To see free market in action, look at video game industry
Published: Thursday, September 5, 2013
Updated: Thursday, September 5, 2013 22:09
Do free markets work when no one is looking? By no one I mean no one important, and by no one important I mean politicians, activists and political pundits. So I suppose the word important should be in quotations. I digress. Soaring college tuitions, the housing bubble, financial instability, and health insurance premiums through the roof are numerous examples of markets and industries going haywire. What we don’t have is a universally accepted theory about what is causing these problems. Predictably, two competing theories have emerged. Greed or government? How do we discern which is the problem? Simple, look for an industry where neither the government nor greed exist, or at the very least plays a smaller role. However, greed is a universal constant, and an insurmountable part of the human experience. Government, on the other hand, is quite variable. In some industries, such as all those listed above, government is an ever present force. In other industries the government hardly factors in. With that in mind I believe the video game industry is a perfect case study in the free market.
Now, I understand the video game industry isn’t life and death. I understand that not everyone has to play video games, nor does everyone want to. With that in mind I wish to establish that greed still plays a role, and that greed acts at times as a detriment to the consumer. This is an easy task. For a long time now the video game industry has operated in an oligopoly. Sony’s PlayStation, Microsoft’s Xbox and Nintendo’s Wii dominated the market. Large companies such as Microsoft used their considerable market share and leveraged to exclude PC gamers from many well-known titles such as the Halo series. They claimed, quite correctly, that PC games hurt console sales. This tactic aggravated many gamers, but was good for the bottom line. Many games didn’t have a split screen option, but did include an online option. This means that the game was designed to support multiple players, and split screen was simply not included. Companies like Microsoft did this in order to drive online gaming, and, by extension, the fees they collect for providing online services.
Now I know I’m trying to make mountains out of molehills. I understand that the situations described above did not hurt anybody. That being said, I think it is clear that these markets were not functioning in the best interests of the consumer, and that these problems were caused in the name of profit, or greed if you like. We have established that businesses do not always do what is in the best interest of the customer. However, over time, market forces should run counter to these practices, and that is exactly what we have seen.
In the video game industry, companies such as Valve, GameFly and formerly Direct2Drive have increasingly been offering downloadable versions of the video games we all know and love. This has increased the demand for PC games, and therefore the number of games being offered. At the same time independent companies are coming out with console systems the Ouya. These new systems offer PC usability with the convenience of a home console system. The Ouya even has a focus on in-home console gaming. Even within the established market things are beginning to change. Microsoft announced plans to license a game to a specific console in order curb game lending and buybacks. This would have meant that for every time a game was played on a new console a fee would be charged. After the announcement, video game enthusiasts were up in arms. Microsoft’s competitor, Sony, maker of the PlayStation, even jumped on the bandwagon and issued a response ridiculing the plan. Microsoft has since reversed this policy and will now provide its customers with a better product. It would seem that competition is successfully regulating the industry.
The conclusion here is that free markets can, and do, work if we give them the necessary time and freedom while staying out of the way. When a market goes haywire it is of vital importance that we take a step back, and look if there’s something the government is doing to make things worse, or if we can imagine a way to profit from fixing the problem. I do not think that is too much to ask of our politicians. I am personally left with one question: Would our higher education and healthcare systems be better today, if we all cared just a little bit less?