Video games have historically been sold in two formats: physically in the form of discs/cartridges and digitally via download from online storefronts (like Steam). While downloads were often more convenient, purchasing physical video games had a major advantage for consumers: physical games can be resold or traded in. By contrast, it was often impractical, if not illegal, to try to resell a downloaded copy of a game.
However, a recent ruling of the District Court of Paris may change that, and give your digital game archive some resale value. But first, it’s important to understand the status quo that this ruling threatens to disrupt.
From the late 80s to the early 2000s there was a thriving physical video game resale market. Consumers “traded in” their old video games for credit towards the purchase of new games. The resale of physical video games to retailers did not provide a direct financial benefit to developers and publishers (whose revenue, typically, came only from the original purchase of the game).
In the last two decades video game sales have seen a dramatic shift from physical to digital mediums, resulting in a corresponding decrease in sales or trade-ins of used physical video games. Developers and publishers have increasingly been choosing to release only digital versions of games to save costs and improve margins on development but also to sell “in game” digital assets. Microsoft recently released an all-digital version of its Xbox One Console with no disc drive or ability to play physical Xbox One games.
The District Court of Paris (the “Court”) recently sided with consumer rights organization UFC-Que Choisir (“UFC”) in its lawsuit against video game distributor Valve, which runs the popular digital game storefront Steam. Despite the assertion that Steam only “facilitates” the sale of video game licenses and subscriptions, the Court found that Steam actually sells “dematerialized games“. Accordingly, the Court ruled that Valve could not prevent consumers from reselling digital versions of the video games they had purchased on Steam. Valve will likely appeal this decision, but the ruling represents a shift in how the law treats ownership rights over digital content like video games. It could also have implications for property rights over in-game or in-app purchases, as well as other digital content services like music and film downloads.
The Law and Economics of Reselling Digital Games
The trend toward distributing and purchasing games digitally raised the obvious question: can you resell digital software that has been purchased legitimately?
Traditionally, in Canada and the United States the answer has been: no. Consumers have the right of “first sale” when it comes to physical products, meaning that the copyright holder’s control over the terms of resale are exhausted after the first sale of the product (such as physical copies of books, CDs, DVDs, and video games). As long as a software provider sells you a license to reproduce their software, you are barred from reselling that license; thus, protecting the underlying copyright of their works. The law traditionally has barred digital resale, but mainly to protect the rights of digital creators and distributors.
Physical products deteriorate or are destroyed over time which reduces both their resale value and the “long tail” re-sales opportunities. Digital products do not deteriorate in quality through use, they can be resold ad infinitum in the same form as when first purchased. Consumers could buy used digital games cheaper than an identical new game on the secondary market. Accordingly, this is likely to result in significantly less sales revenue for game developers, publishers and distributors in the short and long term.
Potential Legal and Technological Responses
If digital content resales are made legal, either by legislative reforms or judicial rulings, there are nonetheless legal and technological solutions that may help minimize the impact to developers and distributers of video games.
Technological solutions include hardcoded limits on the transferable life of digital content and digital content transfer “taxes”. Technological limitations on digital transfers limit the number of times a digital game can be resold after which the game would automatically “lock” itself. Digital content transfer “taxes” would require platforms like Steam to charge a purchaser an amount each time a digital game is resold on its platform, and pay that amount to the copyright holders of the game. However, future legislation may impact the efficacy of these technological solutions, which are often considered controversial.
The newest model of delivering games, subscriptions, may be another way for the video game industry to navigate permitted digital resales. Publishers are already launching subscription-based distribution models in which games are streamed rather than downloaded. Consumers who have become accustomed to video and music streaming platforms understand and like these models because of their relative accessibility and low up-front cost. Game subscription services may help to eliminate digital video game ownership concerns, but they may also mark a shift in how publishers and developers get paid for their games.
Conclusion: The Uncertain Future of Digital Resales for Video games
There is no certainty that UFC’s case against Valve will be the catalyst for a shift in the legal regime of digital ownership. In an earlier and similar decision from 2012, a European Court ruled that it was permissible to resell digital software. But subsequent cases did not follow the 2012 ruling, and very little change occurred in the marketplace. A similar issue regarding the resale of eBooks is in Europe’s highest court right now, and the ruling in that case may impact how future digital ownership cases are determined. Companies should be actively considering solutions that will allow them to adapt quickly to any changes in the legal regime of digital content ownership and resale.