One company's quest for the 'holy grail': Reselling digital games
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.
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.
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.
Skydance Interactive —
Marina Del Rey,