‘Capitalism’ or IP: What’s Ruining Video Games?

business_ethics_highlights_2Matthew McCaffrey on what’s right, and what’s wrong, in the market for video games. >>>

Are Markets Ruining Video Games?
Or is intellectual property the real culprit?

Capitalism is ruining video games. So says game producer Lorne Lanning, creator of the Oddworld series, who recently sparked controversy by blasting economic developments in the gaming industry.

Lanning blames “capitalism” for gaming’s recent financial and artistic troubles, especially its emphasis on commercial success over artistic creativity. His basic claim is the same one levied against the film industry: major studios have been squeezing out their smaller competitors, taking advantage of market dominance to produce an endless stream of big-budget, artistically uninspiring sequels and spin-off franchises.

[I]t’s important not to dismiss Lanning’s views as run-of-the-mill anti-market bias. In particular, we shouldn’t assume the game industry is a poster child for consumer sovereignty and healthy economic competition. In fact, what Lanning objects to sounds more like corporatism in the game industry than unregulated commerce; if so, it’s misguided to respond by defending game developers as heroic entrepreneurs or appealing to the wonders of the free market.

Lanning’s complaints may be justified, though he has misdiagnosed their cause: it’s actually regulation and a lack of markets that are hurting the game industry.

As it happens, major game studios have developed in ways we expect from firms artificially protected from competition: they’ve become less innovative, more risk-averse, and more focused on short-term gains.

But what kind of intervention could be hampering competition in the gaming world?

One culprit is intellectual property (IP) law, which produces exactly the kind of problems Lanning is complaining about. Major studios spend a lot of money developing their IP, which they often license jealously. A case in point: Nintendo takes 40 percent of the ad revenue from YouTube videos featuring its games, a tactic that drives some creators away from their content.

Without noticing the irony, Lanning mentions several times the importance of retaining and nursing his own IP, all while protesting the sad state of small and medium-sized developers.


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