Used Games, Should They Be Locked Out: Part 1

Recently, there was a rumor that the Xbox Next (as i like to call it) would have a scheme to lock out used games from playing on the system. 


Disclaimer: Yes, i have traded in/sold games before.  No, i do not like to buy used games

There are several arguments to be made from both sides of this.  i will mention a few here

Issue 1: Secondary Markets
A key issue for me is whether or not there should be a secondary market for video games.  Digital distribution has answered that question for downloads (no).  It is not like you are talking about a consumer durable (like a house or car).  You are talking about a game purchased at retail for $50-60 (likely less given enough time or sales).        

Should the secondary market for video games be curtailed or eliminated?  i view the answer as YES.  Video games are like any other product.  Essentially over time the retail price will decrease.  The savings from buying games used has been severely mitigated.

What the used video game market has become is a profit engine for companies not involved in production.  They offer a pittance for people's used games and then resale them for a significant profit (percentage wise, likely more than the publishers see).  This is a double win for the used game broker... they buy low, sell high on a used game and then (if in store credit is used) they lock in additional revenue now for pre-sales.

Hypothetical (simplified): Say you traded in your copy of Skyrim for $10 store credit... You then use the credit to pre-order Mass Effect 3.  Say the store turns around and sells Skyrim for $20.  What does the store gain from your trade-in?   The store obviously gains the $10 from the sale, but they also got you to pre-order a $60 game.  So, they get an additional $70 in sales from the transaction.  Used games/credits are just a way to shift and increase profit margin. 

What does the publisher (the one who took the risk releasing the game see from that transaction?  The real answer is highly convoluted.  The publisher is likely seeing $27 (or so - from a 2010 onLive slide) from the game.  However, the used game sale likely took away a new retail sale of the game at a different price point. It is easy to see why publishers hate used game sales - they take the risk, but don't get the rewards. 

From a publisher's standpoint used games should be seen as the equivalent of piracy.  They don't benefit from either - yet someone else does.  Used games hurt the content provider.