Paying for mods

[Mise]

Your characterisation of what constitutes a "free market" is fundamentally flawed. It's simply not reflective of mainstream economics. It's basically a naive objectivist/anarcho-capitalist world-view. Indeed, the statement "state involvement means there is no free market" is pretty much straight out of the manifesto. You seem to have confused "free market" for "one which doesn't have any rules or isn't governed by anything at all". The problem is that a free market often (in fact, always) requires state intervention. Property rights themselves are a state intervention, founded on the notion that the state will protect people's rights to their property; would you say that a market in which such rights are traded can never be free? No, I doubt you would say that.

Similarly, the phrase "intentionally greater than one would receive in a free market" also begs the question. You're assuming that a market without various IP rights is "more free" than a market that does not have such rights. This is not true, as evidenced by the fact that a market without IP rights simply doesn't price intellectual works correctly, and leads to massive undersupply of intellectual works. This is explicitly not a functioning market; it is not optimal; it is not a free market.

I agree that modders in the current market don't typically require normal profits in order to make their mods. But again, this assumes the conclusion... Of course modders in the current market wouldn't require normal profits to make their mods! You're only asking the ones who don't. If modding generated normal profits, would more people create mods? I think the answer is yes. Flip it around, and imagine a world in which artists couldn't get paid for making music (say). Only artists who didn't care about making money would make music. Someone would inevitably say "artists don't need to make money - not one single artist makes any money from their music, and yet they still make music! Therefore, we don't need to consider whether the artists are making adequate profit - the ROCE model is not appropriate here at all". (Perhaps we should also ask whether such a world has a functioning, free market for music -- or whether ours, in which IP rights protect artists' musical works, is a more functioning, free market.)

Basically, you've got the whole thing the wrong way around. The purpose of creating IP rights is specifically so that we can create a functioning market for intellectual works. The market for intellectual works simply doesn't function without them. The "market-with-IP-rights" is more functioning, and therefore more free/closer to optimality, than "market-without-IP-rights". That's why we create IP rights - so that we can trade them on an open market, and let the market decide the price and supply of those rights.

 

[trader/warrior]

Reading this discussion I'm reminded about PC games in the 90's that sometimes would have completely unauthorized expansion packs sold boxed in stores made by developers completely separate from the original game. To me it just seems quite clear that if allowing for paid mods would result in similar activities then companies will keep up the current standard of not allowing paid mods at all. Not too sure of my understanding of the term 'rent-seeking', but if games are to start selling licenses that allow for commercial sale of paid mods then they are allowed to charge whatever they want for it and by the typical practises around IP in the game industry they will want a pretty fat share of revenue for it, just like if they were making a deal with a third-party developer to make an expansion. If that is rent-seeking and won't happen (or is unethical), then paid mods will not happen either.

 

[BvBPL]

That's why we create IP rights - so that we can trade them on an open market, and let the market decide the price and supply of those rights.

Then why would you suggest that there's an implicit surrender of those rights, specifically the rights to modify and create derivative works? If the point is to allow for the trading of the rights than the authors must be able to pick and choose which rights are traded and which are retained rather than being forcibly compelled to give them up.

 

[Mise]

Then why would you suggest that there's an implicit surrender of those rights, specifically the rights to modify and create derivative works? If the point is to allow for the trading of the rights than the authors must be able to pick and choose which rights are traded and which are retained rather than being forcibly compelled to give them up.

They're not giving them up; they're being traded (or licensed, if you prefer) when they sell the game. That is, the value to modders and gamers of being able to make/download mods is priced into the value of the game already. C.f. the right to paint your house green: that right is already priced in to the price of the house when you buy or sell the property rights. Similarly, the ability to make or download mods is priced into the value of a game when Bethesda sell it (or license it, if you prefer).

The reason this works in the case of mods, but not in, for example, remixing a song, is because it is necessary to purchase the original work in order to purchase the mod. Economically speaking, this preserves excludability. Intellectual works, unlike physical property, are not naturally excludable. IP rights make them excludable; it's this excludability that makes the market for IP function properly. Mods retain this excludability, by excluding people who haven't purchased the original game from using the mod. Thus the market still functions.

 

[BvBPL]

They're not giving them up; they're being traded (or licensed, if you prefer) when they sell the game. That is, the value to modders and gamers of being able to make/download mods is priced into the value of the game already. C.f. the right to paint your house green: that right is already priced in to the price of the house when you buy or sell the property rights. Similarly, the ability to make or download mods is priced into the value of a game when Bethesda sell it (or license it, if you prefer).

But they aren't. In fact the user agreement states that any user content that is created is owned by Zenimax, not its author.

 

[Mise]

Yes, and my argument is that this right doesn't need to exist as a separate and explicit right, because selling mods already preserves excludability, and the value of the right to modify games is already fully captured in the price of the game itself. There is no need for a separate right to modify the game's asset and sell those modifications, because mods naturally preserve excludability and hence it's already possible to fully price in the value of this right into the game. There is no need to create an extra right in order to create a market for the right: the market already prices the value of the right into the price of the game.

I mean, not to put too fine a point on it, but if you've accepted that IP rights are only necessary in order to create a functioning market for intellectual works, and you've accepted that a functioning market doesn't simply mean one in which there is no government intervention (but rather one that actually functions properly, prices things properly, and gets us as close as possible to some optimal equilibrium), then you should accept that there is no need for the specific right that you're talking about, because a functioning market that prices things properly already exists.

If you can demonstrate that IP rights don't price things properly, then yes, we might need new rights in order to create a functioning market for that thing. But you've already told me that modders don't achieve normal returns for their work, so it seems to me that any new rights would surely favour the modders, since it's their work that seems improperly priced right now.

If you can demonstrate that Bethesda have created something that has been rendered non-excludable by the existence of mods, then sure, we need a new IP right for that specific thing. But so far nobody's done that. Every time I've asked "what's missing?" someone has simply told me that I don't understand IP. Well, explain it to me then. What, precisely, is missing?

 

[BvBPL]

I can't speak for other jurisdictions, but here in the States those rights are separate and explicit. A license to, say, perform publically a work does not carry with it the right to duplicate the work on a physical medium nor the right to create derivative works. Copyright interests are not unitary, they are collection of individual interests that can, and frequently are, divided up among multiple subsequent parties.

 

[Mise]

If you're trying to tell me that the U.S.'s copyright law is sub optimal then I already know that. What I want to know is why you think there should be a separate, specific right for something that is already priced correctly without a separate, specific right. I'm asking you to justify your position on this issue.

 

[Arakhor]

The EULA can say that a person surrenders any copyright they may have by making the mod, but that doesn't mean it's actually enforceable. What's far more interesting is how copyright law affects third-party modifications in the first place (which I certainly don't know).

 

[Wolfbeckett]

Yes, it doesn't really matter what the EULA says, if the EULA conflicts with the actual law the law wins. They can put a clause in the EULA that says that by playing our game, you agree to give us your firstborn son, and you can agree to it, but they still won't be able to legally force you to hand over the kid.

 

[BvBPL]

On further contemplation, I'm relatively sure that copyright interests are separate and explicit for all nations under the Berne Convention.

 

[Mise]

You're still not justifying anything. As I said before, those laws might have been justifiable in the past, given the requirements for functioning markets for the types of IP they were designed for at the time they were designed. That's not a justification for all possible markets of all possible IP at all times now and forevermore.

And as I said, the way that IP rights should be justified is through economic theory, turning non-excludable goods for which no functioning market is possible into excludable goods for which a functioning market (as previously defined) is possible. You haven't done that. Nobody has.

 

[BvBPL]

I rather think the burden of justification sits on those who would change the system rather than those explaining how it works presently.

 

[Mise]

I rather think the burden of justification sits on those who would change the system rather than those explaining how it works presently.

I've been making my justification for the past dozen or so posts. There is no need for a separate right, because mods for games do not break excludability granted by existing rights, the market functions properly, and the value of the putative separate right is already fully captured in the pricing mechanism for the original work.

At the risk of repeating myself, if you've accepted that IP rights are only necessary in order to create a functioning market for intellectual works, and you've accepted that a functioning market doesn't simply mean one in which there is no government intervention (but rather one that actually functions properly, prices things properly, and gets us as close as possible to some optimal equilibrium), then you should accept that there is no need for the specific right that you're talking about, because a functioning market that prices things properly already exists. What, precisely, do you not accept? What, precisely, is your argument? Or is "is/ought" your only defence here?

 

[BvBPL]

I'm not making an argument.

You haven't demonstrated to my satisfaction an excludable piece of intellectual property must naturally extend to its consumers a right to make derivative works.

 

[Mise]

I'm not making an argument.

Quite! You haven't made an argument, you can't justify your position, and you don't seem to disagree with any specific part of my argument. You're just vaguely unsatisfied, apparently.

You haven't demonstrated to my satisfaction an excludable piece of intellectual property must naturally extend to its consumers a right to make derivative works.

Well, there's not much more to say: the economics is pretty straightforward. You haven't argued against any of my premises. You haven't argued against anything that follows from my premises. You've simply said "this is what the law says, therefore, this is what the law should say".

"Derivative works" is something you need to justify, btw. Is painting my house green a "derivative work"? You can certainly argue the case (well, assuming you don't simply say "no because the law says it isn't therefore it's not so there"). And yet when I sell a house, the right to paint it green (or do up the kitchen, or replace the guttering, or re-landscape the garden, or build an extension, or convert the garage) naturally extends to the purchaser. Again, you didn't seem to have a response to "the right to paint a house green"; you seem to have accepted that not all rights that we can put into words should be rights that are protected by law explicitly and separately to other, more general rights. So why should this particular right, in this particular case, be protected by law? Economic theory says that it shouldn't, because the market already works just fine without it. So what do you say? What, precisely, is your argument?

Oh, yeah, I forgot -- you don't have one.

 

[BvBPL]

Quite! You haven't made an argument, you can't justify your position....

I can't be asked to justify a position if I haven't proffered a position. Suffice it to say that where you are arguing for a wholesale change in copyright law the burden rests on your shoulders to demonstrate why that change should be enacted. Your insistence that I need to defend a position I haven't taken is poor form. Given that you felt words were being put in your mouth previously in this thread I would have hoped you would be a little more conscious about doing the same to other people.

Nor do I feel it is necessary to "justify" derivative works. I'm not even sure what that means. I'm not sure how justification is a verb applicable to derivative works any more than it is to a puppy or a Vermeer.

As for my complaints about your argument, there are a few.

The first being that your statement that Zenimax, or whomever, has grabbed all of the available profit for itself with the initial sale of the excludable property. That's not necessarily the case in the contemporary age of DLC. Subsequent purchases in the form of DLC are now a good way for companies like Zenimax to make a bit more money. If a mod comes out that is similar to an official pay DLC then the profit from that DLC could be harmed by the mod. So saying that all of the value is captured for Zenimax at the point of the initial sale is inaccurate because DLC allows for future value to be captured later.

Furthermore, the changes you purpose would be post facto alterations of private contracts between Zenimax and its consumers. Users of Skyrim agree to certain terms of use that award Zenimax rights to the works created by Skyrim’s users. The economic efficiency argument isn’t sufficient to explain to me why copyright law should be modified in such a manner that it prevents such bilateral agreements because people should be permitted to make economically inefficient decisions should they choose to.

Finally, there’s an equity argument against mods profiting off of Zenimax’s expenses. Zenimax spent a lot of money to develop and market Skyrim. Four years ago, many people knew what going to take place on the eleventh of November. The market base for modders of Skyrim exists because Zenimax created that market through advertising and development of the original product. If you allow modders to charge for mods without compensation to Zenimax then it would unjustly enrich the modders by allowing them to piggyback off the expenditures already made by Zenimax.

 

[Mise]

I can't be asked to justify a position if I haven't proffered a position. Suffice it to say that where you are arguing for a wholesale change in copyright law the burden rests on your shoulders to demonstrate why that change should be enacted. Your insistence that I need to defend a position I haven't taken is poor form. Given that you felt words were being put in your mouth previously in this thread I would have hoped you would be a little more conscious about doing the same to other people.

On the contrary, I was rather demanding you put words in your own mouth. You don't have to argue anything if you don't want to.

Nor do I feel it is necessary to "justify" derivative works. I'm not even sure what that means. I'm not sure how justification is a verb applicable to derivative works any more than it is to a puppy or a Vermeer.

Because you're appealing to the present state of the law, and laws need to be justified. Again, you've not justified why this particular type of "derivative" work needs its own specific right, in contrast to other works which the law doesn't consider derivative, but could be argued as being "derivative".

I mean, bottom line, you don't have to respond to anything I've said. If you find my posts too difficult to argue against, feel free to do something easier instead.

As for my complaints about your argument, there are a few.

The first being that your statement that Zenimax, or whomever, has grabbed all of the available profit for itself with the initial sale of the excludable property. That's not necessarily the case in the contemporary age of DLC. Subsequent purchases in the form of DLC are now a good way for companies like Zenimax to make a bit more money. If a mod comes out that is similar to an official pay DLC then the profit from that DLC could be harmed by the mod. So saying that all of the value is captured for Zenimax at the point of the initial sale is inaccurate because DLC allows for future value to be captured later.

True, this needs to be compensated. The question becomes, "to what extent". To answer this, you need to look at return on capital employed and the presence of abnormal profits. I don't have the answer to that, but I suspect a 50% share for publishers and 25% for modders leaves modders with less than normal profits, and publishers with more than normal profits. But yes, this is one thing that's missing, that isn't already captured by whatever was originally sold, and ought to be protected.

Furthermore, the changes you purpose would be post facto alterations of private contracts between Zenimax and its consumers. Users of Skyrim agree to certain terms of use that award Zenimax rights to the works created by Skyrim’s users. The economic efficiency argument isn’t sufficient to explain to me why copyright law should be modified in such a manner that it prevents such bilateral agreements because people should be permitted to make economically inefficient decisions should they choose to.

You're confusing decisions made by individuals that may not be to their economic benefit, with the efficiency of an economic system or market for a product. People should be permitted to do the former, but the latter is suboptimal for the general welfare, categorically. They are two different things and you're confusing them here. We ought not create economic systems, laws, rights or regulations that result in a reduction in general welfare; we ought to do the opposite. Economics tells us which is which; hence, the economic efficiency argument is sufficient to explain how, why, and under what circumstances copyright law should be changed.

Finally, there’s an equity argument against mods profiting off of Zenimax’s expenses. Zenimax spent a lot of money to develop and market Skyrim. Four years ago, many people knew what going to take place on the eleventh of November. The market base for modders of Skyrim exists because Zenimax created that market through advertising and development of the original product. If you allow modders to charge for mods without compensation to Zenimax then it would unjustly enrich the modders by allowing them to piggyback off the expenditures already made by Zenimax.

Again, this is all priced into the price of the game. If mods exist for a game, that game becomes more attractive to gamers, hence they are willing to pay more for the game (alternatively, more copies will be sold). I've been over this before, so I won't labour the point. Skyrim modders aren't "piggybacking" any more than someone who takes a thing, improves that thing, then sells that thing. The price of the unimproved thing rises, because its value-in-use increases. Hence, original makers of the game receive their fair share of the revenue that modders make. This works in this specific case because modding doesn't break excludability.

 

[BvBPL]

You're confusing decisions made by individuals that may not be to their economic benefit, with the efficiency of an economic system or market for a product. People should be permitted to do the former, but the latter is suboptimal for the general welfare, categorically. They are two different things and you're confusing them here. We ought not create economic systems, laws, rights or regulations that result in a reduction in general welfare; we ought to do the opposite. Economics tells us which is which; hence, the economic efficiency argument is sufficient to explain how, why, and under what circumstances copyright law should be changed.

Video game mods don't affect the general welfare. They are a luxury entertainment product and quite outside concerns regarding housing, food, and other areas that materially affect the welfare of people. I endorse strong consumer protections for those things, not so much for people engaged in a hobby.

Skyrim modders aren't "piggybacking" any more than someone who takes a thing, improves that thing, then sells that thing.

Both are piggybackers because they are utilizing the market created by the senior author without sharing the responsibility for creating that market.

 

[Mise]

Video game mods don't affect the general welfare. They are a luxury entertainment product and quite outside concerns regarding housing, food, and other areas that materially affect the welfare of people. I endorse strong consumer protections for those things, not so much for people engaged in a hobby.

Every good that has demand affects the general welfare. People demand it because (they believe) it increases their welfare. The equilibrium in a free market is the point at which the welfare of all participants is optimal. The purpose of laws such as IP rights, property rights, and so on, is to create a market that functions as efficiently as possible; that is, one that gets as close as possible to this optimal equilibrium. Again, you're displaying a rather stark misunderstanding of economics here. If you reject this, then you're pretty much rejecting market economies in general.

I'm not sure you do reject this though. In fact, a lot of what you've said previously has assumed all of this implicitly. So I wonder what you're really saying. From the last sentence, it seems like you're saying, "I don't care about mod developers or how much money they earn". Which is fine, I suppose, but isn't a justification for why modders should be paid very little compared with people you consider to be bona fide game developers. That you don't care about how much modders make explains why you don't think they should make much money, but it doesn't justify why modders shouldn't make much money.

Finally, if you don't care about "hobbies", then why do you care so much about IP in general? After all, the effect of IP has been explicitly to create a market for things that would otherwise be merely hobbies. Writers, musicians, artists, and yes, even computer game programmers: all of these things are, for many people, hobbies. And without IP protection, they would remain hobbies, because without a functioning market for these kinds of intellectual works, nobody would ever be able to earn a living from them. So your argument lacks internal consistency: either you believe that IP rights are necessary in order to create a functioning market for intellectual works that correctly price them and maximise welfare, or you believe that there should only be a free market for things you consider essentials, such as housing, food, and so on. Worse still, you appear to want me to believe that the things that IP laws currently protect, such as Twilight novels and Bethesda games, just so happen to be "necessities", on par with housing, food and so on, but simultaneously, that any new product or innovation that IP might need to protect in the future is a "luxury" that you don't care about and that we don't need to protect.

If you mean something else of course then please clarify.

Both are piggybackers because they are utilizing the market created by the senior author without sharing the responsibility for creating that market.

So, if I sell a house, should the right to any future gains in the price of the house as a result of renovation or refurbishment be automatically sold along with the house, or should the right to such gains be explicit and separate in law? If I buy a house, renovate it, then sell it, would you classify me as a "piggybacker"? Or would I be creating genuine, legitimate value, to which the original owner of the house has no particular right?

Seriously, you're just arguing against all economic activity now.