Video Game Exec Claims Used Games 'Cheat' Developers

from the lets-learn-you-some-economics dept

For whatever reason, every few months or so, yet another clueless video game company exec spouts off about how the used video game market is somehow unfair or hurting video game developers. We've seen it again and again and again. However, since a whole bunch of you keep submitting the story that Cory Ledesma from THQ has made the downright laughable claim that the used video game market "cheats" developers, it seemed worth discussing.

This shows a fundamental misunderstanding of the law, basic economics and the customers THQ is failing to serve. On the law, Ledesma and others should familiarize themselves with the First Sale doctrine before making silly statements. On economics, repeated studies have shown that a healthy secondary market for products actually significantly helps the primary market. If you take more than a second and a half to think about it, it's easy to understand why. If there's a healthy secondary market for products, it reduces the risk for the buyers in the primary market. That is, if they buy the product and don't like it, they know they'll be able to resell it and recoup some of their losses. That makes it effectively cheaper for them to buy the primary product, increasing the number of sales. On top of that, the secondary market also helps in markets like video games in acting as a good way to segment the market, and get new buyers into a game or series of games. I'm sure many of the folks who are now buyers in the primary market, at one time purchased an earlier game in a series used. How is it that so many video gaming execs have so much trouble recognizing these basic concepts?

Filed Under: cheating, cory ledesma, secondary markets, used games, video games
Companies: thq


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  1. icon
    ethorad (profile), 26 Aug 2010 @ 5:33am

    Re:

    An active secondary market doesn't necessarily mean that customers don't think it's worth the original price, but that the value of continued ownership is less than the secondary market price.

    The utility you get from buying the game is the value of the fun you get from playing/owning it + any resale value. Having a solid resale value is part of the price, not something which means that the price is too high.

    One major example of this is the stock market. This has to be about the most well known secondary market around!

    Companies sell equity when they list or have new stock issues directly to investors in the primary market. These investors can then go on to sell their equity on a secondary market, such as stock exchanges. Indeed, without the ability to sell equity easily, investors would be less willing to buy in the first place - and would pay less for the same stake in the company.

    Basically the amount someone is willing to invest = income from a share in the profits + amount on sale of share at a future date ( = income + capital gain returns).

    Of course, I wonder if these executives who are decrying the used game market are similarly decrying the stock exchange. How long would their companies last if they weren't easily able to raise equity capital? And more importantly are any of these executives willing to give up their share options?

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