There has been much ado on technology news sites about the possibility that the next generation of the Microsoft Corp. (Nasdaq: MSFT) line of Xbox video game consoles, which just entered the early stages of production, might come equipped with anti-used-game programming.
The rumor, which was reported by video game Website Kotaku and attributed to a "reliable industry source," has garnered much attention from the mostly upset video game community. Though what "anti-used-game programming" entails is very much unknown, there is speculation that the console could reject video games unless the player enters a disc-specific code, a practice already commonplace in the computer-gaming industry.
This mostly unwelcome (and as yet unconfirmed) feature could severely harm companies like GameStop (NYSE: GME), which attributed 42% of its overall gross profit to the sales of used games in 2009, and GameFly, whose business model is entirely built around the lending of video games.
Cash strapped-gamers, who rely on stores like GameStop and EBGames (owned by GameStop) to buy, resell, and purchase used games at a discount, would lose out as well.
Used game vendors have frequently come under fire from video game software companies, who claim that the existence of a second-hand game market steals potential revenue (sounds familiar...). They further contend that the practice of selling used games defrauds the market and even harms the consumer (heavier wallets may cause joint problems, I hear).
With these beliefs, game publishers started taking measures to encourage the purchase of factory-sealed video games. Electronic Arts Inc. (Nasdaq: ERTS), producer of virtually every successful sports franchise ever released on a game console, requires gamers to enter a unique code to access online play. These codes come free with first-hand purchases, and at a cost of $10 to used-game buyers.
Other developers offer exclusive in-game features when you pre-order their games at certain locations. Rockstar Games offered everything from a dapper new suit to extra mysteries to solve when players preordered "L.A. Noir" at a variety of locations. "Batman: Arkham City" came packaged with a code to unlock Catwoman as a playable in-game character.
Ironically, GameStop announced in October that it would begin including codes to download Catwoman with the purchase of every used copy of "Batman: Arkham City," which they presumably bought en masse from publisher Warner Brothers Interactive Entertainment (NYSE: TWX). It wouldn't be the first time either, as used copies of "Mortal Kombat," another Warner Bros. title, also came with online passes when purchased at GameStop.
Warner's traitorous actions could augur the foreseeable future of the used games market, one in which video game publishers use online passes, not only to encourage the purchase of video games first-hand, but also to insure that they receive some form of recompense for resold games.
And because video games aren't expected to be digitally distributed for at least a few more years, there's a hefty bit of potential gain there.