Mass Effect

Earlier this week I read an article which reported that the CEO of US based GameStop was complaining about the recent trend by game publishers to restrict sales of second hand games. The point of his complaint was basically that by restricting the sale of used games, consumers are less likely to purchase new games due to lost “residual value.” He basically implies that publisher are to blame for reduced sales due to their dastardly desire to protect their source of profits. So my question is, are used games really harmful to the games industry? Or is GameStop just whining about losing their primary source of profit?

I’m sure we’ve all heard about the so-called Draconian DRM systems employed in Electronic Art’s games such as Mass Effect and Spore, a system where the purchaser must tie their game to an online account and then has X number of limited installs. Or of systems such as Steam whereby games are tied to an account on purchase and cannot then be transferred to another account (with very few exceptions). Well, I’m sure a large number of people will quite adamantly, when asked why such measures exist, insist they are to stop piracy (a subject I will cover in more detail at another time), but they are actually incorrect. DRM systems are to stop the reselling of products. They are the software industries tools for enforcing terms that have been around since the dawn of game sales. Basically, they are now a way to enforce the management of licensing. To stop the purchaser of a license from transferring that license to someone else.

The reason for this is simply that the owner of game (the publisher) makes zero profit on such a resale. They see none of the money from that transaction, despite being the entity that owns the rights to the game. That’s right folks, when you purchase a game, you don’t actually purchase the game. You don’t own it. All you purchase is the right, or permission, to play the game. While you own the actual media, the paper the manual is printed on, and the box the game came in, you don’t own anything else connected to your purchase. The game and contents of the manual are still the property of the publisher. They are just letting you use them in return for your paying them to grant that permission. At no point in that sale, though, did they grant you permission to then go and pass your license onto anyone else, either for nothing or for any form of compensation, be it money, food, sex or rare alien artifacts.

Now when you then take your game to a shop such as GameStop and trade it in, you’re then giving GameStop the ability to resell that game (at a price of their choosing) in a manner in which they no longer have to pay the publisher. You are in essence, denying the publisher some profit. As for every game that GameStop can sell without having to pay the publisher, that’s one sale less of profits for the publisher. Profits that they use to fund the development of new games. So basically, by selling your game or trading it in to a store such as GameStop (or by selling it or giving it away to friend or whoever) you are in breach of the terms laid out by the publisher. You are transferring your license to play the game despite the publisher not granting you that permission. The simple reason they do this, if you haven’t guessed by now, is due to profits that they then lose as a result of such a transaction.

The CEO of GameStop argues that consumers gain “residual value” from the resale of their games, i.e., they get some of the price they initially paid for the game back in return for no longer having the game. For example, if they buy a game for $60 they may get to sell it back to GameStop for $20. Thus getting a residual value of $20 which they can then, in theory (and as the CEO claims), put towards the cost of a new game. The reality of this, is that the consumer is then more likely to sink that money back into a second hand game – sold for slightly less than a brand new game. A sale for which that residual value goes right back to GameStop and not to the publisher of the game they have just bought. GameStop make a bigger profit, the publisher and developers, none.

Given that this resale business is the source of the majority of GameStop’s profits (and other stores like them), is it not surprising that the publishers want to stop this? After all, they want the money to keep themselves in viable business. If GameStop keep denying the publishers their source of revenue, eventually GameStop are going to have nothing new to sell. Did they think about that? Thus I conclude that yes, second hand sales are harming the games industry. But not for the reasons that GameStop’s CEO would have you think. It’s not the fact that consumers will no longer be able to trade in their games that will damage the industry, it’s the fact that if they can, the very creators of the games are no longer going to see the viability in continuing to develop a product for which they are not going to get fully reimbursed.

Should gamers have the ability to trade in, sell, or otherwise pass on games to others? Yes and no. In the current form, no. But what if companies such as GameStop worked with the publishers to set up authorised resellers – a system by which each sale to an authorised reseller would see some of the profits of that sale go back to the publisher? Would that not keep the gamer happy? By knowing that they can trade in their game and knowing that the publisher will also be paid (and thus give them incentive to help the further creation of new titles). Would that not keep GameStop happy? In knowing that they can still buy back games, and mark them up and make a little profit on them while also allowing the publisher to still make their deserved profit too? Probably not sadly, as I’m sure GameStop are only complaining because it means less money for them. Or else they would have worked with the publishers already to put such a system in place, right?

And I guess we know where the publishers stand too. They’d rather restrict the ability to resell games than to try and work with stores and distribution outlets to create a system whereby they can profit from the second hand sales market. Of course, none of this currently affects console games at all. Yet. But it will, unless both GameStop and the publishers wise up and start to work together on this. Consider that the next time you’re faced with DRM you don’t like, and instead of blaming the pirates for it; blame GameStop, the publishers and their inability to play nice together.

Thanks for reading!

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