The Hollywood Reporter has a good article up on how used game sales are affecting game makers (or how game makers think used sales affect them). Seth Schiesel had a similar story in the New York Times a few weeks ago (I linked to it earlier, but it’s no longer accessible), and there will surely be more as the cost of next-generation development really sinks in.
The real problem here is that video game companies essentially have a single revenue stream: sales of new games. Lucky and savvy companies can license their games for toys or movies, but for the most part it’s just new game sales. For many people, though — myself included — those new games are too expensive. I understand that development costs are getting ever higher, and that some games are priced at $39.99 rather than $49.99. But the discussion of game prices only started recently, in anticipation of $60 games coming with the 360 and PS3. There has never been any explanation, to my knowledge, of why games cost $50 in the first place.
I think this is a major part of why used games are such big business. When Napster and file-sharing first became huge, I think a lot of people were responding to the fact that not only are CDs overpriced, but that the record labels’ explanations for those prices ring so hollow. People put up with the high prices because that was the only option; the immense response to file-sharing showed that when given another option, even an illegal one, people would take it rather than continue to accept the record companies’ charade of price explanations. Similarly, when gamers had no choice but to spend $50 on a game, they paid. But when rentals and used games gave them another option, they took it. Because nobody thought $50 was a fair price to pay for Marble Madness or Revenge of Shinobi.
Game makers have only recently started crowing about high development costs. As I said in this essay, the only way companies could charge the same — and charge so much — for Phantasy Star II and crappy NES games like Bill and Ted’s Excellent Adventure was to pretend there was some inherent value that made all video games worth $50. But explaining next-gen price increases in terms of development costs tacitly admits to this charade. The companies must have recently reached their threshold or they would have raised prices already, which means that every game before, say, late 2003 was priced according to something other than the cost of making it.
Or at least that’s what it seems like; the video game industry has done an even worse job than the music biz of explaining why games cost what they do.
— February 20, 2006