Tuesday, January 31, 2012

Next-gen Xbox threatens to kill used-games market

It was reported last week that Microsoft's next generation gaming console, tentatively called Xbox 720, is due out late 2013. Initial reports say that the new system will boast up to six times the processing speed of the current system. But what I'd like to focus on is the speculation that the next-gen console would outright reject used-games--effectively killing the second-hand games market. Taking its queue from the Microsoft Windows model, it is rumored that the upcoming console would require online product validation for games; sans the validation, users cannot play.

This limitation on resale-ability poses legal questions regarding the rights of buyer-owners to resell their games. In the US, there is such a thing as the "first-sale doctrine," which basically gives the initial purchaser wide-ranging rights to the use of the product they've bought, including the right to sell it to a new owner. While we don't have the same doctrine in the Philippines, we nevertheless adhere to the bundle of rights theory inherent to property ownership, including, among others, jus disponendi (right to dispose). Therefore, at first glance, such limitation appears to contravene prevailing rules.

However, software developers have been exploiting the End User License Agreement (EULA) as a legal loophole. Most software these days, including video games, comes with such a EULA, saying the initial purchaser is just a licensee and isn't allowed to resell that license to a new owner. Their position is that they are just selling the right to use the software but not the software per se. Pretty jesuitical argument, if you ask me.

My view on the matter is pretty simple: a person who buys something for value has the right to dispose of it for value as well. I really don't see any reason to treat video games (and software, in general) differently from books and music CDs/vinyls--both of which have thriving secondary markets. I would even say that having a secondary market limits monopoly power in the market. For example, a record label has the exclusive right to control copies of a new album and no one can get that album from any other source. Of course, there are retailers but all of them have to ultimately buy from the record label. The existence of used music CD stores means that record labels can't raise prices for hot titles arbitrarily high. Just check out used CDs from Amazon.com and see how competitive the prices can get. While this sounds great for consumers, Microsoft is sure to disagree.

SOURCES: IGN, Ars Technica

Francis Paolo Tiopianco, Entry #7

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