Let me tell you how selling a product works

Once again, a game developer has stumbled out into the internet, trash talking used video game resellers, and generally sounding like a clueless buffoon. Naturally, he's mad at GameStop, because it's the biggest and sexiest target. Everything here applies to other big corporate re-sale stores, like Best Buy and Amazon.

And yes, I'm using GameStop's real name this time, at risk of being attacked by internet trolls, because all this anti-consumer blathering needs to be called out.

Read the comments if you feel like taking in a healthy dose of neckbeard fury.

Now, Ru Weerasuriya, let me, a low-level retail employee with no economics degree, explain to you how your business works.

1. Make a product worth buying.

Ready at Dawn, Mr.Weerasuriya's development studio, does not make bad games, so this isn't really an issue. They're responsible for the God of War titles on the PSP, and the Wii port of Okami. (Remember that their highest rated title is a port for later.) 

I mention up front that making a product worth buying is a vital part of the process because the other guy famous for complaining that GameStop is "cannibalizing" the industry is Denis Dyack of Silicon Knights. Sweetie, the reason your company is struggling is that the only games you've put out in the past decade are Too Human and X-Men Destiny, and you got your pants sued off by Epic Games for copyright infringement.

2. Find someone willing to publish your product.

Ready at Dawn is a second-party developer published by Sony Computer Entertainment. They pay Sony to package and advertise their product, and release it on their consoles. Keep in mind that if the game isn't selling, your publisher isn't going to be willing to keep paying to print more copies. (SEE #1: "Make a product worth buying.") Ready at Dawn is fortunate in that their two God of War games have been re-released several times on PSP and PS3, both physically and digitally, so there's still a stream of revenue coming in. You know, because the games are good, and people want to buy them.

You can, of course, skip this step and the following steps by self-publishing, but I'm pretty sure Mr. Weerasuriya doesn't want to give up the money and recognition he gets for making A-list titles like God of War. More on that later.

3. Find someone willing to buy your product.

Did you know, Mr. Weerasuriya, that everything sitting on the shelves at GameStop, or Best Buy, or Target, or God forbid Wal-Mart, is owned by that store? Stores don't "lease" products, consignment style, and send a check to the publisher each time one sells. They buy in bulk.

People who play video games are not your customers. Retailers are your customers.

GameStop buys loads and loads of physical copies of your game from your publisher, and then keeps the meager profit they make from selling them again, to A Video Game Fan. Your continuing sales profits come from retailers ordering more copies of the game.

It should also be noted that GameStop (though Best Buy and Amazon and even Wal-Mart are getting into it now, too) is notorious for pushing pre-sales of new releases. You know, day one sales. The ones that make developers money.

Mr. Weerasuriya tells a charming story about freaking out on some poor GameStop employee who tried to sell him a used copy of a game. I mean, first off, if you hate GameStop so much, why are you shopping there? The developer sees no profit from the sale either way. The money all goes to GameStop regardless, because GameStop already paid for the game. And secondly, I guarantee you that that poor register jockey schmuck was being forced to try to pre-sell full-price copies of that game to everyone who came in the store for months.

Because:

4. Selling new video games is not profitable for retailers.

There's a reason GameStop is the only major video game specialty chain in most parts of the US, and there's a reason they push day one sales of their new stock. The instant that game goes on sale, even $10 off, the retailer is selling it at a loss. Other retailers, like Target or Best Buy, can subsidize their somewhat-less-than-profitable video game department with high margins in other areas, like clothes or food or pretty much anything else. GameStop only sells video games, and video game paraphenalia.

So why are they able to stay in business?

Used game sales.

Used products, accessories, and strategy guides are really the only things GameStop sells that they actually make money on. The figures for game consoles are even worse than the games themselves.

Let me spell this out for you, Mr. Weerasuriya.

The reason GameStop is able to buy your product- to the tune of nearly 50% of the market share for new 360 and PS3 software- is because they make money off of selling your product used. You remove GameStop from the equation, because "wah wah they're profiting from selling our product used wah," developers on the 360 and PS3 immediately lose half of their sales.

That's why, even though these developers whine and moan about used game sales, they're completely unwilling to stop dealing with GameStop.

"Waaahh! GameStop made money off a used sale of my game and I hate them and they're ruining the industry wah wah wah! Here, GameStop, have some awesome preorder bonuses. Please sell our stuff. Please."

There is absolutely no reason to take any of these people seriously.

Now, if you don't want to have to go through a physical retailer to sell your product, there are plenty of ways to do so. Digital distribution through PCs and consoles is on the up, though your product wouldn't be accessible to people without reliable internet. You could throw your support behind the Ouya, a console designed specifically to allow programmers to publish their own games with no licensing fees, or even self-publish on Android and iOS. 

Of course, if it did any of these things, then Ready at Dawn would lose its valuable contract with Sony, and no longer be able to make fancy-pants bro games.

The way the industry is set up now, if you want to make big, A-list titles, you have to play nice with GameStop. They are the ones buying your product, and advocating its value to consumers.

Speaking of whom!

I've only been talking about the business side of things, of course, and completely ignoring the most important factor: the people who play the video games. Like me. I am the most important factor.

Which brings us to:

5. Gaming is a really expensive hobby.

Your average person, self included, simply can't afford to pay cash for a ton of new releases every year. Assuming we want to own the game instead of borrowing or renting it, that leaves us with two options: wait to buy the game until it's used or on mega-sale, or magic up some money from somewhere.

GameStop is that magical money generator. GameStop and other corporate resellers provide a service that consumers want.

As my disapproving parents will tell you, I buy a lot of new release video games each year. How can I afford to do that on my meager retail hourly wage?  

I use trades.

I trade in the stuff I've already played to get a discount on the new stuff I want. I've traded in stuff to get mega expensive collector's editions. I've traded in stuff to get Steam money and network cards, to buy digital content that doesn't have to share profits with a retailer.

Sure, I could sell my crap myself on Craigslist or eBay, and I have done so, but that's an amount of time and effort that doesn't really seem necessary if I'm not selling something fancy and expensive. GameStop is quick and easy, and you can get the product you're looking to buy all at the same time. GameStop's CEO even went on record saying that 70% of resell credit given out by GameStop is used to buy new products.

More importantly, consumers have the right to resell a physical product that they buy. They don't have the right to copy the content, but the physical game is theirs to do with as they please. The first-sale doctrine is a vital pillar of consumer protections. To make an awesome nerd analogy, these developers are like the Harry Potter goblins who believe that everything belongs to the original creator, no matter how many times it's been gifted or sold.

"Nope, the sword of Godric Gryffindor is definitely still mine, even though one of my ancestors made it specifically to give to Godric Gryffindor a million years ago and we haven't had it since."
        
Of course, the goblins didn't expect to be given money every time the sword changed hands. Which means that what some of these developers are proposing is even more ridiculous than a fake goblin culture that was designed to seem nonsensical to modern readers. 

"You can't make a living at the expense of everybody else," says Mr. Weerasuriya. Remember when I said to remember that Ready at Dawn's highest-rated title is a Wii port of Clover Studio's Okami? Now is the time to remember that, and either giggle, or roll your eyes, or both. 

Mr. Weerasuriya, your ideas are bad and you should feel bad.

#dealwithit