Monday, January 30, 2012

Console Post Of The Week (part two--following on from last week)

E-mail after last Thursday's post about the Xbox 720 contained two primary lines of dissent:
1. The PC gaming market didn't collapse after the end of used games.
2. The 720 will have a Steam-like marketplace that will actually be better than what we have today.

Let's talk about the first point.

I certainly remember that after retailers (like GameStop) stopped accepting PC games for refund or trade-in, I spent more money on console games. I still spent my gaming money, but I just spent it somewhere else.

So did lots of other people, too. In 1998, the PC game software sales were 1.8 billion. In 2008, it was 700 million. That's a 60%+ decline in just over a decade.

Sure, gathering this kind of data can be very complicated. Yes, by 2008, online gaming was contributing revenue not counted in the 700M number. Were there other complicating factors, like piracy? Yes. But is it true that refunds/trade-ins for PC games dried up during that period, and that the used game market for console videogames exploded? Also yes. And is there any question that PC gaming declined significantly during that decade? No. None whatsoever.

What brought PC gaming back? Even more than online games, I believe it was digital distribution--in particular, Steam, Which accounts for half to 70 per cent of the $4 billion market for downloaded PC games.

Again, the data collection issue rears its ugly head--4B? Is that an accurate number? I'm not sure, and I doubt that anyone else is, either, but I think we have an accurate arc, even if the numbers are imprecise: PC market declines from 1998 to roughly 2009, and then it recovers mainly due to digital distribution, led by Steam.

Let's translate that to the possibility of an Xbox "720" that kills the used game market (and the rental market as well--don't forget that). Hell, it's possible to make games unplayable on a second console inside your own house! I don't think that's actually going to happen, at least not now, but the technology can theoretically be extended to that point.

So let's say that one console giant releases a new console that doesn't play used games, and doesn't play rentals. Could the console market survive a decade-long decline? What if the other console manufacturers decline to follow suit? Why would I buy an Xbox 720, which can't play used games or rentals, when other new consoles could?

Well, I wouldn't, and a lot of other people wouldn't, either.

Folding this in with point #2, a Steam-like platform could potentially alleviate many of these problems, right? If I can't sell a used game, but I can get the new $60 games for $30 on sale, isn't that $30 savings more than I could've gotten by selling the used game?

Yes, it is, and if Microsoft sells new games for $30, or discounts them to $30 very quickly, Happyville would be full of citizens. Nirvana: a robust, dynamic pricing system with huge sales and discounts.

Here's the question, though: why would we think that would happen?

Is Microsoft more like Steam or the recording industry? I would strongly argue that a giant like Microsoft is far more similar to the recording industry, and we all know what happened there. The recording industry nearly strangled itself before they relented and provided more value to customers. The music industry was basically willing to die before it was willing to change.

$10. That's what I think the pricing difference in new games would be at launch, if that much. From $60 to $50. In other words, for millions of consumers, they'd save $10 but lose the $20-$25 value of trading in the same title (yes, I know those kinds of prices are only available for the first few weeks after a game is released, generally).

So we'd be paying $50-$60 for new games, including FPS games that often feature a single-player campaign of less than ten hours, and we couldn't trade those games in? We couldn't try out a game as a rental first?

Why would anyone think that's going to work?

And let me say this: the gaming market is a complicated beast. No one has reliable data on how the used game market affects new game sales. In other segments, though, the used market has been demonstrated to have a stimulative effect.

Destroying that market is wading into the great unknown.

I also think Microsoft is really missing the point. Look, Microsoft is in the videogame business to make money. Would destroying the used game market guarantee them more money? No.

Here's what would make them more money--much more--and it's simply following the most important rule or retail in the digital age: make it easier for people to buy shit.

Used games? Forget them. Irrelevant. Microsoft should be focusing 100% of its efforts on making it insanely, ridiculously easy for people to buy everything from Xbox Live.

Why do I spend 80% of my purchasing money at Amazon? Because they make it easy and convenient for me to buy stuff. Incredibly easy. Yes, the prices are generally great, but what's greater is the user experience.

That's what Microsoft should be doing: concentrating 100% on the purchasing experience when using Xbox Live. Put 500GB drives into the 720, and then sell us so much stuff that we fill those drives up.

Forcing me to buy all my games new because the used market was killed? Negative customer reaction. Making it incredibly easy to buy a ton of stuff on Xbox Live so that I have a better user experience and want to spend more money? Positive customer reaction.

Videogame companies need to stop beating us with sticks and start handing out cupcakes instead.

Site Meter