You’ll frequently hear authors and IP companies bitching and moaning about the fact that they don’t see a penny when their copyrighted material is sold on the used market. Even otherwise fairly intelligent folks like Isaac Asimov have irrationally believed that people buying used paperbacks were sticking daggers in their backs.
Even if we ignore the ethically tenuous position of people who want to sell you a toaster and then prohibit you from ever selling that toaster to somebody else (which a few weeks ago I would have considered hyperbole, but then the Ninth Circuit Court of Appeals decided it would be a good idea to gut consumer protection and ship American jobs overseas all in one fell swoop), the claim being espoused here is fundamentally nonsensical.
What they’re overlooking (either willfully or ignorantly), is the actual effect that being able to sell used books has on the original customer’s buying habits:
First, it influences their decision to buy. (“I’m willing to pay $50 for this textbook, but only because I know I can sell it back for $15 at the end of the semester.”) If they weren’t able to recoup a portion of their investment, they might never buy it in the first place.
Second, it amortizes risk. (“I dunno if this DVD is worth $20. But I guess if I don’t like it, I’ll be able to sell it for at least $8. $12 isn’t that much of a risk.”) Customers who can amortize their risk are more likely to buy. And if the product turns out to be good, they may not resell at all.
Finally, it injects fresh capital: The $10 you get from GameStop for your video game is often going right back into purchasing a brand new game at GameStop.
This effect is somewhat diffused and may, therefore, not be clear when it comes to books or DVDs or video games. But it’s crystal clear when you look at the auto industry: X buys a $30,000 car from Ford. X sells it a couple years later to Y for $10,000 and uses that money to buy another $30,000 car. A couple years later X sells his new $30,000 car to Y for $10,000, while Y sells the original car to Z for $2,000.
Holy shit! Ford has lost all that money spent by Y and Z! X is ripping Ford off! … right?
Nope. Because (a) X couldn’t afford to buy a $30,000 car every two years if he wasn’t selling to Y; and neither Y nor Z can afford $30,000 new cars. The money from Y and Z is, in fact, funneling right up the system and into Ford’s pocket. And everybody wins: Ford makes more money. X gets fancy new cars on a more frequent basis. Y and Z get cars they otherwise couldn’t afford.
This is why nobody in the auto industry makes a new car that they can sell for $5,000 despite the obvious market for $5,000 vehicles.. They’re already getting the money from the $5,000 market.
ARCHIVED HALOSCAN COMMENTS
Thomas W.
A lot of the problem is poor service. Almost no gamer company accepts returns. Maybe if it’s a blue moon, you know the secret words of wisdom, and the person you call is in a good mood, you might be able to, but probably not.
This is doubly a problem for the many developers who don’t release demos with their games, or publishers who don’t give excerpts of their book. You can’t try it out to see if you like it, so you need some option to recoup your losses if it sucked.
There’s also the service issue. If I buy from a trusted used dealer, I know they’ll give me good tech support, a warranty, and have a refund policy. Good luck getting that from any game company. They also stop making, or giving any service on old games. A big part of the used market is buying games that the producers decided they don’t care about.
There are ways to tackle the used market, just, companies don’t find it cost effective to do them. The overhead is too high, and obviously, returns aren’t profitable, neither are warranties.
And yeah, I always price the resell value of a game into buying it.
Thursday, August 05, 2010, 12:30:59 AM
Greg
AAA game developers are getting the idea — every new game is being made incomplete, or shorter than it could be, and aftermarket DLC is sold alongside it . There’s even “day-one DLC” which is free for first purchasers, and it can’t be transferred.
Booksellers have a technological solution to this problem as well, in the form of non-transferrable e-books.
Tuesday, August 03, 2010, 1:00:13 PM
Eric M.
Your analogy between cars and computer games and books is flawed. New and used cars are much less easily substituted for each other than new and used books and computer games. People with the ability and desire to buy a new car are much less likely to buy a used car because they know that used cars are inferior to new cars due to wear and tear. Used cars will be bought by people who cannot afford a new car but still need a way to get around. This means that used cars do not substantially decrease the number of new cars sold. At the same time, the ability to resell an old car allows purchasers of new cars to afford more expensive new cars (or buy a new car more frequently). For this reason, auto companies encourage the used car market and sometimes advertise new cars by claiming they maintain their value.
Used books and video games, on the other hand, are good substitutes for new books and video games. Assuming it is not missing pages, I can derive nearly the exact (or nearly the exact) same pleasure reading a used book as a new book. For this reason used copies of, say, The Fellowship of the Ring will compete with new copies of the Fellowship of the Ring and every used copy sold is much more likely to result in a new copy not being sold. I can therefore understand why authors, developers and publishers dislike the used book market and try to discourage it by releasing frequently releasing new editions.
My arguments above should not be construed to imply that authors etc. should be able to ban the sale of used books and video games. I believe that people who own used books and video games should be able to do as they please with them, including reselling them. I just understand the authors’ point of view.
Tuesday, August 03, 2010, 11:11:50 AM
Draz
I’m shocked at the hostile responses this post is getting. I think I might agree more thoroughly with this post than with anything else Justin has ever written.
Tuesday, August 03, 2010, 11:10:51 AM
Guest
I would really enjoy reading yoru argumetns more if you knew how to disagree with more grace.
Sunday, August 01, 2010, 2:16:54 PM
Scott W.
And I would enjoy reading your arguments more if you paid any attention to A) your spelling, B) the actual substance of other people’s posts, and C) whether or not you’re actually managing to convey whatever message you intend to convey, as for the life of me I can’t figure out who you’re attempting to reply to here (or, if the intended target is Justin, what on Earth it is that you’re talking about).
Just a friendly tip! Wink
Sunday, August 01, 2010, 7:46:07 PM
Guest
I don’t frequent gaming shops if they don’t sell used gaming books. It’s pretty much the only reason I go to a gaming shop. To find things I have never heard of or things I might be interested in if they are cheap enough. If I am going to buy a new gaming book I buy online. Even with shipping I save money over brick & mortar stores. And I frequently get free shipping through Amazon. I can’t lose. Not to mention the Amazon used marketplace is awesome.
Friday, July 30, 2010, 9:50:56 AM
Akiyama
Interesting to hear someone complaining about games shops selling second-hand games. There is no games shop where I live, but of the three shops I have visited in nearby cities, none of them sell second-hand games. I asked the manageress of one of the shops about this, and she said that they weren’t as profitable as new games, so there was no point wasting space on them.
Thursday, July 29, 2010, 7:03:16 PM
Andy P
Speaking as a games developer myself, I’m agape at the absurdity of comparing a $50 game to a $50,000 car… I don’t know where to begin pointing out how ludicrous that is, if it’s not obvious enough already.
I will instead merely confine my response to the fact that you are completely missing the point. The point is not whether a customer has a right of resale; if someone wants to sell on their game when they are finished with it, more power to them. If someone can’t afford a game brand new, I won’t see any of their money anyway – so it makes no difference to me if they buy it second hand or not.
The evil that is happening with second hand sales comes not from the customer, but from the shops, the like of Gamestop that you espouse. They buy games from the distributor at $40 and sell them at $50, and any that don’t sell can get sent back; then they buy them back from the customer at $10 and sell them again at $30 (all figures rounded for sake of example), and do the same repeatedly. It doesn’t take a mathematical genius to work out where the big money is – and what is obviously going to be their biggest push for sales. That’s why you see pre-owned games on the shelves from day one of release – that’s why when you take a brand new game to the sales counter, they immediately offer it to you pre-owned instead. The simple fact of the matter, which can be easily confirmed with a bit of research, is that for any given game the developers (in a team of 100+) see less revenue per copy sold than the spotty teenagers who put a box on a shelf in Gamestop. That is a nonsense, and morally reprehensible. The “fresh capital” you mention is a grand thing for the economy at large no doubt, but not much use if the people who make the games see nothing of it!
No, I’m afraid good sir that you have completely misunderstood the argument against used sales: there is nothing wrong with used sales per se, but there is much that is wrong with a used sales industry in the same shops that sell new games. (To use your misguided car example, practically no shops sell both new and used cars from the same forecourt; there would be a clear conflict of interest, just as there is with games). Fortunately, digital distribution will kill bricks and mortar games retailers stone dead within a year or two, or five at most. Unfortunately, the same system will kill the consumer’s right of resale. If the vampires and leeches at Gamestop weren’t so intent on abusing their position, perhaps it wouldn’t have worked out that way, but there is no doubt that it will now.
Thursday, July 29, 2010, 5:54:45 PM
Justin Alexander
There are two possibilities here:
(1) New games are priced too low. If Gamestop is profiting so lucratively from their initial investment, it means the Gamestop isn’t paying enough for their initial investment.
(2) New games are priced too high. If the market for $30 (used) games is completely dwarfing the market for $50 (new) games by the order of magnitude you describe, then game publishers would be far better off selling their games for $30 and reaping the profit from the much higher volume of sales to be found at that price point.
But the reality is that you’ve fundamentally failed to understand market realities. The fact that you find the comparison of a $5 paperback, a $50 game, and a $50,000 car “ludicrous” is the dead give-away here, because the economic model at work in each case is identical. The size of the price tag is almost wholly irrelevant.
The $20 in profit that Gamestop is hypothetically pocketing in your example is not “free money”. There are real costs associated with running a used game business (starting with the increased dangers of dead inventory). And some of that cost represents the convenience cost Gamestop is charging to the person selling them their game (who would otherwise need to go through the hassle of eBay or Craigslist or Amazon to sell their game).
And, ultimately, Gamestop isn’t manufacturing new copies of the game: There is a level of demand for X copies of the game which must be met at any given moment. If you want to increase the volume of that demand then you need to either (a) increase the number of people who want to play the game in general or (b) increase the replay value of the game so that people will hold onto their copies longer.
You, OTOH, just want to make it illegal for anyone to resell the toaster they bought from you so that you can ARTIFICIALLY increase the level of demand for toasters. In other words, you want to introduce new laws specifically designed to harm the consumer. And then you want to lecture other people about the ethical value of their position? Physician mend thyself.
Thursday, July 29, 2010, 10:13:29 PM
Liked by ECOA, Guest
Andy P
I would be a lot more inclined to respond to this in further detail if I thought there was a chance you might actually read what I wrote. I specifically said that I have no objection to consumers reselling what they bought, now you accuse me of wanting to make that illegal! Any further criticisms you try to apply to me after getting that simple fact fundamentally wrong are entirely without basis.
As a side issue, if you truly believe that selling something at $0.05 instead of $0.50 is the same as selling something else for $5000 instead of $50000, you have absolutely no concept of economics. I can afford to spend $0.50 on something, I just might choose not to if I can get it for $0.05. $50000 is way out of my price range for, well, anything. This changes the situation completely – the ratios don’t simply scale.
Friday, July 30, 2010, 7:31:18 AM
Justin Alexander
From this I’d be forced to conclude that you’re a child of privilege who has never lived with a personal budget in which the difference between a $30 game and a $50 game might, in fact, be the difference between being capable of buying a game and not being capable of buying a game.
Can I also comment on how you’ve made up numbers both larger and smaller than any numbers I originally mentioned? ‘Cause it was a really subtle and elegant construction of a strawman. Bravo.
Friday, July 30, 2010, 1:05:59 PM
Liked by ECOA
Dave Cesarano
This is a rational and well-reasoned argument. Unfortunately, much like downloading music and other sorts of “offenses,” the industry lobbies are completely deaf to any and all arguments but their own. It is as if they want to have 100% control of every aspect of a product they sell to you. This, indeed, even extends to DVDs and videos, where all you are really buying is the right to watch it. The actual physical DVD is still considered property of the company, so if you do anything to it, you can get in legal trouble. When we enter the land of corporations and copyrights, sales, and litigation, we are entering a world of absurdity where reason and rationality don’t matter as much as people with power and money crying out, “I say so!”
Thursday, July 29, 2010, 5:39:15 PM