In the current generation of the Xbox 360 and PLAYSTATION 3, videogame prices have bloated to an average of $59.99 per unit; while Nintendo has maintained the previous generation’s $49.99 per unit average due to lower development costs.

Costs to develop videogames are on the rise and while the Entertainment Software Alliance (ESA) claims piracy is a factor we question does the sale of used software increase the suggested retail price of our beloved hobby?

In 2004 the ESA issued a report that claimed the industry lost $3 billion in potential sales due to videogame piracy. According to their official investor relations site, GameStop Corporation alone recorded just over $1.2 billion in profit from used software sales from January 2005 to February 2007.

Piracy works in many ways, but the most popular method is via the internet. In most cases a game is legitimately purchased, illegally copied and distributed online; the original sale of the game is the only profit the developer will gain. The used game model at various retailers works in a similar way. In most cases a title is legitimately purchased, later exchanged for credit (or cash) and resold for a profitable sum; the original sale of the game is the only profit the developer will gain.

While piracy is an illegal because it removes profit from industry developers, the used game business model is allowed but has a similar effect.

When asked who controls the majority of this market, analyst Michael Pachter told The Hollywood Reporter in February 2006:

"GameStop and Electronics Boutique [which merged with GameStop last April] essentially own about 80% of the second-hand game market,"

While GameStop and Electronics Boutique make up 80% of the used game market other retailers are focusing their attention on this cash cow. Movie Gallery's Hollywood Video, Blockbuster's Game Rush and Canada's MicroPlay stores carry used software while Best Buy is began testing the used-games business in nearly 50 stores in 2006.

Hal Halpin, president of the Interactive Entertainment Merchants Association (IEMA), the trade association that represents 75% of retailers that sell video games (including Wal-Mart, Toys R Us, Circuit City, Target, and Blockbuster) told The Hollywood Reporter, "Publishers were originally looking at the second-hand market as a second swipe at the apple." Publishers hoped the resale of an older title will push gamers to use their credit to purchase newly released titles, but it isn't usually the case.

Pachter told The Hollywood Reporter,

"I think publishers are making noise because they'd like to get a piece of that almost $1-billion that GameStop is making ... and that's all there is to it, or they'd like to somehow regulate the price of used games, to be able to say to GameStop 'we'll sell you copies of, say, the brand-new "Halo," but you've got to promise us that you won't sell the used copies for less than 80% of the new price.' If the retailers were to do that, if the used copies of a $50 game would go for, say, $40, most gamers would pay the extra $10 for the new version. That's how the used market would be regulated, but I don't think that's going to happen."

When an industry loses $1 billion dollars, doesn't that money need to be made up in other ways?

When the price of oil goes up, doesn't the industry increase the price of gas?

As piracy rocks the film industry ticket prices have bloated to $10+ in major cinemas to make up for losses.

Could the $1 billion in losses to the videogame industry of used software sales also fuel the fire of increasing the cost of games?

While we're not insinuating the sale of used games should be illegal, we wonder why the industry doesn't push the used software retailers into an agreement that secures a portion of the profit to its rightful owner.

The answer may be simpler than you think.

First, console makers are indebted to retailers to sell their hardware to the masses - any attempt to regulate their practices may strain their relationship. Valve's Steam service is a good example. Steam sells full games to customers downloadable via the internet but ordinarily sells at a rate equal-to or slightly discounted in comparison to its retail counterpart. The widespread belief is publishers force these price-points to maintain relationships with their retail partners.

Secondly; its legally within the limit, explains Halpin:

"Honestly, publishers can gripe about the used and rental markets 'til the cows home, but the reality is that the First Sale Doctrine permits the legal re-sale of this product, so it's a moot debate. If we, as an industry, are truly worried about the commoditization of our products and the erosion of wholesale and retail price points, there are far better uses of our time to that end. We need do nothing more than come together and discuss the matters face-to-face and agree upon resolutions that are both practical and legal."

Retailers that control the used software market own around 20% of the industry sales and both above points state they are within the limit to continue to push their philosophy onto gamers.

While used software sales affects the entire industry, it's surprising that most industry officials would not comment on this issue.

When The Hollywood Reporter's Paul Hyman brought the issue to then executive VP Wim Stock of Atari in 2006 he commented:

"Speaking only for Atari, I can tell you that we've tried to have a dialogue with the used-game retailers as recently as last year. We believe there's a discussion we can have with them about how publishers can share in the proceeds that come from a secondary sale. Obviously, that would make us feel very differently about the business. But, at this point, those kinds of talks have been met with a lot of pushback and it's just not something the retailers seem willing to consider. What can I say? The balloons have been floated."

Is this a business practice or are retailers holding publishers hostage for the profit of their own software?

We ask you loyal BBPS-Heads; because publishers do not receive any portion of the billion-dollar used software industry from the sale of their own titles, does the used software industry have any influence on the rising costs of the suggested retail price?

• ESA Piracy FAQ
• GameStop: Investor Relations
• The Hollywood Reporter: 'Used games a boon and bane for the industry'
• Used Videogame Pricing Data

[Edit: Correction of small grammatical errors]

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