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Reselling games: two ratios of interest
FeepingCreature
Registered User new member
Registered User new member
From pondering the question raised in the news post from August 27th, it occurred to me that there may be two values of relevance to the question of reselling - the first, the ratio of item production cost to item price; the second, the ratio of up-front investment to total item production cost.
Say you are selling couches. The value of the couch that you sell is comparable to the value of the materials you used to build it plus a fraction of standing costs (salary, insurance, bureaucracy loss) - there's a certain mark-up, it may be rather high but it's not _insanely_ high. Also, there is a certain amount of up-front investment required to acquire tools and the necessary skill set, but over the lifetime of your company, that cost will be outstripped many times over by the cost of materials for each couch.
Thus, the income from each couch mostly goes to immediate re-compensation - the first ratio is usually between 1 and 2, the second is .. some value > 1, I have no idea. I'm not a carpenter.
With software, the situation is reversed. Let's take the extreme example - a company that distributes their software online, using torrents to handle the bulk of the server load. As its efficiency increases, the first ratio approaches infinity and the second approaches zero.
It is my belief that the more extreme these ratios are, the more worried companies are about resale. This is because the smaller the cost of item production becomes in comparison to price and upfront cost, the more tenuous the rationale for the item price is. As this link devolves, it becomes clear that what's really being sold is not a physical good but _permission_, or license, and license is not generally thought of as transferable.
Of course, the problem is that software companies still like to advertise as if they're selling a good, not a license - all the above is buried deep in legalese because people would be less willing to pay high prices for a mere permission. I think this cognitive dissonance is the reason for the aggressive nature of the debate.
Thoughts?
[edit] The same, to a lesser extent, applies to miniatures and trading cards.
[edit2] Apologies for wrong forum.
Say you are selling couches. The value of the couch that you sell is comparable to the value of the materials you used to build it plus a fraction of standing costs (salary, insurance, bureaucracy loss) - there's a certain mark-up, it may be rather high but it's not _insanely_ high. Also, there is a certain amount of up-front investment required to acquire tools and the necessary skill set, but over the lifetime of your company, that cost will be outstripped many times over by the cost of materials for each couch.
Thus, the income from each couch mostly goes to immediate re-compensation - the first ratio is usually between 1 and 2, the second is .. some value > 1, I have no idea. I'm not a carpenter.
With software, the situation is reversed. Let's take the extreme example - a company that distributes their software online, using torrents to handle the bulk of the server load. As its efficiency increases, the first ratio approaches infinity and the second approaches zero.
It is my belief that the more extreme these ratios are, the more worried companies are about resale. This is because the smaller the cost of item production becomes in comparison to price and upfront cost, the more tenuous the rationale for the item price is. As this link devolves, it becomes clear that what's really being sold is not a physical good but _permission_, or license, and license is not generally thought of as transferable.
Of course, the problem is that software companies still like to advertise as if they're selling a good, not a license - all the above is buried deep in legalese because people would be less willing to pay high prices for a mere permission. I think this cognitive dissonance is the reason for the aggressive nature of the debate.
Thoughts?
[edit] The same, to a lesser extent, applies to miniatures and trading cards.
[edit2] Apologies for wrong forum.
FeepingCreature on
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A typical piece of furniture will be marked up 300-500% over cost once it hits the retail chain.