The Ethics of Video Game Scalping

Chances are that someone reading this was interested in the PlayStation 5 and Xbox Series X. There are even slimmer chances that everyone managed to get their hands on when they came out. From personal experience, I only managed to snag one from Walmart because the PS5 was still in my cart from a previous attempts to order it and I punched through the pages within ten seconds…

Long story short, it’s hard to get these consoles. Understandably, COVID-19 disrupted Sony’s and Microsoft’s supply chains enough to restrain stock (compounded by the fact both companies are producing two distinct SKUs) and amplified an unprecedented demand as millions more took up an interest in video games. The launches of the PS4 and Nintendo Switch faced similar changes in better conditions, so this comes as no surprise.

However there is another factor to consider: scalping. When you scrounge around on marketplace sites like eBay and Facebook Marketplace, listings for the brand-new consoles will retail for hundreds, occasionally thousands of dollars above retail prices. At one point there were listings on websites for pre-orders of the console for those vying to guarantee one on launch day.

In some cases, however, some entities managed to get their hands on multiple copies with the aid of automated bots with algorithms to swipe up consoles faster than most people. This issue was exasperated when retailers announced a specific timeframe because it gives scalpers preparation time to set up their bots to be active at the exact moment pages refresh with stock. There are no concrete numbers, but it was estimated in mid-December that scalpers generated over twenty-eight million dollars in profit from selling PS5 and Xbox consoles on eBay alone, amounting to tens of thousands of consoles.

Some efforts were taken to address this. Unfortunately it often emerged in the form of expensive bundles, with GameStop selling PS5 consoles with additional controllers, subscriptions, and games that push the spending thresholds for consumers while accounting for return loopholes. It appears effective in turning away scalpers due to the slimmer profit margin and controlling site traffic to ensure a smooth checkout process, but it further restricts availability during a time of higher unemployment and financial uncertainty.

Without a doubt, scalping arises intense emotions from passionate people who pinpoint the blame on its perpetrators for not getting a console. It should be acknowledged that COVID-19’s impact is significant enough that not everyone who wanted a next-generation console would obtain one. It might also be suggested that those who are most passionate about PS5 and Xbox are the ones willing to sign up for queues and stay glued to stock trackers, and they should rightfully get the consoles.

Much of this holds true, but rampant scalping still poses unfair circumstances that put the average consumer at a major disadvantage. For one, bot protection and site infrastructure is not consistent across retailers. Numerous people reported consoles selling out in seconds, and others note running into glitches that prevented their payment methods from processing. Ordering items online typically requires one to input something manually (i.e. credit card CVV or account login), whereas bots come equipped with scripts to fill in the gaps automatically.

Outside of consumers missing out on getting their consoles in time for the holidays, there’s implications for the video game companies themselves. Supply shortages will continue well into 2021 as Sony and Microsoft compete with other manufacturers for essential components. The new technological advancements in the PS5 and Xbox Series X/S from their last-generation counterparts warrant more complicated logistics on their production pipelines. Profit margins are thin on the PS5 side with an estimated $450 production cost. With thousands of consoles in the hand of scalpers, software sales will suffer since less consoles are in use. This is by no means a death sentence for PS5 and Xbox Series X/S; both will achieve considerable success in the long-term. But the side effects of scalping will reveal themselves in the short-term with unsatisfied consumers and even more unsatisfied supply.

Legislation might restrict scalping activity in the near future. The UK parliament motioned a proposal to deem the resale of consoles purchased with automated bots for prices about their suggested retail ones illegal. This follows the call from the country’s politicians for loot box regulation last year, indicating a precedent for introducing regulation to the gaming industry. It remains to be seen whether or not scalping activity will witness similar scrutiny outside of the UK.

Regardless, scalpers will continue to exist in the video game space for years to come. Without the use of bots, lucky individuals can purchase multiple consoles to sell for extra cash. Their impact is minimal compared to the excess scalping that occurs when using automated software to gain an unfair advantage. Given this debacle, retailers should continue to find new solutions to implement bot protection in the interest of consumers. In the meantime, those vying patiently for a PS5 and Xbox Series X/S shall hopefully secure one before the year’s end.

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