games as well as providing a reason for gamers to purchase a new copy of the game over a used one. This is difficult because as a digital medium you get exactly the same experience as the person who bought the game originally. Game developers also need to have a way to get their piece of the pie for each used copy of the game sold because there are always going to be cheap people out there who could care less about DLC.

My solution attacks both sides of the problem and even allows publishers to get a piece of the pirate market. I'm sure that most gamers will hate the idea but if it's done properly I think both sides will benefit in the long run.

My solution is that companies add more advertising to each game they ship. I'm not talking in game, product placement style advertisements but adding ads to the menus, load screens, teaser screens of the game. These ads can be deactivated by a onetime use code that is included with a new copy of the game. I can already hear the gnashing of teeth on this idea but longer term I think it's something that both sides benefit from.

Imagine a Pause screen sponsored by Coca-Cola ("Hey, you're stopping the game, doesn't an ice cold Coca Cola sound good right now?"). What about an ad for Depends undergarments ("You wouldn't have to stop playing the game if you were wearing Depends") for the same pause screen? Imagine a save game screen sponsored by Western Digital or a Load screen brought to you by the fine folks at Pepsi?. You could even have time based ones like a Pizza Hut ad one that tells you how you deserve some hot pepperoni pizza after eight hours of play Halo 3 online. The possibilities for this are endless, especially when coupled with local advertisements. While you're loading a level in Elder Scrolls: Oblivion an advertisement for the Renaissance Fest could be on screen along with a code for a discount admission. The possibilities of corporate synergies are plentiful.

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The advertising infrastructure is already in place so developers would just have to create the hooks in the game and this would be a major win for game developers and advertisers. Game companies would be able to monetize the second hand game market and would even be making money off pirated games as they would be forced to endure the same ads. This would also provide all kinds of fun demographic information which can be re-sold to advertisers and marketing firms, further boosting their bottom line.

I know this isn't going to be a popular idea and I'm sure there would be a thundering roar of disapproval from gamers when and if a company did this in a game. The thing is that eventually people would learn to look past the ads completely and just see the game. Most people don't see banner ads now a days and I'm thinking that over time most gamers would adjust to the ads and developers would get a second revenue stream to help offset their development costs. I'm sure there might be another solution out there to fix the problem but I don't think there's one that's easier to implement or attacks both sides of the problem so quickly. If you've got alternatives put them in the comments.