Used Games and Rights

A new article says that a US court has ruled that software publishers can prevent reselling software (i.e. used software). The ruling (if upheard) could allow publishers to kill the used games business. The whole “used games” and “used software” sales market has been opposed by a few companies. Some companies see used sales as undermining new sales, and while I don’t agree with their attempts to eliminate used-sales, I can understand why they would be irritated by the fact that GameStop makes a lot of money from used-game sales. Nearly half of GameStop’s profit comes from used-game sales. Because of their markups, GameStop earns 85% more money on the sale of a used game than a new one. At the same time, the publisher gets paid when a new game is sold, but not a used one.

Autodesk* has also tried for years to shut-down used sales of its software – including blocking eBay sales. The typical method for doing this in the software world is to give users a “licence”. When software is counted as a “licence” rather than a “sale”, it opens up more options for publishers to restrict what a user can do with that software. For example, they can sell the user a non-transferable licence (i.e. no software resales). On the other hand, if software is “sold”, then it falls into the legal structure of the “first sale doctrine” which means users can do things like resell their software. The first sale doctrine was originally setup a hundred years ago, and applied to things like books. Book publishers tried to shut-down used bookstores (for fear that used book sales were undermining new book sales), but courts handed down the “first sale doctrine” that said people can resell them. The main way that software “licences” are being challenged is by arguing that publishers are using “licence” as a legal ploy to restrict what users can do, when, in fact, it’s really a “sale” masquerading under the “licence” term.

I think there’s a certain logic to preventing used-game sales, I just don’t think it’s strong enough logic to convince me that users should not be allowed to resell their software or buy used software. I also think the act of shutting down used-sales creates a degree of dissatisfaction among users, and creates the idea that companies have too much control in their lives what they can do with their software. This unhappiness among users has to be weighed against the monetary benefit of eliminating used sales. While eliminating used sales might increase revenue in the short term, it might create longer-lasting resentment, as well. As we all know, CEOs of companies can be ridiculously short-sighted – either because everything is measured and rewarded on a short-term basis, or because they lack foresight. Based on that, I have very little faith in business leaders making the right long-term choice.

On a more positive note, it’s rumored that Steam will begin allowing users to sell their games back to Steam (at a reduced price, of course). Presumably, their logic is that players who can sell back bad games will be more willing to buy new ones (i.e. there is less risk involved since they can get back some of their money if they don’t like the game). Even if it doesn’t immediately result in more sales, it makes their customers happier which keeps them coming back. Funny how companies seem to be moving in opposite directions. Also, I don’t really expect used-game/software sales to disappear anytime soon. GameStop is bringing in $1 billion per year from used-game sales, so they’ll spend millions to block any disruption of the used-games market.

* Footnote: I have to admit that I’m not really a fan of Autodesk. They have a tendency to buy up their competitors (e.g. Maya and SoftImage), in an apparent attempt to prevent meaningful competition in the 3D Modeling world. This allows them to charge higher prices.

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