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TheStreet Open House

Retailers Play Harder on Secondhand Sales

GAME CHANGERS For years, the gaming demographic has been expanding. It's no longer predominantly teenage and male; seniors and female toddlers -- who play dress-up with Barbie (MAT) dolls online -- are getting into the game.

"Compared to 10 or 12 years ago, the market was more male and it was in the 17-35 demographic," Noel says. That change means fewer avid gamers, who are more likely to buy a new game, and more cost-conscious users. Steinberg says the latter group is "more frugal and just looking for a title on a box and are the ones more likely to look around and wait a week or two because they don't have to have it that second."

It's these cost-conscious shoppers that have publishers worried, but they're cooking up ways to strike back.

According to Christopher Swain, director of the University of Southern California's Games Institute, "the companies that are the most involved -- Electronic Arts, Activision Blizzard (ATVI), Disney (DIS) and Nintendo -- recognize that their games are getting sold and they're not making any money," he says. "They're adopting new strategies, imbuing their games with bonus content that encourages you to be the first one to buy it versus the second one, or when gamers pre-order, they get exclusive market player characters. Even if you buy at the store you won't get them, and you won't get them if you buy secondhand."

Steinberg, the analyst, confirms the trend. "The pressure is so crippling, many publishers are trying to find ancillary means and testing out pilot programs that can generate revenue. Think of EA's online pass program that charges $10 for titles like Madden NFL or other downloadable content online."

Also, Steinberg says, "rather than push the bar higher" in terms of creating compelling content, publishers will often work with what they have, producing games called "minimum viable products" that boast fewer extra features but still draw an audience. Grand Theft Auto 4, Fallout Three, Mass Effect and Farmville are some examples, he says, and the idea is to get gamers to spend $4 or $0.99 here and there, which can add up. Virtual add-ons have also taken off, as have virtual universes such as Lord of The Rings, which offer unlimited play for a monthly subscription.

Swain sees more publishers adopting these strategies "because the economics are so much better," he says. "The more they distribute online, the higher the margin goes. They don't have to print, ship, deal with problems or pay the retailers taking a cut." Another perk: "You can get more creative with what you do," Swain says. "Selling the stuff online increases innovation and you can justify trying something more risky and oddball."

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