Sunday, January 24, 2010

Rent a byte

On-line multimedia distribution is growing at a steady pace. Amazon is renting out books for its Kindle device. Game distributors such as Steam are generating more and more income. At the other side of the ocean movie providers like Netflix and Hulu are popular. And today there are two big announcements. Youtube will offer full movies for rent. And today Greenmangaming wants to offer second hand games... digital games.

An interesting idea but I can't see how they will manage to pull it off. Publishers seem to have put second hand sales into the same category as piracy. DRM schemes such as the infamous "three installs and you're out" are there to stop second hand sales. Stopping pirates will be the official version but it doesn't stop a single pirate as they never even see those installation limits. A sad case where the pirate is better of then the buyer. From a publishers side it's simple. If they sell their game for a third of the price to you they still get a third of their money. If you buy it for a third of the price in a second hand store then they will get nothing. Greenman promises to deliver a part of the profits to the publishers. But will it be enough?

Of course, renting out media only works through DRM. iTunes has its DRM on mp3s, Amazon on its books and Youtube on its movies. Services without DRM such as are out of the picture. If you paid for the game, you can download it and install it ad infinitum. Selling a game to greenman should stop making it working for the seller. And that's just not possible without DRM.

Then there are the bargain deals. Steam is now running a “Buy Men of War and Men of War: Red Tide” for about 10 euros. Men of war is normally up for 12 euros and the expansion for 20 euros. If you put the resell value to respectively 6 and  10 euros then you have a problem. I could buy both games for cheap and resell them after the bargain period to make a profit. Forbid bargain deals to be sold?

The only way I can see this work if they offer their own Steam-like digital distribution  centre. You could buy their games and resell them for a third of the price. The second hand game could then be sold in their store for two thirds of the price. It's a system that might work. But which publishers are going to want to sell the game for less profit then a full version?

What I find most interesting about all this is however that we're not really talking about second hand items. If I buy something in a second hand shop then its quality will have deteriorated. A book will have some ripples in it, a game will have scratches and a car will have less kilometres left in it than a new car. We're OK with that because the price is lower. Those bytes you downloaded from Steam? They're still as good as the original. Buying the original gives zero benefit from buying a second hand copy. Buying a game "second hand" in this case will always be better then getting it new as you get the same product for less money. So the only value difference is in what people give them. And that's usually just wanting the newest, shiniest games. We might end up with a hierarchy of gamers. Those who really want to play a game buy it first. Then those who can wait a bit buy it second hand two weeks after the release. But is this really different from the current system? Now they just ask full price in pre-order and drop your price in a bargain weekend a few weeks later.

Selling second hand games is an interesting idea and I'm curious how they will pull it off. It could be great to offer games to people who have some patience. But I doubt that it will be ever be more than a platform to sell B grade games. The future will tell us.

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