Used Games Are Not Piracy, Just Make your Games Better (google plus reupload from 2013)

Originally uploaded September 15th 2013. For context, this is a time when there was a big discussion over xbox one DRM and many discussions over why used games are killing the market, and DLC was the big thing people were angry about. Now adays it's all about microtransactions.

I really hate it when people compare used games to piracy. Their argument, "developers don't make money on used sales just like how they don't make money on pirated games."

OK, piracy and used games are not on the same level. The main reason is because, unlike piracy where an infinite amount of people can enjoy 1 once legal copy at 1 time, only 1 person can enjoy a used game at 1 time, up to 4 if it has split screen multi-player. The person who sold the used copy forfeited his rights to play that copy. He can no longer play the game he sold to someone else. If a pirate seeds his torrent, an unlimited number of people can enjoy that copy while the seeder also enjoys his copy. Even if he doesn't seed, the original torrent is still up for an unlimited number of people to get.

Another reason used games are not on the same level is because, unlike seeding a torrent, a fair amount of weighing of positives and negatives must happen before a consumer sells his copy of a game. As mentioned earlier, the first owner loses his ability to play the game once it's sold, therefor, he must be sure he doesn't want this game anymore or that the positives of selling the game outweigh the potential future enjoyment. I assume most people don't seed their torrents because they're lazy or don't like the thought of people getting stuff off their computer, or something like that, but it doesn't have the same choices that must be made like with selling a used game.

Now to address the lack of developer compensation. It is true that developers don't make money off of the sales of used games and they don't make money off of the download of pirated games, and as such it does make sense that developers would want to lower the instance of both. I don't know how to curb piracy. People seem to like steam sales and apparently that significantly lowered piracy in Russia, but I'm not going to try to come up with ideas on how to lower that; I have no ideas how to lower piracy, and since this rant isn't about ethics of piracy, I'll just stop it here.

WARNING: Explanation of basic economic concepts ahead. Please proceed to the next paragraph if you already understand the basics of free market capitalism and new game prices.

The main difference between the new and used game market is the new game market operates on a fixed price model with the price set by the developers and the used game market operates at fair market price as dictated by the consumer, aka, free market forces. In a capitalist economic society, consumers as a whole decide what they are willing to pay for a product which matches what sellers as a whole decide they wish to sell the product for. For a used game, there is a set supply as determined by the number of people wishing to sell their game and a set demand as determined by the number of people wishing to buy that game. Then based on supply and demand, the price for that game is determined by how much the seller is willing to accept based on how badly they wish to sell the game and how much the buyer is willing to depart with in order to get that game. It's basic econ. Now with the new game market, there is theoretically an unlimited supply because the production companies can print off as many copies as they want. To keep these games from being sold for nothing as would be dictated by a free market system for an item with an unlimited supply, the publishers specify what the price is going to be. There will be people willing to pay that price if they see that as being a fair price, but it's not always the same as there would be if an equilibrium supply and demand was found.
ECONOMICS OVER NOW.

Here's a way to lower used game sales though. It's a really simple concept, make games that people won't want to sell. If a game is really good and offers great gameplay and replay value, people won't be so quick to sell. This then lowers the supply in the used game market. Also if the game is really good and offers great gameplay and replay value, that increases the demand for the game. In a free market system such as the used game market, the price is directly related to supply and demand, and if you can get the price of a used game higher than a new game, people will buy the new game over the used game, because people generally go with the cheapest version. If the difference is $5-$10 dollars, it could go either way. The ability to have a game that's never been touched by anyone is worth $5-$10 to some people, others it's not. However, when the difference is $40, the consumer will go with the much cheaper version almost all of the time. Games such as the EA sports titles come to mind when thinking about the price difference between new and used. Stores might still have copies of Madden 2k-whatever, and as required by their agreement with EA, they must still sell that at whatever the standard retail price is, let's say $40. However, when everyone is selling last year's edition, the fair market price for the used game goes down to $1 because everyone wants to sell it and no one wants to buy it.

Now lets look at another game, Xenoblade Chronicles for the Wii. This game also has a $40 price difference between the new and used copy. Now what sets this apart from madden? It's quite simple, the used version is $40 more expensive than the used version. You heard me right, developer required retail price for a new copy is $40 cheaper than a used copy. If you find a new copy at gamestop, walmart, or anyone else that gets their games from the developers, they have to sell it for $50. If you find a used copy at gamestop or ebay, it's gonna cost you around $90. Gamestop was even involved in a scandal where they got shipments of new copies and they opened them up to call them used so they could sell them for more money. It's not ethical, and I'm not entirely sure if it's legal, but they were just playing to the free market.

Now as a developer, ask yourself, why was the game selling for $90 used when a new copy was cheaper? Well part of that is it was a limited release game with far fewer copies on the market. However there are probably a couple games that had the same number of sales new but now go for $10, so don't think that limited release is the answer. The primary reason, is that supply and demand dictated that $90 price tag. People were not so quick to sell their game because they really liked it, thus there was very little supply. Also, many people wanted to play it, thus there was high demand. Mixing the low supply and high demand gave that game a high price, one larger than that of the new price as dictated by the developer. If this game had a much larger release, the used price would probably be around the new price with that $5-$10 price difference, maybe less.

Now what sets a pirate apart from a buyer of used games? Simple, a pirate is not willing to pay for the content, but a used buyer willing to pay for it so long as the price matches what they are willing to pay for it. If they don't think the game is worth $50 but it is worth $20 and lower, and they can get it for $20 or lower, they will buy it for $20 or lower, compensating the developer or not so long as it was once bought legally and the previous owner can't use it anymore. Now you can remedy this by dropping the price to fair market value or lower and get some money for it, like the steam sales, or you could keep it at $50 and wonder why people would sell their games for $20; 5% of that $20 if they use a middleman like gamestop. But price drops might not seem like a good idea the year it was released because then the guys who already bought it feel like chumps and won't buy early again. So what's a developer to do?

I already said it, make games people aren't so willing to resell. If someone buys a $50 game and finds out it's only $20 worth of fun, there's a good chance they will cut their losses and sell for $20, probably then buying a better game with that money. Make a game that's $90 worth of fun and charge $50, people won't be so quick to resell for anything under original purchase price; maybe even a little over original purchase price. If you want to undercut used games, sell at or under fair market value.
Yes, it typically takes thousands if not millions of dollars to develop and make a game. Video games are a form of art, but not all art is created equal. I know I'm terrible at drawing and painting. I could spend the same amount of time and money on resources as Da Vinci did when painting the Mona Lisa. Thing is, if I managed to sell it, I would be lucky if I recouped the money I spent on paint. What makes my work of art worth $1 but Da Vinci's worth billions? They both took the same amount of time resources and there's the same number of copies in the world. Well his looks great and defines a generation of artistic creation, whereas mine is probably a lopsided circle that no one cares about. Don't invest millions of dollars in lopsided circles and expect to make a lot of money. Make the games that define a generation of games, and see how many used copies are out on the market. Just look at Earthbound. That game defined RPGs on the SNES, and loose carts are going for $150. When a virtual console release for the Wii U was produced, it was the top selling virtual console game, and it wouldn't surprise me if it outsells games like Mario U. It was that good. Now if you look at a game like NCAA Basketball, fair market value is under $1, and if a virtual console game was released, it probably wouldn't sell at all, because it's a lopsided circle. It probably cost a couple thousand dollars to make, but it's not worth the $2 of silicone, plastic, and other guts within it. Why, because it's a lopsided circle.

What's the moral of this story? Pirates are not the same as people who buy used games. Pirates aren't going to pay fair market value, new or used, because they would rather get it for free. Used game buyers will pay what they deem to be a fair price. If they feel a game is worth the $50 price tag for a new game, they will pay that $50. If not, they will wait until they can get it for the price they feel is fair, new or used. If you want to compete with the used game market, drop the price to used fair market value price, or make a game that is worth the $50, or make it worth more than $50 but charge that, that'll really screw the used game market.

Now don't get me wrong, I despise piracy. Arguments such as "avoiding DRM and the company sucks" I call Bull. Everyone who uses those arguments that I've met ultimately does it because they want free stuff. The only time I can understand piracy is if there's no legal way to get the content, like with Star Fox 2 for the SNES. Unlike the used game market that shows what fair market value is, piracy is just free stuff from an unlimited source. Piracy is bad, don't do it.

Hapy Gamer Rambles, a look at XBOX ONE's used game DRM

OK, so welcome to part 2 of the XBOX ONE original design look. Last time I talked about the always online aspect. Today I'll talk about the used game DRM. Next time, I'll talk about the kinect. Now with the used game DRM, I believe Microsoft was trying to accomplish 2 things, control over the market and no more used games, and make the XBOX ONE an all digital machine.

Now like always online, you can't sell me on only digital and no used games. I'm a collector, I like my physical copies for display reasons. I also hate digital only since I've missed some digital only releases and now I can't get them anywhere. There have been launch titles that are no longer produced, and if not for used physical copies, I would be out of luck. Not only that, with physical I don't have to worry about my console running out of space. I'm only limited to how much shelf space I have. Also, as a collector, I refuse to sell games. Even if the game is utter crap, it is now part of my collection and I will not sell it. Again, I'm not the norm, but this time there are more people who would agree with me. There are a lot of people that like physical copies.

So, where did Microsoft go wrong? Well here's how they treated physical copies. "If you buy the game physically, the game is then installed onto your hard drive and is locked to your account. With this, you don't need to have the disc in the tray and you've got family share. You can't sell it unless at a specified retailer. You can only loan the game to 1 friend, and now the game is tied to their account forever. Basically, you can't simply sell or loan your games." So what's the problem here? Well Microsoft basically missed the entire point why people buy physical copies. You don't buy a physical copy to have it treated exactly like a digital copy. If you buy a physical copy, you buy it so you could easily trade with with friends, easily sell it, and play the game off the disc. If you wanted disc-less play, no way to sell your game, and no way to trade your game, you buy it digitally. Whether you wanted to control used game sales or wanted to go all digital, this was not the way to do it.

So, controlling used game sales. I can see where they come from, developers don't get money from used sales, they need to keep the servers running, and they might not have gone under if more people bought it new. Here's one thing though that I think developers forget; used games are far different than pirated games. With pirated games, one once legal license can be used entertain an infinite amount of people. With a used game however, only one person can enjoy it, and the original owner forfeits all rights to enjoying it later. With used games, people do experience seller's remorse, because now they can't enjoy that game ever again unless they buy another copy. I will save the details on my explanation of why people sell their games and how to avoid that for a later date, but here's the gist; people sell their games because they're board with them and don't want them anymore and would rather have some money. If you don't want people to sell their game, make a game they won't want to sell. Xenoblade Chronicle was going for $70 used, because that's the price it took to get people away from it. Bear in mind, new it cost $40. It was so good, people considered it worth more than the new price. If those developers released more copies at $40, they would have sold so many more. In fact, GameStop got into some trouble because they got some new copies and they opened them and called them used because it would make more money due to used costing $30 more. If you don't want people to sell your game, make a game they won't want to sell.

So I addressed preventing used games, what about going all digital. Well that's a very simple answer that developers don't seem to grasp; pass the savings in shipping and production onto the customer. When a game is physical, there's far more costs than just digital; shipping, packaging, printing, disc writing, the middle mans cut, and things like that. All in all, the developer and Microsoft might only get like $45 together after all the other costs of doing physical. So without all these added costs, how much do digital games cost? Exactly the same as if you bought it physically. Sure, developers now make more per game and financially it's the same for the consumer, but then that means that the consumer has to deal with all the draw backs to digital, aka, no flexibility on sharing or selling and hard drive space. Sure they get the perks of disc-less play, but that doesn't necessarily make up for the drawbacks. If you want people to buy digitally, make it financially advantageous. "OK physical copy costs $60, if you're going to buy digitally, we'll subtract the cost of printing the disc, making the packaging, shipping the game to the retailer, the retailer's cut, let's round that down to the nearest dollar, so now your final price is $45." That's 25% off physical. Do you know why Steam can do all those sales? It's because it's an all digital platform without any middle men or production costs, and they pass the savings onto the consumer. They did do some physical releases, but they made it better financially to buy it digitally. You make digital cheaper than physical, people will then buy digital, and you can naturally phase out physical. I fear the day when that happens, but that's how you do it.

So, when Microsoft got rid of the DRM, they got rid of the "features" like disc-less play and family share. I already addressed disc-less play and if people want that feature they'll just buy it digitally, but what about family share? Well, we really don't know what we lost with that one. The details were kind of hazy as to what that would actually do. There was something about being able to share your entire game collection with 10 people in your family, and those 10 people could use the same license. An example they gave was a dad and his 2 college sons playing CoD together off the same license with the dad at home and the sons off at their respective colleges. The way it sounds is that you could have shared your entire game collection with 10 "family members," aka friends. How would this have worked, we don't know. Would there have been 10 permanent people you call family that could use it? Would that mean you could be logged onto 10 different consoles? Would it have meant that you could call 10 consoles your "console" and everyone on that console had access to your games? No one really knows. Microsoft did try to advertize the DRM as a good thing, and to that I must give them some credit, but it ultimately failed because people still hated it and DRM is almost never the way to go. People expect a certain level of DRM with digital games. If you want to get rid of physical games, you need to make digital more appealing than physical, not destroy the whole reason people buy physical in the first place.

OK, that's enough for today. Next time, the kinect. Well this has been happy gamer, and if you want to get rid of physical copies and used games, DRM is not the way to go.