Wednesday, January 23, 2013

#54: Why Game Companies Should Stay Out of Used Games

The other day, I had a discussion with a friend of mine over the impact of used game sales on the profits of game developers. While we argued for quite a long time on the subject, a lack of data led to a stalemate. Having said that, it made me start thinking about used games. I have always been a massive supporter of the used market, but had a hard time justifying exact why developers and publishers should stay out it, since they would logically want people to purchase new releases instead. Despite how massively unpopular measures like Online Pass systems are to the gaming populace, they are not annoying enough for consumers to outright boycott companies that use them. This means that on the consumer front, there is also no reason to not include them in the vain hopes to combating used game sales. Upon reflection, I realized that indeed there are very good reasons to not try to stifle the used games market and realize that it is not a developer's enemy that needs to be stamped out, which just so happens to be the topic for this week.

The first reason publishers would be wise to not fight used games is that, depending on how far they go, it could be illegal. This is because of a law that is on the books in the United States (and I assume most developed countries, though perhaps in different forms) called the First Sale Doctrine. For those not familiar with copyright law, the First Sale Doctrine says that when a consumer purchases copyrighted material from its copyright owner in a lawful manner, the rights to that one specific copy of the material transfers to them, including rights to barter with or otherwise dispose of it. The copyright owner is no longer allowed to have any influence over that one particular copy. The one exception to this is that the new owner, who bought the copyrighted work, is NOT allowed to copy or duplicate it; Aside from that, the consumer now owns that copy in its entirety and the original copyright owner no longer has authority over it. Because of this, there is a possible, if admittedly weak, case to be made that using Online Passes or other methods of curtailing used games may be illegal. The same may even be said of On-Disc DLC, but that exists outside the purview of this article. Though this may seem like a good reason, there are a few loose ends to it. First of all, to the best of my knowledge (and I am no legal scholar by any means), because of a variety of different reasons including court costs, time, effort, and the massive amount of resources that publishers have at their disposals, this has and likely will never be challenged in the court of law. Honestly, most sane people (myself included) would rather just spend the $10 on an online pass or whatever than go through all of that. Also, the First Sale Doctrine strictly applies to physical goods. When dealing in digital distribution, what consumers purchase is not an actual product but rather a license to use the data and copy it onto their system. This may be changed some time down the road, but until then it is pretty cut and dry. There is also no protection for server access, so if the Online Pass is strictly for some online component (and not something like Arkham City's Catwoman missions), there is also no legal leg to stand on.

Another very good justification for allowing used game sales to continue as they have for a long time is that the money that consumers get by trading in used games can go towards new games. According to Gamestop's statements, (which are admittedly biased, so take them with a grain of salt) 70% of all the money that given out through used game trade-ins immediately goes in that direction, in support of publishers and developers. In a dwindling economic environment, this is even more important now than it ever was before. People are on tight budgets, some more than others. For these people, trading in games is often the only way they can get the $60 necessary to purchase new games on release day. It is either that or do not buy that game at all, which neither the publisher nor the potential customer desire. This war on used games has a potential to severely reduce the potential market and profit margins for game publishers. Without the money that is generated through trade-ins, it becomes more difficult for lower income wage earners to afford gaming. Games are a luxury product after all, they are no where near necessary. When it comes time to cut the budget and see where one can save money, games are often the first things to take the fall, being as extraneous and expensive as they are. Keeping this in mind, it may actually be more important to preserve the used games market in order to allow people to continue to buy video games and stimulate the market.

The last reason I will go over that publishers have to ignore used games is that later on, they can help generate a market for future games. What I mean by that is simple. If there is one thing that publishers can be counted on trying to do, it is make sequels to IPs in their possession. (Unless it is Mirror's Edge; Yes, I am talking to you, EA!) Once sequel time comes, then companies are going to obviously want to attract as large an audience as they possibly can. One of the easiest ways to do this is though the used game market. Instead of dropping $60 on a brand new game that they may not like, consumers would be more willing to spend a smaller amount, maybe $20-30, on a used copy of the previous game in the franchise. Then, they could learn whether or not they truly like the concepts and ideas behind the series before jumping in blind with the new installment. This is quite a common practice that people have come to adopt. I know quite a few people who have gone on to buy many other games based on what they have seen in a previous game. For me personally, I would have never bought the latest Hitman game if I had not taken the time to play through Blood Money the summer before. My purchase of Fallout: New Vegas was also entirely based upon my enjoyment of its previous installment, Fallout 3. This form of brand recognition is something that publishers count on to sell units. It does not make sense to stifle that by trying to inhibit used game sales.

The bottom line here is that used game sales are just a boogeyman. I have yet to see any conclusive evidence that used games harm the sales of new games. Considering that its the only fair way to operate, I must assume that used games are innocent until proven guilty. It is far more likely in my opinion that video game are not as profitable due to a combination of over-inflated budgets and an unwillingness to lower prices to below $60 to compete in the marketplace. Games like The Walking Dead prove that high budgets are not necessary to make remarkable games. Steam sales prove that lower prices, even if only temporarily, will boost sales and improve overall revenue. Instead of trying to needless combat this used games “menace,” the industry should focus on improving itself and changing away from an obviously unsound business model.


Thomas said...

Online passes? Have you ever tried to sell your copy of Half Life 2? :(

Or Empire: Total War, which isn't even made by Valve

newdarkcloud said...

Again, it's the pesky technicality that online you are only buying a license to use the data, not an actual copy. I only use Online Passes as an example because Used Games and PC DRM are related, yet separate topics. One bleeds easily into the other.

Maybe they'll one day look over the laws and change them, but right now that's unlikely.

Thomas said...

I meant a physical copy of those games. All physical game disks that require Steam authentication can't be sold used and it's against the Steam EULA to try to attempt it.

newdarkcloud said...

Wow! That's horrible. In that case, the First Sales Doctrine may apply, provided anyone is willing to stand up against such practices in court.

And that's unlikely.

Thomas said...

To be honest I was shocked that no-one ever seems to have kicked up a fuss about it. I mean this must have been going on for years? I wasn't even trying to play a used game when I discovered it, I was just trying to play my brothers copy of Empire on my laptop instead of the family PC (he doesn't use steam often so we were struggling to find his login details).

I don't think companies like gamestop accept used PC games so maybe thats why it never comes up

Thomas said...

The EU did declare the Steam EULA illegal and last year a Germany watchdog gave out an advisory warning to people and threatened action, so maybe it will change but I haven't heard anything come of it

newdarkcloud said...

There's also the fact that the retail business for PC games is pretty much dead aside from a few sales (largely due to this fact).

I imagine that Gamestop doesn't sell PC games for this reason as well.

This is the downside to the monopoly that Steam holds on the PC market.

newdarkcloud said...

Odds are we won't see change until the US gov't over here is the one to do it. Most countries still follow our example.

Anonymous said...

This is a neverending cycle. You're right- within reason, brand recognition is everything. But to the people who help pay for these things, the numbers are all that matter. You can explain to them about how it's not a leak, but in the end, they themselves are ina precarious position- moreso than we consumers: we hadn't just ponied up 250 million for this to not work, after all.

Naturally, this makes people a tad jumpy. For example, look at the opening of Bug's Life, as Princess Atta hovers over her staff and having a panic attack over every lost scrap of food.

In the real world, look at the past entirety of written history- artisans and producers alike have always fought against this concept, because it cuts into them immediately. Nobody wants to starve, and nobody wants to find themselves outmoded.

But, real world examples: BluRay hacks, DVD copiers, VCR's/Betamax, tape recorders, piano reels for autoplaying pianos, the printing press, on back to either Socrates or Plato, who complained that writing things down killed ideas.

(I'm in agreement, though. First Sale Doctrine needs defending from these people, otherwise It'll end with us being bled dry for daring to enjoy that which we legally own.)

newdarkcloud said...

A lot of the problem is as you say, investors are in control and they just want to make money. These people tend to fear losing money or making less money. Paranoia is the name of the game up there, so they are reluctant to change practices even if the numbers and data are against them.

It sucks.