Rather Than Whine About Used Markets, Why Not Enable Them Yourself?

from the swedish-design dept

We were recently talking about how so many in the video game industry seem so antagonistic to the used video game market, despite widespread evidence that a healthy secondary market helps the primary market in a variety of ways. Reader Johnny points us to the news that retailing giant Ikea is now planning to experiment with used goods sales itself via a website in Sweden. The company says that it won't make much money from the offering, but recognizes that it adds value for consumers, thus suggesting they actually recognize how such things help the primary market as well. Nice to see not everyone reacts so badly to used markets.

Filed Under: enabling, secondary markets, used markets
Companies: ikea

Video Game Exec Claims Used Games 'Cheat' Developers

from the lets-learn-you-some-economics dept

For whatever reason, every few months or so, yet another clueless video game company exec spouts off about how the used video game market is somehow unfair or hurting video game developers. We've seen it again and again and again. However, since a whole bunch of you keep submitting the story that Cory Ledesma from THQ has made the downright laughable claim that the used video game market "cheats" developers, it seemed worth discussing.

This shows a fundamental misunderstanding of the law, basic economics and the customers THQ is failing to serve. On the law, Ledesma and others should familiarize themselves with the First Sale doctrine before making silly statements. On economics, repeated studies have shown that a healthy secondary market for products actually significantly helps the primary market. If you take more than a second and a half to think about it, it's easy to understand why. If there's a healthy secondary market for products, it reduces the risk for the buyers in the primary market. That is, if they buy the product and don't like it, they know they'll be able to resell it and recoup some of their losses. That makes it effectively cheaper for them to buy the primary product, increasing the number of sales. On top of that, the secondary market also helps in markets like video games in acting as a good way to segment the market, and get new buyers into a game or series of games. I'm sure many of the folks who are now buyers in the primary market, at one time purchased an earlier game in a series used. How is it that so many video gaming execs have so much trouble recognizing these basic concepts?

Filed Under: cheating, cory ledesma, secondary markets, used games, video games
Companies: thq

EA Execs Also Worried About Second-Hand Sales... But With A Better Approach

from the recognizing-the-market dept

We recently wrote some video game execs complaining about how they should get a cut of any second-hand sales, apparently against the concept of the (well established) first sale doctrine. Reader EJDean alerts us to another article that quotes an exec at EA who also is complaining about second-hand sales, noting that it's a "critical situation." He makes an odd argument that video game companies probably do deserve a cut of the second hand market because digital products don't wear out, like normal second hand goods. Again, he may want to understand the first sale doctrine, as well as basic economics where the availability of a resale market helps increase the value of the initial product.

But, the good news is that while EA would like to get a cut of the secondhand market, it seems to at least realize that seriously pursuing it would be a problem. Instead, the company seems more focused on giving people reasons to pay, such as through additional online services that make it worthwhile for people to pay, rather than freaking out too much about second hand sales. This is the right approach. Rather than worrying about second-hand sales, find a business model where that's not even an issue.

Filed Under: resales, secondary markets, video games
Companies: ea

Video Game Execs Freak Out Over Used Game Sales

from the try-learning-some-economics dept

You would think that after years and years of evidence that a second-hand, "used" market for products increases the value of the original products that executives who create the original products would know better than to complain about resales or demand a cut of the profits -- but apparently you'd be wrong. Reader Lucretious writes in to let us know that the audio director of Bungie Studios, a Microsoft subsidiary and the makers of Halo among other things, is out complaining about how the second-hand market for video games has a huge detrimental effect on the industry, claiming that the game makers deserve a cut of all of those sales.

Except that's not just wrong, from a common sense standpoint, it's wrong from an economic stand point and a legal standpoint. It's almost impossible to come up with a rationale where it actually does make sense. First, on the legal front, the first sale doctrine is well established. When it comes to copyright products, once you've sold something, you really have sold it, and the buyer has every right to resell it -- just as they do with things like a chair or a house -- without owing the original creator another dime. Second, from an economic standpoint, plenty of studies have shown the importance of an active second-hand market. First, for buyers of the initial product, the fact that they can resell it is part of the value they put in the price. Wipe out (or heavily tax) the second-hand market, and you decrease the amount people are willing to pay for the initial product. Thus, you actually shrink the market for your product. There's also a lot more research in terms of signalling and market adoption that show that a second-hand market is important. Finally, from a common sense standpoint: you sold the game, you no longer have control over what people do with it. That's how transactions work. Would the folks at Bungie like it if we suddenly started telling them how they could spend the money we gave them for games? No? Then they shouldn't complain about what people do with their games.

Filed Under: economics, secondary markets, video games
Companies: bungie studios, microsoft