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
    Ima Fish, 30 Sep 2008 @ 12:23pm

    This is nothing more than unintended consequences. I remember reading two different articles about Japan. The first was about how the used car market in Japan is basically nonexistent because the automobile makers want to force people to buy new more expensive cars. This is enforced by the government through taxes and fees which make it prohibitively cost effective to sell a used car in an open market.

    The second article came years later and was about how young people in Japan no longer see any need to buy cars, and how the market for new cars was essentially dead for adults, even into their 30s.

    What happened was obvious. Without the used car market giving teens and young adults the opportunity to buy cheaper automobiles they could afford, they had to survive without cheap automobiles by taking public transportation and living close to school and work. And because they learned to live without an automobile while they were young, by the time they grew up into adulthood and were financially able to actually buy a car, they saw no reason to do so. It was just a wasted expense to them.

    This is true of gaming, on a much smaller scale. If you know you can get a bunch of cheap games used, you're more likely to buy a new console. And if you know you can get a fair market price for the new games you buy, you great incentive to buy those new games.

    However, if gamers, who tend to be young, are priced out of gaming, the entire market will shrink.

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