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Digital trading, DRM, and why GameStop leads inexorably to a 24 hour online check...

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Is it possible to create a DRM scheme that doesn't require online check in on a 24 hour basis, allows data to be delivered on disk, allows trading, allows sharing, and allows something beneficial to be traded to gamers used to selling disks?

(TLDR. I think so, but it screws GameStop)

Ok. We start from the basic principle that you're purchasing a licence, and you're trading a licence. There are two delivery mechanisms for this license - digitally along with a digital download, or on a scrap of paper attached to a disk containing the content. You need to be online when the license is added to your account - so far so this generation.

You have a primary console, on which you can play any of your licensed games whether you're online or off. This is designated by you, but can only be switched every 30 days or so (again, this is the same as this generation) and requires you to move all the licenses. Your previous primary console still works offline (except, in this generation it had probably rroded) until its next brought online at which point the licenses are removed.

So far, I've just described the 360's model of DRM; with the exception that I'm requiring games purchased on disk to be associated with a digital license (sorry). You do gain "don't need disk in drive" though, and the possibility of installing the game on multiple consoles around the house and not needing the disk on any of those either.

Now, you have options. When on your primary console, and online, any game license (regardless of how it was purchased - here's the trade to gamers) can be loaned for a set period (a la kindle) or gifted, to another user. Gifting gives you the possibility of private sales between people you trust. Requiring your primary console to be online means that the license can be revoked and assigned to someone else's account.

The more interesting case is sales between people you don't trust. If we start with "the disk is effectively worthless, and the value is in the content", why not set up a reverse market - allow people to bid for the amount they're willing to pay for a license, and (if necessary subtract a publishers cut, limited to 10% or something similar - perhaps higher to begin with then lowering over time - to the value proposed to sellers) let people who own a license accept those bids, from their primary console. Something like "put this game on sale for above £15 for a week" and see if it sells. You control what you're prepared to trade for, and you have a far bigger marketplace to trade to than the forum, or your local game shop.

You've still got trading/second-hand, but now including digital copies as well as physical because there's no longer a difference (another gain, in trade for your physical media trade rights). The reverse auction avoids an immediate undercut in the price of new copies, and the arbitrage fee ensures that pathetic second hand prices don't really hold water and there's some kind of floor. By forcing this to take place from your primary console while online, you don't need the always online requirement any longer. Games will drop in price over time, and you could put in a lowball offer that someone might accept. (You'd obviously need parental controls on this). I don't think we'd see Diablo 3 levels of nuttiness, because there's a limited supply.

But.. It doesn't leave room for second hand game sales in shops, and eBay (though it renders the later redundant) - the always online component is *only* needed for cases where someone needs to sell via a third party, while away from the console.

Which is why GameStop's business model has helped Microsoft screw themselves.

Anyway, I'm actually less interested in whether this is an acceptable trade or the rights and wrongs of DRM.

My question is - why doesn't this model work?

(Known issues: you can't trade games for cash to use on something else, like weed, though I suppose you could get a chargeback to a credit/debit card if you had one; it screws instant purchases - although it also avoids you getting screwed over on your trade-ins).

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Here's the problem with a console allowing digital second hand sales as you describe:

What's the difference between the second hand copy, and the brand new one?

Why would someone pay £40 (or £30, or £20) for a game download, when the exact same data is going second hand for £20 (or £15, or £10)?

A publisher's cut may make this workable if the publisher's cut for second hand sales amounts to enough to make back the difference on "lost" sales of new copies (by "lost", I mean people who'd traditionally buy new for reasons of reliability and quality, neither of which applies in a digital marketplace). But I suspect that even then, what's likely to happen is a majority of private sellers offering their games for peanuts less than the cost of a new license for anything desirable, so unless the publisher's cut is pretty much the same as that for a new license, they'll stand to lose money on it.

But hey, maybe I'm wrong. I like the idea of being able to trade digital goods in such a manner.

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Here's the problem with a console allowing digital second hand sales as you describe:

What's the difference between the second hand copy, and the brand new one?

There isn't one. Hence the reverse auction to avoid an inexorable race to the bottom; and the requirement for a floor.

But the same applies at the moment for physical copies of things like games - with the floor being set by the retailer - particularly once you end up with mandatory installs.

Why would someone pay £40 (or £30, or £20) for a game download, when the exact same data is going second hand for £20 (or £15, or £10)?

A publisher's cut may make this workable if the publisher's cut for second hand sales amounts to enough to make back the difference on "lost" sales of new copies (by "lost", I mean people who'd traditionally buy new for reasons of reliability and quality, neither of which applies in a digital marketplace). But I suspect that even then, what's likely to happen is a majority of private sellers offering their games for peanuts less than the cost of a new license for anything desirable, so unless the publisher's cut is pretty much the same as that for a new license, they'll stand to lose money on it.

Ah, again - my reverse auction was intended to fix that:

* User says they're willing to pay £15 for a game.

* Publishers cut is subtracted from this.

* People willing to sell the game see that they can sell it for (say) £10.

The normal auction:

* I'm willing to sell my game for £5, £10, £15.

* Publisher margin put on top.

automatically pushes the onus onto the seller to try and drop their price further than they'd otherwise go, which isn't a good thing if you're not wanting to cannabilise sales of new products (or sale prices on new products).

The tricky bit is "how do you set the publishers cut" (high at first, or limited second hand trading for a period of a fortnight or so), and "does the publishers cut decrease over time" (I think the answer to that has to be yes, pushing the publisher towards putting their games on sale). But if you've a shit game, and you've paid full price, you won't get people making offers at a high price. If you've a great game, you'll expect to get a high proportion of the as new price...

But hey, maybe I'm wrong. I like the idea of being able to trade digital goods in such a manner.

I think it'll happen eventually.

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Hmm. Unless I'm misunderstanding what you're saying here, this bit is wrong:

You need to be online when the license is added to your account - so far so this generation.

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Hmm. Unless I'm misunderstanding what you're saying here, this bit is wrong:

Yes, it's wrong for some disk based purchases. It's true for any digital purchase, and true on the PC.

It's a trade-off for the other features that moving to a digital license model would enable. The problem with having a "disk only" exception is then that none of the other stuff will actually work. Perhaps you could publish a version of the game that only works from disk, but... *meh*.

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Yes, it's wrong for some disk based purchases. It's true for any digital purchase, and true on the PC.

It's a trade-off for the other features that moving to a digital license model would enable. The problem with having a "disk only" exception is then that none of the other stuff will actually work. Perhaps you could publish a version of the game that only works from disk, but... *meh*.

I'm not seeing much in the way of 'other features that moving to a digital licensing model would enable'. The features seems to revolve around selling games. Which you can do if you simply stick to the existing disc model.

Also. Games that only work from disc. Maybe that's a big meh for you, but for me that's a perfectly acceptable and workable model that has existed since the start of the home videogame industry.

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I'm not seeing much in the way of 'other features that moving to a digital licensing model would enable'. The features seems to revolve around selling games. Which you can do if you simply stick to the existing disc model.

Trading and sharing of games that don't merit disk release, for a start, which will be an ever greater proportion over the next few years.

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