Xbox One pre-owned: analysts, publishers, indie retailers weigh-in

Friday, 7 June 2013 21:17 GMT By Stephany Nunneley

Last night, Microsoft announced Xbox One would not block the sale of used games unless publishers decided to impose used game activation fees. Today, analysts, publishers, and a few indie retailers have commented on the matter.

Analysts feel its “unlikely” publishers will block used games

In an investors note we recieved today, Robert W. Baird & Co. analyst Colin Sebastin said at “first glance,” he would be “surprised” if publishers used the opportunity to ask for a revenue share

“Microsoft itself will not restrict used game sales, nor charge a fee for game transfers, the company is giving third-party publishers the discretion to restrict used or negotiate a fee from retailers,” he said. “At first glance, we would not be surprised although we see it as unlikely that GameStop would agree to any meaningful fees given business model constraints and outsized market share (almost 50% of Xbox software sales).”

Wedbush Morgan analyst Michael Pachter told GI International, that publishers that block used games would be lose money to competitors without such blocks in place. He does, however, believe some publisher might put time restrictions on when games would be allowed to be traded-in.

“The currency generated from used game trade-ins is beneficial for the publishers, as it provides currency available for new game purchases,” he said. “However, many believe that used games sold in proximity to a new game’s release cannibalizes sales of the new title, so we think that some publishers may limit used game trade-ins for a specified period of time following the game’s launch.

“We expect used gaming to continue to be widespread, to the benefit of GameStop.”

The analysts believe the announcement was a mixed bag for GameStop. While a possible block on used games would affect the company, the revelation that all titles would be available for digital distribution on launch day could be a blow to the retail giant’s new sales.

Publishers refuse comment or are unsure at the moment

MCV got on the horn first thing this morning, and started asking various publishers whether Xbox One games from the firm would be blocked if purchased used.

Unsurprisingly, many either declined comment or didn’t bother replying.

Bethesda and Capcom both said since neither has not announced any games for the console at this time, it was not offering comment.

Ubisoft “politely” declined to comment, as did Namco Bandai and Activision. Rising Star Games said it had no comment at present either.

While EA, 2K and SEGA said each would get back with them on the matter at some point, MCV had yet to hear back from the following publishers: Codemasters, Square Enix, Warner Bros., Deep Silver and Konami.

Speaking of 2K though, the CEO of its parent company, Strauss Zelnick, has said previously that the firm isn’t too worried about used game sales because according to him, if you make a good game, the consumer won’t want to trade it in.

“Our view about used games has been, as opposed to whining or figuring out ways to punish the consumer for buying used games, we’ve figured out we better delight the consumer,” he said. “Let’s push up our quality, which you’ve seen in our Metacritic scores, and then let’s make sure to give people DLC, often free, three or four weeks out; which is the time you’re at risk for them trading in their game.

“If you can keep the game in consumer’s hands for eight weeks, you almost don’t care anymore about used game sales because it’s the first 8 weeks that really nail you.”

The indie factor

The Xbox One news last night didn’t go over too well with the inide retail camp, with most contacted by MCV feeling such complicated pre-owned licence agreements would be bad news for the consumer, and maybe even worse for Microsoft.

“Microsoft has screwed the launch up big style,” Chips MD Don McCabe told the site. “It is digging a big hole. It’s the classic dominance leads to arrogance, arrogance leads to fall and the fall leads to a fall in sales and then they listen to consumers and become humble and being humble leads to growth.

“History always repeats itself. Our industry is very cyclic and some haven’t completed that dominance to humble cycle. Look at THQ – it became arrogant, invested in uDraw and it screwed them up. The history of video games is littered with companies that were massive in their day but took a wrong step. EA have gone through the same cycle a few times and now they have become humble again. Look at the Simcity debacle.

“You’d think Microsoft has looked at all the past mistakes and thought how can we do all of these. Again, it’s a case of more questions than answers and that’s not good in terms of PR. The negatives are what people remember and all retailers are crapping themselves. This is my business, why should you control my business?”

Matthew Brady of Game On and Xpress Games’ Chris Muckell wondered if the policies apply to get the larger retailers or the small, independent stores as well.

“They have left yet more unanswered questions,” said Brady. “[Distributor] Gem doesn’t have any info and nothing is feeding back from Microsoft. We don’t know anything. The new information put to bed the issue of Kinect buying but ‘participating retailers’ could be anyone! If it’s just the big boys, they’ll be no competition.”

“Does ‘retailers’ mean GAME, HMV & Tesco? Or does it mean Xpress Games and all the other indies throughout the country?,” added Muckell. “We’ve not been briefed on anything yet, so it’s hard to give a good honest judgment until we’ve heard from the horses mouth how/if Microsoft will be working with indie retailers.

“In a nutshell it just sounds over complicated for a consumer. There are too many rules, overcomplicating something that should be a simple process simply just to syphon out a few pounds of pre-owned revenue for the publisher/Microsoft. ”

Brady said with Microsoft over complicating things, and Game On is in need of answers as the release of the new console is going to “affect us for the next six or seven years.”

“This is going to be a minefield for all retailers to one extent or another,” added Muckell. “Imagine the fun with customer returns/unwanted gifts. It will be an interesting 12 months ahead.

“Let’s see what Sony have to say.”

Microsoft has said its E3 presentation on Monday with consists of nothing but games, for 90-minutes. Hopefully, it will take five minutes to alleviate any lingering fears consumers may have along with announcing happy good time stuff.