
Another view of game piracy - jeff18
http://blog.wolfire.com/2010/05/Another-view-of-game-piracy
======
sambeau
I have to take issue with two points:

"relatively few gamers are pirates" : sadly, I don't believe that. I work in
the games industry and I am surrounded by people who pirate. They also buy a
lot of expensive games too, but they continue to pirate games and movies.

"Blizzard is one of the most successful game developers because create games
that are designed from the beginning to work well with the mouse and keyboard"
: Blizzard are successful because they created the first main-stream, polished
MMO. MMOs are the future of games exactly because the server component cannot
be pirated.

~~~
tsally
_Blizzard are successful because they created the first main-stream, polished
MMO._

Blizzard was already _incredibly_ successful before World of Warcraft. The
foundation of World of Warcraft is the brand Blizzard started to build in
1996.

 _MMOs are the future of games exactly because the server component cannot be
pirated._

I'm not sure what you mean by this. There are tons of private World of
Warcraft servers. And you can be sure the same will happen for Starcraft 2.
It's the social aspect of the server, not the server itself, that can't be
pirated.

~~~
ido

        the brand Blizzard started to build in 1996.
    

The first Warcraft game (Warcraft: Orcs & Humans) was released in 1994.

------
mrcharles
"The common industry assumption is that developers are losing 90% of their
revenue. That is, pirates would have bought every single game that they
downloaded."

As a long time game industry veteran, allow me to tell you that this is simply
not true. In fact, that is actually the internet's straw man counter argument,
which is fueled by a couple poor PR incidents where a few people have made it
seem that way.

But the reality is that there are a lot of lost sales, and if you can prevent
someone from pirating it, there is a nonzero chance that they will go out and
buy it instead of waiting.

What is that number? Who knows! But it's certainly greater than zero, and
there's certainly enough impact of piracy to make it worth it to explore
methods of minimizing that impact.

I have other issues with the article, such as the assertion that most pirates
can't afford the games. Well, my counter anecdote is that I have a bunch of
friends who pirate, who make plenty of money and could easily afford the
games. They pirate them because they can.

I would expect that everyone knows pirates, and I would expect that everyone
knows pirates who make enough money to pay for (most of) the games they play.

(These are my own personal opinions and not necessarily those of my employer)

~~~
scotty79
> What is that number? Who knows!

From article:

When Reflexive games performed a series of experiments with anti-piracy
measures, they found that they only made one extra sale for every 1000 pirated
copies they blocked

Besides if you successfully lock away pirates you loose all the good publicity
that they give you on forums (provided that your game is any good of course).

~~~
mrcharles
And you also lose the bad publicity they give you on forums. See Titan Quest,
which was maligned on forums (and even some reviews) due to crashing problems
which were entirely related to the pirated version, and weren't seen at all on
the release version.

~~~
memetichazard
From what I recall, that was due to the DRM used, in an attempt to reduce the
quality for pirates. In hindsight, a bad idea on the part of developers.

------
pilif
while the 10% number of lost sales might be correct, there's one more thing
you should factor into the calculation: The cost you need to pay for these 90%
illegitimate users.

There's support cost (some pirates are for sure dumb enough to call/email
support even though they didn't pay), then there's the cost of infrastructure.
Depending on the type of your game this can just be hosting a high score list
or much more on the server side.

So depending on your game, a pirate isn't just lost revenue but it will
actually cost you some amount of money - in some cases a significant one.

In reverse, that means that honest players are in a way paying for the pirates
as the developer of the game has to ask honest players for enough money to run
the infrastructure for everyone - including the pirates.

~~~
heyitsnick
_So depending on your game, a pirate isn't just lost revenue but it will
actually cost you some amount of money - in some cases a significant one._

But in most cases an insignificant one. I expect a very small number of
pirates are dumb enough to contact or email support. And I expect most
pirating is distributed over bit torrent, and are hacked so that they are
pirated so that they don't ever report back home (that's half the job, right)

It would be interesting if wolfire too a look at this aspect but i doubt the
result is significant.

------
robryan
I don't really like though how we justify piracy by saying people wouldn't
have brought it anyway. Isn't that how our economy works? You either have the
money for something and you buy it or you don't have to money so you don't get
it.

If someone exchanges 3 hours of pay for a game how is it fair for them that
the guy sitting at home doing nothing gets it for nothing and it goes down to
he wouldn't have been able to afford it anyway.

~~~
derefr
Why does it matter if it's "fair?" Our economy is based on _value_
propositions—that's why we can charge 100x the price for a box labelled
"enterprise edition" that contains a stream of bits no different than the one
labelled "home edition." The enterprise values the software 100x as much, so
we make one exchange of value with them, and then make another value exchange
with (presumably a larger number of) home users for a smaller price. For some
people, the value proposition you exchange with them simply is "zero dollars
per license."

Also,

> Isn't that how our economy works? You either have the money for something
> and you buy it or you don't have to money so you don't get it.

No, that's how a _scarcity economy_ works; the people who don't pay don't get
an X so there are Xs left over for the people who _do_ want them. An
information economy works completely differently: the best possible "solution"
to distributing an information product is to have everyone in the world owning
it at the maximum price they're willing to pay, on a value gradient all the
way from $billions to $0.

~~~
rick888
"Why does it matter if it's "fair?" Our economy is based on value
propositions—that's why we can charge 100x the price for a box labelled
"enterprise edition" that contains a stream of bits no different than the one
labelled "home edition."

Using this comparison, one piece of fine art is no different in value than the
other because the value of the paint used to create each is the same.

"that's how a scarcity economy works; "

I keep hearing this argument and it's just wrong. Just like art, the scarcity
isn't in the bits that you can copy. It's in the talent, time, and energy used
to arrange those bits on a higher level.

When anyone can create (not copy) Photoshop CS5 in a few hours on their
computer, you might have a point.

"An information economy works completely differently"

I like how software, music, and movies are called "information" only to make
the argument that it should be free.

"the best possible "solution" to distributing an information product is to
have everyone in the world owning it at the maximum price they're willing to
pay, on a value gradient all the way from $billions to $0."

If you want to make a living, this doesn't work. If people are given the
choice of paying $100 or $0, most will pay $0. This is why business doesn't
work on the basis of donations.

~~~
Gormo
But talent, time, and energy aren't the products being sold. Those are capital
expenditures, and are already sunk costs by the time there is any product to
sell.

The product itself _is_ the set of copyable bits, and this _is_ scarcity-free,
due to having zero marginal cost of production.

In a non-scarce market, people pirating your game is economically equivalent
to e.g. people reading books instead, or spending their time writing their own
games. Pirates are just another category of people who aren't your customer.

The best possible solution to piracy is to _ignore_ it, and focus on
identifying your actual paying customers and developing products for them.

But if you absolutely must think of piracy as lost sales, then use piracy
volume as an input into your demand curve and adjust your pricing model
accordingly.

But don't waste your talent, time, and energy trying to fight a Quixotic
battle against a macro-level phenomenon that you have no actual control over.

~~~
rick888
"The product itself _is_ the set of copyable bits, and this _is_ scarcity-
free, due to having zero marginal cost of production."

It doesn't have a $0 cost of production. Did it cost Microsoft $0 to develop
windows?

"The best possible solution to piracy is to _ignore_ it, and focus on
identifying your actual paying customers and developing products for them."

I disagree. While it is good to focus on paying customers, if an industry
ignores it, they will quickly put themselves out of a job.

"But don't waste your talent, time, and energy trying to fight a Quixotic
battle against a macro-level phenomenon that you have no actual control over."

It's the people that want free stuff that are trying to tell me I have no
control over it. I know for sure that adding copy protection for software
increases sales.

The other issue is with search engines like Google. If the pirates get organic
keywords that are higher than a legitimate source and offer the same thing for
free, many users will go to the illegitimate source and never purchase.

It's okay though. With the Internet getting faster and cheaper, I see most
software apps going to a service eventually.

~~~
derefr
> It doesn't have a $0 cost of production.

You skipped over the word "marginal," which was the most important word in
that sentence. <http://en.wikipedia.org/wiki/Marginal_cost>

~~~
rick888
"You skipped over the word "marginal,"

Most pieces of software cost millions to develop, so I don't think it even
applies.

~~~
Gormo
The cost of development is a capital investment, not a production cost. You
may or may not recover that investment, depending upon a whole host of
variables, most of which you will have no direct control over, presuming you
even recognize their existence.

Software does have zero marginal cost of production, so someone making an
illegal copy of your software does not create any actual cost for you in the
way that someone stealing your physical inventory would. So the impact of an
individual using a pirated copy of your software is the same as that
individual not buying your software for any other reason. The macro-level
impact of piracy is the same as the impact of any other macro-level factor
that discourages people from buying your product, e.g. a competitor offering
an equivalent or better product at a lower price point.

I'm not saying that you shouldn't assert your copyright in the face of brazen
piracy. But the best way to earn your ROI for developing the product is to
maximize the value that it creates, and thereby maximize the number of people
who will willingly pay for your product. Focusing on pirates, who are
manifestly unwilling to pay you, is a dead-end. Spending money on DRM is a
waste of capital that could be used to improve the product and attract more
paying customers.

------
sdgdthfd
Good luck getting Joe Public to get their heads around this - have you seen
how they handle anything even remotely like Bayesian maths?

------
MichaelGG
So how much effort is wasted on anti-piracy, and how many lost sales are there
because of DRM?

As TechDirt says about music, obscurity, not piracy, is the problem for many
artists. As someone that enjoys playing games, I find this often to be the
case when trying to find good games.

------
sdfx
_The average pirate downloads a lot more games than the average customer buys.
This means that even though games see that 80% of their copies are pirated,
only 10% of their potential customers are pirates, which means they are losing
at most 10% of their sales._

This is simply not true: Sales are not distributed evenly amongst customers.
It could very well be that people who are pirating would usually buy a lot
more apps than the usual customer. Sure, if you don't have to pay for stuff
you consume more, but they are probably more likely to spend more than average
in the first place.

~~~
DanielStraight
If we accept the profile of pirates as typically low-income, then it seems
extremely unlikely that pirates would likely spend more than average.

