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EA Sports, the hottest sports gamemaker around, is setting a new trend, saying you'll have to pay double to play your used games fully. You'll first have to buy the game at the store, and you'll then have to pay EA $10 to reactivate multiplayer services.  (Source: Daily Radar)
GameStop will be helping Electronic Arts implement its scheme

Electronic Arts is the king of the sports game market with hot upcoming titles including NCAA Football 11, NHL 11, Madden NFL 11, NBA 11, FIFA 11, and EA Sports MMA.  Now it has made a controversial decision concerning all of those titles -- it will lock players who buy used copies out of online multiplayer.

When it comes to sports games, a multiplayer mode is one of the chief draws.  And now that the internet allows playing with fans all over the world, online multiplayer provides massive amounts of fun.

Purchasers of a used game get locked out of that goodness.  "Online services, features and bonus content" will all be covered by a one time code, that won't work for the new purchaser.  EA describes, "You will be unable to play multiplayer online game modes or use your downloaded content in online game modes."

Used purchasers do gain access to a 7 day trial, but they will have to purchase a $10 pass if they want to continue to play online.

EA claims its all about offering its customers more, "This is an important inflection point in our business because it allows us to accelerate our commitment to enhance premium online services to the entire robust EA SPORTS online community."

Ultimately, the slick move is likely designed to help it rake in bigger profits, though.  Many purchasers will likely pay the $10 fee to renew their online access.

Retailer GameStop is partnering with EA to implement the plan.  States GameStop Corp. Chief Executive Officer, Dan DeMatteo, "GameStop is excited to partner with such a forward-thinking publisher as Electronic Arts.  This relationship allows us to capitalize on our investments to market and sell downloadable content online, as well as through our network of stores worldwide."

GameStop recent landed itself in a bit of trouble when it was caught selling used games which it claimed they were new.  Hopefully it doesn't try that again, this time around.



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EA Sports...
By MrBlastman on 5/11/2010 9:36:20 AM , Rating: 2
It's in the bank.

What a bunch of puerile nincompoops. "You bought our game but neener neener your code doesn't work! Gimme your lunch money so you can play online."

This is pretty low. Many gamers have figured out that buying games new just isn't worth it half the time. Why pay extra when you can buy them used? Perhaps... game companies such as EA should take note rather than whining about it and instead of resorting to abusive tactics like pounding your customers to dust in a quest to raid their wallets--lower their prices a bit so more people are enticed to buy the games new.

It is simple economics really. At some price point a huge majority will buy, usually a low one. Raise prices a bit and many will back out but profits will increase. Raise prices a bit further than that and you will see a big exodus and profits will drop. I believe EA has gone too far, along with many other game companies, especially on consoles.

Right now, the economy stinks (though it is recovering), perhaps the average consumer is more price conscious than ever before. EA could recognize this and take a few easy steps to increase their revenues and profits without berating their clients, but instead, they choose to become draconian with their policies.

This is ludicrous.




RE: EA Sports...
By SeeManRun on 5/11/2010 10:56:41 AM , Rating: 2
Every single company that makes online games will be doing this depending how it works out for EA. They are all watching to see how it plays out, and if it works well, they will all do it. This is not speculation.

Once again, you are all seeing a price increase, when there has been no increase in price. It is up to Gamestop to drop their price, otherwise people will just buy new copies.


RE: EA Sports...
By porkpie on 5/11/10, Rating: 0
RE: EA Sports...
By SeeManRun on 5/11/2010 1:07:23 PM , Rating: 2
I am using logic. EA does not dictate what Gamestop sells it's games for. If EA drops the price to 50, then Gamestop can just drop their price to 45 and will still make tons of money because people will see the exact same good for 5 dollars less. The online pass changes that, and makes a used game worth less, so Gamestop has to charge less for that game because it is not the same good any longer.

This tactic will not force EA to sell their new games for any cheaper, but only to get a cut of the continued service they have to provide for buyers of the game for which EA received nothing for.

And for the other readers of this, they can say the first buyer paid the price so EA should not be getting anything after first sale, as they already got their money. The problem with that is online gaming is a service that costs thousands a month to maintain. Take the example to the extreme. EA sells 1 million copies of a game, and then after 2 months every player sells his copy. Then 2 months later they all sell their copy. EA has to continue to fund the servers indefinitely all while receiving no money. There is no incentive for them to continue hosting the servers, because every month they have those servers up they just spend money with no income generated. Obviously this is a contrived example, but it should be enough to illustrate the point that servers cost money, and EA needs some income to support a good online experience.

Microsoft discontinued support for Windows XP for the same reason, they weren't making enough money to keep it going any more, so there is no incentive to keep supporting customers.


RE: EA Sports...
By porkpie on 5/11/2010 1:17:17 PM , Rating: 2
Hello, I was replying to BlastMan, not you. Had you read my post, you would see I was agreeing with you.


RE: EA Sports...
By Reclaimer77 on 5/11/2010 1:15:07 PM , Rating: 3
quote:
I think EA lost what, $600M+ last year? That can't continue forever.


Clearly that was because of the dreaded used games market. *rolls eyes*


RE: EA Sports...
By porkpie on 5/11/2010 1:39:05 PM , Rating: 1
Companies like Gamestop are now seeing 40% of their profits from used games and, since used games are only slightly less expensive than new, each used sale is potentially the loss of a new sale, then yes, its obvious.

Gamestop alone is making $2B a year in used games. What sort of ignorant buffoon fails to realize that's eating severely into sales of new games?


RE: EA Sports...
By Anoxanmore on 5/11/2010 2:01:56 PM , Rating: 2
Well his name is Reclaimer, that would be what sort of buffoon. :)


RE: EA Sports...
By MrBlastman on 5/11/2010 4:47:11 PM , Rating: 2
You're failing to take into account one important thing:

For there to be used games, there first have to be new games that were bought and traded in. It isn't like there is an infinite supply of used games, it is a finite supply proportional to the amount that are traded in versus being kept of the original supply.

The other thing to consider is you will never have 100% of the games sold traded back in, there will always be a slight chance that at least one game out there stays in the possession of the original owner, thus the secondary supply will always remain less than the original supply. Compound this with the fact that the remaining supply will decrease as the churn continues over time and you definitely have a finite supply over time at this point. At some point in the future, the supply of used games will be decreasing towards that of a very small number.
Mathematically it can be expressed as follows:

x = new games
b = games kept
t = % games traded in
T = number of resales
G(T) = Probability of a subsequent resale (or games remaining in the wild from initial sale)

x-b
--- = t
x

thus

t^(T+1)
---------- = G(T)
2^(T+1)

So as you see, G(T) will always approach zero over time, constantly reducing in probability with each subsequent resale, T. Also, with each subsequent resale, the quality of x will degrade, thus leading to a further price reduction.

It is absolutely beneficial to EA to maximize the number of initial sales and far more beneficial to do this than to focus on trying to capture repeated resales. If they maximize the initial purchase plus focus on churning out _additional_ content, in the end they will have a better perceived image in the eye of their consumer and--they will not be chasing a perpetually dwindling number.

My equations aren't perfect(they probably stink), but, you get the idea.


RE: EA Sports...
By porkpie on 5/11/2010 5:32:55 PM , Rating: 2
Err, people who don't understand algebra shouldn't play with figures. I won't even go into the many other problems with your magic formula, but not only is the result itself wildly incorrect, but you're also raising your numerator and denominator to the same power -- which means the exponent drops entirely out the equation.

Furthermore, you have many base misconceptions outside the math alone. First is that the value of a used game depreciates substantially on subsequent tradeins. It does not. Given a high enough velocity, a single copy could service 20+ buyers in a single year, with each subsequent sale at the same price as the first resale (excluding the
"new" purchase).

The much larger misconception, however, is the belief that you can substantially eliminate the used game market simply by slightly reducing the price of new games. Would a drop from $60 to $40 do this? No, of course not. Most people would still rather pay $30 for a used copy than $40 for new. To eliminate the market entirely, you'd have to take the price down to a trivial level, would would of course decimate revenues.

Oops. Do you really think the MBA graduates at EA don't have a clue about maximizing a price/profit curve? That's only one of the very first things you're taught in business school. EA has pricing vs. sales data, and I'm sure they've done extensive analysis on it and their market position.

Still more problems. You're forgetting that the demand curve for games has a substantial measure of inelasticity to it. To illustrate, if we cut the price of toothbrushes in half, would people suddenly buy twice as many? If we did the same with cars, would demand double? There's only a certain amount of tooth-brusing and transportation people need. You'd see a small rise in total widgets sold in either case, but much less than you might think.

There's a similar inelasticity to game sales (though not as strong). A gamer only has so many hours to devote to playing. Halving the price of games doesn't mean most people will buy twice as many. Further, for EA at least, there is a certain component of Veblen behavior to their pricing. Reducing their price can reduce the status of the game, and hence the perceived value.


RE: EA Sports...
By MrTeal on 5/11/2010 7:47:18 PM , Rating: 2
quote:
Err, people who don't understand algebra shouldn't play with figures. I won't even go into the many other problems with your magic formula, but not only is the result itself wildly incorrect, but you're also raising your numerator and denominator to the same power -- which means the exponent drops entirely out the equation.


Really? So 5^10/2^10 is the same as 5^5/2^5?

quote:
Err, people who don't understand algebra shouldn't play with figures


RE: EA Sports...
By porkpie on 5/11/2010 8:09:11 PM , Rating: 2
No, I wasn't clear. They have the same exponent, so it should drop out of the numerator and denominator as such:

(t/2)^(T+1)

In that form, its easy to see it doesn't work. If 100% of the games are resold, the chance of resell becomes:

(1/2)^2 = 1/22 = 25%. QED

The proper way to solve something like this is with a differential equation of the form

dx/dt
----- = K
x

Where the k constant is based on the exchange velocity and the probability of a resale. That gives you pretty much the standard exponential decay law.


RE: EA Sports...
By MrBlastman on 5/12/2010 9:21:20 AM , Rating: 2
I had a swell reply but DT ate it. Thus, this one is a condensed reply.

quote:
You're forgetting that the demand curve for games has a substantial measure of inelasticity to it.


Not completely true. For the fanboi's, this _is_ true, for the second portion of the market--the average consumer, this is not. You forget one pinnacle economic concept:

Substitute goods.

Price it too high and the consumer _will_ find other games to play. There is a glut of good games out there. Maximize your price to attract both fanboi's and the average consumer and you win. For the average consumer, it is an elastic demand curve with games unless they are vehement fans.

quote:
Halving the price of games doesn't mean most people will buy twice as many.


Correct, I never suggested this. I suggested finding a point somewhere between 45.00 and 65.00, probably around 52.00-58.00 that will be the sweet spot towards increasing _new_ game sales.

EA charging money for a used game just rubs customers wrong. Rub enough of them wrong and they'll go elsewhere. Find the optimal price to attract both fanboi's and non, while maximizing your revenue and profits.

If you want to make a revenue stream out of the secondhand market, make your games consumables rather than content delivery vehicles--aka a bottle of scotch or a can of coke. You play it once or twice, you have to insert more money to refill it. They do this already, it is called an MMO which is a niche market that many gamers refuse to pay for.


RE: EA Sports...
By porkpie on 5/12/2010 9:48:48 AM , Rating: 3
" You forget one pinnacle economic concept: Substitute goods"

Irrelevant, as EA games are not priced substantively above those substitutes. Further, if EA did as you desired and lowered prices, the substitutes would then be higher in price, not lower. And, if the entire market lowered prices in lockstep (as unlikely as that is), there still wouldn't be a significantly cheaper option to EA.

"I suggested finding a point somewhere between 45.00 and 65.00, probably around 52.00-58.00 "

Are you seriously suggesting that a $10 price drop in new games is going to seriously dent the used market? Anyone willing to buy used is still going to prefer $45 to $55. This transfer charge will be far more effective.

"Rub enough of them wrong and they'll go elsewhere."

I'm willing to bet hard cash that EA's sales data will show otherwise.

You forget that this charge doesn't hit EA's actual customers (those who actually buy new) directly at all. It hits them slightly indirectly (by making any subsequent sale of the used game less valuable) but most consumers will vent their rage at that on Gamestop for offering them less, and not EA for instituting the gap.


RE: EA Sports...
By MrBlastman on 5/12/2010 11:37:35 AM , Rating: 2
quote:
This transfer charge will be far more effective.


Far more effective in pissing off their customers. I don't play sports games at all so I could give a crap about whether I have to pay more or not. What I _am_ worried about is the hostility of this action and how it presents itself to future used game sales.

Actually, I'm primarily a PC gamer so it won't effect me one bit. Steam routinely has weekend deals where games go on sale, brand new (if you can call a digital copy that) at deep discounts. Steam makes their customers happy, they spend money on Steam. Simple concept, right? I know a guy who blows hundreds of bucks on games simply because they are on sale (I doubt he'll ever be able to play them all).

What EA is doing is bullying their customers. I imagine quite a few who buy the used game will just forgo playing online altogether.

quote:
most consumers will vent their rage at that on Gamestop for offering them less, and not EA for instituting the gap.


I beg to differ. When they are forced to enter their credit card on an EA website, they'll clearly see it is EA that is being greedy by making them do this.

While it is a novel idea that could lead to an infintesimally small increase in revenue and profits, I think there is a much better way to go about enhancing their monetary streams.


RE: EA Sports...
By SeeManRun on 5/12/2010 10:37:10 AM , Rating: 2
quote:
If you want to make a revenue stream out of the secondhand market, make your games consumables rather than content delivery vehicles--aka a bottle of scotch or a can of coke. You play it once or twice, you have to insert more money to refill it. They do this already, it is called an MMO which is a niche market that many gamers refuse to pay for.


They are making a consumable. It is a consumable code for added content that will only be available to the first buyer. Just like the can of Coke, only the first person gets the soda, while all subsequent persons can have the can. Your recommendation is exactly what they have done!

In the future when digital distribution is more pervasive this won't be a problem. All games you buy will be tied to your credit card, or your online ID, and you won't be able to sell them.


RE: EA Sports...
By Reclaimer77 on 5/11/2010 6:12:19 PM , Rating: 2
quote:
Gamestop alone is making $2B a year in used games. What sort of ignorant buffoon fails to realize that's eating severely into sales of new games?


There have been used game shops since the freaking Nintendo. They REALLY took off during the original Playstation days. Judging by the growth of console gaming since then, or just in recent years, only an ignorant buffoon fails to realize the impact can't be THAT bad.

EA is fine. They aren't being hurt by used games, give us a break. They are simply trying to double dip into the consumer candy jar to boost profits. I'm generally all for Capitalism and business rights, but this is just over the top. They already SOLD the disk once, that should be good enough for them.


RE: EA Sports...
By MrBlastman on 5/11/2010 2:44:19 PM , Rating: 2
I am using logic, think about it for a moment:

Company sells game at 30.00/copy
Nets 1,000,000 copies sold
10.00/profit a unit (19.00 fixed costs from development, 1.00 variable production costs due to economies of scale)

Net profit, 10,000,000.00

*------------*
Company sells game at 45.00/copy
Nets 750,000 copies sold
24.50/profit a unit (19.00 fixed costs, 1.50 variable costs)

Net profit, 18,375,000.00

*------------*
Company sells game at 65.00/copy
Nets 400,000 copies sold
42.50/profit a unit (19.00 fixed costs, 3.50 variable costs)

Net profit, 17,000,000.00

*------------*
As you see above, the company is more profitable selling the game at 45.00/unit versus 65.00/unit. Now, I have simplified it to the EXTREME in that of course the 19.00 for development is assuming some form of profit to cover the basic development expenses, whereas normally this would be a floating base with a set, pre-defined sunk cost divided by copies sold, but, I'm just trying to make it digestible for the average DT reader.

At some point, you reach an optimal sales-to-profit ratio versus price, above it, you make less profit overall as well as below it. Finding that optimal point is where you want to be to maximize sales to the price sensitive consumer while taking into account your "guaranteed base" as those people who will buy regardless of the price. These gamers exist for basically every genre. It is the group that is sensitive to price versus other percieved substitute goods (i.e. other franchises that provide equivalent fun) that the game company spends quite a bit of its time chasing after. Of course, this is on the marketing front, as the development front should have addressed the built-in base from the start and these examples are assuming they did.

This is the point I'm trying to get at. The used market exists for an important reason:

People don't want to pay so much for games. They've figured out they can get the same content for less if they buy second-hand. If EA wants to increase their revenues and profits, they need to be focusing on their pricing model for the initial purchase to lure those non-fanboi's into forking over their money the first time around.


RE: EA Sports...
By SeeManRun on 5/11/2010 3:37:35 PM , Rating: 2
The way it will eventually go, and has for some, is total digital distribution, so there will be no used games. This is already the way it is for Xbox live Arcade games or Playstation network games. It will happen, and it is unfortunate in a lot of ways.

However, it could lead to new things, like a free weekend of a game that is fully functional, like Modern Warfare 2 was on Steam this weekend, or all sorts of easy ways to drop price.

Don't forget, EA can't necessarily drop the price on demand. Gamestop, or Best Buy would still have to sell all their copies they purchased for sale at 60 dollars before selling the 50 dollar games, not to mention those price guarantees many of them have.


RE: EA Sports...
By MrBlastman on 5/11/2010 4:55:18 PM , Rating: 2
quote:
EA can't necessarily drop the price on demand


You're right, they can't control the price of their games once they enter the wild in a dictator-like way.

They can control the supply of their games though via the price they charge to their retailers and via the MSRP. Of course, price-fixing is illegal and they can't dictate that the retailer has to sell it at any price, the MSRP goes a long way towards at least creating a ceiling (as EA will sell the software directly on their website at the MSRP, if a retailer charges more than the MSRP, customers will buy directly from EA instead).

The price they charge to their retailers on the initial release plus MSRP will go a long way. If they reduce their initial pricing from 60.00 to 50.00 going forward, all new games will debut at 50.00 (or less). The existing older titles in the wild will not automatically drop from 60.00 to 50.00, but, over time, as the old inventory is replaced via new inventory (and with games, it usually is LIFO versus FIFO).


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