Psychochild's Blog

A developer's musings on game development and writing.

15 September, 2010

Economic consequences
Filed under: — Psychochild @ 2:46 PM

A discussion blew up on the blogosphere as I was getting ready for a cross-country trip: the ethics of buying games used. It started when a a THQ employee rather tactlessly pointed out that used games don’t support developers, and truly exploded when Penny Arcade said what most people interpreted as “used game buyers = dirty pirates” (and not the cool bottle-of-rum kind).

As with most emotional arguments, a lot of it seems to be a misunderstanding. I think the core of the issue here is one that people don’t understand well: the economic consequences of their actions. Let’s take a look at “pre-owned” games from a developer’s standpoint.

The caveat

Note that I don’t have much skin in the game here. I’m an MMO developer, so people aren’t going to be picking up my games second-hand. Of course, there is the issue of account transfers, but those are often restricted or even prohibited in most cases. (It’d be interesting to see how many used game supporters are fans of eBayed MMO characters…) Of course, MMOs restrict sales for arguably different reasons: online reputation has less meaning if a griefer can just go buy a new account. But, I’m not looking at this from a “what keeps me fed” point of view.

Charging and piracy

One problem is that this argument took on emotional depth quickly. A lot of people who buy used games were being pointed at and it wasn’t a warm and fuzzy feeling, so they lashed back. Stripping the emotional layers off of this, I think that the core arguments do makes sense.

The issue at hand is how some companies are “giving” some additional content via one-time codes to people who buy a game new. THQ’s Smackdown vs. Raw 2011 has a code that allows online play, but this would not be available to people who buy the game used. Creative director for THQ’s wrestling games, Cory Ledesma, said that ‘loyal fans’ who are interested in buying the game first-hand are more important. He then went on to say they “didn’t care” about used game buyers; The Ancient Gaming Noob points out that this position is legitimate, but perhaps not the best response.

I certainly agree that there are more tactful ways of putting this, but on its face I don’t think it should be controversial. Honestly, this attitude is the way most businesses work. If I buy a used car from a third party (like a former rental car from Hertz), should I expect the local dealer to give me the free oil changes they offer to people who bought a car directly from them? Probably not.

Penny Arcade threw kerosene on the flames when Tycho said, “If I am purchasing games in order to reward their creators, and to ensure that more of these ingenious contraptions are produced, I honestly can’t figure out how buying a used game was any better than piracy.” Of course, it’s that last bit that people focused on. But, from a strictly economic point of view, this is accurate: a developer sees as much income from a pirated game as a second-hand one; in fact, the pirated game might result in more income if the person does enjoy the game and decides to buy a (new) copy.

Being a customer

Part of the righteous indignation from this was because people viewed themselves as a customer. (Let’s ignore the incorrect “the customer is always right” claim for now.) I think the Penny Arcade comic says it best: if you buy used games you are not the customer of the game company, you’re a customer of the shop you bought the “pre-owned” game from. As in my car example above, if I want free oil changes with my car purchase, I need to make sure that the place I buy my car from offers that. Economically, I have to look at how much that is worth to me, and look at the relative cost differences. Or, consider the “cash back” deals. If I buy a used car, can I really demand that the car manufacturer give me that cash back deal? No, but this is like people expecting games to provide free online access even if bought used.

Consequences

The issue here is, as I said, one of consequences. This is what Tycho was trying to convey (poorly): if you love games and want to see more of them, then buying used games does not support that goal. This is the same thing I’ve been saying about games for a while: the games you buy directly supports that kind of game, and if you want something different you’re going to have to go support a different type of game that is more of what you want. Unfortunately, innovation and the search for more fun can hit rocky shores before we find something quite as polished as your typical Blizzard game.

Now, obviously, not every action you take has to have a deeper meaning behind it. I avoid air travel because I don’t like it, not necessarily as a poke in the eye to overbearing government regulations (although that’s part of what makes me not like it) or the carbon footprint associated with air travel. Perhaps someone might buy used games because they are on a strict budget and need to play a wide variety of games because they’re a game developer. Or, perhaps a used game is the only way struggling parents can provide entertainment for their children.

It’s not all negative, however. A lot of people have pointed out that used games were new games at one point, and the ability to sell back a new game probably encourages some people to buy a game who might not otherwise be willing to take the plunge for full price. The problem here, of course, is that this is a hypothetical situation and it’s hard to know what buying habits would be without used games. Even if you ask people, what people say they’d do and what they actually do are two separate things. Personally, I’m not sure that the type of person who doesn’t blink at throwing away about $20 on selling back a new game they didn’t like is going to be the type of person who won’t buy a game new if the option isn’t available. At least for console games, there are game rentals and places like GameFly (which I’m sure aren’t too happy with having more hoops to jump through to provide games to people.) But, there are options out there for people truly interested in saving money who can’t just throw down cash on every game available.

Be thoughtful

One thing I love about games is that gamers, as a whole, tend to be smart and passionate people. We get into flame wars about seemingly trivial things because our passions run deep. We tend to think about things a lot because we’re smart enough to “get” games, something that for many people seem hopelessly complicated.

The lesson here is that one should take that intelligence and passion and put it to good use. Consider your actions and how they affect others. In this case, consider how you buy a game and how it supports the people making the games you enjoy. As much as most game developers would love to subsist on the love of their fans, sometimes the landlord only takes hard currency. ;)

What do you think? Is there a better way to get people to support developers? Are one-time codes annoying? Are used game sales destroying life as we know it? Are online games the only possible future?


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29 Comments »

  1. My beef with this discussion is that’s it’s entirely acceptable to buy and sell used books, music, movies, etc. Why should the situation be any different for games? Nobody will call you a pirate for frequenting second-hand bookshops.

    Too late here for a longer post, but this summary is how I feel about things. One-time codes? Why not. Online games only? Please no. Overall, I have a tendency to boycott games that place too many restrictions on how I can use them. I’d rather not be pissed off at stuff I pay for.

    Comment by unwesen — 15 September, 2010 @ 4:08 PM

  2. I would argue (in fact, I did at the time) that the non-resell-ability of MMO’s is something that players consider in making purchasing decisions. Look at how quickly MMO veterans cancel pre-orders if the initial word out of the beta is not good, and at how quick we are to cancel a sub after the 30 days that come with the box if we didn’t axe our preorder in time. Too many of us own a $50 CD/DVD coaster for some past disappointment and aren’t willing to risk being fooled a second time.

    Comment by Green Armadillo — 15 September, 2010 @ 5:08 PM

  3. I can’t think of when I’ve ever bought a used game, but it seems like a reasonable practice to me. Maybe I’d buy used games if there was a GameStop next door. But imagining the same convenience level between new and used, I would sooner buy a slightly more expensive new game than a cheaper used game.

    Maybe the true issue is one of physical property. We think it’s reasonable to resell a used car, lamp, couch. They are physical objects. Similarly why not resell some CDs? The data is almost an afterthought. If instead we asked: should we be able to resell the games we downloaded on Steam? I think we’d see a lot of no answers. In that case the data, the development, the ideas and code, are the primary ‘object’.

    This isn’t a purely game issue. All items are in some way based on development time. Someone designed the glass I’m drinking from, the machines to produce it, trained the people who made it. What’s the difference? As best I can think of right away, it seems to be material costs. Should we worry so much about buying used dishes? They do nothing to help the dish designers. Not so many people are passionate about dishes, so they care less. Ironically, those who are passionate about dishes so often are collectors buying antiques, which also do nothing. People are weird.

    Comment by Klepsacovic — 15 September, 2010 @ 5:25 PM

  4. The argument that game developers/publishers don’t see any from a used sale is not entirely correct, when taken in the context of the entire gaming market:

    A used game is created when a gamer sells their copy to a store for, usually, store credit. That store credit then almost always goes towards the purchase of another game.

    So yeah – the a specific doesn’t see money when the store resells that used game, but they certainly do when the original owner spends his store credit on a brand new title that he might not otherwise have been able to afford.

    Comment by Andrew — 15 September, 2010 @ 5:26 PM

  5. As unwesen notes, the issue revolves around all the commodities where the medium/physical object isn’t really what you’re paying for, but the creative work behind it. Movies aren’t That What You See in the Theater anymore; for a while the “enemy” was videotapes, and now it’s DVDs, streaming on Netflix, downloading on a torrent, or the file you’ve copied for twenty of your friends. We’re living in an era where computers make it more and more difficult to link the “box” sale with the actual property you’re buying. This is the distinction between selling a used game and piracy — in the former case you’re still handing around the original physical object, while in the latter you’re cloning it, perhaps thousands of times, rendering the initial sale meaningless. They’re not the same thing, and I think equating the two caused a lot of the consternation.

    I’m not positive Klepsacovic’s question about reselling data is so clear-cut — if I’ve bought the files, shouldn’t I be able to hand them off as I see fit? Duplicate them, perhaps not, but transfer ownership? That seems reasonable to me… although, given technology, almost unenforceable outside of the realm of DRM or the exclusive first-ownership privileges like in the THQ title.

    As consumers, we in turn have the option of rejecting the restriction and not buying the game. We just saw Blizzard do a (semi?) reversal on the RealID experiment, probably because of the wide-scale rejection of the notion. Similarly, if a game required me to have some sort of proof of first purchase in order to play it, and I didn’t care enough for the game to pay the asking price… I could simply not buy the game, and enough people rejected the notion that might cause the developers to rethink their plans.

    I’m interested to see how it pans out, not just for games but for all purveyors of reproducible, creative media.

    Comment by Sok — 15 September, 2010 @ 11:06 PM

  6. The anti-used games argument is religious in nature and is not on a sound economic basis. This is similar to people arguing against the right for gays to marry based on a long standing societal belief that a marriage should be between a man and a woman.

    The economic system for game creation, production, distribution, delivery, and consumption, is balanced among the stakeholders. The argument is whether or not the balance as it is right now is fair? The resale of used games gives the biggest lift to the consumer, allowing the consumer to play more games than she could otherwise afford. The retailer/delivery shops fight for a share of the consumers entertainment budget, and resellers added another alternative to the consumers’ choices. But, when we talk about this amount of money in the hands of the paying public, we must include the other forms of entertainment from bowling through movies. The market research clearly shows that electronic gaming is increasing as a percentage of the entertainment market, and that the MMO market is accelerating as the category of greatest growth in electronic gaming.

    Creators (or more specifically, the publishers) need to create a value added feature that can be purchased new when the extant game changes hands. For example, are there updates for the game that the used purchaser can pay for?

    This same logic holds as one part of the explanation for the MMO business model evolving to a F2P model from the subscription model. When the company doesn’t care how the player gets the game because it makes money from the event of playing (possibly as a percentage of total players) the game, then everyone. This new model, made popular by MMO delivered via download, disintermediates much of the retail distribution channel, which means more money for the developers’ company. How the company distributes the money is a separate issue, but part of this same discussion.

    Sorry for such a business like response, but I don’t like throwing money away any more than the next man.

    Comment by Harrison Rose — 15 September, 2010 @ 11:43 PM

  7. I think it’s important that we not conflate used game sales as a practice with the Gamestop model in particular. In the Gamestop model all of the profit goes to Gamestop and its owners, essentially leeching money from the game industry financial “ecosystem”. Selling a game on craigslist directly to another person however, does not work the same way. A significant portion of that money is likely to, however indirectly, fund additional game purchases because both parties are gamers and that’s what gamers do. :P

    Perhaps we should destroy the Gamestop used game sales model with a nonprofit (or at least small business) that operates by assisting gamers with trading/selling their used games; by helping them find people who are interested in the games that they currently own; and by providing some assurance that you are getting what you agree to pay for (keeping you from having to meet with random internet denizens to boot). I can imagine a couple of ways that such an organization could maintain profitability, and I’m no businessman.

    Comment by Charles Ellis — 16 September, 2010 @ 12:10 AM

  8. @Charles:

    Uhhhh – you have it backwards. There is more of a chance (i.e. close to 100%) that the profits from selling a game to Gamestop get reinvested in the gaming industry than some random Craigslist sale.

    Comment by Andrew — 16 September, 2010 @ 3:12 AM

  9. If instead we asked: should we be able to resell the games we downloaded on Steam? I think we’d see a lot of no answers. In that case the data, the development, the ideas and code, are the primary ‘object’.

    I’d argue that is exactly the argument why it should be allowed to resell downloaded games.

    The cost of a book, movie, etc.. all boils down to three parts: how much did it cost to produce the contents, how much did it cost to market it, and how much did it cost to create the physical copy you’re holding. In almost all cases – except for e.g. computer books, which are issued in relatively small numbers – the cost of production is marginal to the other two.

    In fact, the whole printing/pressing industry is set up that way: a fair amount is charged for the initial master copies, and the more production copies you order, the lower the price per copy becomes. It’s the sort of model where the production costs tend towards zero the more units you shift.

    So when you make downloadable versions of the same thing, what really happens is that you cut out the part of the production cost that tends towards zero anyway. Given that’s the case, there should be no distinction between reselling a downloadable and reselling a physical medium, as all “losses”, real and imaginary, are the same for both distribution channels.

    The technological challenge lies in ensuring that reselling a downloadable cannot result in duplication of the downloadable. Unfortunately, as much as I hate it, some form of online activation is the simplest and most tamper-proof method we have for that, and it’s still severely flawed.

    Assuming that we have a method for avoiding duplication – which is a big assumption – then there is no real difference between downloadables and physical media, and I’d very much be in favour of being able to resell them.

    Alright, that’s my argument. Now for a tangential topic:

    I’m not a great fan of online activations. Let’s run through how they work, briefly.

    Transferal of a physical object from one person to another is very simple: because the object can’t be duplicated (easily), there’s a distinct handover where the object changes from being in the possession of one person to being in the possession of another. Physical ownership changes that easily.

    Legal ownership changes differently: there’s a point in time were both parties agree that the ownership status changed, but the physical object might still be physically in the possession of the first owner, or held in escrow. Theoretically, such an agreement of ownership transfer should always be documented by a piece of paper (in at least two copies, one for each party) stating the details of the agreement, and signed by both parties.

    Fortunately lawmakers were clever enough to understand that this would be too cumbersome, so verbal agreements are legally binding, too, until disputed in court – so there’s a mechanism in place for a) allowing quick and simple transactions, and b) for settling disputes.

    When it comes to reselling downloadables, no physical object changes possession. What happens is that a copy is created, and an agreement is made that ownership has changed. The original owner’s responsibility is then to delete their own copy, while the new owner may keep theirs.

    It’s that second part of the exchange, the part where the original owner deletes his copy, that is unfortunately not inherent in the virtual world, but requires that people behave.

    Whenever downloadables are resold – which happens rarely – what usually happens is that some third party brokers the trade, and places on record, in one form or another, that the trade has been made. I’m fine with that.

    What I’m not happy about is that in most cases this broker is the party with the most interest that no copies are being made: the downloadable’s manufacturer. In order for them to ensure that disputes can be settled, they must require of all parties for which they broker trades that they provide contact information, and possibly some form of identification.

    In the end, with thousands of manufacturers of downloadable content out there, that means we need to identify ourselves with (potentially) thousands of parties, leaving thousands of copies of easily misused personally identifiable information on thousands of computers whose level of trust we have no means of gauging. That part I’m not fine with. I’m also not fine with being spammed once I’ve traded a used downloadable; removing that temptation from manufacturers would be a good idea.

    So we could probably move towards a world where we can trade downloadables – any digital content really – by establishing brokering agencies for digital trades. I’m fine with leaving my details with one independent and well-audited company. I’m fine with that company acting as a proxy to other companies identifying myself as who I am, so that you can choose a different brokering agency, and we can still do business.

    You’d need manufacturers supporting that model, of course, but in the end it’ll mean that they get the activation keys to use in their software from the brokering agency rather than generating them themselves. Not that bad a deal, I think.

    Anyway… tangent ends.

    Comment by unwesen — 16 September, 2010 @ 6:26 AM

  10. I didn’t mean to imply that we shouldn’t be able to resell downloaded software, but that the gut reaction is that it’s somehow different than a physical CD. The content is the same, just the method of transfer and storage is different, which I see as pretty much irrelevant. But reselling code is tricky, due to the duplication issue. The easier fix might be to just charge so little ($5-15) that it’s easier to buy new, the loss of resale value is made negligible, and piracy becomes comparatively less valuable to the consumer. But I’m almost certain marketing people have worked out the numbers and found that the lost per-game revenue wouldn’t be offset by the increased sales, otherwise they’d already be doing that, Steam sales excluded.

    Comment by Klepsacovic — 16 September, 2010 @ 7:21 AM

  11. A lot of the discussions about this come down to the legal question: when you go to a store (retail or digital) and plunk down cash for a game, what are you really getting?

    The problem (as I see it) is that there’s a disconnect between what a lot of people believe the answer to that question is, and what it actually — legally, ethically, economically and philosophically — really is.

    What a lot of people today seem to think is that they’re actually buying the game — that is, that some kind of transfer of ownership of property takes place when they hand over their money.

    But the reality is that they’re not, and that’s defined by a sequence of beliefs encoded in our legal/economic system. (Sorry for the length of this, but I thought it might be helpful to break down the argument into its logical pieces. That way if someone thinks it’s wrong somewhere, they can point to the specific argument.)

    1. Created things, whether tangible/moveable objects or organized ones and zeros, are in our economic system considered to be the personal/private property of the entity who created those things. That applies to software developers (game creators) like anyone else.

    2. The fact of ownership confers a couple of fundamental rights: the right to sell an owned thing, and — importantly — the right to allow others to use a thing without ceding ownership of that thing.

    3. The right to sell a thing is pretty clear, but the important bit is that when you sell something, you give up all claims over how that property can be transferred or used by its new owner. Again, that’s a requirement for a workable definition of “ownership.”

    4. The right to allow others to use a thing without giving up ownership of a thing is also hugely important for a functional economic system because (sort of like the concept of capital lending by banks) it dramatically expands the productive use of created things. People can create more things than they can personally use, but those things still get some use because the law says other people can be allowed to use things belonging to someone else without transferring the actual ownership of those things.

    5. This concept of use-without-ownership is important enough to get its own specific and accepted legal formalisms: leasing and licensing, of which the latter is what we care about in terms of computer games. As the End User License Agreement for every game says (if unclearly), when you pay to play a game, you are not “buying” the game itself — ownership of the code doesn’t change hands — you are instead paying the owner of property for the limited use of that property. (NOTE: This is where there’s a link to MMORPGs: real-money transfers (RMT) for in-game items are considered illegal because of this notion that you don’t own the virtual objects in a gameworld. The game’s owner licenses you to use the ones and zeroes defining those intangible goods . You don’t own them, therefore you’re not permitted to “sell” them outside the game for real money to other players.)

    6. So the confusion is about licensing versus ownership — people believing they have rights to dispose of some piece of software that they don’t actually have. When you agree to license the use of some piece of property from that property’s owner, you agree to whatever usage restrictions the property owner may impose… in the case of games, up to and including that you don’t get to use the online component for free. (Of course these restrictions should be reasonable, but if you agree to an unreasonable restriction that was your decision, and judges have so held.)

    7. There are usually two objections to this reasoning that licensed games aren’t owned by the player and thus can’t be resold. One is that ones and zeros are somehow different from tangible property, that the fact of ones and zeros being relatively easy to clone somehow makes them less a form of property and therefore less deserving of the legal protections for the assertion of ownership rights over property. So far, however, I haven’t seen anyone make a principled defense of this argument, which really is nothing more than the “because I wanted it” excuse for theft.

    8. The other objection is the slightly more sophisticated “first sale” argument. This appears to be based on people reading Wikipedia (edited by individuals who occasionally exclude facts that don’t support their preferred beliefs on some subject) and seeing that one judge ruled that an agreement to let someone use a piece of software (through a license) was exactly the same as selling a physical object to someone, which caused the “first sale” doctrine to apply. This (supposedly) set a precedent that software licenses don’t exist (regardless of EULAs), and that once you pay for a piece of software you own it and can do whatever you want with it. (Hence “used game” sales.)

    In reality, this “first sale” doctrine says that when you sell a copy of an owned object to someone, you can’t dictate what the new owner will do with that copy. That’s fine… but the judge then magically decided that licensing a piece of software for someone else’s use actually constituted a sale. At a stroke, this one judge (or perhaps judges in several states; the Wikipedia entry is strangely vague on this) bizarrely chose to arbitrarily discard the entire concept of for-use licensing that doesn’t convey property ownership. On balance, I think that’s clearly a bogus ruling; even if you buy the Wikipedia entry there are still plenty of states where established licensing law — applying to software like any other kind of intangible property — still happily applies.

    On balance, then, I think the problem here is one of understanding. Gamers need to understand that they don’t own games — they’re paying for the opportunity to play a game, just like they’d rent an apartment or a car without actually owning either.

    Maybe the solution is for EULAs to be much clearer, with the point made in plain English: “You don’t own this software — what you’re paying for is the right to play this game. That means you can’t resell it as a ‘used game’ because it was never owned by you in the first place.”

    Whoever does that will get to enjoy a legal fight, but at least we’ll then get this “first sale” nonsense resolved….

    Comment by Bart Stewart — 16 September, 2010 @ 8:56 AM

  12. @Bart
    “Maybe the solution is for EULAs to be much clearer, with the point made in plain English: “You don’t own this software — what you’re paying for is the right to play this game. That means you can’t resell it as a ‘used game’ because it was never owned by you in the first place.”"
    This I could go for. But it would require a lot of changes in language, including by advertisers and retailers. It might not even be popular, since when people hand over money, they like to take something back and say “this is mine.” To not own something is a huge risk: it may be taken, changed, destroyed. Humans are possessive.

    Comment by Klepsacovic — 16 September, 2010 @ 9:16 AM

  13. I wrote about this, albeit somewhat pithily. Two key points, perhaps, lest I take too much time:

    First, prices are a big key. Resale effectively points out different price points on the demand curve. Seems to me that publishers (not devs, incidentally) who are interested in capturing money might pay more attention to that price curve and why it’s a variable, and adapt to it, rather than trying to kludge every potential customer into the same spot on the curve.

    Second, I don’t rent games. I also don’t pay for time in MMOs. I pay for products that I can then use whenever I please for however long I please. The more the industry moves away from that model, the less money they get from me. It’s a simple economic decision, nothing personal like “supporting devs” or a highfalutin’ moral argument.

    Comment by Tesh — 16 September, 2010 @ 10:08 AM

  14. @Bart:
    Thank you for taking the time to break that all down, seeing all the separate pieces actually makes a lot of sense that way.

    Personally though, I don’t think the EULA is the problem. There’s a few places where our experienced reality does not mesh properly with the legal definitions.

    1) As mentioned, the language we use is already heavily biased towards describing it as a “purchase” or “sale” rather than “lease” or “rental”. This is likely a side effect though.

    2) The “lease” on most games (as well as books and movies) is permanent. The contents do not expire naturally as with most physical goods, and the legal agreement also does not end without express definition by the lease vendor.

    3) We have centuries of history of these transactions being purchases instead of leases from books. This is a result of paying for the physical product combined with the concept of “owning” an idea (what I believe is a relatively “new” concept itself, considering).

    I think the biggest step forward that the industry could take to clear this up would be to “lease” games for an actual relevant period of time. Perhaps a 3 or 6 months standard term for 20$ less than normal, and include the more traditional “lifetime lease” in collectors editions. It helps hit multiple pricepoints, and cleans up the language and transaction handling to be more true to the real nature of it.

    It would definitely help to have something in place like unwesen suggests in place. I can’t (seriously) imagine having some 250 lb repoman busting down someone’s door and uninstalling a 40$ game, nor the privacy concerns of having a centralized system “breaking in”

    Not that I would mind them cleaning up the legalese in EULAs and other agreements…

    Postscript – Thinking about this, I’m curious. You can sell a lease, right? You can buy debt, I can’t think of a reason why leases would innately be non-transferable (aside from a likely non-transferable clause in the EULA). And that makes sense how book sales have worked for so long; you sell the lease to the information inside the book.

    Comment by Steven Gosling — 16 September, 2010 @ 1:31 PM

  15. I like the “limited lifetime license” idea. Conceptually, it addresses the quality of permanent possession that leads gamers to think they own the games that they’re actually just licensing the use of.

    Practically speaking, however, how would this time limit be enforced for single-player games? Without some clever programming, if I’m willing to reset my computer’s clock I could keep playing forever.

    Alternately, there’s the approach I suspect we are inevitably headed toward: every single game whose owner wants guaranteed revenue will be designed to have an online leash. To play it, you’ll have to go online to activate it. (Presumably this requirement would — at least initially — be sweetened with promises of additional content beyond what’s on the disk.)

    Among other things, that would allow the limited lifetime license concept to work since it would be administered at the server. So what do others think about the time-limited license idea, assuming the typical cost was considerably lower than the you-can-play-it-forever version?

    Speaking of online activation, BTW, “Notch,” the developer of the astonishing MineCraft, recently posted some comments on the subject of piracy and how a reasonable developer (i.e., property owner) might most reasonably cope with that. Online activation is basically what he’s concluded is required. (His thoughts at: http://notch.tumblr.com/post/1121596044/how-piracy-works )

    Transferable licenses are another approach… but that’s basically what GameStop and Best Buy are trying to do now, just with lousy “buy used games!” wording. Does existing law support a way to handle this?

    Or do we really require some new kind of legal formalism specific to ones and zeros that adequately protects both the ownership rights of digital content creators and the fair usage expectations of digital content consumers? Are ones and zeros really different enough from intangible property to need their own sub-genre of legal description? In what substantive way would that formalism need to differ from the generally well-understood concept of licensing of intangible property that we have now?

    Comment by Bart Stewart — 16 September, 2010 @ 2:45 PM

  16. To take your car example, if I buy a used car, I might miss out on deals that dealerships offer people who buy new. That’s fair and fine since I didn’t buy a car from the dealer. But it’s quite another thing for the dealer (or manufacturer in this case) to say that I might as well have stolen the car because I didn’t buy new. It’s no wonder that gamers heard this as an accusation that they had stolen the car.

    Tycho’s “If I am purchasing games in order to reward their creators …” holds no weight from a consumer point of view. Nobody buys games in order to reward their creators. We buy games for the entertainment value. That the creators benefit and live to produce more games is an abstract benefit but nowhere near compelling in the buy/don’t-buy decision. Where developer identity comes in is something like this: “these guys made a good game last time so this new one’s probably of similar quality.” Of course I appreciate that some people spend their time developing games, but it’s not my responsibility to ensure their livelihood any more than it is theirs to ensure mine.

    Honestly, if I buy a used game for $20 instead of a new one for $50, it’s because I didn’t think it was worth $50. That’s not my problem. That’s the game company’s failure to create a sufficient expectation of value. Some games just aren’t worth the asking price. If every new game were worth its retail price, there would be fewer used games sold. Instead of cursing at people who have a different view of their game’s value, perhaps developers should be happy that a person got to play their game who otherwise would not have.

    Bart, the legal status of games is a non-starter. If I walk out of the store with a console game cartridge, I might agree to the EULA (without reading it of course) in order to play the game. Then, a week later when I’m bored of it, I’m going to put it up on craigslist in violation of that agreement because I can. Possession being 9/10ths of the law, what’s the game developer going to do? Sue me? The record industry proved just how badly things go when you start down that road. Claiming that I’m just renting access to the game isn’t credible. MMOs have it a little easier in that it’s much clearer that you’re leasing access; there is often no physical medium to transfer and an opportunity for the MMO to shut down an account.

    Comment by Michael — 16 September, 2010 @ 2:55 PM

  17. I maintain my pragmatic approach: Everyone should buy used or pirate games I don’t like, and pay double-price for games I do like. If you like Halo or Starcraft, it doesn’t matter that much; if you like Psychonauts, don’t you wish more people had bought it at full retail?

    Books aren’t really the same: The book market accumulates in ways that non-sports video games don’t. Prolific authors can put our more than two books a year; I’d like to see a game series keep up with that. Converting someone to an author via used or library means that they might go out and buy the rest of the series; long-term authors still make full price on 20 year old books.

    Video games … not so much.

    And, to be honest, most writers never make back the advance for their first book. So please, buy books you love. Like video games, it’s the best way to ensure that there will be more of them.

    “@Charles:

    Uhhhh – you have it backwards. There is more of a chance (i.e. close to 100%) that the profits from selling a game to Gamestop get reinvested in the gaming industry than some random Craigslist sale.”

    Wrong!

    Well, half wrong. You’re only counting one type of profit.

    If I buy a game for $60 and sell it to Gamestop for $20, and they put it back on the shelves and you buy it used for $50. Essentially, I paid $40 to rent a game, you paid $50 to own a game. I’m probably going to spend my extra $20 on another game, sure. I don’t think Gamestop Management is going to spend its $30 on games. That’s the profit not being spent on games.

    In another world, I bought a game for $60, ran into you on my way in and traded it to you for $40. I get an extra twenty bucks, you save ten bucks, and the game company that produced the game makes exactly the same amount.

    So a lot of irritation over the whole “used video game” thing is that Gamestop is a pawn shop — and often where people buy their games in the first place. And will suggest to people coming in to buy new games that they could get it cheaper buying it used, as they have done to me. After all, Gamestop makes more money on used games than it does on new…

    Comment by Trevel — 16 September, 2010 @ 3:18 PM

  18. Wow, I guess this topic still sparks some passion. Lots of bits to discuss…

    unwesen wrote:
    …it’s entirely acceptable to buy and sell used books, music, movies, etc. Why should the situation be any different for games?

    All of those other media have multiple ways to make money. Books are created by a small team (author + editor(s)) come in hardcover, trade paperback, mass market paperback. Music is created by a small team has CDs, singles, licensing music. Movies are created by large teams, but have theatrical runs, Pay-Per-View, premium cable channel runs, VHS/DVD/Blu-Ray. Games are created by large teams and have… the game itself. Do we really want games to come along and charge full price for another slight variation? (*cough* Star Wars *cough*) Games only get cheaper, even if you get a “collection” package with multiple games. (To be fair, the publishers somewhat did this to themselves by emphasizing new games and depreciating older games.)

    Also, approximately 31% of the sales made by GameStop are used games. Compare this to how the Author’s Guild and book publishers got upset when used books reached only 23% of the market. There is backlash, you just haven’t been looking for it.

    Stabs wrote:
    If Steam gives a 4 games for $10 deal is that not similar “piracy”?

    Uh, assuming that Steam is selling the game at an agreed upon price and giving a cut to the publisher/developer: no, not really. The issue is if the publisher/developer gets paid. $10 Steam sale = developer gets something. Used game sale = developer gets nothing. Also note that getting games for $2.50 each isn’t the price for new ones. I got KotOR for that price this week, but that’s a 7 year old game now.

    Klepsacovic wrote:
    I can’t think of when I’ve ever bought a used game, but it seems like a reasonable practice to me.

    As a gamer (ignoring any sort of economic discussion), I think it’s foolish. Buying a new game for $50 then trading it back in for $30 a week later if I don’t like the game seems kind of dumb. I wait for reviews, recommendations from friends, or possibly rent it if I’m not sure. I’ll get back to this in a moment.

    Andrew wrote:
    A used game is created when a gamer sells their copy to a store for, usually, store credit. That store credit then almost always goes towards the purchase of another game.

    A few flaws with this: some stores offer cash (but give a more generous allowance to buy other games), it might go to buy a used game, which means the developer doesn’t see any of that money, and if the person buys a new game it might go toward buying a game from another publisher/developer. Someone trading in an EA game means that EA will potentially lose a sale on that game, and the store credit might go toward an Atari game. Doesn’t do EA much good.

    Sok wrote:
    and now it’s DVDs, streaming on Netflix

    I don’t think many movie studios are seeing DVDs as the enemy. They were against VHS tapes, until they figured out they could use those VCR things to sell copies of the movies after they were no longer profitable enough to put in a theater. Then they got you to “upgrade” all your VHS tapes to DVDs (and now to Blu-Ray!) Netflix is probably like most other rental places in that they pay a hefty premium to “rent out” the DVDs. Blockbuster and the like don’t buy their DVDs like you do.

    if I’ve bought the files, shouldn’t I be able to hand them off as I see fit? Duplicate them, perhaps not, but transfer ownership?

    And this is the crux of the argument about sales in the digital age. How does the publisher/developer know you haven’t copied the files for yourself before “transferring ownership”? They don’t. This is why it’s easier to restrict resale than to allow it and hope people are ethical.

    Harrison Rose:
    Creators (or more specifically, the publishers) need to create a value added feature that can be purchased new when the extant game changes hands.

    That’s pretty much the strategy that companies like THQ are advocating. They want people to pay extra for online access or extra content that is included with the new game for the new price. They just went about it in a tactless way.

    Bart Steward wrote:
    I thought it might be helpful to break down the argument into its logical pieces.

    This is very insightful. Thanks, Bart.

    The one problem is that I think we’re always going to have people using incorrect terminology. Yes, you technically license software instead of purchasing it. Just like in LotRO (and really, every other game) you’re “defeated” instead of “killed”, but people still call it “death”. I don’t think we need to redefine the system because some people use the wrong terms, we just need people to understand that calling it something doesn’t make it so.

    Tesh wrote:
    Seems to me that publishers (not devs, incidentally) who are interested in capturing money might pay more attention to that price curve and why it’s a variable, and adapt to it, rather than trying to kludge every potential customer into the same spot on the curve.

    That’s a thornier problem than you might first think. The reason why Gamestop pushes used games so hard is because they made a higher profit margin on a $40 used game than a $50 new game. A MUCH higher margin. Of course, this is because they aren’t giving a cut to the original publisher/developer.

    I think the game industry does a pretty good job with price discrimination, though. Games usually come down in price after a while. The trick is you have to wait. That’s why used games are so appealing, because they short-circuit the process.

    Second, I don’t rent games.

    Do you sell used games? I don’t quite buy the explanation that people would only buy games if they knew they could return them. Game rentals are a live and well. Why would someone so worried about finances think nothing of throwing away a large chunk of money to sell back a used game, but not even consider renting a game.

    I can see why people would want to buy used games, because you can get a game for a lower price sooner than waiting for the game to come down in price. But, I’m just not clear on how the logic supports losing money on trading a game back but not on renting it.

    (And, yeah, I did read your post, but I couldn’t think of a way to work it in. Sorry. :)

    Michael wrote:
    But it’s quite another thing for the dealer (or manufacturer in this case) to say that I might as well have stolen the car because I didn’t buy new.

    That wasn’t the developer, that was a fan and advocate with a huge soapbox. The developer’s point is that they don’t get paid if you buy a used game.

    Nobody buys games in order to reward their creators.

    Some people do, and perhaps you should consider it. The whole point of this post was to point out that your economic actions have consequences. If you’re smart enough to play a typical game, you’re smart enough to stop and consider the impact of your actions.

    One quote I particularly like that originated in food discussions, but it works here: “Every time you spend money, you’re casting a vote for the kind of world you want.” -Anna Lappe Buy used games and you’re voting for a world where developers don’t get paid for the work you enjoy. Buy corporate games and you vote for more of those. Buy indie games and you cast a vote for independent developers.

    Trevel wrote:
    And, to be honest, most writers never make back the advance for their first book.

    Yeah, a writer usually doesn’t make a decent income until their second or third book. JK Rowling made a £1500 advance from the first Harry Potter book, for example. It just happened to hit at the right time and now she’s a billionaire; not a typical story. But, it demonstrates what happens when you get the support of a lot of fans.

    Comment by Psychochild — 16 September, 2010 @ 11:38 PM

  19. Quickie: Phoned In

    [...] Since I’m not at home, am nowhere near a computer, and forgot to pre-write a post, all you’ll get today is this: Head over to the ingenious Psychochild and read his take on buying used games. [...]

    Pingback by Procrastination Amplification — 17 September, 2010 @ 4:24 AM

  20. Used books are physical and can’t be copied. They also are not sold in major retail chains, but often in smaller stores where you cannot get used copies of instantly released best sellers except for one or two copies. The selection usually is bad, and the books themselves are often damaged. Even then, remaindered books cut significantly into sales and profits, especially hardcovers and trade paperbacks. They even are reduced 90% sometimes.

    Not only that, authors get no royalties for remainders, which are books just dumped and sold at a loss. Plus, the entire Ebook market is trying to shift writing to a long tail mode where you’ll have to compete with thousands of people, many who often flood the market with poorly written and non-edited crap. Books are not a good example of how used helps the market, and many authors cannot make a living writing them.

    As for the main argument, I think Brian is being too kind. The freeloader culture needs to die, or we are going to see a shift to games which are poor in quality but designed to make money in ways pirates and used game sales cannot touch. If the used market is a large burden for small devs, small devs will not release games except tied to online services where security is there. Everyone keeps focusing on what they want while forgetting that creative work is hard, pays poorly, and can not exist at all if new sales fail.

    I think we’ll start seeing more of what Korean developers do: release the core product for free, and then add a heavy grind and cash shop to a normal game. The freeloaders can play a stripped game, but the people who pay for it will often suffer through games designed to harvest them for money many times the amount of a decent box price. In consoles you’ll start to see less innovation and more quirky games being put on xbox live arcade, while retail stores just stock the triple AAA releases from big name companies, or smaller games that make money of of collectors editions and small print runs.

    Comment by Dblade — 17 September, 2010 @ 6:11 AM

  21. “As a gamer (ignoring any sort of economic discussion), I think it’s foolish. Buying a new game for $50 then trading it back in for $30 a week later if I don’t like the game seems kind of dumb. I wait for reviews, recommendations from friends, or possibly rent it if I’m not sure. I’ll get back to this in a moment.”
    Well yes, that is dumb. More than kind of dumb. That’s spending money on games that might not be good, meaning giving incentive to make games that are bad, but are hyped up and flashy to draw initial sales. I guess I was thinking more of games that are several or more years old and may be hard to find new.

    Comment by Klepsacovic — 17 September, 2010 @ 6:18 AM

  22. I can see why anyone with game dev would have negative views towards used games but the only way you could ever get me to buy only new games is to lower prices to around 20$ and to make sure i wouldn’t have to deal with stupid company’s like EA games.

    Comment by mrnotcrazy — 18 September, 2010 @ 9:53 AM

  23. Honestly I think it became so easy to buy games that I don’t even think about pirating or buying used games.

    Make buying easier and then pirating or buying used games becomes just ridiculous. Whatever people say most of them buy compulsively (of course nobody commenting here… *cough*).

    Even on consoles now you can buy some games right away so I really don’t feel going through the trouble of waiting for someone “that told you would bring you the game monday but there was so much going on in his life that you don’t get the game until 2 weeks later”.

    And people are cheap by the way. You could give them stuff for free that they would ask you to pay them to get it so the price is a non-issue. I can’t believe all the useless stuff people buy these days that I can only come to the conclusion that they don’t know the value of money.

    It’s of course easy to contradict me on that last point but I just cannot be convinced that X is too much for Y game. Buy it and play or forget about it. Playing is not a right it’s a luxury.

    Comment by Dave Toulouse — 18 September, 2010 @ 10:58 PM

  24. Brian, I don’t rent games because to me it’s the same as paying for time. I don’t like it in subs, I don’t like it in rentals. I don’t mind that they exist, but I don’t spend that way.

    I do occasionally sell used games, but through Craig’s List, eBay or maybe Goozex. The GameStop model is a ripoff as far as I’m concerned, so I don’t deal with it. (And I don’t buy used games that way either, unless they are $5 specials in the bargain bin… and only then on very rare occasion.)

    Oh, and on…
    “Buy used games and you’re voting for a world where developers don’t get paid for the work you enjoy.”

    Not exactly. As I’ve pointed out before, the secondary market effectively reprices the product. The devs/publishers got $50 either way (yes, yes, minus distribution cuts and so on) whether one person buys and keeps their initial $50 purchase, or whether they resell it to someone else for $25. The devs could have had both purchases if they changed their price point. Whatever the case, they still got paid. If that secondary buyer wouldn’t have purchased at the $50 pricepoint, there’s no point (and no honesty) in counting them as a “lost sale” or a “pirate”, unless devs take a close hard look at why that sale is lost… and it’s not because the purchaser is a weasel.

    Comment by Tesh — 19 September, 2010 @ 12:48 PM

  25. @Tesh – the issue is that regardless of price point, a used game seller such as GameStop can make money selling the used game cheaper than it costs to buy new. Game costs $50? Sell the used version at $40. New game costs $25? Sell it used at $20. There’d be some price point where that starts to break down for used games, but it would break down for new games long before.

    There’s a big difference between ‘used game sales’ and ‘used game sales from GameStop’. A huge problem is GameStop’s practise of trying to flip used games of just released titles – that’s core to this entire issue. If they only did it to titles outside of their launch window (let’s say – 60 days post launch) there would be less of a problem. However, when they encourage gamers to return the game for max credit within a weekend of launch, it has the definite effect of eating into dev / publisher profits.

    It’s a matter of lifetime copy value. Say a game launches at $50 and is worth $5 less with every resale. It passes through five sets of hands – the original new purchase, at $50 to the developer, and then 4 sets of used game buyers (who pay $45, $40, $35 and $30 for it) all through someone we’ll call StopGame. Assuming 100% of the purchase price goes to the ‘seller’ of the game, the developer has seen only $50 returned, while StopGame has earned $150 and arguably stripped out the developers’ chances of selling copies to those 4 extra people. Sure, you could argue that the person who paid $30 for it may not have paid $50, but the person who paid $45? $40? It’s this kind of model that makes StopGame very rich, but erodes the potential for developers to make money.

    Comment by UnSub — 20 September, 2010 @ 1:56 AM

  26. @Bart:
    You’re stating the way things are, but we’re also discussing the way things should be. If it’s permissible to resell physical media – and at least to me it’s very clear that you’re not reselling ownership over the contents, but ownership only over the physical copy – then why should there be exceptions? You’re allowed to watch a movie whose physical medium you possess, you’re allowed to read a book you hold in your possession, you should be allowed to play a game whose physical medium you possess.

    There’s a huge cultural impact if we start making exceptions to this. Suddenly I, as a former book publisher, would be allowed to order you to burn the copy you bought because you don’t really own the contents. That would be a terrible precedent.

    @Trevel

    Books aren’t really the same: The book market accumulates in ways that non-sports video games don’t. Prolific authors can put our more than two books a year; I’d like to see a game series keep up with that. Converting someone to an author via used or library means that they might go out and buy the rest of the series; long-term authors still make full price on 20 year old books.

    The number of authors out there that make any significant amount of money on 20 year old books is very low. Most authors don’t get much in terms of royalties. And publishers – non-pulp publishers I should say – become increasingly unwilling to buy book content from authors without something of a guarantee that they’ll recoup their investment. The upshot is that this accumulation you speak of
    a) happens in the “pulp” sector of the market, where royalty payments are the exception, but
    b) doesn’t happen in the rest of the market, where royalty payments are more likely.
    Your author that makes significant money on 20 year old books is about as rare as your millionaire musician. We only read about the ones that have made it.

    @Psychochild

    All of those other media have multiple ways to make money.

    True, but game related merchandising isn’t unknown of either, especially in this day and age. Unfortunately that’s an avenue only the truly large games go down, which probably make enough money without it anyway.

    I do get your point, though. But really the problem then is that games are too expensive to manufacture for the amount they can be expected to make. That’s a non-sustainable business model if I’ve ever seen one; I for one would be very reluctant to try and force sustainability by legislature, which is what we’re arguing about in the end.

    There is backlash, you just haven’t been looking for it.

    It’s true, I haven’t, but now that you mention it I was aware of that, I just forgot about it.

    I’ve also published books myself and spoken to authors. The clever ones have realized by now that they can make more money via book reading events than actual book sales. It’s a current trend in the market – slow, but increasing – to treat author’s readings as almost more important than the physical copy of a book you buy. Really it’s the rock band model of doing business, and it works better for authors than others.

    So I tend to disregard such backlash as a dying breed thrashing in agony, rather than as where the market is going. I suppose I think I’m further in the future than I really am ;)

    I wait for reviews, recommendations from friends, or possibly rent it if I’m not sure. I’ll get back to this in a moment.

    I do the same. Unfortunately – or fortunately, depending on how you’d see it – by the time I get around to buying a game, it’s usually dropped in price. That’s great for me, of course, but not for the manufacturer. I’d usually be willing to pay full price by the time I’m sure I want a game.

    @Dblade:

    Used books are physical and can’t be copied.

    Oddly enough, the very reason “copyright” exists is because they can. And prior to the introduction of copyright, they were… it was the publishers who were accused of being pirates, back then, not readers.

    They also are not sold in major retail chains, but often in smaller stores where you cannot get used copies of instantly released best sellers except for one or two copies.

    While I tend to buy used books in smaller stores, the huge number of used book sales made through Amazon or eBay would beg to differ.

    The selection usually is bad, and the books themselves are often damaged.

    Again, Amazon and eBay make the difference. Most people I know who buy used books don’t care much about the damage, though, as long as we’re talking about a bit of yellowing and a creased spine. Comic book collectors take quite a different view, usually.

    Plus, the entire Ebook market is trying to shift writing to a long tail mode where you’ll have to compete with thousands of people, many who often flood the market with poorly written and non-edited crap.

    The funny thing about the long tail is that it helps publishers, not authors. If you’re an author of long-tail content, you’re likely not going to make much money off your content. However, publishers’ royalties across thousands of authors such as yourself will accumulate to be significant. That money then goes towards promoting non long-tail content.

    When you actually look at what e.g. the Kindle store has to offer, it’s usually ebook versions of very popular print books. There’s not much of a long tail to see there. I wish there was, I’d get more of the stuff I like to read.

    So I’m a bit confused about what you’re trying to say here that has anything to do with used books, or the book market in general. Or how that would apply to other media.

    (Oh, as an anecdote, I recently purchased a number of ebooks. It’s amazing how many spelling mistakes, formatting errors, and PLACEHOLDER words there are in them. You can clearly see that they are not very well edited, yet we’re talking about works that sold incredibly well in paper form. You’d think publishers paid some attention to a new distribution channel…)

    Comment by unwesen — 22 September, 2010 @ 3:53 AM

  27. unwesen, you’re quite right that I emphasize the view that law and policy continue to strongly uphold property ownership. Maintaining a productive culture (by insuring that property ownership is respected) is a lot more important than whether I can play a game someone else might once have played.

    But that’s not to say game publishers can’t or shouldn’t look for ways within the law that help to get games into multiple hands. I agree with you; I think it would be to everyone’s advantage to do so. The question, how do you do that when you’re talking about a product that no longer requires a physical component for distribution?

    That is, what kind of commercial/social/technological structure would satisfy both the ownership rights of digital entertainment creators/publishers as well as the reasonable usage (including redistribution) expectations of digital entertainment consumers?

    The first sale doctrine makes sense for books. As an author or publisher I own the expression of the contents in a book that you buy. But you own the physical book, and you can reasonably sell that content-carrying object at whatever price you fairly negotiate with someone else. But if you download a game from Steam, there is no book! There is no distribution object, so there was nothing to “sell” in the first place — you got the pure content through a license. And at that point the “first sale” doctrine that works for books no longer applies to a computer game.

    It’s conceivable that the executable and associated files comprising a game could be considered a kind of “distribution object.” This would mean that files, like a book, could be bought and resold. But are files, consisting of ones and zeros that can be duplicated many times for effectively zero cost, something that someone should be compensated for?

    This is the kind of thing that led me to ask if maybe software (especially if digitally transmitted) needs some kind of new legal status — a new class of object with appropriate property protections but whose distribution doesn’t require licensing.

    What that might look like, I leave to the lawyers… as frightening as that might be.

    Comment by Bart Stewart — 22 September, 2010 @ 1:59 PM

  28. It goes back to the old problem of whether Intellectual Property is licensed or sold. If what is on the disk is sold then the seller has no say it what is done with it afterwards, including cracking the game to allow it to be played without the CD, or ripping the song. If the IP is only licensed then the physical disk should be replaced for free + shipping if it should ever become unreadable or lost.

    Steam basically does this, and many online music stores will allow re-downloads, Licensing the straight data is the future becasue it most effectively addresses this problem.

    Comment by Adam — 2 October, 2010 @ 6:11 PM

  29. Be careful what you game devs ask for. If you get a world where no one can resell used games then every other industry out there will start lobbying for the same protection. Regardless what anyone wants to claim there is no legal,intellectual or moral difference between reselling a game and reselling a car,laptop or tv. The exact same arguments for how GM,Dell, or sony respectively are losing money because we aren’t buying thier product directly from them can be made.

    Most likely if someone sells thier used games it’s to someone that isn’t going to buy a 50 dollar new game anyway. The seller will probably use it to buy his next 50 dollar game. Winning this fight may be a net loss of revenue long term.

    And I suspect that the MMO monthly sub model is probably whats cutting into game sales now. People are committing long term to one game and buying less games. It just may be that the market is close to saturation and the percentage of people playing games isn’t going up. It could be that the market has matured.

    Comment by sam — 2 October, 2010 @ 7:03 PM

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