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
Comments on “Video Game Execs Freak Out Over Used Game Sales”
Nothing New Here?
Nothing new here, they (publishers mainly) have been complaining about this for years. One of the main reasons for the growth of console games is the ease with which unauthorized distribution of content can be prevented. Through this antiquiated model content publishers built a frankenstien as some major retailers who control this distribution have found the 100% markup on used titles far more profitable then the 8% profit they can expect from new releases. This is one of the reasons why publishers loved the idea of digital distribution with draconian DRM, it allows them to bypass even retailers in controlling content for products for its entire life cycle. Retailers of course have worked hard in the past years to ensure they cannot be undercut by “online” sales through consumer unfriendly deals with publishers. Its all very incestual and frankly distasteful in my opinion.
Content publishers ask that content be treated as property . . . but only if it forever remains thier property.
They have already been paid
One more point not made in the article: even if it is only a license, the company has already been paid for it. They should receive additional compensation ONLY when additional licenses are added to the marketplace. Once the product is sold, the original purchaser can no longer use it, so it is still just a single license in play.
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.
Re: Ima Fish
Brilliant…
Re: Re:
Do you have links to the articles?
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I too would like to see that. I have a particularly hard time believing the thought “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.“
Re: Re: Re: Re:
I lived in Japan for almost two years and, though I can’t say the stated comment is true, it is prohibitively expensive to sell/buy a used car.
Most people just bought a new car because it wasn’t that big of a difference in price. Plus, because Japan has more vehicles to choose from (they have cars from pretty much around the world available there), people can find what they want a lot easier.
Most of the time, it’s simply easier to take the train and walk a little bit than try and fight traffic and hunt for a parking spot. It makes sense that young people get used to that and don’t bother with purchasing a vehicle of their own.
Re: Japan
Look here, I’m all up for free market and that. Still I think Japan has (inadvertently) came up with something huge, kill the Auto industry via taxing the second hand market. We’ll all be MUCH better off with less cars and more public trans. everywhere.
a friend of mine has a PSP and he use to live in the uk
knowing him i was surprised that one he had the time and that he cared to buy actually buy a game that he wouldnt play that much.
turns out all he needed was 1 game (which i think he got with the PSP) what he did is when ever he got bored he traded in the shop next door, as long as the game is working they had no problem.
When he move to Phily i told him his PSP day were over cause of things we are talking about, he didn’t believe me that an issue about used game could exist.
Re: Re:
now back to the article im pretty sure how the concept of everquest (they were the 1st if im not mistaken was born).
that way even if the game got sold (which I believe Sony didn’t allow) the new Owner had to pay the monthly fee in order to have access to the server, unlike what was common before that mainly with blizzard as long as your copy is valid you had free access to the server, and even if it wasn’t you still could play offline or on a local network.
Re: Re: Re:
Quote:
unlike what was common before that mainly with blizzard as long as your copy is valid you had free access to the server, and even if it wasn’t you still could play offline or on a local network
Yep, and look at what the most popular game of all time is… StarCraft. Sure it’s a great game, but think of all the people who started playing it years after release!
Re: Re: Re: Re:
re-reading my post I realize it sounds like I agree with them.
personally i never played EQ, and i loved Diablo I and II.
I was just saying if they are really bothered by it then they should just create games like World of War Craft and stop complaining.
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…
Re: Dichotomy
Actually, with Steam, reselling is not a problem. Just turn your username and password over for a fee, and they can use their account on your computer. Of course, this means that they get all your games, so it’s all-or-nothing. Then again, you could conceivably create different accounts for each game you purchase. Pain in the ass, but it would be a way of managing and reselling Steam licenses.
Re: Re: Dichotomy
Oops, I meant “…they can use your account on their computer…”
thats ok, DRM will put an end to second hand games – The asshats!
I’m surprised the article didn’t touch at all on their *preferred* method of sales — digital downloads.
I have a PS3, and I’ve been hesitant to buy any games on there. I’m used to buying computer games that come with a physical disk, but with games bought online, there’s no way to resell it. In other words, the publishers win out because if anyone wants a copy, they all have to buy it from the same place, where they get to control the price point.
Kinda poopy.
like someone said, DRM
DRM and limited installs will help kill the second hand market which brings up a question, if FIRST SALE DOCTRINE is a legal point, is forcing limited installs of a game or software illegal if that inhibits/prevents the reselling of said product?
HALO sucks anyways. FUCK microsoft!
I’ll never undersand any of the tech companies. As a general rule, you never hear the people that make cars, lawn mowers, snow blowers, bicycles, clothes, guns, tv’s, home appliances telling you what you can and can’t do with the suff you bought. They don’t care if you use the merchandise, how you use it, what you use it for, if you sell it, burn it, throw it away, give it away. Once you paid or it it’s yours to do with what you want.
What about the people that build houses, process food, do tattoos, sell animals, it’s the sme thing same thing.
If I pay for something then it’s mine and I can do what I want with it.
no longer part of MS
it’s worth noting that as of Oct 2007 bungie is independent again. They should have never sold out to MS to begin with, imho, but that’s an issue for a different day…
Re: no longer part of MS
“it’s worth noting that as of Oct 2007 bungie is independent again. They should have never sold out to MS to begin with, imho, but that’s an issue for a different day…”
LOL, right, you work for who pays you, regardless of what any press release says.
someone said something about the Japanese car market, which is funny because i just saw a car commercial (honda or toyota i think) outright saying that their car has the highest resale value. they were advertising the secondary market, which actually makes a lot of sense. similarly when i see that used copies of gears of war or halo 3 are selling for almost $50 when the new game costs $60, i can have a lot more faith in trying the game out since i know i can sell it for a decent price if i hate it.
What SPORE DRM is really about.
EA was one of the main complainers about this. This is in fact the real reason for Spore DRM. It doesn’t even slow down Piracy. They know buy now that it has no effect on piracy.
http://www.gamesindustry.biz/articles/ea-second-hand-sales-are-a-critical-situation
But what it does do, is stop the legitimate customer from reselling. It is quite successful at this.
So EA DRM screwing over the good and loyal paying customer is not an unintended consequence of fighting piracy, it is intended result of their anti-fair use policies directly targeting paying customers.
Ugh...
This continues to sicken me. The hypocrisy of the software/game industry blows me away.
On one hand, the industry fights sooo hard to equate digital goods to physical goods. They call copyright infringement “theft” (even though a copy is made). They insist that individual copies be made distinct/unique for each customer (hence the absurd amounts of DRM). RIAA/MPAA fight to have these civil matters changed to criminal matters with financial damages that make no sense whatsoever.
On the OTHER hand, they try to hold onto the digital benefits without relinquishing any of their “tangible item” arguments. They offer direct download but still charge $60; I guess the retailers and publishers cost $0 , eh? Now they demand a cut of resale. If I buy a chair, use it for a year, and then pass it onto my friend, only one of us can use it at a time; that is why the creator of the chair gets no cut of the sale. The same goes for video games. As long as each license is only in use by one person, it is perfectly legit to sell it to another person.
It’s disgusting to hear these executives complain, “Well, because of used game sales, one person can play it and then just pass it on to someone else!” Well, I guess we should just buy one chair and let everyone take turns using it. Why bother purchasing other chairs when we can just use the same one? Maybe, there are inherent BENEFITS to owning multiple chairs.
Sorry, Bungie, but the answer is no: you do not deserve a cut of all sales. If your game is so shallow that people buy it and immediately turn around to sell it to someone else, maybe you ought to make your games better. If your game is NOT that shallow, then, I don’t know what you are complaining about. >_>
Re: Ugh...
The lion’s share of most games’ sales come in the first weeks and months after the release. There are exceptions, but there’s a reason why there are big marketing pushes at release time, not three or six months later.
If your game sucks so hard that a significant portion of your market will be able to buy used copies of the game because the first owners got tired of it or hated it almost immediately after buying it, you really need to invest more time in making games that don’t blow and less in customer lock-in.
It’s gonna be a sad day around the Bungie offices when they get the bill for all that money they owe the people who made the computers they program their games on…
I have to say the first comment is totally off the mark!
I guess said person does not cruise any bit-torrent sites as they are FILLED with games that have been cracked/broken. Whether they are a majority of the market… probably not. But, consoles are NOT immune to the effects of piracy or cracking.
The fact of the matter is, that the game industry has become every bit as greedy and pompous as the music and movie industry. Customers are getting treated more like “users” than customers. Software giants like EA and Ubisoft care more about making a buck than producing a quality product.
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“I have to say the first comment is totally off the mark!”
Its not off the mark at all, its absolutely true and most publishers will tell you so. Thats not to say that piracy is non-existant on consoles, but it is alot more rare and difficult and this is in fact one of the main reasons for the growth of console gaming. Publishers feel thier content is easier to control if released on specific consoles.
Used Car Dealer Smile
Please. So my dealership should write a check to Chevy (et al..) for every used car sold? Who writes the check to the original manufacturer when I buy something off Craigslist? I configured a firewall which was then sold. Where’s my check for the config work? Doesn’t corporate America ever get it?
Guess not.
Single User
I’ve run this same thinking at the ski hill. If I buy a ticket that lasts until 5PM and leave at 2PM, there is still 3 hours of value on the ticket for a single user. Though it’s illegal I’ve sold said ticket in the parking lot. Violating the ‘no transfer’ piece of the contract on the back. Here’s the kicker – I don’t think I’ve stolen anything as the ticket still only allows one user until 5. The ski hill hasn’t lost anything. Justification? Sure, but it works for me!
HALO sucks anyways. FUCK microsoft!
Truer words have never been spoken Sir!
Games don't wear out?
From the article on EA and second hand sales:
http://www.gamesindustry.biz/articles/ea-second-hand-sales-are-a-critical-situation
“But digital goods is not actually becoming inferior in quality, so people passing that on is actually very challenging for us,” he added.
Digital goods DO wear out because they are stored on media that is subject to wear and tear.
But beyond that digital media becomes OBSOLETE.
I have a 10 year old washer and dryer that work perfectly well and I use regularly 10 years after purchasing them.
There isn’t a SINGLE game that I purchased 10 years ago that will still run on modern hardware. I would LOVE to still be able to play Master of Orion . . . not an option for me because the game became . . . OBSOLETE.
The levels to which these people are full of crap are beyond comprehension.
Re: Games don't wear out?
http://www.dosbox.com/
It runs both Master of Orion and Master of Magic just fine.
shady headline
The headline should read “Bungie Studios Execs…”. “Video Game Execs Freak Out…” seems to imply video game execs in general are freaking. And come on, are they really freaking out? With a provocative name like “techdirt.com” a news site doesn’t need provocatively misleading titles for their stories.
Re: shady headline
The headline should read “Bungie Studios Execs…”. “Video Game Execs Freak Out…” seems to imply video game execs in general are freaking. And come on, are they really freaking out?
If you read the linked article, it includes other video game execs as well. The title is accurate.
With a provocative name like “techdirt.com” a news site doesn’t need provocatively misleading titles for their stories.
Why is “techdirt” provocative? And why do you think we’re a news site? And how is the title misleading?
Mark Rein of Epic came up with the same knuckle-headed opinion last year.
Could anyone imagine GM, Ford or Toyota coming up with the same demand?
What gets me the most is that both Bungie and Epic are two of the most successful studios in the industry, its not like they’re on the verge of Chapter XI
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).
Why am I not shocked?
Oh, yeah, because I have no sympathy for gaming publishers and creators who allow a new console every 4 years, charge $49+ for poorly developed games, and continuing this notion of a “console war” in which every damn consumer loses.
I don’t say this often, but fuck them all. Every. Last. One. Of. Them. Let these executives cry when legitimate consumers get shafted for those copying games.
Let them cry because consumers are pissed they can’t get the titles they would like to play because they “chose” the wrong console.
I feel sorry for none of them. This whole crap about “creative licensing” is tiring and consumers shouldn’t have to feel guilty by selling the game. Many, many gamers will keep games when they’re exceptional. The primary reason a gamer will sell a good game is to offset the cost of the other new game they want to play.
These publishers should take a listen to the consumer and adjust their business model accordingly. DRM? No. The majority of gamers are legitimate buyers.
Continue raising the price because it costs more to develop a game? No. Gamers often state graphics don’t matter. We didn’t ask these developers to rush out and create HD games (especially when 70% of the current market still doesn’t own an HDTV).
I’ve quit buying games at full price long, long ago because I’ve tired of losing my money on bad games. I’ve long learned most games drop to $29.99 within a year (except Nintendo, whose greed is so ingrained, it’s hard to imagine ever seeing a Nintendo title less than $49, unless a new, worthless console is developed).
The only exception to this is Retro Studio’s “Metroid Prime” series. I’ve yet to feel disappointed on paying full retail for these games. And yes, to me, better than Halo because I don’t have to run around shooting everything that moves.
When there’s only one console, less expensive games, and better quality games that I’ll begin to care.
Until then, fuck them all.
(sorry for the language to those offended)
MS's SOP
Microsoft has been doing this since the beginning. You can’t resell windows… it’s licensed, not purchased,
You don’t have the right to even move windows from one computer to another.
why would you think that they would feel any different about any other software that they sell?
Microsoft has never been interested in what’s fair in the market, just more revenue.
Nice site (gamesindustry.biz)… can’t even see comments unless you register? Fail.
I’m expecting to see games with the next generation of consoles that have the product tied to console serial numbers that are verified online. If that game’s been tied to one console, it won’t work on another if it’s sold.