Friday 28 June 2013

First-Sale Doctrine Drives Bad Game Design?

As the Xbox One policies have flipped around, the backlash to the backlash has emerged that says the path to the future has been set back by retaining a classic model of physical goods.  Here's the argument.

So because games have to compete with their used stock (as the designers of copyright intended, fair use and first-sale doctrine being the safety valves built into the exclusive right to duplication given to creators at a time when reasonable copyright terms were a decade or thereabouts) this is what has forced everyone to use DLC, filler content, micro-transactions, etc etc.

It isn't that DLC/micro-transactions were only made possible by internet connectivity and that started during the 6th generation of consoles (DC/PS2/xbox/GC) but was only there on the ground floor (with significant population coverage) for the 7th gen (PS3/360/Wii) so that is where it came to power?  Filler content is a result of a move to combat used?  If so then why is it something that has existed since the beginning of time (where it was first linked to the quarter slot and need to get more money to see the ending, an alternative design choice to hard and arbitrary death mechanics) with 'grinding' (especially in RPGs) being far more extreme well before used was a 'debilitating' thing (ie before there were significant retail presence for games at all, let alone used)?

Case study analogy: The automotive industry is 'losing sales' to used cars.  They can combat this with the application of repairs at authorised dealers and sale of spare parts for those repairs.  There is therefore tremendous pressure on car manufacturers to get their engineers to build less and less reliable cars to reinforce the value of buying new and extract the maximum value from those used cars for which they don't directly get a cut of the sale.  If we look at vehicles over the previous few decades we can see that this pressure has done nothing to reliability.  A competitive marketplace where the ability to increase reliability within a cost envelope increases your perceived value and so ability to stand out against peers has driven up the reliability of all types of vehicles at all price points.

Does the video game industry have something to hide?  Should they be referred to the Monopolies and Mergers Commission to work out if this is some anti-competitive cabal where all the players have agreed not to compete on value with each other in order to stifle the marketplace competition that should be driving up quality or driving down price?  My thoughts are no, the entire argument doesn't hold water that links used and these practices.  The industry looked for additional revenue streams as soon as they were technologically viable and this was independent of used games and that perceived issue.  Expansion packs have been a traditional form of expansion content and those actually moved the other way, to enabling more sales by selling as standalone (so not requiring the original game disc/installed content) before DLC and piecemeal expansion content was considered to be cheaper to produce/generating better revenue for manpower expended at a time when traditional expansion content build on the same engine and gameplay mechanics was now being used as annualised sequel fodder at $60 per disc.

Here is the end-game of the digital revolution: subscription services.  The global music industry can entirely replace their annual income from wholesale music sales with 90m premium Spotify subscribers*, assuming the cost of streaming is below that of physical disc production they currently pay on those revenues.  Done.  That's how you monetise a zero duplication cost/IP item.  You form an evil cabal, call it an artists collective, and collect such a wealth of content (and new content production) that anyone would be culturally excluded if they didn't sign up.  Use the volume of people to make the per-person price very affordable.  Be aggressive in picking up new talent that is potentially initially incubated outside of the collective (where they live on direct sales or free distribution of their content and donations).

Here's what goes wrong with trying to walk down that road by first removing first-sale doctrine (while retaining your demand that copyright be enforced using harsher and harsher legal penalties for non-compliance and cooperation with data connectivity services and providers to remove potentially fair use and non-infringing content at the mere accusation of copyright infringement) to tighten up the traditional sales mechanic to bleed as much money as possible from each individual: You're going the wrong way stupid!  We're aiming to bring down the per user cost and bring up the numbers and make sure our collective products are culturally essential at a great value.  Stop driving people away by trying to increase how much you extract from each individual by any means necessary.  Here's how you sell a premium product: delight the consumer.  Get them to eulogise the value anyone should obtain from making the transaction they did.  Apple can make an almost 50% profit on their products (ie they are priced about twice as high as they could be and still be viable) and they don't do it by making people feel ripped off when they've purchased something.  This is a perception war, stop fighting to make people feel like their $60 doesn't buy the entire product and demonise people who increase the value of your new product (by offering people who do purchase it cash to sell it at a later date).

In the current climate then digital marketplaces should look at how they can better serve the consumers (and creators) by enabling their traditional rights (and in doing so protect creators from potential issues with challenges to their copyright under grounds of failure to comply with the conditions of fair use and first-sale) and any move to justify the import of current digital license rules into the physical product world should be noted as highly suspect and probably unable to hold water.  This is a companion piece to my article last month about how the technical limitation of DRM on a closed platform stands opposed to the viewpoint that the medium has and will continue to increase in cultural significance and provide a good value purchase for more and more consumers.

* Twelve monthly payments of $15 x 90m = source for total revenue figure.  There are over 7 billion potential pairs of ears out there, the music industry only needs the current subscription value from less than 1.3% of them.