Pre-owned crackdown is a sad excuse for business innovation

We're far from the end of the story regarding second-hand games and the next generation of consoles. Microsoft promises to have more information to reveal and implies that gamers will be placated by these further revelations; the only reasonable reaction to this nudge-and-wink follow-up to last week's public relations disaster is to raise an amused eyebrow and imagine the chaos within the company as they try to figure out exactly what the hell they're going to reveal when the time comes. Sony, meanwhile, may well be watching with some trepidation - it's entirely possible that the PS4 also restricts second-hand sales in some fashion. Sony has always said that PS4 will play second-hand games, but hasn't been drawn on detail regarding that stance - and the halo the company is presently wearing (no pun intended) will evaporate rapidly if it transpires that it's also planning such an unpopular move.

"An industry which thinks it's reasonable to wage war on perfectly normal consumer behaviour in this way is an industry that's seriously dysfunctional"

Stepping back to consider the wider picture, we're looking at a very bleak future for pre-owned or sharing of software. Steam is already the de facto platform for PC games, and it offers no second-hand sales channel and no method of sharing software with friends (and I mean that in the traditional "borrow my game" sense, not the euphemistic "sharing" as in piracy). iOS and Google Play games are locked to the user account. Now Xbox One (and possibly PS4) games will also prevent you from sharing games with friends and place hefty restrictions (and costs) on second-hand sales.

This isn't just going to impact on the racks and racks of second-hand games at game retail stores, it's going to have a major impact on gaming culture overall. It means no more buying a game and lending it to a friend when you're finished, or going halves on a copy of something both of you want to play. It means no more going over to someone's house and browsing their shelves for something to borrow - and by extension, removes a major impetus for many people to collect games in the first place. It means no more Lovefilm or other rental services for games, no more communal caches of games in the office that colleagues can dip into. Eventually, terribly sadly, it could even mean authorisation servers somewhere being turned off and an entire generation of games becoming inaccessible - a grim scenario but one which has already happened on a smaller scale with the switch-off of other DRM-backed systems.

There's little point in going into any huge depth about why this is all a bloody awful idea - suffice it to say that as a consumer myself, I don't think I'll be buying an Xbox One if its DRM system turns out to be as draconian, abusive and intrusive as it presently seems, and similar decisions by Sony would equally nix a PS4 purchase. Given that I've bought every console in every generation for almost 20 years, that's a fairly significant departure, but it's no idle chest-beating on my part. If you take out the ability to lend and borrow games, the process of sharing enjoyment and entertainment that's been at the heart of my gaming hobby since it began, I don't know that my time or investment in consoles is justified any more. It's terribly sad to think that key decision makers in our industry are now apparently of the impression that "social" in terms of prancing around like a drunken tit in front of a camera is the future of the medium, while "social" in terms of pressing a game box into a friend's hand with a gleam in your eyes and words of praise and enthusiasm on your lips is to be frowned upon and treated as criminal.

"The cost of developing AAA games has risen and will rise again, but the cost of marketing games has absolutely soared"

What's more useful is to ask how on earth we got ourselves into this position, because an industry which thinks it's reasonable to wage war on perfectly normal consumer behaviour in this way is an industry that's seriously dysfunctional. It's easy, and very tempting, to blame the avarice of publishers and platform holders. There's no denying that some of this market's biggest firms are - like so many modern companies - rather over-padded with MBA-toting examples of human mediocrity whose understanding of the creative industry they've joined is zero but whose capacity to string together meaningless corporate buzzwords into arcane incantations summoning forth utterly rapacious and awful business practices is practically limitless. This is not to say that creative and excellent business minds aren't also at work in games, but they're very outnumbered by sub-par chancers spouting corporate drivel, and as such this entire area of the industry effectively wears a giant "kick me" sign that lights up in bright neon every time something like the Xbox One reveal or an egregious abuse of IAP in a full-price game occurs.

Yet even if swearing about people with expensive suits, MBAs and not a jot of real wit or intelligence to share between them is cathartic, it doesn't actually get us to the bottom of the problem. The reality is that the crack-down on sharing and second-hand sales is part of a wider malaise. A wide swathe of high-end game development is struggling to pay the bills - that's a simple reality. The cost of developing AAA games has risen and will rise again as new consoles demand higher-quality assets and new technology R&D, but the cost of marketing games has absolutely soared - and as Square Enix' Yosuke Matsuda pointed out in a revealing statement this week, the cost of actually getting games into retail and sold through to consumers has also soared. Everyone poked fun at Square Enix' huge sales targets for games like Tomb Raider and Hitman: Absolution, but Matsuda's assessment of what happened to those games is sobering - as are the frankly enormous figures the company had to earmark for marketing and retail-related costs such as returns allowance.

This is reality; something is utterly broken at the heart of the AAA business. It's entirely possible to put a game on the market which sells millions of copies, easily covering its development budget, and still not make enough money to justify the outlay once you factor in all the other huge costs. Developers have always felt screwed when they looked at games selling millions of units while royalties failed to materialise thanks to the creative accounting methods many publishers borrowed from Hollywood. Now, publishers are starting to feel a similar pinch, as games which should have been a safe bet see their profits evaporate in a perfect storm of additional costs and revenue drains. The cost of making a game has risen a bit; the cost of getting someone to buy a game has risen a lot, and unless your franchise is a Call of Duty scale monster, the whole thing is looking increasingly unsustainable.

"Killing off the second hand market isn't going to earn the industry a moment's respite - if anything, it'll hasten the decline and death of the existing business model"

Is the answer to crack down on customers sharing games with friends? No, of course not; that's the frightened lashing out of a wounded animal. Is it to crack down on the second hand market? Again, no. There's absolutely no question but that companies like GameStop and GAME have spent the past decade rabidly gnawing on the hand that fed them, but this ill-conceived crusade against second-hand sales punishes consumers for the industry's own years-long failure to rein in the transgressions of its most cavalier and self-interested retail "partners".

Is there, however, a problem that needs a solution? Yes. The AAA business simply has to change; the existing model is broken and a new one needs to be found. Matsuda says that Square Enix is going to experiment with ideas like Kickstarter and Steam Greenlight, among others, in the hope of finding a new approach to creating games that makes financial sense. I'm not convinced that crowdfunding is a viable model for big publishers in the long term, but I'm absolutely convinced that something new needs to be tried. How games are funded, created, distributed and ultimately enjoyed is going to have to change radically in the next few years, or there simply isn't going to be a AAA market outside of a handful of established, ultra high-budget franchises. Killing off the second hand market isn't even going to earn the industry a moment's respite - if anything, I suspect that it'll hasten the decline and death of the existing business model. I don't expect that any company which isn't rethinking its AAA funding, development and release model to still be in business five years from now.