More Evidence: Used Sales Benefit The Primary Market
from the basic-economics dept
We've pointed to research in the past that shows how a robust used goods market boosts the primary market, because the buyers know they'll be able to resell the goods at a later date, if they choose to do so. In other words, it makes the purchase less risky and lowers the bar for making that purchase. Yet, for some reason, many content execs -- especially those in the video game space -- continue to insist that not only are used markets bad for the content creators, but that they're bad for consumers as well. Yet, now there's yet another study showing how a robust used market can be quite helpful to a primary market -- specifically in the video game space. In this case, the research done by Game Crazy found that nearly 20% of sales on primary goods were purchased with dollars from trade-ins:We did a study not too long ago for a very large vendor who we managed to figure out for them 20 percent of their sales inside the first 28 days were paid for with trade dollars. So you got 20 points of their sales that wouldn't happen unless we had a trade business going. And that's specialty retail. Game specialty retail is maybe a third of the channel, 35 percent of the channel. So you got 10 percent of your sales that wouldn't happen unless somebody was out there trading games with your customers.Now, you could argue that the source is biased, but at least this is one more suggestion of how a used market can help improve the primary market.
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Filed Under: primary market, used goods, video games
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proof?
"So you got 20 points of their sales that wouldn't happen unless we had a trade business going"
I can't read the article from work so I have to ask, is there any proof that those 20% would not have been bought anyway? If not, the whole conclusion is flawed.
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Re: proof?
Well to make the conclusion flawed you would have to establish that the whole 20% would have been bought anyway. The conclusion only requires a marginally positive value.
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Re: proof?
In relation to the RIAA & other trade industry groups, they are arguing a level of scale, that piracy is causing $X of damages, and as a result needs government intervention. In that regard, the value of $X is very important, because $1 lost in sales vs $1,000,000,000 lost in sales paints a very different picture of piracy. And the lobbyist groups are using inflated numbers to get legislation passed by leveraging emotions tied to their questionable numbers.
Whereas the argument in this story is simply that there is benefit to a secondary (used) market, in which case the amount of increased sales is secondary to the existence of secondary sales. So, whether it is $1 of trade-ins vs $1,000,000,000 is irrelevant, because both are support for the idea that a secondary market helps the primary market.
So, the specific number of 20% is not what is most important, but as long as it is >0%. We can argue whether or not in the absence of a secondary market it would have been unchanged, but to argue the specific number is moot beyond simply being accurate.
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other secondary markets?
Wonder how interested they'd be in continuing to get stock options if there was no secondary market enabling them to sell their stock? I bet they'd rather have the cash, thus proving that they value something with no secondary market much less.
A massive reason why people are willing to buy equity, and thus a massive reason why companies (including content plc) are able to raise capital, is investors have access to a secondary market. If investors were locked into their investments for life you'd find a lot less people willing to pony up for equity.
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Missing Stat
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meh. used games are a thing of the past
http://www.penny-arcade.com/comic/2007/3/30/
this generation of consoles may very well be the last for games on physical media and at that point there will be no used games. steam, greenhouse, live arcade, etc. can distribute games without media, making a used market impossible.
so while it's great that used CD's, games, dvd's and whatnot are great or at least non-harful, it won't matter much since digital delivery will make physical media obsolete.
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Why You Buy Used
Also, new games let buyers (like me) jump in and try a game maker before passing judgment on them. If I buy a two year old game and love it and then see a game by the same group coming out I'll probably buy it.
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Take cars as an example
People who like to pay half that can buy a 2-3 year old car with a transferrable warranty, thus making it possible for the people buying new.
The people who (like me) have never spent more than 5K on a car, enable these "2-3 year old" people to exist.
Would Ford benefit from banning car resale ?
No, because either
- New owners would have less to spend
- New owners would own cars till they were far older and hence buy cars less often.
But music is different because noone in their right minds believes that the seller of a used CD didn't keep a copy for himself on hard drive...
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Price discrimination
While I think this is what the game companies fear, I don't think the secondary market is bad. It actually allows companies to practice price discrimination. The people who wait and buy used probably wouldn't have bought at all because the game is not that interesting. This ultimately makes the market more efficient by allowing more people to enter the market.
Thus, I think the secondary market is good but the reasons noted in the post are only one piece of the puzzle.
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Two reasons execs whine about used game sales
Reason 2: Superficially it makes sense, and if you want an excuse to give to stockholders then superficial is usually enough. At this point the execs have been whining about used sales long enough that they have to stick with the story. Some of them may have repeated the story often enough that they actually believe it. As long as congress doesn't outlaw used sales they can keep using this as an excuse.
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What's the big deal?
This is nothing new and I'm a little mystified, though not surprised, that software vendors think this is a problem. If I'm done with a book and don't care to keep it to re-read later, I have the right to re-sell it or trade it in. And then I can buy shiny new books. I would think the same would be true of games.
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