Red Light: CD Keys And Parallel Markets

Welcome to the first installment of Red Light, a new, semi-regular segment based on the more shady side of the videogame industry. Certain topics in the gaming industry seem taboo, misunderstood, and are judged under false pretenses. Legalities of digital contracts, definitions of proper product usage, the management of digital rights, and slightly tilted business practices are a dime a dozen nowadays, and with the way we enjoy our interactive entertainment changing everyday, it's tough to keep up with the flurry of activity. This segment's dedicated to sparking conversation, asking questions, and every once in a while, taking sides with the opposition. This installment? We discuss the purchasing of cd keys at discount vendors, and the impact it has on the industry at large. You may be suprised.

With the recent leak of 3 million Dirt 3 cd keys, many PC gamers have had a taste of the benefits of going entirely digital: Sometimes, you'll luck out, and not have to pay full price for a game. Whether this be through purchasing videocards (as some game vouchers come bundled in the box), certain websites giving away games, or getting gifted digital content through cool new trading stations, it's nice to get things for cheap. Steam, Impulse, GamersGate, Direct2Drive, and GoG all have amazing holiday deals, and it's always a rush to find a remarkable value. For some PC gamers, though, they've been getting these deals in ways that may or may not be seen as illegal.

Various 'grey market' (we'll get to that in a minute) vendors promise discounted rates on hot new titles on PC. In just a few minutes time, I've just found Warhammer 40k: Retribution, Bulletstorm, and even Diablo 2 cd codes for 60% of their standard price, with a 100% guarantee to activate on their respective service. Some sites have archives, libraries, and full-on request functionality. This awkward business appears to be booming, but isn't this type of business practice illegal? Not in the slightest.

 Let's take a look at what constitues a 'grey market', so we have a solid frame of reference. From my old-time family friend, Mr. Wiki von Pedia:

A grey market or gray market (also known as parallel market) is the trade of a commodity through distribution channels which, while legal, are unofficial, unauthorized, or unintended by the original manufacturer.

This is a very solid definition. In the event of a cd key being sold at discounted prices, nothing illegal is being traded, and nothing illegal is happening during the transaction. The website has acquired a copy of the game, and is selling them at a discount. As the First Sale Doctrine dictates, an original purchaser is granted these rights:

"The First Sale Doctrine allows the purchaser to transfer (i.e., sell, lend or give away) a particular lawfully made copy of the copyrighted work without permission once it has been obtained."

You probably noticed that this doctrine protects 'copyrighted' work that is actually owned by the purchaser. The real kicker? You don't own the copyright for the game you purchased. Even if you own a disc of the game (so this affects you, too, console gamers), you're only granted access to use the content, but the content is still owned by the developers, publishers, and manufacturers. This doctrine does cover copyrights, after all, and unless a source code has been released to the open market, you're somewhat screwed out of ownership of any part of "your" copy of the game.


Okay, okay, we're losing sight of our goal. CD keys. Buying them off of some russian guy on the internet. Not the smartest move, right? Right. In no way am I condoning the use of these seedy establishments to save a few bucks, but I am bringing to light a very important distinction to this argument: Morality never equals Legality. A good rule that's served me well in my life is 'if it feels wrong, it is wrong'. It's admirable to defile the name of these underground merchants, for sure, but let's do a quick question and answer session:

Q: Who's getting cheated out of money if you buy from Bubba's CD Key Emporium Blowout?

A: Most likely? Nobody.

Digital distribution is a weird thing. Many establishments have very harsh criteria for being hosted on their digital distribution service, but that's not to say that payment to the developers and publishers isn't made on a consignment basis. Steam pays a developer for rights to distribute the developer's content. The developer enjoys a lucrative front-page banner on the biggest digital gaming service on the planet. Steam takes a small residual cut, while the developer gains the majority share of the revenue.

Q: Well, what if a website does some giveaways? What if a video card has a few packed-in vouchers?

A: These copies are already paid for for the company distributing the giveaway. The money has already exchanged hands.

Let's take a look at our Deus Ex giveaway for a recent example. How'd I get that key that our contestant won? I bought it, silly! It was a pack-in bonus for pre-ordering Deus Ex: Human Revolution's Augmented Edition on Steam, and I was given the opportunity by Valve to distribute the extra copy as a gift.

Q: So, how does this relate to the grey market? How did CD Key Emporium Blowout get the keys?

A: Either theft, luck, region exploits, or an inside-man.

Here's where things get interesting. If a parcel company ships a box of cd-keys (that activate on Steam, for instance), to the wrong address, is it illegal to use those keys? If your friend buys a copy of Awesome Game 7: Fight For More Awesome, and it ships with two unique keys (as a mistake of the packing company), is it wrong to use that second key for yourself? Now, if someone you've never met is getting wholesale prices directly from the distribution center (aka, ordering Call of Duty keys directly from Activision), and passes those savings on to you, is that wrong?

Don't get me wrong, I'm not irresponsible enough to believe that every shady business dealer is actually an honest, hard-working citizen with the best intentions of delivering fantastic values to fans of our beloved hobby: I don't have that kind of faith in humanity anymore. But to think that 100% of these people don't spend a single solitary dime on the cd key vouchers is just as irresponsible.

For instance, remember our world-shattering, 'oh my God we're actually famous' breaking story about the Oblivion steelbook re-release? I got that information from the distribution warehouse printing the discs. I fully asked permission to break the story, and was granted it, straight from the distributors and publishers themselves. I asked. What's to say that these same publishers don't make cd keys with no intention of putting them in physical, retail copies of games? It happens all the time. Like, all the time.

Now, I think you see what I'm getting at. Sure, the example of someone buying codes in wholesale bulk from the publisher, and selling them with a higher margin is anecdotal at best, and pure conjecture at worst, but at the end of the day, it's capitalism in its truest form. It's the way of the world nowadays, ladies and gentlemen.

For the final question, and the final answer, I think stating the obvious is the only way to go:

Q: What if Steam (or any other service) pulls your copy of the game after finding out you purchased them from a dealer? Isn't that against our rights as a consumer?

A: Steam (and others) have complete control on how you interact with, purchase, and consume their offerings. At any point, for any reason, they can strip you of your license, and under extreme circumstances, ban your account completely.

You have the right to purchase goods and content wherever you see fit. However, at the end of the day, it's up to the service itself to honor the terms of your agreement. It's the 'no shirt, no shoes, no service' policy. If you don't have shoes on, does your money immediately become worthless? Not at all, but Walgreens doesn't want your stinky-ass feet driving away business.

These rules are all covered in the nice little pre-install document that comes with any software install. We all know it, we all contend with it, and imagine that, it's the topic of the next installment of Red Light: The End User License Agreement (EULA). Is it actually a legal document? Does it hold up in court? Can a user modify the intent of a EULA to their advantage? All of this and more, next time, when we visit the gaming industry's darker side, on Red Light.