I think this is bad; not necessarily for the consumer, but for the industry as a whole. Reselling means that copies sold after the release benefit random consumers, not the developer. On the other hand unresellable licenses along with sales mean that everyone pays the same price, but the developer gets all of the revenue. Digital goods cannot be scarce; we shouldn't treat them as if they are.
I think this is good, not just for the consumer, but for the industry as a whole. Reselling means that copies sold at the release have a higher resale value, and therefore a higher price could be charged at release date. If a product has a healthy used market, then I will pay a higher price, knowing that some of it will be recouped later on. This shifts the game's income earlier after release, providing a faster ROI on game development.
This is also besides the fact that the developer has no moral right to prevent the public from reselling a product that has been sold. (First-sale doctrine)
Also that opens a possibility to sell the crap you accidentally bought but refund window closed before you realized that. Many games are promoted as a blockbuster revolution, while being the same old grinders with new textures, or worse. You wait for a plot/ideas that are not there and then oops, you played for three hours, no refund.
In this case, it is a solution stretched to a separate problem, but who cares.
I'm not sure if you're wrong, but it's not at all clear that you're right.
By having a real used market, there are two opposite effects on the new market:
1) Obviously, having more choices (viz purchase of a used copy) tends to pull prices down.
2) But less obviously, the knowledge that one can sell the game when complete means that a buyer would be willing to pay more up front. That is, today they pay $X new, and that represents the total investment. But with resale, they pay $X' up front, but later recover $Y later when they sell it.
The question is what is the equilibrium between these two countervailing forces?
You need to consider the following strategy. Buy game, play for 20h straight. Sell game. Physical media have transaction costs, but for digital copies it will be as easy as pushing a button.
Either doing this is dirt cheap (say less than $1). If it is not dirt cheap, then it means that the game must depreciate hundreds of dollars per year. Which means the starting price must be like $1000.
People wont pay $1000 for a game, so the second case is impossible. Hence, it means that it will be dirt cheap to buy-play-sell. This may be a big threat to the current model.
> You need to consider the following strategy. Buy game, play for 20h straight. [...]
On average, people don't play a game for 20 hours straight. Even I could not do this during a World of Warcraft release, and most people don't. The few who do are outliers.
Most people sleep 8 hours a day, have a household, a job, school, etc. Even a "weekend no-lifer" (which I suppose is more common than a "complete no-lifer") can only play for about 16 hours a day on 2 days a week in the weekend, and that assumes they have no real-life responsibilities. People like that are most likely teenagers (even though these have homework).
> Either doing this is dirt cheap (say less than $1). If it is not dirt cheap, then it means that the game must depreciate hundreds of dollars per year. Which means the starting price must be like $1000.
> People wont pay $1000 for a game, so the second case is impossible.
Sorry, why must the start price be $1000? This makes no sense.
If you want us to consider a strategy, you need to present a plausible one, with plausible data.
Right now, if you want to buy a game cheap, you can already on G2A (circumventing things as region lock). I believe this is going to render the need to wait for discounts (which I currently use) less. If game developers simply quit with all and every discounts (some already do) then the resale value will stick. The amount of people who play a game, might increase as well, and as long as the game retains value over time the first hand and second hand price will stay the same.
Ultimately, the model of selling licenses might have to adapt to the situation, but that is a Good Thing IMO. The way it should work with content, is that people invest money in it, and then these people get an exclusive right to play it first ie. crowdfunding model. Unfortunately, the rights of investors on crowdfunding are currently very low, but that is merely a legal problem. You can certainly keep game licenses sparse right after release, but it increases the urge for piracy because people in non-West can't afford.
I also agree that #2 is greatly overlooked. I know, personally, I would have purchased many games in the past, if I had an option to resell it for even half the price I paid for it. Instead, I end up waiting 12+ months until that game comes down in price commensurate with the value I believe it to be worth.
This applies a lot to single player games that will take 10-20 hours to complete like the newest Tomb Raider series or Deus Ex series, where I'm sure I will enjoy them, but not enough to spend $70+ on them.
You can apply the same argument to books. Every consumer/user/individual right you have is in some way "bad for the industry as a whole", and if they could take that right away from you, they could squeeze you for more money.
You argument applies to any secondary market. The creator has already made money from the first sale. Why should they continue to get a piece of every subsequent sale?
> On the other hand unresellable licenses along with sales mean that everyone pays the same price
no, unsellable licenses result in price discrimination, because it gives the distributor a monopoly on the sale. That is why steam games have different prices in different regions. Through resales this is eliminated because people can trivially use the arbitrage opportunity to buy low and sell high.
This is a good thing because it maximises consumer surplus. I'm not really sure what a 'random consumer' is either. I don't really see why we should let platform owners or developers exercise market power to the disadvantage of consumers.
> no, unsellable licenses result in price discrimination
> Through resales this is eliminated
> I don't really see why we should let platform owners or developers exercise market power to the disadvantage of consumers.
No price discrimination may result in the single sale price being the first world country price rather than the developing country price (it may make more financial sense to ignore developing countries than to cut the first world price by 3x). So it wouldn't necessarily be to the advantage of consumers.
Secondly this is ignoring what games are a viable financial enterprise to begin with. Without taking that into account, mandating all games be free would be to the advantage of consumers. If a low friction way to buy/sell digital copies single player games existed, I could imagine a single player game changing hands 10 times rapidly after it's released as people finish playing it and sell it to the next person. Unlike physical goods used digital goods would be basically perfect (and would require no time or money to ship).
But rather than consumers paying 10x less overall and developers finding a way to make the same games with 10x less money, I expect a different equilibrium would be reached. Probably developers mostly ignoring pay-once single player games altogether in favor of multiplayer games and/or in app purchases.
>No price discrimination may result in the single sale price being the first world country price rather than the developing country price
no (unless developers would be willing to forego revenue). In a market with perfect competition (and this is close enough to be modelled this way), the equilibrium price is equal to the marginal cost of production. (which is very low for a videogame). Regular old economics does apply here and consumers on the aggregate would win out.
>I expect a different equilibrium would be reached. Probably developers mostly ignoring pay-once single player games altogether in favor of multiplayer games and/or in app purchases.
This may be true but it's not really an argument against competition, after all we allow you to resell your car despite the fact that we could protect car makers by granting them monopolies and they could argue that they could build you fancier and nicer cars with their new surplus profits.
In a market economy, we generally tend to favour the dynamics of competition and consumer welfare over the protection of profits acquired through market power.
> no (unless developers would be willing to forego revenue). In a market with perfect competition (and this is close enough to be modelled this way), the equilibrium price is equal to the marginal cost of production. (which is very low for a videogame). Regular old economics does apply here and consumers on the aggregate would win out.
I don't understand. Clearly video games are not priced at the marginal cost of production, which is just the cost of transferring a few GB. Are you suggesting they are currently or they would be with allowing resales?
I was trying to illustrate it with a specific example, but the point was that price discrimination does not seem to me to be inherently anti-consumer. It would depend if (compared to the scenario where it is not allowed) the price is being raised to get more from customers willing to pay more, or lowered for customers unable to pay as much (who would otherwise be ignored). I'd argue that discounted pricing for developing countries is mostly the latter case.
> In a market economy, we generally tend to favour the dynamics of competition and consumer welfare
I'm arguing that consumer welfare is not obviously served best by torpedoing the market for single player games. The whole point of granting copyright monopolies is to enable content production. IMO allowing companies to charge per person to play a game (an unlimited number of times for the rest of their life) is not an inherently immoral business model and in some ways is more consumer friendly than pay-per play experiences like movie tickets or in app purchase based games.
>Clearly video games are not priced at the marginal cost of production, which is just the cost of transferring a few GB. Are you suggesting they are currently or they would be with allowing resales?
well they'd drop in price heavily. They won't come down to the marginal costs because as you correctly point out AAA titles have high fixed costs in relation to their marginal cost so if the firm wants to continue to exist they can't charge zero obviously. But yeah most competitive digital goods actually do approach their marginal costs of production, which is why so many of them cost something between a few dollars or nothing, see newspapers.
And actually pricing the good at the highest first world rate isn't possible (or at least not rational) because in a market with resales those consumers can then go on and sell their games, taking your revenue (that's why competitive markets push the profit down in the first place).
> is more consumer-friendly than pay-per play experiences like movie tickets or in app purchase based games.
I think that's because (I would guess) you've got a bias towards this business model and dislike other ways to monetize games. But for consumers at large (who don't mind those experiences if their decisions are any indication) this model works very well.
Also keep in mind that the economical point above (that competition drives profits to zero)d does not imply that the company goes bankrupt, it means that the company only gets to keep what it costs to produce the product, it is still a perfectly plausible business.
And culturally speaking, a lot of great games were developed in environments without much copyright protections, reselling rights (literally every game before digital platforms could and was trivially resold). Almost all my favourite single player games precede the online platform era, and anecdotally I'd say there were more of them. We don't really need to give EA or Disney surplus profits by protecting their market power.
I could be wrong, but with easy digital resales allowed it seems like the price would either have to:
- Remain stable, so that someone can buy the game for $40, play it for 30 hours of entertainment and finish the game, then resell it for $40, earning the game developer no money.
- Continuously decline. Of course this means the price rapidly reaches 0, at which point the game developer can't make any money.
These problems would be the same regardless of if the game costs $10 or $60 initially. I think under either of these scenarios most indie and AAA developers would have to switch away from single player pay-once games, since they wouldn't be able to make nearly enough money to pay back the development costs, forget about profits.
So if it pans out that way I don't think that is helping consumers. It would take a product that consumers want to buy and developers want to make (single player pay-once games), make it impractical to produce, and shift the market to products that those consumers like less. I'm not a libertarian but that sort of regulatory outcome seems bad, since as far as I can tell it just hurts developers and consumers while earning the government no money.
I think instead, if we are worried about game companies making too much profits, we should raise the tax on corporate profits for game companies (although this might lead to less investment, since there will be less return). Or if we are worried the companies having too much revenue, regardless of profits, we should have a special sales tax on video games (like on cigarettes), although that will hurt even unprofitable games. Unlike the mandatory resale plan, these sort of taxes can be adjusted to focus more on big companies instead of small ones that are barely surviving, apply equally to all types of games, and even make the government money. So it's win-lose instead of lose-lose.
I don't think mandatory resales would be such a big problem for other types of software like office software that need to be continuously used (although that's moving to subscriptions anyway). The main problem is a lot of video games people just play for 30 hours or so and finish. So if you can buy and sell for the same price people can just do that and pay nothing. I think it's less of a problem in the physical game era since used games aren't identical to new ones (people won't pay as much since the disk could be scratched etc) and it's more trouble to buy and sell them since you have to mail it, pay for postage, wait for it to come in etc.
Games were not scarce before neither, you just had to move your ass to a store to get it, but that was it. Games were available there with no shortage (there might have been in rare occasions, but that's it).
The only difference is that distributors killed the second hand market when the switch to digital distribution happen.
