The blog of Sterling Franklin (DJ Sterf), servant of Jesus Christ.

Wednesday, July 08, 2009

The Legality of the Used Games Market

Are used games illegal? Does it rob developers of potential profit? How can you possibly have a clear conscience and still buy used games? If used games are legal, then why aren't pirated copies legal?

For the reason that it's on my mind and that I'm moderately peeved, I want to cover this topic.

I've recently been accused of being an inconsistent and careless person for having morals against pirated games, yet being ok with buying Used and legitimate games. Likewise, could I be called the same for buying a used car three years ago? I mean, really, how dare I? Given a limited budget, jobless state, as well as active ordination, I wanted to buy a decent car without going into debt, and I wanted to do it legally. It's also nice to have the right to resell a bum product if it turns out to be useless or a lemon.

Yes, I'm very grateful for the Used market here in the US. It's gotten me through pinches, especially as I am one of the unemployed at the moment, though the Used market also has emptied my wallet from time-to-time via venues such as eBay and Craigslist. However, there are people who not only see the Used game market as theft to the developer, but also people who justify piracy since they deem it as 'no different' from selling Used games.


I will discuss my stance below:

I hold the view that government, as mentioned in Romans 13, is to be followed unless it demands a rejection of Jesus. For example, if government comes to the point of punishing you if you believe that Jesus was the Son of God and Savior of the world, I would choose punishment. Otherwise, it's our duty to strive to do things legally, though not for the purpose of legalism. Of course, I'm human and not perfect. However, it is my general view that we should honor God by obeying government.

That being said, both producers and consumers within the American market system are accountable to obey the law. So in 1908, there was a Supreme Court decision relating to the matter of the Used market, which sounds SO similar to what I hear especially regarding used video games.


First-Sale Doctrine
was put forth in the early 20th Century. This states that the Producer sells its rights to income after the first sale of its product. Places like GameStop and Game Crazy rejoice at this ruling nowadays since much of their income comes from sales of used games. These places are legal in their general Used sales and are still well in business.

So what about this Used business? When Volkswagen produces a car, they get money from car dealers from their first sale. The owner then holds the sales rights to the car and can sell it used if they decide to get rid of it. Yes, it is legal to buy Used cars. Likewise, developers of games get their cut of the money with their FIRST SALE, i.e. when they sell it to dealers such as Wal-Mart or GameStop, etc..

In my opinion, the First-Sale Doctrine of 1908 (and note that it was also reinstated with the Copyright Act of 1975) was a great decision -- it protected the rights of both producers and consumers, and it makes the economy more efficient. If a consumer buys a product and finds it useless, buys the wrong product, or even see someone else who needs the product more, they are legally allowed to sell it to someone else who could use it, and money continues to flow. However, in a great deal of cases, people keep their products and never resell (especially consumable goods).

Does the Used market boost the New market? This is the gamble. Usually, yes -- lower prices allow the consumer to see a producer's goods, which is direct advertising at its best. If they like the product, they could be persuaded to try another product from the same maker (direct increased demand). The Used prices also are usually a floor for New prices (there are definitely some exceptions), and the mark-up for New items is most often reasonable if the buyer wants something brand new and unused. Note that on resell, however, that the seller renounces rights to ownership. Thus, the reseller does not get royalties for providing the game to the re-buyer.

However, people who take advantage of the system could get together and circulate one item to save money. This is inconvenient, though, as people want to have what they want. Much of the American market depends on convenience, so it's unlikely that this will take much from the developer's original cut even though possible. Once items are sold by producers/developers to dealers, it is the dealers' responsibility to sell the items. That's how they stay in business.

Developers get their cut of the share from the sales of their original product run. The complaint from developers these days ignores the fact that they lose their sales rights after the first sale. Since developers want to be exempt from the First-Sale Doctrine, even though all other industries abide by this policy, there will be a push for a different digital policy in the future as well as a move toward charging royalties for used games. Even in relation to online I would rather honestly see a move made for challenging the Supreme Court decision if it is debated, though the Used and bartering markets in the USA is important to our economy.

So why are Used sales ok, while piracy is not? Well, piracy is making unauthorized copies of products, which robs sellers of the original sale profit. By pirating games, you would be stealing the money that the developer was originally entitled to. This has never been legal. The only legitimate copier and distributor of New media is the original maker. Used games are legal since the developer gets their rightful cut from the original production run and since the user has rights to the ownership and sale of the product in their possession after this first sale. One way the developer could increase income is to increase original production run (supply). However, producing too much would cause loss on their end, so it's wise to limit it reasonably.

Another way developers could legally improve their profit margin is to have an expiring product. When you buy a expiring product, such as a subscription to World of Warcraft, the buyers agree that they are purchasing a good for a limited time. In my opinion, this is genius marketing. Nintendo made a wise move with its virtual console -- you can legally support Nintendo and legally play emulated games on your console. However, these are non-transferable, which is, again, agreed upon at purchase.

Consumable goods are intelligent within this marketing system. You don't usually buy shampoo and then sell half a bottle once you're halfway done. They're packaged so you use them up, and then you can buy more once that's done. The same principle can be used legally by game developers.

However, all this boils down to whether or not one feels that developers should retain the rights to their product at all times. So much of the time, I see the view that the producer has all the rights and the consumer has none. The American market puts producer and consumer on the same bartering level -- money for goods.

So since both producer and consumer are accountable to the legal system here for the definition of, "What is legal," I am perfectly fine with buying Used games. The developer gets the cut from the first sale, and any rights to sale after that is transferred to the buyer. Our Judicial branch sets forth what is legal -- not developers.

If Used items became illegal, I would by conscience buy only New. However, I do believe that if the Used market were deemed illegal, the American economy would crash. There would be no Goodwill store, no used car dealerships, eBay would be broken, no returns on items anywhere, and the like. Even more, you would have a fully Marxist system if the consumer had no rights, Proletariat vs. Bourgeoisie.

If you don't agree, then your issue is probably with the system. Let me know what you think.

Labels: , , , , ,