What You Need To Know About the Death of Used Games

Written by gregsuarez on Fri, Feb 8, 2013 8:18 PM

When I was a kid, I loved the old black and white monster movies Universal Studios produced in the 1930s. In particular, I was a fan of James Whale’s 1931 classic, Frankenstein, starring Boris Karloff as the iconic monster. At the end of the film, the villagers of the town that the monster terrorized took up torches and pitchforks in a blood lust furor to exact revenge against the creature.

This week on Game Debate, Valve and Microsoft were monsters, and many of my fellow members were angry, pitchfork-wielding villagers out for blood...

First was the news that Valve was under fire for not allowing Steam members to trade games among themselves. Then came word that it was a distinct possibility Microsoft would prohibit the use of pre-owned games on the upcoming Xbox 720.

Threats were made. Bile was spewed. Angry promises of never buying another Xbox product were bandied about.

I do not blame anyone for taking this news with anything other than genuine disgust. I even found this information distasteful, from a public relations standpoint. However, what I did NOT find this information to be was anything other than surprising.

While piracy is a gigantic problem for game publishers, the used game market is a huge money pit, as well. A publisher will spend tens of millions of dollars bringing a high quality game to market, only to see many of the title’s players purchasing used copies. A game can only be brand new once, and the publisher only sees profit from the first sale. That one single copy of Black Ops II or Assassin’s Creed III may change hands three or four more times in its lifecycle, and the publisher sees no profit from those additional sales. The production and distribution costs to the publisher to bring that single copy of the game to the marketplace stays fixed no matter how many times the game changes hands, with no profit to them.

From an economic perspective, an individual video game title has an “elastic” demand curve based on its price. The demand for this game will change as the price changes, and this is usually an inverse relationship: demand increases as the price drops. Goods producers need to find that just-right price that satisfies demand and maximizes profit. The used game market kicks the practicality of this theory, as Cartman would say, “squah in the nuts.”

The argument may be made by some that the price of a new game is too high, which spurs the continuation of the used game market. I cannot say if this is true, as I am not privy to the closed-door financial analyses of game publishers. What I do know is the cost of developing games is increasing, and it will continue to increase as more powerful hardware hits the street. Allow me to offer some perspective. Think back to a typical Super NES game. It was sprite-based, 2D, and had a large amount of recycled art assets. The playable character jumped, fired some kind of weapon, and maybe sprinted. Now, think about Grand Theft Auto IV. It’s a game with a massive 3-dimensional playable map filled with thousands of NPCs and vehicles, each with an AI script. There are hundreds of small streets, alleys, tunnels, and corners of the game world, and each of those need to be individually created and dressed; the same goes for all the interior areas of the game. Further, the entire world is governed by a complex physics system, which affects every polygonal object in the game, aside from buildings. Oh, and I completely forgot about the game’s multiplayer component, which is an investment in itself to develop, test, and balance. It takes hundreds of people working hundreds of thousands of man-hours, and operating on an army of expensive PCs and servers to bring this game to the marketplace. Rockstar games invested about $100 million to develop GTA4. It is no surprise, then, that they wish to earn back that investment, and then some.

The simple fact of the matter is the way video games are delivered to your PC, console, handheld device, etc. is about to change. Game publishers want desperately to stomp the used game market into a bloody pulp. As technology becomes more complex and as more of these delivery devices are networked, it allows publishers the freedom to manipulate the system in their favor. Console makers and game publishers are looking for as much control as possible over what you play, how you play, and when you play it. Many industry insiders predict the era of the PS4 and Xbox 720 will be the last generation a video game console has a ROM drive included. Ten years from now, you will likely be playing your PS5 and Xbox 1440 completely on the Cloud. No DVDs, no Blu-rays, no HDDs; the box you buy will be nothing but a media server connected to a 4k HDTV.

Not only does this scenario mean the end of the used game market (and I promise you, this is inevitable), but it also means the end of the boxed game market. Retail chains like GameStop will be nothing but a footnote in the annals of video game history. Here is some friendly investment advice: if you own shares of GameStop, sell them as fast as you can.

However, all is not doom and gloom ahead. While there is a certain segment of the market that loves to have a boxed copy of a video game, I prefer the space savings and convenience of digital distribution. So do tens of millions of other gamers, judging by Steam’s subscription rate. There is a definite advantage to having a collection of hundreds of games living on a virtual shelf, instead of taking up space on a very real shelf in my 1,250 sq-ft home.

The bigger issue in this debate, however, is cost to consumer. If used games are no longer an option, gamers will need to spend more money to feed the beast, so to speak.

Or, will they?

Think about it: games always experience price reductions, whether by temporary sales or in permanent price cuts due to the title’s age. I guarantee you this will continue to happen in the age of digital distribution. Companies will always be motivated to push certain products a little harder during sales lulls, especially during summer months, or in face of a competing product. Economic market forces will always exist in a capitalistic society.

Further food for thought: technology companies tend to operate with a philosophy of best industry practices. Tech company “B” looking to break into a market tech company “A” has already had success with will almost always mimic the best practices (e.g., the keys to success) of its predecessor/competition. In other words, if Microsoft sets up an exclusive digital distribution system for the Xbox, it is going to investigate, and likely somewhat mimic, what Valve has done with Steam to make it so successful. One of the biggest drivers of Steam’s success is its sales, especially its seasonal sales. If, for example, the Assassin’s Creed franchise is on sale for 50% off on Steam, there is no logical reason Microsoft would not follow suit and offer the same sale on Xbox LIVE. This might even be at the request of Ubisoft; the publisher may direct a distribution-wide sale across all platforms. Microsoft will be competing directly with Valve, and they are going to engage in their own strategies to cultivate a larger market share.

 

After the dust clears, the gamer will still be able to afford to play the games he or she desires. Video game publishers are not so brain dead as to price themselves out of the marketplace. Once again, I say economic market forces will prevail. Without the used game market around to cloud price elasticity, I think consumers will be satisfied in how future game pricing plays out. The bottom line is game publishers want us – NEED us – to buy their products, because without us, they would not exist. What we all must keep in mind is over the next decade our beloved industry will undergo the biggest paradigm shift it has ever experienced. We simply need to be patient until the repercussions of all these changes settle and we have a truly clear picture of how things will play out in the coming decades.

 

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18:03 Feb-11-2013

Firstly, a very good read.
Secondly, the used games market, as huge and popular as it is, was seen declining for sometime now. GameStop is now going to bare the full assault if reports of Microsoft abandoning it is in fact true. Some reports are murmuring the same about Sony's PS4, by the way.
Valve's Steam is an extraordinary service no doubt but that's also another reason this industry is going down. Used games is just the start and boxed games are next, like you said. I prefer boxed retails to digital service simply because I cannot afford to lose my bandwidth all the time. Im sure there are many with the same 'issue'. Anyway, back to the main topic, I seldom purchase used games for my PS3 and I was pretty satisfied with it. It would suck if that weren't the case anymore with the PS4 (which I'm clamoring to get). While I have to believe that our industry is going to see a drastic change in the future, I hope it's not as soon as you make it to be.

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17:15 Feb-11-2013

well there's one HUGE positive thing on it:
if pirates won't find a way to crack that,
everyone will be able to see exactly how many of which games are sold!

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20:03 Feb-11-2013

pirate will find a way to crack it. i know you know it microsoft and sony know it. just inevitable.

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20:04 Feb-11-2013

but manufacturers are trying and put serious bunch of money into it to find an unbreakable way :Đ

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20:16 Feb-11-2013

Yes they have for a long time but everything gets cracked. Might take longer to find out and might take a hard set up to do. I remember the original iphone had a program to download on the computer than you install that and it was refined to go to website on phone press button and done. And now if your in the USA its illegal to hack an console but not a phone or tablet. hmm i wonder why.

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18:59 Feb-12-2013

And lets not forget.. Some of the pirates that start these cracks tended to be insiders, sometimes with a grudge others just because they can... so no matter how complex you make the lock there will still be too many people that know how to open it

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17:12 Feb-11-2013

This is such a shame. When I was a kid I used to see how many used games I could get with my birthday money. Well that's the end of those days for everyone.

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13:02 Feb-11-2013

It'll definitely bring a faster end to bricks and mortar shops - the majority of their profit is based on used, not new games.. I hope that for console users (who are restricted in where they can buy digital content) prices will be reasonable given the relative lack of competition in their markets.

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13:06 Feb-11-2013

Of course, there's competition between consoles but for most people once they buy a console they're locked into it for the next 5 years. If you can only get content from PSN or XBLA then, while publishers (hopefully) won't price themselves out of the market, there's little incentive for decent sales

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09:21 Feb-11-2013

Excellent article! :)

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15:53 Feb-11-2013

Thanks!
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Sometimes when I bang my head against the keyboard enough, words happen.

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17:03 Feb-11-2013

Lol xD

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09:13 Feb-11-2013

I can't believe it the gaming industry is coming to this.... A long time ago in a galaxy far far away games were made by skilled programmers that wanted to entertain people and make them forget the stress of a daily life. Now games are made by hungry corporations that only want your money! They don't even care about their game anymore, most modern games have bugs that even I can solve them but they just leave them there and add thousands of wortheless DLCs with a huge price next to them. What happend to this world? What if in the future I can sell back my old car or an old house, or my cellphone? Game publishers, don't you have enough money?

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09:52 Feb-11-2013

Well said :)

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10:43 Feb-11-2013

I think a lot of publishers hamper developers with harsh deadlines, meaning they rush to get products out - hence the bugs that slip through and have to be corrected via constant updates. It's a sucky state of affairs but that's business for you, and unfortunately gaming is a massive money-making business. Still, it's heartening to see so many fantastic indie games, unhampered by these issues, finding a platform via Steam and other digital distribution services. Usually awesome, imaginative gameplay for a fraction of the cost.

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12:35 Feb-11-2013

When I was younger, I was much more idealistic than I am now. When I was earning my first undergraduate degree in business (oh, God, has it been more than 15 years ago?) I had an attitude that corporations should look out for the best interests of their customers. Most young, naive college students have that attitude. By the time I earned my Master's Degree, my opinion changed, and now that I've been in the corporate workplace for 12 years, I absolutely know better.
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The first idea you learn in business school: The function of a corporation is to maximize shareholder/owner wealth. It's not to treat its customer well, or perform against its own interests to please people. It simply exists to make people rich. And a company will do JUST ENOUGH to not piss off customers. They will not give you any more than they need, and they will do it barely within the bounds of the law.

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14:57 Feb-11-2013

Yes I know that and it pisses me of because corporations act like savage animals that will do anything to take your money and put it in their pockets. Because of corporations this world is getting worse year after year...

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14:59 Feb-11-2013

@greg
problem is that companies will never say "this situation is good enough for us", they'll always want more money, but overall it's bad attitude...

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16:00 Feb-11-2013

I think the biggest problems with corporations is how they have weaseled control of the law-making process. The corporation run the world, because they're the ones with all the money. They are able to influence law makers with backdoor deals and shady "donations," and it leaves the little guy, like you and me, struggling to make a way for ourselves in a world that's more and more designed to work against us. The corporations want nothing more than to destroy the middle class and separate the very rich from everyone else. That's why, in America at least, nothing is done about illegal immigration. Companies now have access to a massive workforce that earns very little money and expects no health or retirement benefits. It's expensive to employ the middle class because we expect our employers to take care of us.
So, to summarize, I love video games (I had to move it back on-topic) ;-p

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07:14 Feb-11-2013

used games i never or rarely buy one i work a job @ hours and wage but i can still get a new game @ 50$ on steam everyone and a while and still pay all of my bills.

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07:25 Feb-11-2013

That's good, you can manage your money well, but some people are not able to get jobs and cannot afford $50-60 for a new game for a console, so used games are good for them.

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09:50 Feb-11-2013

That's good, you can manage your money well, but some people are not able to get jobs and cannot afford $50-60 for a new game for a console, so used games are good for them.

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19:59 Feb-11-2013

Not to go against your point 100% but if you cant get a job you shouldnt be buying games. sorry to say. thats just my take on it. Be practicle with your money. if you cant get a job dont go spending it on video games.

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22:37 Feb-11-2013

Some people do, if i get money, I don't spend it on games first, I do what i need to do with it, then I use what i can to buy games. However, some people aren't smart with there money and buy games right when they get money.

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05:27 Feb-11-2013

I'm not rich, infact, I'm broke, and so are my parents (yes, I live with my parents, i'm only 17), so the death of the used game market, would be big for me, as saying I still use ps3, and some other consoles and cannot afford new games, I got lucky i was able to afford the games I bought lately for my pc. If Sony and Microsoft kill the used game market, I think I might get a Will U when I can.

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07:29 Feb-11-2013

Well in the best senario here all the companies will follow suit behind Steam. They will put out random 75% Sales. Marking a 60$ game down to 15$. Granted you won't be in controll of WHEN the sales happen, but right now you really aren't in controll of when you find the exact used game your looking for fer sale. Used games don't even drop 75% to. At MOST they only drop 50% and thats the average sale price for Steam. Furthermore old games (SWTOR knights of the old republic) get marked down to a average of 20$ (Even less if they sucked. like 5$) You're also are garenteed a mint condish copy.

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08:17 Feb-11-2013

Yes, your correct, guess I was just alittle upset to see the used game market (how i always used to buy games as a kid) die out.

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01:14 Feb-11-2013

I couldn't give less of a crap about used games. My issue with this is the inability to use games on multiple consoles (if it's true). I play a lot with my little brother and I really don't want to have to buy two copies of every game so that I can play them on his console when I leave school for breaks.

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01:23 Feb-11-2013

That's a really good point I did not even think about.

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02:03 Feb-11-2013

the games might be locked more so so consoles instead of accounts. or up to 2 accounts for familys so there can be multiple accounts on the system OR the best one yet i know you will love this. A $10 YES $10 pass to get it onto a second account for achivements

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14:10 Feb-11-2013

This would piss me off so much. There's not way I'm paying to authenticate a game on a second console. I bought the game, that should be enough.

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02:07 Feb-11-2013

They might link it to an account, which still has its fair share of problems.

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22:18 Feb-10-2013

Man this is gonna suck because I buy most games used...

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21:52 Feb-10-2013

Nice article. I dont know why everyone is getting mad at this. As a console gamer and a pc gamer personally, i never buy used games, so this doesnt affect me in any way. Steam has done this since day 1 and no ones getting mad until now that consoles are doing it. People think that these gaming companies are just trying to make more and more money. While true they are trying to survive. Just look at THQ. and every online game needs servers.

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22:04 Feb-10-2013

In my experience, PC gamers tend to be more open minded about trying new technology. PC players tend to be more tech-savvy, and already are more comfortable with change. Console gamers only deal with change every 5-10 years when a new console launches, and even then, there has always been a boxed-game market.
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Change is coming...

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07:15 Feb-11-2013

true silly council box players

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21:40 Feb-10-2013

I haven't bought a pre-owned game in a few years, but still like to have the option. Although with the price of Digital copies, it is cheaper to buy new(if you have enough download). You've change my thinking of the pre-owned market, and I now don't care that it will disappear in the near future. Great Article!

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18:49 Feb-10-2013

Nice article! Is it your first?

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22:00 Feb-10-2013

I've had a few reviews published on this site, but this is my first editorial article for GD. About 10 years ago I wrote reviews and other articles for a home video industry web site called The Digital Bits, so I've had experience with writing.

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23:59 Feb-10-2013

Well I hope you continue to write well and write some more.

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00:22 Feb-11-2013

Thank you!

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17:25 Feb-10-2013

As a Chartered Accountancy intern, I completely understand where you are coming from... This is a really nice an well though out article... Glad to see that game debate has a lot of intellectual gamers as members...

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17:51 Feb-10-2013

Why, thank you, my kind sir. Allow me to kindly return the "bon mot," and wish you many years of good fortune with regard to your burgeoning vocation.
...and...
PARTY ON!!!

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17:20 Feb-10-2013

First when i read it, i think it is long & boring but finally it is nice one!

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17:15 Feb-10-2013

A really nice article bud. I completely agree with or understand a lot of what you are saying. I really don't have a problem with Steam doing this because as you said, their games are constantly on sale and honestly that is probably cheaper than buying used games. I'm a little more wary about this in consoles though. Game prices keep rising and its at the point of being ridiculous. I remember when you could buy a brand new game for the PS2 for sometimes less than $20. Now games are almost a minimum of $60. It is sort of a vicious cycle because as the price goes up, more people will pirate or buy the games used; but as used sales and pirating goes up, developers need to charge more to make profit from their creations. Nobody really wins.

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17:54 Feb-10-2013

I really believe, and this is in the long term, that the death of the used game market will allow publishers to normalize game prices much more effectively than they can now. Development costs will continue to rise as hardware becomes more complex, but economic market forces will prevail, when all is said and done.

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17:57 Feb-10-2013

I agree. It is going to be a rough period of developers and players just having to trust each other and working together.

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18:01 Feb-10-2013

The next decade will see all kinds of changes in the game industry (far more than ever), and gamers will have to be patient while it all sorts out.

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18:19 Feb-10-2013

I believe the opposite.
Development costs will continue to come down.
New, easier to use frameworks are built on top of new engines to make game development and delivery quicker and easier to achieve.
This has happened throughout the (brief) history of programming.
The availability of these new frameworks drift down to the indie developers and modders of the general public. They require little to no programming experience and can turn out free and incredibly imaginative new games.
However, the publishing giants in turn need to enhance the quality of their products to continue to meet the ever increasing standards being set by the next generation of game releases.
But they understand that this new part of the entertainment industry is a money pit that easily competes with Hollywood. So they pump more and more money into each game development as the returns justify this investment.
This keeps the game prices set.
An interesting strategy currently being carried out is the one EA is attempting.
£60 for SimCity? Will that work? They are forcing up the price of PC games to meet console products. You cannot buy Simcity anywhere else and it is always online. Diablo 3 did the same. Will these publishing giants succeed?

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18:22 Feb-10-2013

I see your point as well. What really gets me is that these developers charge so much money for a game that is often unfinished and then they charge more money for the DLC. Just look at the Sims 3. The game itself was almost $50 and now there are almost 15 DLC packs, each about $15 by themselves. That's just not right.

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18:44 Feb-10-2013

Killing gamers' wallets with endless DLC is a whole different topic, altogether. Boy, I have some PUH-RITTY strong sentiments about that one (don't get me started on my EA Sports Tiger Woods golf course DLC rant!). >:-O

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18:51 Feb-10-2013

Felix - I think you have an interesting point of view.
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Forever the business student, I believe in the power of economic market forces. If publishers want to play nasty little games with their prices, they are going to face the consequences in the marketplace.
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Like I wrote in the article, publishers need us to by their products, so there's only so much leeway inherent in the system.

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18:53 Feb-10-2013

Actually you can buy Simcity for a lower price from other places :)

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17:14 Feb-10-2013

Remember when console gaming got properly popular? Ps2 games that cost 30 quid were 'corr... thats a bit steep' games, second hand trading turned new games into outlandishly pricey purchases, Christmas/birthday treats for a lot of people, make all the games 'new' and the market works for us (consumers) again, capitalism doesn't work when there are two markets for the same industry.

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16:44 Feb-10-2013

For some reason I don't find it strange that steam is planning to do it but for some reason the fact that a console company is kinda pisses me off. Most of the games I have ever played I have only borrowed, and I currently only own like 6 games for my Xbox.

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14:24 Feb-10-2013

since I'm trying to make game myself, I have quite a specific point of view:
to make good game it takes alot time, ideas, effort, skills - it is not easy;
then you need to find optimal way to publish the game;
I don't like "50%-off sales" and such things because they just say "the game is crap even for half price"... yes, really, think about it:
if you make a good game, worth buying, optimized for common PC and so, I have no problem paying 50€ for it - but only in case the game is worth it;
problem is that games are kinda tacky or "idea-poor" so there's no reason to buy it actually, so the price must drop so at least someone buys it...
also there's second important point: hardware requirements - what GD is about, people are unsure if they can enjoy the game, and can't afford to buy ultra-beast rig, so they invest in hardware rather than software...
solution for this all is very uneasy, I think nobody found answer yet:/

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14:47 Feb-10-2013

Steam has sales on most of the games, some good games also have 25%-75% off, so they are bad too?

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18:13 Feb-10-2013

I see no clear reason for that;
if the game has sold enough copies to generate enough money,
they should give the game free;
such as APB returned as free APB: Reloaded :Đ

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15:10 Feb-10-2013

In some places/stores that is true. Although not in Steam, they put every game to sale at some point.

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15:11 Feb-10-2013

I posted a comment here but its gone :D Don't know how ! :D :D

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15:29 Feb-10-2013

The Underwear Gnomes stole it.

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20:21 Feb-10-2013

Lol lol xD

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15:32 Feb-10-2013

tzzsmk: I'm glad you posted this here, because it emphasizes for our fellow members the point I was trying to make about how developers want the time and cost associated with creating games returned to them in the form of sales profits.

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16:55 Feb-10-2013

What game developers need to learn is that we NEED demos and betas and alphas and other s... im not going to spend 50+ euros on a game that I havent tried! They also shouldnt overprice their games ( 50 euros for premium for battlefield even after I gave 50 for the game?! you EA! ). Remember when Valve released CSGO? It was perfectly priced. Some of us dont have hundreds of euros to spend.

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17:57 Feb-10-2013

I believe as retail distribution dries up, the prevalence of game demos will become much greater. In fact, look at it this way: if a game company does NOT offer a demo, that should be a clear indication that the publisher has little faith in the game because they're releasing a garbage product. Take that as a sign to wait for reviews and gamer feedback on message boards. Generally, when a publisher releases a demo, they have great faith that the product is good.

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18:11 Feb-10-2013

YES totally agree !!!
companies like Adobe or Autodesk always provide 30-day trials for their products;
game demos and trials aren't too often, I think as I said in my post, because people might then see the game is not worth buying :/
*gregsuarez also indicated same thing by quite different explanation :Đ

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14:19 Feb-10-2013

Nice Article :D

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15:32 Feb-10-2013

Thanks!

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| 60FPS, High, 1080p
Ryzen 7 5800H 8-Core 3.2GHz GeForce RTX 3060 Mobile 16GB
100% Yes [2 votes]
| 60FPS, Ultra, 1080p
Core i5-10400F 6-Core 2.90GHz GeForce RTX 3060 Ti MSI Ventus 2X 8GB 16GB
100% Yes [6 votes]
| 60FPS, Medium, 1080p
Core i7-10700F 8-Core 2.9GHz GeForce GTX 970 Gigabyte G1 Gaming 4GB Edition 16GB
100% Yes [3 votes]
| 60FPS, High, 1080p
Core i5-11400F 6-Core 2.6GHz GeForce GTX 1650 Super 4GB 16GB
| 60FPS, High, 1080p
Core i7-3770 4-Core 3.4GHz GeForce GTX 1650 Super 4GB 16GB
0% No [1 votes]
| 60FPS, High, 1080p
Core i7-4770K 4-Core 3.5GHz GeForce GTX 980 4GB 32GB
100% Yes [2 votes]
| 60FPS, High, 1080p
Ryzen 7 5800H 8-Core 3.2GHz GeForce RTX 3060 Mobile 16GB
100% Yes [1 votes]
| 30FPS, Medium, 1080p
Xeon E3-1230 GeForce GTX 1050 Ti Gigabyte G1 Gaming 4GB 16GB
100% Yes [1 votes]
| 30FPS, Low, 1080p
Core i5-3470 3.2GHz GeForce GTX 1050 Ti Gigabyte G1 Gaming 4GB 12GB
66.6667% Yes [3 votes]
| 60FPS, Medium, 720p
Core i3-10100E 4-Core 3.20GHz GeForce GTX 750 Ti Asus OC 2GB Edition 16GB