That's not how it works.
The margin on the first game drops with the returned revenue with the trade in, but that lost revenue is simply transferred to another game that might not have even been purchased were the first game not traded in, in the first place. This is the point of the equation you don't seem to get.
The entire incentive behind a resale or trade in option is to enable gamers to buy more games than they ordinarily would, and make more impulse purchases too. The situation doesn't usually adhere to games which might be regarded as keepers, e.g. games that users may want to keep in the long run, in-case they ever want to replay them. Rather it usually incentivises the trade in or resale of games they only intend to play through in the short term, and whose value they want to put towards another likely temporary or impulse purchase.
However, to be more viable to publishers, this is why I mentioned that a digital trade in voucher could adopt a similar depreciation of value that retail trade in does, that is the older a title is, the less trade in value it holds, and the less of a contribution it pays towards a newer purchase.
It is a lack of a proper trade in option of digital that is one of the key reasons there aren't more digital sales, especially comparative to retail, and more so the opposite. As I mentioned many times, it's resale options on retail games that enables gamers like me, to buy far more games than we would without such options. Were digital to adopt a similar trade in option, it would be the exact same thing, only with greater margins to the publisher.
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You don't look at it as lost revenue, but gained revenue, which again, is the reason Microsoft are even offering this 10% return. They are not looking at it as lost revenue, but rather revenue that will be put towards games that the customer may not have otherwise made.
In other words, customer Y might purchase only 3-5 full priced digital games a year without a resale or trade in option (situation A), but 10-12 full priced digital games a year were there to be a digital resale or trade in option (situation B).
So in situation A, with your figures, the publisher makes $126-$210 in the year from customer Y.
In situation B, say the gamer keeps 3 of those 10-12 games and never trade's them in, the publisher makes $315-$369 in the year from customer Y.
In other words, because of the trade in option, they have net revenue gain.
This is the point of my posts you are continually disregarding. Don't look at it as revenue on like for like sales, the whole point of a resale or trade in economy is that enables more sales than would ordinarily take place.
Ok. there are quite a few variables.... But if we look at a typical gamer, this person is going to buy games regardless of whether or not digital buyback exists.
Let's say a gamer budgets $600 a year on a publisher.
A) If I buy exclusivly buy digital games, and there is no buyback option, and I buy Game 1for $60, and a second game for $60. The publisher gets $420 from me annually...
B) If I buy a digital game A, for $60 play it to completion, and then sell it back to the publisher for $15 bucks (25%)Then use that $15 to buy another $60 game, the publisher takes home $69 in revenue. I sell game 2 for $11.25 (25% of my out of pocket)... So forth and so on. If that's how it would work, then after my it would cost me $545 for 10 games. The publisher netted $381.5. IF that person desides they want to spend there $55 savings on another game from that publisher, (they'd be over budget), the publisher would pull in $423.50, after selling 11 games.
Or they could say 'I only have time for 10 games a year, thanks for the savings, sorry for your loss. Oh yeah, and I'll only need to pay for 9 games next year, thanks again'
If the rebate doesn't consider out of pocket expense then the situation is even worse for publishers. If it was just a flat 25%, publisher margin would drop from $42 to $27... After 10 games, the user would have saved enough for 2.5 games, after spending just $450 of his own. Would he use his savings to buy more game this year? Maybe, maybe not. The publisher at this point netted just $270 from this customer. Who will likely spends $150 less next year.
The idea that a person who doesn't have an option to sell back games won't make a subsequent purchase is false. the question is whether or not the increased rate of sale encouraged by a rebate is offset by the reduced margins. The numbers people are suggesting are not reasonable given what we know about buying habits.
Is this the kind of of risk that publishers would take? Would it encourage enough people to go digital to be worthwhile? Signs point to no, because physical still would offer much better resale deals. People who are looking for resale value would likely stay with physical.
The point that you are missing is that the dynamics of a trade in are much less beneficial to publishers when they are the ones buying the licenses. You can't just plug in the physical model and expect it to work out.
You are reducing the margins without increasing the volume significantly...
There is no economically feasible, publisher funded, trade in percentage that could drive up interest in digital enough to offset the lower margin. Publishers are better of sticking with the status quo, and letting digital gain popularity without intervention.
That's why you need to look at this offer for what it would be realistically: A deal that would instantly benefit those who are already all in on digital, whilst increasing the volume of sales to that particular demographic. It's clearly not aimed at converting physical buyers to digital.
Microsofts offer would allow publishers to maintain their margins, helps them (slightly) increase their sales volume, while allowing digital customers to exact a little value from their unwanted games.
PS: the idea that getting rebates would jump the number of full priced purchases someone makes from (3-5) to (10-12) is clearly pulled from ones ass... It takes no actual buying practices or cost analysis into account. The type of rebate it would take to justify that kind of buying behavior would completely wipe away the profit margins.
Isn't the bold what I'm saying? I'm actually suggesting that pubs/Microsoft not buy back their own games, and that instead they facilitate the transfer of licenses, skimming a little off transactions between private sellers. In the end, all the money that changes hands between private sellers stays in the Xbox Live marketplace and will be spent on more content.
The pubs get their money from the initial transaction, plus a little from every transaction between private sellers, and then all the money gets spent on more games from pubs because it's all being handled in the same Xbox Live marketplace where those digital games were bought in the first place.
The store owner and publishers themselves doesn't really put any money into this system; it's only private individuals who are doing that. They just get to benefit from facilitating the exchanges, and eventually from the money involved in the exchange being spent on more content.
The main risk is, as you say, that used prices will undercut new prices, and with no material difference between a new and used digital game there will never be a reason to buy new if there's a cheaper used option. But then this is entirely a factor of people's willingness to pay; the same force eventually drives down new prices anyway, which is how I was able to get BioShock for like $5 (it might have even been $3, I can't remember). This of course makes the whole idea a non-starter.
The other risk is that the money someone gets for selling a Ubisoft game doesn't have to go to another Ubisoft game.
The problem is, currently the MS/Publisher duopoly has the market cornered. So any one that wants the game has to go through them.
With gamer to gamer sales, we know that the owner would sell the title for less than $60, so the only way that the publisher would be happy is if they got a cut larger than 70% to make up for the fact that that user wasn't forced to by the game full price from the store.
The user would want as much back as possible. They can sell a physical game on Craigslist shortly after release and get 90% or better. They can sell it to gamestop and get 40%.
There isn't enough pie to make this endevour worthwhile for everyone, even if MS settles for just 20%
Giving up the duopoly would minimize the publishers and MS' earning potential.
Then you gotta figure many people wouldn't even be seeking market prices. They'd be selling games to friends and family for massive discounts... Meaning that even with a cut of the exchange, publishers are losing out on potential earnings.
The whole reason publishers push digital is because they have greater margins due the to the lack of middlemen. There's no incentive for them to participate in an environment that immediately deprecates the value of their product.