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. icon
    qhartman (profile), 30 Sep 2008 @ 12:36pm

    Dichotomy

    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.

    That comment points to the core friction that I believe is the root of a lot of this. The publishers have come to see their products as the "IP" in the game, the bits, which are licensed, not sold. Everyone else in the world sees their product as the tangible object which those bits are delivered on. Hence the disconnect between the two sides of this debate. Until publishers let go of the idea that what they are selling is a license and not a tangible good, or they start delivering things intangibly ( like Steam, or the various other download-only delivery methods) the two sides of this will never see eye to eye, and even then it's doubtful.

    Of course if that happens on a large scale, then the prices of games will have to come down dramatically, otherwise the audiences will be so small they will be wishing for the "good old days".

    I also don't see why they are complaining about game shops making residual money on used games. I mean, these shops are their primary bridge to their customers. Those shops make tiny margins on the new kit, and if it weren't for the money made on used, I'd wager most of them would fold. With fewer shops, there are fewer places for these publishers to get their work out...


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