Last week Polygon published an extensive investigation of the secondary game code market, also referred to as the "gray market." In that story we enlisted the help of both Kinguin and G2A, two of the largest such marketplaces for games, to help explore their industry.
We also bought some codes, and tracked one from the point of purchase all the way back to the source. What we found was a trail of anonymous buyers and sellers, at least one of whom was lying to us about the provenance of their product.
Polygon also talked to publishers and developers alike, who discussed the impact of secondary game sales in both financial and ethical terms. Erin Robinson, developer of one of the games we bought, went so far as to compare the practice to piracy.
Many questions were left unanswered, as were emails that Polygon sent to both Valve Software and PewDiePie, G2A's most high-profile partner.
We did end up with an inbox filled with thoughts and opinions from you, our readers.
Richard Wirth, games scholar and master's candidate at University of Texas at Dallas, uses the gray market regularly and feels that Kinguin and G2A are an important part of the streaming community.
I'd like to say that I am a current supporter of these companies and their practices (that are readily visible to the public), though I am certainly open to investigative reporting that might shed some light on their business.
Unless these codes are stolen or otherwise acquired unethically and/or immorally, I believe that there is something to be said about getting games and other media out to a wider audience, while not necessarily fattening the pockets of publishers. As long as the developers are supported, through full pay and additional game reach, I am in favor of this gray market practice.
Additionally, Kinguin and G2A are active supporters of gamer communities through the sponsorship of a great many Twitch streamers and the organization of game tournaments. While of course this is a marketing strategy, I much prefer this methodology over spam promotion, targeted advertisement, and banners.
"Unless these codes are stolen ... I am in favor of this gray market practice"
SquareWheel, an IT professional who wished to remain anonymous, offered his thoughts after years tracking the gray market games industry as a moderator of the /r/GameDeals subreddit.
We've been following the situation with unauthorized resellers for years, and have been steering our users away from them and towards official sellers. In this case "official" means they work directly with publishers, or through an intermediary like Nexway or Ztorm.
We've seen a lot of confusion over this subject, and so I'm glad to see more articles going out to try and educate buyers. People often don't realize how these sites operate, and everything going on behind the scenes.
I am biased though. Having worked with a lot of these sites, I'd like to try and convince you that it's best to take a direct stance on these sites, and not sit in the middle in the name of equal balance. I understand the draw towards neutrality, and as you say the sites were cooperative. But it's my belief and experience that unauthorized resellers are damaging to all parties other than themselves.
You asked for opinions, so here's mine.
It's clear how unauthorized resellers are damaging to developers. Keys are most often bought in regions where the game is cheaper, and then sold back to users in more expensive regions. This happens with both physical and digital copies. The result is that the developer and publisher are paid less money for their work.
The only way to combat this is for publishers to start region locking their games. This leads to support requests as well as unhappy users, but is an effective tool. There's parallels to the piracy/DRM debate.
"At the end of the day it's just skimming money off those who create real value"
Of course, users are harmed by this as well. When you're buying a game you shouldn't have to worry about where the game can be activated or played. It shouldn't require a VPN [a private tunnel into an internet address in another country] to activate, or limit the languages you can play the game in.
Ideologically, I support the ability to sell digital goods. I don't want to see a Steam monopoly, and I believe in competition. But when it creates secondary markets like these, I take issue with it.
Users don't know the source of their keys. Sellers can't verify if a key was valid or not, and cannot provide support (without extreme measures such as watching a user's screen during activation, as "G2A shield" does). We've seen numerous incidents of keys being bought with stolen credit cards, purchased in bulk through Humble Bundles (not store, but the charity bundles), and indie developers being approached by people claiming to be journalists or YouTubers.
These services just give them a place to peddle their wares, and at the end of the day it's just skimming money off those who create real value.
I'm always glad to see more articles like yours teaching users about resellers. I wrote this to hopefully try and nudge you in the direction that they're not a positive force though. I'm sure you've uncovered a lot of this in your own research and can make an opinion for yourself, but I have a unique experience in having worked with — and against — many of these sites. I've spoken to many of their reps, developers, and publishers on the subject. I see new resellers pop up on a weekly basis, and know which try to be honest, and which are not.
(Sidenote: G2A was the largest spammer our subreddit has ever had).
I fully support users making educated decisions, but when someone searches a game in Google and G2A is the top link, that's not a conscious decision. That's why I suggested adding "nofollow" to those links. Sites like Polygon pass a lot of PageRank, and it is an indirect recommendation every time you link to a site. But I won't push the issue — just explaining my rationale.
Finally Chris Nichols, president of GameTimeZone.com, appreciated the attention given to secondary resellers like his and focused on a single product — Xbox Live subscription cards — to discuss some of the oddities of his industry.
Some of the products out there are worldwide products being sold to US customers because the overseas price is much better than the margin offered to US wholesalers. The best example for this is probably Xbox Live subscriptions. For years wholesalers have been importing Arabic, Asian and other product because Xbox Live products are cheaper there than can be obtained directly from Microsoft in the United States.
The wholesale price on 1-year Xbox Live cards direct from Microsoft in the US was $46-48, but through the secondary channel they were $33-$36. Since many of these wholesalers were already dealing internationally, it was hard for them to pass up on that margin when they were only making $1-2 a unit anyway. We only recently realized the actual source of the products we were buying from wholesale when we received physical inventory, instead of digitized inventory which is often sent to us in PDF form.
Six to eight months ago Microsoft assured U.S. partners that they have reset margins worldwide to be consistent, but there is a remarkable amount of inventory around still at the reduced price. ...
"We were buying the Cracker Jack for the prize inside"
There is always an amazing amount of strange unanticipated behavior that goes on in the marketplace. This produces unintended effects over and over again.
Microsoft discontinued the Xbox Live 1-month card several years ago despite the fact that it was overwhelmingly popular with consumers. ... We were determined to find a way to get these cards, and we found them in old games that our wholesale suppliers could no longer sell. The cards had been included as a bonus item in old PC games, like Shadowrun and a few others. So, back in 2008 and 2009 these old games all of the sudden became like gold to us.
I had to learn how to operate a forklift to be able to unload pallets of them. We would tear down the boxes, toss the games out, recycle the packaging and digitize the codes so that we could sell them to our customers. We were buying the Cracker Jack for the prize inside.Nichols says he ended up with boxes of pull tabs from the Xbox Live cards he had to dispose of.
I hope these stories might provide some additional perspective on the industry. It's been an interesting one to be in. We founded our company in 2008 and had at that time expected to focus a lot on the MMO market. Unfortunately, as game after game has failed to succeed in that area we are now more closely aligned with the free-2-plays and the pre-paid cards that players use to buy in-game items with. We have sort of actively shied away from a lot of the specific "game keys," ... but we have been able to cover that pretty well by having Steam pre-paid cards at a good price and hope that our customers use those to buy the games that they want.
A large portion of our inventory is pulled on demand through official relationships with the major game companies or through InComm — the company that activates their pre-paid cards at retail &mdash so we deal less and less with physical product, or even digitization of physical product. ... I think the secondary market will really begin to grow as the big names like Amazon and Walmart are stepping into it. Hopefully there's still a place for the little guys.
If you've got more thoughts on the secondary games market, we'd certainly like to hear them in the comments below.