EA Forms Business Model To Combat Second-Hand Sales
The digital entertainment industry is unique for retailers, and extra lucrative in that they can sell the same product multiple times for only slightly less money. Just about every gamer has traded in games in the past, and they know they can't do the same with CDs, books or movies (although GameStop did take DVDs in trade for a while). This situation is "critical" according to Electronic Arts.
Thing is, while retailers just keep raking in the profits from selling the same game a bunch of times, the publishers and developers responsible for the product don't see an extra dime. EA doesn't particularly like this - and we imagine other major publishers aren't too happy about it, either - but they realize there's nothing they can do to stop it. Therefore, according to an interview with GamesIndustry.biz, senior VP and general manager for EA's European publishing branch, Jens Uwe Intat, EA is taking the following approach:
"I'd actually make the point that for us second-hand sales is a very critical situation, because people are selling multiple times intellectual property. What we're trying to do is build business models that are more and more online-supported with additional services and additional content that you get online. So people will see the value in not just getting that physical disc to play at home alone, but actually playing those games online and paying for them."
Well, that makes sense. Give the consumer more reasons to hold on to the game rather than take the trade-in money and put it towards something else. As Intat pointed out, the gaming industry is very unique simply because the second-hand product in question isn't exactly "second-hand."
"In our understanding of the business model we are actually giving away the rights to play, and if you just pass it on, pass it on, pass it on, that is not comparable to second-hand sales in the normal physical goods area where you have physical wear-out - second-hand cars, second-hand clothes, second-hand books... they're all physically wearing out, so you have an inferior quality product. But digital goods is not actually becoming inferior in quality, so people passing that on is actually very challenging for us."
Hence, EA plans to battle this challenge simply by producing games that are definite keepers. In other words, when you're scanning through your current collection, looking for games you may want to trade in, EA wants you to pass over their titles. They want you to say to yourself, "nah, I'll still play that." And if you hadn't noticed, things like online play and downloadable content are already in play throughout the industry, which should help to combat the trade-in phenomenon. And guys, PLEASE don't fill the Comments with a bunch of EA slamming; they're only saying what every other publisher on earth would say. Think reasonably. :)
8/28/2008 Ben Dutka