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One company's quest for the 'holy grail': Reselling digital games Exclusive
One company's quest for the 'holy grail': Reselling digital games
October 31, 2012 | By Tom Curtis

October 31, 2012 | By Tom Curtis
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    37 comments
More: Console/PC, Business/Marketing, Exclusive



Consumers have been selling used games since nearly the dawn of the industry, but while video games have evolved into new, digital formats, used sales haven't yet broken away from their retail roots.

But it might not stay that way forever, as companies like GameStop have been noting their interest in reselling digital goods. The leading game retailer recently told us that it isn't actively pursuing that business just yet -- only researching -- but other companies are.

One company that's looking into the possibility is a startup known as ReDigi. In fact, the company has already made headway in unlocking the used digital marketplace.

Massachusetts-based ReDigi launched roughly three years ago, and has already developed an online marketplace that allows users to resell their unwanted digital goods. The platform only supports music for now, but it's quickly expanding to adopt all sorts of downloadable media.

The ReDigi platform will add support for eBooks in the coming months, and company CEO John Ossenmacher told us that he wants to see ReDigi become the de-facto platform for reselling all kinds of used digital media -- and with games becoming more and more reliant on digital formats, he thinks they seem like a natural fit.

"I think games are one of the holy grails of the resale market because there's so much value in games," he said. "There's a well-established physical market in that space, and a lot of people have wanted alternatives to that physical marketplace."

The company has yet to announce any official plans for embracing digital games, but Ossenmacher strongly hinted that he wants to see his business move in that direction. When pressed for details on his vision for used digital games, he declined to go on record.

He did note, however, that before tackling the "holy grail" that is the digital game market, he's had to focus on getting ReDigi's music and eBook stores up and running.

Avoiding fraud

The biggest issue with creating a used digital marketplace, he said, is making sure that your platform is secure, safe, and fraud-proof. Consumers aren't used to reselling downloadable goods, and digital media can be very easy to copy or pirate, so ReDigi has had to go out of its way to create a platform that protects its users and adheres to copyright law.

To that end, ReDigi has put together some complex -- and patented -- digital forensics software that tracks each file that passes through the system. This way, the company can ensure that users are playing by the rules and are only selling files that come from a legal source.

"The way ReDigi works, any time you connect or sync anything, we're always scanning," Ossenmacher said. "We built this thing that works like antivirus software, and we're always scanning in the background to help protect you and make sure you're adhering to copyright law."

Ossenmacher claims that ReDigi's software can track the history and source of any digital file, and the platform has a number of security measures in place to make sure sellers aren't holding on to copies of their digital music, books -- and perhaps even games -- after selling them to someone else.


"We built a system that notes when someone wants to sell a game or song or book from their user account, and we'll create a digital fingerprint of that. Even if someone has two copies of something they lawfully acquired, we can differentiate between the two and any copies thereof. If someone goes to another computer or tries to use it, our service will pop up a window that says 'You've already sold this digital good, please delete this version,' and we'll just block them from logging in temporarily. If they try to circumvent that, then we'll suspend them from the ReDigi marketplace," he said.

Even if users found a way to circumvent the system and keep copies of their old digital files, ReDigi wouldn't necessarily have to worry, as copyright law dictates that a marketplace cannot be held responsible if a user illegally copies and distributes copyrighted goods. After all, GameStop can't get in trouble if a consumer sells a game after illegally ripping it to their hard drive, and the same holds true for ReDigi.

Supporting artists

Where ReDigi really differs from GameStop and other retailers is in its business model. While most stores keep all of the revenue that come from used sales, the company actually offers a 20 percent cut to the artists responsible for the media that's sold through the ReDigi marketplace.

"We think it's really important to support everybody in the ecosystem," Ossenmacher said. "It gives artists a new source of income that they didn't have before... With something like music in particular, that 20 percent sale on a used song is roughly equal to what they'd get for a new sale in iTunes."

If ReDigi or another company brought this model over into the digital game market, it could have major implications for the used marketplace, as publishers and developers would finally be able to tap into used game revenues. There's always been tension between publishers (who don't see a percentage of preowned sales) and used game retailers. If game companies could make money from their used downloadable titles, they could have more reason to embrace the growing digital market.

But here's the problem

While ReDigi's approach could have major implications for the digital market, let's not get ahead of ourselves. It's unlikely we'll see consumers reselling downloadable games anytime soon, as the company has encountered some heavy legal resistance that could impair the entire future of used digital media.

ReDigi is currently embroiled in a heated lawsuit with major record label EMI, which is hoping to shut down the company's used digital marketplace altogether. EMI and other record labels are extremely wary of ReDigi's business and don't like the idea of losing some of their new digital sales to a second-hand market.

While he admits that there's a lot at stake, Ossenmacher believes ReDigi has a solid case to defend itself.

"The way copyright law was written... once you receive your royalty the first time, that person who paid money has the right to do whatever they want with it -- they can resell it, they can give it away, or they can destroy it. The publishers don't have the right to tell them they can't," he said.

It seems courts overseas are leaning in the company's favor, as the European Court of Justice recently ruled that it is, in fact, legal to sell used software. Of course, this only applies to the European Union, but ReDigi believes this precedent spells good news for its case in North America.

But regardless of the company's optimism, it's still far too early to say how things will play out. If ReDigi succeeds in its case, it might have the chance to pursue its "holy grail" of reselling digital games, but if it fails, the entire used digital marketplace could come to a screeching halt.

Either way, game publishers and developers may want to keep a close eye on ReDigi, as it's one of the first companies to really explore what it takes to resell digital goods. If the game industry ever wants to fully embrace used downloadable games, we might want to take some notes.


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Comments


Richard Ellicott
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i must play devils advocate: saying that a user has the right to sell a DRM free MP3 is just ridiculous

they're not track-able, you cannot use any kind of fingerprint to prove a file has not been duplicated if it has so much been read off of a single location in memory.


so consumers want NO DRM and they want to be able resell stuff?.... my hats off to anyone who'd dare take on EMI, but to be honest i'm not sure how we can expect this, if you want to resell you need DRM so there's an actual case of "ownership"

TC Weidner
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I take it as selling your license. You buy the right to use as specific piece of software,all people are attempting to do it seems is sell and/or transfer that license. Problem I see is that I am sure in the EULA there is a restriction of not being able to transfer said license.

Cynthia Gayton
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I agree with TC. In the absence of another agreement, the EULA would determine how the license can be transfered. The "first sale doctrine" which is often applied to the resale of physical objects is complicated by a licensing scheme. When there isn't an explicit contract between the rights holder and the buyer, it is easier to apply first sale concepts with regard to that "thing" or license purchased - but no other rights other than the use of that thing has been passed. Once there is a license, you have to see whether the licensee has obtained the rights to resell those rights paid for, which are usually only use rights. I think it would be quite a burden for a digital product purchaser to go through the trouble of renegotiating rights in order to resell. Especially onerous in an environment where purchasers have to "activate" or "register" their purchase which is tied to a specific licensee or purchaser.

Ian Uniacke
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Contract law is subservient to common law. You can't opt out of common law rights by including it in a contract. I'm not certain about the specifics of first sale doctrine but I would guess that just saying "first sale doctrine does not apply to this product" does not make you exempt from the law regardless of whether the user agrees to it or not.

Michael Schneider
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Ownership of a digital game should be no different than that of a physical game. I am paying for the same game, same experience. My purchases is simply delivered in a different format.

If the technology exists to verify the authenticity and facilitate the transaction of a used digital game-- where the seller loses access to the game the buyer obtains -- then there should be no problem. The real problem here is that the digital industry has been holding consumer purchases hostage...leading us to believe we are buying something but denying us basic ownership rights to those purchases.

Richard Ellicott
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now this company, they're letting you sell your DRM free MP3's, they have no way of knowing other than your good word that you deleted the old one (and so did your mum and all the other people you sent it to)

this is the problem


and when you resell that copy of call of duty, how do I know you destroyed that copy of your serial key?


maybe that better illustrates my point, if you love DRM, then you love this idea... yes just transfer the license then (but you need to accept the DRM on the music so they can "cancel" your songs by the internet). This form of song cancelling DRM is really what everyone got so upset about.

Maria Jayne
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I think the first step for this sort of idea about reselling digital products is the need to step away from the design of giving the product digitally to the user. Cloud gaming for example, stores the game on a server you can access but not directly. Thus when transferring the rights to another person you have nothing on your own computer that could allow you to continue using that software after resale.

As long as games and other media are contained within a local source to each individual user, there will always be a way to copy, crack or redistribute that software to others.

Of course first cloud gaming has to be viable as a gaming platform which in turn, requires both the technology making it and the internet speed in everyone's homes to catch up. So it won't happen soon.

E McNeill
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For goods that are trivial/free to copy, it seems inevitable that payments to creators will become totally voluntary. I don't feel very comfortable with that, but I'm starting to think that I'd be best off trying to figure out how to embrace that future.

TC Weidner
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I agree. I tend to think that game creators and the industry at large dont think outside the box enough. I tend to think computer entertainment is like tv entertainment early-mid last century. At this point in the life cycle of popularity TV thrived on sole sponsorship. Perhaps gaming can do the same.

Heck look at Hanna Barbera the main stay of cartoon entertainment for 30 years, they would of never even gotten off the ground without Kellogs sponsorship. All the game shows and so forth of the 50s all sponsored by one compnay and to be honest , the advertising was more upfront, and none invasive than now. We need to look to our past to see our possible future IMHO.

Many companies and products are looking for new and productive ways to reach people and consumers, I think outright sponsoring entertainment venues such as gaming is a possible way to go. Flash ads dont work, TV ads no longer work as we have evolved to simply ignore them, print advertising is dead, radio is dying.

Its just a thought, but we are need of something new in both arenas.

Ian Uniacke
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I hear what you're saying Cameron but it sounds terribly like "Halo 10: 200$ comes with free hand job". Where the money goes that's where the focus will lie.

Jeremy Alessi
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I wish people would stop trying to draw parallels between physical and digital goods, they are completely different. I don't know if there's a real term for this but it's kind of like reverse-skeuomorphism.

With entertainment you're paying for the experience, not a piece of property.

Also, with f2p schemes this is a pretty antiquated concept anyway.

Lars Doucet
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Not entirely - what if someone wants to resell their virtual goods?

Ian Uniacke
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But what are they selling Lars? Property law doesn't really apply because property law was created for property (ie terra firma, or physical land).

By the way thank you for teaching me a new word Jeremy. ;)

Michael Schneider
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@Ian - they are selling their digital game. You can spend your money on the physical version or the digital version. Same game, different formats.

When you sell you physical game, you forfeit access. When you sell your digital game, your forfeit access. This seems pretty straight forward to me. As long as the technology facilitating the transaction is sound, which it seems like it is, stop denying people the right to a secondary market for their digital purchases.

Jeremie Sinic
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@Lars Doucet
Good point. I think many players who have invested hundreds of hours in MMOs would be happy to have a platform to resell their characters, gears, etc. legally once they are done with a game. And then if developers also come to get their share, I see no reason to complain.
It would even create additional revenue streams from players who sell their character after playing the game for free.

Brian Anderson
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The whole thing seems rather stupid to me. The items are digital, I can make as many copies as I want, just burn them onto a DVD.

"The way ReDigi works, any time you connect or sync anything, we're always scanning," Ossenmacher said. "We built this thing that works like antivirus software, and we're always scanning in the background to help protect you and make sure you're adhering to copyright law."

That quote is reason enough not to use the service.

Greg Quinn
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No thanks. I put a lot of time and money into the development of my company's games.
If my digital game retails for $9.99, then that's what people must pay to play it.

Why should someone get to pay $2.99 for it?
I don't want the revenue cut of this 2nd hand sale, I want the revenue cut of what it costs to license my game, which is $9.99.

Software is a 'license', you pay money for that 'license' to use the software.

Simon Ludgate
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No one likes the "My way or the highway" approach. If someone offers you $5 instead of $10 and you say no, they're going to offer it to someone else.

Ed Macauley
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They might not like the "my way or the highway" approach, but Greg is free to distribute his IP the way he wants to. That's something folks seem to always forget.

Greg Quinn
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@Simon, the point is it creates an unfair market. If a license is $9.99, why should somebody else get that same license at a fraction of the price? That's the same as buying goods on the black market or illegal/bought stolen goods for cheap, I'd even go so far as to say it's a form of limited piracy...

Sure, as a game developer, I'd rather have $2.99 than nothing, but what about customers who paid the full price for the license? If I wanted to sell the game for $2.99 I would rather advertise and time a sale that increases sales figures and builds my customer base..

Selling the game at a discounted price should be when it works best in the game's life cycle, not determined by a site that resells digital goods.

Michael Schneider
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@Ed, True. But people will eventually stop buying games from Greg.

jonathan melnik
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I agree with Greg.
The main difference here with buying a physical used copy, is that the physical copy is actually used. It's not brand new and for that it loses it's value, but that doesn't happen with digital copies. For that reason it's unfair that someone buys a digital copy of a game at a smaller price.

Jeremie Sinic
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"I'd rather have $2.99 than nothing, but what about customers who paid the full price for the license?"

You know it's not much different from a Steam sale, at least from the point of view of the customer.
Edit: for the matter, that's not different from someone buying a second-hand game at Gamestop either, and people who purchased the game at full price are not that upset that others can have it later at a bargain price.

Luke Shorts
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"@Simon, the point is it creates an unfair market. If a license is $9.99, why should somebody else get that same license at a fraction of the price? That's the same as buying goods on the black market or illegal/bought stolen goods for cheap, I'd even go so far as to say it's a form of limited piracy..."

If you sold, for instance, 10000 copies of your software and these copies are sold second-hand, you technically don't lose your copyright because your installed base stays the same. What happens is simply that some users which do not care about using your software any more give their copy to someone else, who presumably considered your price point too high.

I won't make statements on US law, but the case in Europe mentioned in the article above saw Oracle fail exactly on that issue: in EU law, copyright (the right of making copies of a work) and distribution rights (how these goods enter and circulate in the market) are considered distinct (the law is fairly recent, so the lawmaker was at least aware of the existence of digital goods) and it is the latter that is exhausted by means of the first legal sale. The CJEU also made a relatively strong statement (for a court) on the issue by saying that you could not work around the exhaustion by clever EULA drafting. The judgement was rather tied to the specific facts of the case, so it would not apply to software like MMO clients and such, but I think it showed a fairly reasonable interpretation of the scope of copyright.

Greg Quinn
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Aside from the fact I'd rather control what price the game retails at, I guess a sale is a sale and I should rather take the $2.99 over nothing.

What will be interesting though is how will this company make payment to so many different software companies? So if one copy of my game goes into their shop, they'll need to contact me for payment details. What happens if I refuse though?

Another thing they don't bear in mind, is what about online game activations?
All my games will have online activation tied to an email address, and if that serial is already used, the game won't activate with another email address. So in order for the 2nd hand copy to work, it will be quite the process.

Jongwoo Kim
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"We built this thing that works like antivirus software, and we're always scanning in the background to help protect you and make sure you're adhering to copyright law."

This really gives me the creeps. Antivirus or antispyware programs are tolerable given their role. But who's going to sign up for a service that forcibly scans their hard drive and tells them what's legal or not?

Ardney Carter
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I agree but the mere fact that this is being pursued as a viable business venture means there are plenty of people willing to do just that. Over the past few years not enough people have stood up and said "screw you" when someone tries to tell them what they can do with a product they've already paid for and at this point the tide is unlikely to change.

K Gadd
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"We built a system that notes when someone wants to sell a game or song or book from their user account, and we'll create a digital fingerprint of that. Even if someone has two copies of something they lawfully acquired, we can differentiate between the two and any copies thereof."

This is complete, utter nonsense. Two identical files are two identical files. I would at least expect a technically focused outlet like Gamasutra to apply some skepticism when writing an article about a vendor that is making statements as implausible as those behind perpetual motion machines.

James Castile
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I suggest you look up on things you don't understand before you bandy insults.

TC Weidner
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im thinking they mean like how windows handles it, you can have two identical files in the same folder, windows will just rename one with the suffix "copy". Files are identical only thing separating them is the suffix in the name

Kristian Hogberg
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It's a good idea but there is a difference between physical and digital products. A digital product never really gets "used" and worn. The reason you can sell a used physical game at a lower price is that someone has already used it and the game is noticably used. So I agree with Greg in the sense that it is a bit of an issue to set a lower price for a "used" digital game compared to a physical.
If you draw a paralell to cars for example then the reason you buy a used car at a lower price than a new is that the used car is not in the same shape as a new one. The same does not apply to digital goods.

Danny Bernal
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Thank you! you took the words right out of my mouth.
This entire Idea is downright ridiculous!

Mike Smith
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The price could be reduced the same way new games go on sale that have been out for a while. So for example, I purchase a digital copy of game A for $40.00 on the day that it launches. I play it for a month and decide to sell it. I look online and see that the game is sold for $30.00 now. I want to beat the competition, so I sell my used game for $25.00.

Kristian Hogberg
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If the developer lowers the recommended retail price then it wouldn't be a problem for a third party to sell it at that price. The problem persists though that the game isn't really "used".
Another problem is that you can't go sell other peoples IP without their authorization especially not when you can't differ a used game from a new. How would the company or person that sells the "used" game go about with the pricing if they sell both "new" and "used" games?
Why should you pay less for a "used" digital game?
Why should a company like the one in the article buy back a "used" digital game at a lower price?

I don't want to sound like some kind of backwards-looking person but as it is now I think it's hard to resolve all the issues. The market for digital goods is new compared to physical goods which has been around for thousands of years, so there are still a lot to learn and deal with and a lot of questions that needs to be answered. :)

Pallav Nawani
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More and more people looking to live off our hard work.

Greg Quinn
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Good point Pallav. This guy basically becomes a 'distributor' of our hard work without our approval.

Kyle Redd
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Not a fan of the First Sale Doctrine, I take it?


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