Friday, March 30, 2007

Should Used Game Sales be Legal?

A frequent argument between gamers is whether or not games should be resellable. Stores such as Gamestop/EB Games frequently buy used games (console games only--Playstation, Xbox, etc.) and resell them at a discount. Some gamers argue that this is immoral, harmful, and/or should be illegal. The argument usually presented is that game developers and publishers do not make any money off of used game sales, so sales of used games does nothing to promote game development. As a result, we get fewer games (and possibly poorer games, as only big budget titles can survive).

This argument is probably wrong. I'll let Steven Landsburg explain why, in this quote from The Armchair Economist (a book well worth reading):

I have an op-ed piece from the Chicago Sun-Times calling for a law that would protect artists by allowing them to collect royalties when their paintings are resold at a profit. The writer ignores the question of how his proposal would affect the price of original artwork. Let me fill in the gap for him. If the original buyer expects to pay a $100 royalty at resale time, then his willingness to pay for the original painting--and hence the price collected by the artist--is reduced by approximately $100 ("Approximately" because of an adjustment for the fact that $100 today is worth more than $100 in the future.). What artists gain in royalties they lsoe on the sales of original artwork.
Actually, it's worse than that. Some artists have careers that fizzle unexpectedly. Those artists accept depressed prices for their original work but never collect enough royalties to compensate. Other artists do much better than expected; their royalties more than compensate for the depressed price of their originals. So the op-ed writer's plan is a prescription for making unsuccessful artists poorer and successful artists richer. (Landsburg, Steven E., Armchair Economist, The Free Press 1993, page 123)

The second part of his argument probably doesn't apply to games--they either succeed or fizzle in their first year. Seldom do games maintain popularity or "get discovered" ten or twenty years after their creation. Also, when he says he "has" an op-ed, he doesn't mean that he wrote it. He means that he clipped it out and saved it because it made an interesting economic error.

The first part of his argument does apply to games, however. If people cannot resell their games, then the value of the game to them will be reduced by the amount of the lost resale. They will be willing to pay less for the game in the first place. This reduced demand for games will be felt by the game developers and publishers.

This doesn't just apply to games or painters. It also applies to any durable good--cars, ovens, refrigerators, houses, etc. They're all competing with the preexisting stock of goods. Should we make it illegal to resell houses, because then the builders of houses aren't making money off the resale, and therefore they have insufficient incentive to build houses? Of course not. Making it illegal to sell a house would make a house significantly less valuable, so fewer people would buy houses--and this would harm homebuilders.

So why, then, does Valve Software use Steam, an online content distribution system that prevents resale (because games are tied to your Steam account, rather than a physical disc)? They may believe that benefits them because it prevents resale, although they are probably wrong. I think a better explanation is that it offers convenience that increases sales. With a Steam account, I can download my games onto any computer, without having to worry about discs. I don't even have to go to a store to buy them (and I don't have to worry about Steam going out of stock of the games carried there). Steam is also probably slightly better at preventing piracy than other distribution methods (although only slightly better).

I am lucky that there is a Gamestop near me with employees who are not idiots, who actually know games, and who make good recommendations. I buy both new and used games from them. The last time I went the guy at the counter reminded me that I should try Trace Memory if I liked Hotel Dusk: Room 215 (which I did). The only copy they had was used, and I gladly bought it without feeling guilt.

So go ahead. Buy and sell used games, and don't feel any more guilt than you do when you buy and sell your used car.