As gamers continue to wonder if they’ll still be able to play used games without restriction on the upcoming next-gen consoles, NYU has published a study that shows that potential used game restrictions would actually hurt the industry, not help it.
NYU business professor Masakazu Ishihara and professor Andrew Ching of the University of Toronto came to this conclusion after studying data collected from the Japanese market. In their study, entitled “Dynamic Demand for New and Used Durable Goods without Physical Depreciation: The Case of Japanese Video Games,” Ishihara and Ching discovered that consumers are far less likely to buy new products if they know they won’t be able to resell, trade, or share them.
“The used goods market has been viewed as a threat by producers…However, it is not clear if this view is justified because the used goods market also provides owners with an opportunity to sell their products,” Ishihara and Ching wrote in their report. Ishihara and Ching predict that the games industry profits would drop about 10% if these consumers stopped buying new games due to the proposed used-game restrictions that may come with the next-gen consoles.
In an email to Wired’s Game|Life blog, Ishihara further stated that the games industry could be more profitable if they lowered the standard MSRP of console games. ““We find that the optimal price would be on average about 33% lower than the current price level, if the used game market were eliminated… So roughly speaking, in the US, game prices should go down to about $40.”
According to Ishihara, gamers would also be more likely to accept DRM if the prices of games were lower. “The reduction in price is partly driven by the fact that if the used game market were eliminated, gamers would no longer be able to sell their games and get back some money [so they need to be compensated].”
Ishihara and Ching’s report sounds like common sense to most gamers, but if recent rumors are true, it seems like Sony and Microsoft might ignore common sense and go ahead with their plans to place some sort of restriction (either built-in to the console itself or imposed on retailers) on used games, and I don’t see publishers lowering the price of new games anytime soon, either. I understand that the most of the games industry has been faced with declining profits over the last few years, but they need to look at Ishihara and Ching’s report and realize that the problem isn’t with used games, but their own business practices. (PROTIP: if the budget for creating games is outpacing the price that people want to pay for them, stop making expensive triple-A games.)