Maybe it's time to stop pretending we buy software?

There's been a lot of noise about comments made by THQ's Cory Ledesma about used games. Namely,

"I don't think we really care whether used game buyers are upset because new game buyers get everything. So if used game buyers are upset they don't get the online feature set I don't really have much sympathy for them." -cvg

Well, this has gotten a lot of gamers upset, and my immediate reaction was something like "dude, you are just pissing off your customers." And while Cory may have been the one to say it out loud, actions by EA and others in providing free DLC only to the original buyer and similar original buyer incentives show that the industry in general agrees with his sentiments.

Holding steadfast to my first-sale doctrine rights, I, like most gamers, software and media purchasers, strongly believe that we can sell those bits we bought. Of course, EULAs have said nu-uh to that belief for just as long. We purchasers of bits only own a license to those bits, we don't own a product. But just as nobody reads an EULA, everybody believes those EULAs to be unenforcable. I own those bits, man!

So I continue to believe that when I purchase a product, let's say some bits on a DVD, i can sell it again or buy such a product from someone else. It wasn't until I read Penny Arcade earlier this week, that I had to admit that, first-sale doctrine notwithstanding, I am not their customer.

Penny Arcade - Words And Their Meanings

But, I thought, just like buying CDs used, I am actually contributing to a secondary market that promotes the brand of the artist. Buying that old CD used makes it more likely that I will buy the next one new, or that I will go to their show when they come to town, etc. Put aside whether this secondary market really has the magical future revenue effects i ascribe to it, for games there is no such secondary market. As Tycho said in his post accompanying the strip:

"If I am purchasing games in order to reward their creators, and to ensure that more of these ingenious contraptions are produced, I honestly can't figure out how buying a used game was any better than piracy. From the the perspective of a developer, they are almost certainly synonymous." - tycho, penny arcade

Ok, maybe you think the secondary market is sequels that you will buy new because you bought the original used. Never mind that most sequels are farmed out to another development house by the publisher, buying used games, at best, actively encourages the endless milking of sequels rather than new IP. But it's even worse for games, because virtually all games now include some multi-player component and keeping that running costs real money. You paying for Xbox Live doesn't mean the publisher isn't still paying more cash to Microsoft to run those servers. So every used Modern Warfare player costs the publisher money while only Gamestop made any cash on the sale. So, sure, you own that disk, but you're insane if you think that the developer/publisher owes you anything.

Now, let's extend this to the rest of the software market. Here you can argue a bit more for a secondary market, since software regularily comes out with new versions, encouraging you to pugrade. If you look at that boxed software revenue cycle it becomes clear that the added features and version revving just exist to extend a product into a recurring revenue stream. And if that's the motivation, it also means we're encouraging developers to spend less on quality and bug fixes (because nobody wants to pay for those), and more on bells and whistles, cause those justify the version rev and with it the upgrade price. In reality, if you use Photoshop professionally you've long ago stopped being a purchaser of boxed software and are instead a subscriber to the upgrade path.

This fickle revenue stream also has an effect on pricing. You may only use Powerpoint once in a while, but you paid to use it 24/7. Or maybe because you don't use it enough you've rationalized pirating it, which only serves to justify a high price tag, since the paying customers are subsidizing the pirates. Either way, the developer inflates the price to smooth out the revenue stream.

The sooner we stop pretending that we buy software and just admit that really we just want to rent it, the better. Being addicted to high retail prices, some publishers certainly will try to keep the same pricing as they move to the cloud, but the smart ones will adjust their pricing to attract those buyers who would never have bought the boxed version. Buying metered or by subscription has the potential for concentrating on excellence rather than bloat and the responsiveness and frequent updates of existing services seem to bear that promise out already. It's really in our favor to let go of idea of wanting a boxed product with a resale value.