Video Game Execs Freak Out Over Used Game Sales

from the try-learning-some-economics dept

You would think that after years and years of evidence that a second-hand, "used" market for products increases the value of the original products that executives who create the original products would know better than to complain about resales or demand a cut of the profits -- but apparently you'd be wrong. Reader Lucretious writes in to let us know that the audio director of Bungie Studios, a Microsoft subsidiary and the makers of Halo among other things, is out complaining about how the second-hand market for video games has a huge detrimental effect on the industry, claiming that the game makers deserve a cut of all of those sales.

Except that's not just wrong, from a common sense standpoint, it's wrong from an economic stand point and a legal standpoint. It's almost impossible to come up with a rationale where it actually does make sense. First, on the legal front, the first sale doctrine is well established. When it comes to copyright products, once you've sold something, you really have sold it, and the buyer has every right to resell it -- just as they do with things like a chair or a house -- without owing the original creator another dime. Second, from an economic standpoint, plenty of studies have shown the importance of an active second-hand market. First, for buyers of the initial product, the fact that they can resell it is part of the value they put in the price. Wipe out (or heavily tax) the second-hand market, and you decrease the amount people are willing to pay for the initial product. Thus, you actually shrink the market for your product. There's also a lot more research in terms of signalling and market adoption that show that a second-hand market is important. Finally, from a common sense standpoint: you sold the game, you no longer have control over what people do with it. That's how transactions work. Would the folks at Bungie like it if we suddenly started telling them how they could spend the money we gave them for games? No? Then they shouldn't complain about what people do with their games.

Filed Under: economics, secondary markets, video games
Companies: bungie studios, microsoft

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  1. identicon
    Keill Randor, 30 Sep 2008 @ 4:14pm

    Buying a product vs. licensing information...

    The MAIN reason why the industry - (mainly computer games, but can also be seen affecting music etc., (though that is harder to solve) - is having problems is SIMPLE:

    In law, (at least here in the UK), there are two main protection systems and routes one can take to sell and distribute a product/information:

    a) Selling a product.
    b) licensing a product/information/computer program etc..

    These two options are, AFAIK, INCOMPATIBLE with each other - i.e. you can either sell the product - (say a disc with a computer game on it) - OR you can license the information itself, (which just happens to come on a disc).

    These two options have been found to be the best compromises so far in law, which is why they're both there, with different rights and regulations governing them.

    What computer gaming companies are trying to do with Digital Rights Management, is literally an end-run round the law, and have both a bought AND licensed product at the same time - which should NOT be possible - in other words, they are not prepared to COMPROMISE, and sell either a licensed program, or a physical product...

    If the consumer buys a product, then that product becomes theirs to do with as they wish. If they wish to resell it, then there should be nothing to stop them from doing so...

    IF the consumer buys a license, then so long as the agreement is fair, it becomes legally binding. However, there must be a record of such agreement between both licensor and licensee, and an administrative overhead to look after it. Not only that, but because the license agreement will be for the information itself, and not the product it's shipped on, it is the licensee's DUTY to create a usable backup so they can keep using the information for the length of the license - (which, if not agreed upon, is understood to be the length of the licensee's LIFETIME). Obviously, if someone wishes to transfer a license agreement, then they must get the licensor's approval. Not only that, but it should be easily to make each copy unique so that any unauthorised distribution can be easily tracked back to the licensee who broke the agreement/contract.

    The problem with these, is that BOTH options are a compromise, which the industry doesn't seem to want. Until they get taken to court to prove once and for all whether or not they sell a product or a license, however, the pain will continue. It's never been about piracy - if it was, they would have had a proper licensing system in place by now... It's about CONTROL. Since both legal options are a compromise, they both mean giving up some control to the consumer/user - but that's EXACTLY why they're in law to begin with!

    Here in the UK, we NEED a case to go to court to find out whether or not we buy a product or a license when buying a PC game. And guess what? Spore would be the perfect example to do so - if we buy a product, then the limited installs etc. should be illegal - (due to the unfair contact terms in the sale of goods act at least) - and if it's licensed, then they should be able to provide a list of all the licensee's... (Which of course, they can't).

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