Digital Resell, 2019 edition
In doing some research on my last article about digital reselling, I found this article talking about Robot Cache, a new storefront coming out in roundabout competition with Steam and Epic. The primary selling point of this store is… reselling. Specifically, you can resell digital games you purchase and get 25% of the cost back.
The gist of Robot Cache is that it’s a new store that uses a blockchain certificate as a form of DRM. That certificate allows the store to track individual copies of a game so they can be resold. The price is the same as a new copy—you’re really just selling a license to a digital good, so it’s never really “used”—and you get a 25 percent cut put on your credit card, while the publisher gets 70 percent and the store takes 5 percent.
“Used” copies up for sale are put into a queue alongside brand new ones and the sales alternate between new and used copies, so on some sales publishers will get 95%, and on others 70%, as long as there are players selling their games back. Crucially, Jacobson says, you can’t sell a game back in the first 90 days after release, when publishers make the most money.
The “used game sold at retail price” thing kind of threw me for a loop at first, but… no, actually, I’m still looped. I understand the concept that used goods are generally cheaper to account for diminished value, which is not entirely relevant with a digital game. I can also appreciate the obfuscation going on insofar as you never really buy explicitly “used” games on this new store, as the keys will be mixed together with new ones.
But it’s difficult to grok how all this works in practice. Is the resell basically guaranteed then? Or will it sit in a queue until enough licenses have been sold/resold? Are there mechanisms in place for banning users instead of revoking licenses? What happens when you go to resell and there’s a sale on the base game? Hell, that 90-day stipulation all but guarantees that the base game will be at a lower MSRP by the time you’d be eligible to sell your own copy.
What I do enjoy though, is the candor:
While Jacobson said Robot Cache’s goal isn’t to compete with Epic or Steam, it’s notably not a reseller like Humble or GreenmanGaming, selling Steam keys at reduced prices. To some extent it has to compete, because its games will be sold elsewhere, too, sometimes with superior features like the Steam Workshop’s mod support. But it does seem like out of the gate, Robot Cache will actually be more fully featured than Epic’s store with an SDK meant to replicate most of Steamworks’ major features, from multiplayer to chat to cloud saves.
I do not expect Robot Cache to succeed as a storefront. But I am hopeful that it will be enough of an agitator to possibly move the needle on digital resells in some small way.
Gotta love this news headline: GameStop’s stock in free fall ‘as business burns to the ground‘.
Couldn’t happen to a better company, am I right?
Still, I am a touch concerned. As the article notes, GameStop revenue is down as more and more gamers rely on digital purchases and streaming services than physical games. It’s been more than five years since I bought an actual physical game, myself. But it is vitally important to me that physical gaming continues to exist because otherwise we consumers lose the ability to resell our games.
While there have been attempts to make inroads in digital resell, the lack of recent headlines leads me to believe things have stalled. The most recent article I could find was from last year, wherein a new storefront (sigh) was going to be launched that could allow digital resell based on blockchain technology. Except, you know, the consumer’s own cut was going to be only 25%.
Which kinda makes GameStop look downright charitable in comparison, yeah?
In any case, if GameStop goes away, I am not entirely certain what fills the gap. There are a few off-market used game stores in my area, but none of them have any particular web presence or meaningful sales. Perhaps we will see more eBay storefronts open up, but where are they sourcing the games? My fear is that once GameStop goes under, there won’t be a big enough lobbying voice to dissuade game makers from pushing an all-digital future and thereby removing one of the last bastions of gaming Consumer Surplus.
Can’t Stop, Won’t Stop
Posted by Azuriel
The minute you hear that name, chances are you had some kind of visceral reaction. Was it happiness or elation? Probably not. I don’t actually know if there is a positive “visceral” reaction to anything.
For me in particular, GameStop is like OG Pawn Stars. It’s a place where you took your old games and got $7 in-store credit and watched them slap a $45 price tag when they placed it back up on the shelf. And the staff would shadow your footsteps trying to upsell you on subscriptions or preorders when you were really just killing time near the movie theater (remember those?) or before getting a haircut (remember those?). That pushy behavior makes a bit more sense when you realized the insane quota requirements management levied on the near-minimum wage workers. And who can forget the time when that same management asserted that its stores were “essential retail” and thus should remain open in the middle of a pandemic. Suffice it to say, this is not a chain with a particularly great reputation. Even amongst its target audience.
Why bring this up now? Well, there are two things going on. Technically three, but I’ll get to that.
The first is that the stock price has rocketed up in the last week. Back in March, GameStop stock was trading at $2.80. Nearly everyone, myself included, felt like it was really going to be the next Blockbuster: a former retail giant in its niche who chose hubris over innovation, and let the world pass it by. If you have been in a GameStop lately, you can see that they’re trying – nearly 50% of the store is now gaming merchandise, like Minecraft T-shirts and various tchotchkes that wouldn’t be out of place in a Hot Topic. Which, okay, good for them and whomever is out there buying those sort of things. But as both Microsoft and Sony release flagship consoles with digital-only editions at a lower price-point, surely the days of physical media and those who focus on selling it are numbered?
Remember when I said GameStop was at $2.80/share in March? Friday it closed down 11% to… $35.50. It was really at about $20 on Tuesday (1/12) before it rocketed up to a high of $41 mid-Thursday, and now here we are.
What happened? Last Monday, Ryan Cohen from Chewy.com fame and two of his executive buddies landed seats on the GameStop board of directors, after owning 13% of all the shares. What’s Chewy.com? It’s a place to order online pet food. Which… yeah. If you’re older than 35, that may remind you of Pets.com back in the heady 2000 internet-bubble days. The difference here is Ryan founded Chewy in 2011 and sold it to PetSmart in 2017 for $3.35 billion. It’s now worth $44+ billion. And all this was done despite Amazon being a thing. Apparently their relentless focus on customer service is what puts them over the top with most people.
In that regard, the speculation here is that Ryan can pull the same magic with GameStop. And I can see it. The current retail experience cannot possibly be worse, so any meaningful improvements would do wonders. Plus the online shopping experience… well, it’s not that bad, when there are things actually in stock. Can’t really blame GameStop for that specifically though; just try finding a non-scalped Switch anywhere for MSRP. Point being, there is room for improvement.
One the biggest advantages and reasons I care about this at all though, is the simple reality of resale. If not GameStop, then where? Craigslist, Facebook Marketplace, eBay? People do it, I guess, but I prefer to not have to rehearse hostage negotiations strategies before heading to a parking lot to acquire luxury goods. “OK, I’ll hold the envelope in my left hand and take the Vita in my right.” Places like eBay might be good for buying things – there are some customer-focused policies to cover situations where you open the box to find a literal brick inside – but from a seller-standpoint, it’s nerve-wracking. Those same customer-focused policies make it easy for buyers to scam you by claiming it broke in transit or claim you sent a brick. That gets us back to hostage negotiation wherein the correct move is to film yourself putting the console in a box, which probably wouldn’t hold up in court anyway. Maybe you can get UPS to vouch for you, or pack it themselves?
So, yeah. I like the possibility of rolling in somewhere with this unused PS3 and get $5 for it or whatever. The local Pawn Shop sure as shit won’t take it (I asked), and my only other option would be to throw it away via Good Will. Just kidding, I still hold out hope that one day I will turn it on.
Anyway, there’s all that. Back in 2019 I had some schadenfreude over GameStop’s then-collapsing stock price ($3-$5) but pointed out how I wish them to stick around for resale purposes. And at that time, I also mentioned resale of digital goods. Even if they somehow pulled digital resale off, it probably won’t be the bounty that it may have been back then: Steam and the Epic Store would directly compete (if forced), and the Game Pass reality we live in means less people are buying licenses to games to begin with. There is some speculation that GameStop could instead start leveraging themselves into being a physical meeting space for gamers, or start selling PC parts like a mini-Microcenter (one of the best retail stores for that, but only 25 in the whole US). That’s probably the better avenue to take, IMO, as they already have stores everywhere and I’d love to have a place to go to see if a mechanical keyboard is any good or to see the difference between a VA, TN, and IPS computer monitor in-person. Price-match Amazon in-store with something I can take home that minute? Now we’re talking.
We shall see where things go.
[Edit] In the interest of full disclosure, I’ve been selling puts on GameStop stock since November. Selling puts is not the same thing as buying puts – selling means I’ve been betting that its stock will go up and not back down. I am not recommending any financial advice here.
Posted in Commentary
Tags: Customer Service, GameStop, Investment, Questionable Business Practices, Resell, Stock Market