Spot The Loony: Pre-owned Edition

Only one of the following news articles actually occurred:

Ford CEO Alan Mulally has slammed the pre-owned car market, stating it has no benefit for car manufacturers.

Dealerships are able to cut out the automobile makers and make a higher margin on second hand sales, often reselling cars multiple times, he added.

"The pre-owned market is a serious problem, because there is no benefit to any of the Ford brands," Mulally told USA Today.

"A car lot makes a bigger margin on a pre-owned vehicle, and can sell them six or seven times, so there is no incentive for them to reorder and the manufacturer gets no slice of the action."

EMI Group head Guy Hands has slammed the pre-owned music market, stating it has no benefit for record labels or musicians.

Record stores are able to cut out the labels and make a higher margin on second hand sales, often reselling CDs multiple times, he added.

"The pre-owned market is a serious problem, because there is no benefit to any of the labels," Hands told CMJ.

"Music stores make a bigger margin on pre-owned music, and can sell them six or seven times, so there is no incentive for them to reorder and the musician and label gets no slice of the action."

Random House Chairman Markus Dohle has slammed the pre-owned book market, stating it has no benefit for publishers or authors.

Bookstores are able to cut out the publishers and make a higher margin on second hand sales, often reselling books multiple times, he added.

"The pre-owned market is a serious problem, because there is no benefit to any of the major publishing houses," Dohle told the Wall Street Journal.

"Book retailers make a bigger margin on pre-owned books, 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."

Eidos life president Ian Livingstone has slammed the pre-owned retail market, stating it has no benefit for developers or publishers.

Retailers are able to cut out the creators and publishers of the product and make a higher margin on second hand sales, often reselling titles multiple times, he added.

"The pre-owned market is a serious problem, because there is no benefit to developers or publishers," Livingstone told the BBC.

"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."

Edward A. Romano, President and COO of Warner Brothers, has slammed the pre-owned DVD market, stating it has no benefit for studios or directors.

Video stores are able to cut out the production houses and make a higher margin on second hand sales, often reselling DVDs multiple times, he added.

"The pre-owned market is a serious problem, because there is no benefit to any of the studios," Mulally told Variety.

"DVD shops make a bigger margin on pre-owned movies, and can sell them six or seven times, so there is no incentive for them to reorder and those who made the movie gets no slice of the action."

The answer: only the president of Eidos is this thick.

Two related thoughts:

To say there's no benefit for game makers in the pre-owned aftermarket is patently false. The gaming industry has a healthy model for selling additional content for games - something that cars, music, books, and movies don't really have. Games also tend to live and die by the health of online communities, where having a constant stream of people playing it is to the benefit of the franchise.
Games distributed over XBLA/PSN/WiiWare/Steam don't have the ability to be resold. They also don't retail for $60, typically. If you want to remove the right to resell, the market is fine with that, so long as your games are priced and distributed appropriately.

Xythar

It's worth noting that cars and books aren't completely analogous with games, DVDs and CDs because they tend to exhibit a lot more wear and tear from normal use, whereas for optical disc based media as long as you're moderately careful with the disc you can keep it in near-mint condition pretty much indefinitely. I definitely agree that the sale of used games still benefits the market, however - the simple fact that people are able to resell their games makes people more confident to buy games new.

This is also why the argument that buying used games has no more benefit than piracy is false, as buying used games creates the market for used games, which means people are more willing to sell used games, which means people are more willing to buy new games.

Zhuge Liang (Kongming)

You have perhaps forgotten the biggest benefit for game makers that the pre-owned market (being the retail pre-owned market to which I am referring, as is, I assume, Livingstone) can offer: used game sales increases the profitability and (therefore) longevity of retail game outlets which allows them to be able to purchase copies of games from developers.

Something that I have found a surprisingly large number of people are unaware of is that game developers have already made their money once retail outlets purchase copies from them. It is not as if publishers ship out copies for free and, upon purchase of a brand-new copy of a game, a certain percentage of the store’s profits are sent back to the company. Just the ability to stock a half-dozen copies of a videogame at hundreds of stores each across the nation requires a rather large amount of capital spent by the retailer, and the amount of money they glean from the overhead is generally not enough to order more copies of the same game (or its sequel if one is forthcoming), pay the staff AND maintain the store. To be perfectly honest, I cannot ever recall seeing a retail store carry only new, unopened games and nothing else; stores that sell games tend to either offer new and used games, or new games and other products (i.e. Wal-Mart, Target). It is simply impossible to run a retail store with the cost of carrying brand-new videogames as it is.

What’s interesting is that the videogame market seems the most vocal about this issue, and not just in the West; anyone remember the Used Game fiasco in Japan a decade or so ago (and the logos bearing the words NO RESALE on various PS1 games)? It was fairly swiftly rescinded as previously prominent videogame retailers were falling like dominoes; even in a technologically and stylistically disposable society such as Japan there is a market for used videogames, and that market is very much what keeps dedicated game stores in business. And yet the videogame market seems to never take heed from previous failures at large-scale, radical reform such as this nor really understand just what kind of role used game sales really play in continuing to drive their own profits.

I could perhaps understand some sort of need for reform. No one will ever be able to stop private, small-scale transactions from occurring, of course, but compromises such as perhaps contractually forbidding game stores from offering used videogames of titles that are, say, ninety days or newer might be reasonable. This way, during which certain titles are still considered “hot” and desirable, stores will be forced to sell their new stock and require publishers to print more, and after a reasonable amount of time when the initial frenzy is over, offer a large quantity of pre-owned versions (a store can certainly accept trade-ins of a title before they would be able to legally sell them, though depending on one’s point of view that may or may not be a great idea) for those stragglers that still want the game but who are unwilling to pay prices they feel are exorbitant. This way, stores can continue staying in business (at least until the digital distribution model puts a large enough dent in brick-and-mortar stores to make the whole thing unprofitable) and developers can make more of the money they want and need to develop more games.

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