The Case for Piracy

Ha-ha, just kidding. I’m not going to be arguing for piracy, but I do want to make one observation about how our industry is dealing with this issue. Some commentators have been talking recently about the massive piracy afflicting the launch of Demigod. According to Stardock’s Brad Wardell, of the 140,000 connections to the main server during the game’s first week, only 18,000 were by legitimate customers. This ratio compares favorably (or is that unfavorably?) with the 90% piracy rate reported by the developers of World of Goo. I don’t want to comment on the viability of various DRM schemes, but – needless to say – unless a game is server-based (WoW, EVE, EverQuest), piracy is a bracing reality for game developers. However, I have an unscientific theory about the root of the problem:

For any given game, only around 10% of players are ever willing to purchase an original retail product.

Obviously, this proposition holds up for PC gaming, but I believe the same is true for console gaming (housemates sharing a copy, renting from Blockbuster over a weekend, friends loaning each other games, grabbing a cheap used copy from Gamestop) and even board games (one gamer buying a copy for a group of friends). This reality is immutable – if DRM was perfect, the percentage would go up somewhat, but it would never come anywhere near 100%. Too many games exist for consumers to afford even a small percentage of them, and – more importantly – players’ individual interests in a specific game are always on a continuum. People on one extreme found a website about their favorite game while gamers on the other end might play it only once on a random Tuesday night at a friend’s house.

The interesting thing about this percentage is that it mirrors another important percentage – the number of players willing to pay money on so-called free-to-play game usually hovers near 5-10%. (RuneScape, a F2P example on the higher-end, has reported figures around 12%.) The important thing about the free-to-play movement is that the business model turns the theory I posited above into a founding principle. In fact, the smartest F2P games use a dual-currency system so that the 5-10% cash-rich players can subsidize the time-rich ones. Ultimately, this model works because a place exists for everyone on the continuum, from gamers who just want to dip a toe to ones willing to drop thousands on microtransactions. Launching a traditional retail game and hoping to change your “piracy conversion” rate is fighting the current; launching a free-to-play game built from the start with multiple levels of player commitment is sailing with the current.

10 thoughts on “The Case for Piracy

  1. That’s a great point and I think it’ further generalizable to not just games but movies, books, music, etc. The realization that this is how it works is going to be the key to the next generation economic model for creative types across all media.

  2. I notice in almost all discussions of piracy, the role of the pirate in driving and increasing sales is ignored. It is certainly a significant force. Those who pirate are the only ones able to try out large numbers of games and provide honest, personal recommendations to their circle of friends. While they may not purchase the game, if they drive 5 other purchases, it makes little sense to ignore their contribution. The fact that consoles with no piracy languish and fail supports this. The Xbox 360 has a robust piracy scene, and trounces the Playstation 3 which has effectively no piracy. If you eliminate piracy, actual experience shows, you eliminate sales. You doom your platform. It would be nice if there were some clean way to test the market absolutely, to determine if the increased sales due to piracy and that word of mouth offset the very tiny amount of pirates who actually just play the game and never tell anyone about it. The majority of pirates are, of course, never going to play the game, or else only going to play it for 5 or 10 minutes. The nature of being a collector cannot be ignored. When people hold up a number of downloads as equivalent to lost sales, they display their idiocy for all to see. Most of those downloads go into a collection and never get unarchived, let alone played.

    Microsoft should have some very, very terribly useful data. The way in which they fought the piracy game on the 360 was very interesting to watch (even if the mainstream gaming press refuses to cover such things out of prissiness, the news is out there) and it’s almost certain that they know exactly how many people were playing pirated games on Live and exactly when they played them, how long they played, if they ever bought the legitimate copy after playing, etc. I doubt they will ever be able to release the information (I can imagine many lawsuits from third party partners angry that Microsoft knew pirates were illegally playing their games for weeks or months and let it continue for so long) but it would be very interesting to see.

    How many copies would World of Goo have sold if it remained a no-name indie that instead of being played by a huge population, 10% of which purchased it, it was played by a community 90% smaller? I think you may be right. Maybe 10% of that 10% would have bought it. If the argument is what brings in the money, and not what is moral, you can’t discount the many benefits of having your game played by a huge audience.

  3. I agree with the observation – even after the Demigod experience Brad is still (last I heard) well entrenched in the anti-DRM camp, and my own company remains the same. We even encounter the ‘oddities’ of pirates later purchasing the full version, and of course pirates of a first release purchasing the second. (We had to foot a pile of support requests because a legal install on top of a pirated one didn’t work properly on Vista, and of course that was a situation we didn’t really put through QA)

    So now that the guys in the trenches know how this works, we just need to convince the highly-paid suits in the big offices to ease up on DRM.

    PS – And lets hope that book and board game publishers don’t start coming after us when we share with our friends!

  4. ok so through my years of gaming I’ve been trained to solve evermore intricate problems and encouraged to constantly think of games in a more realistic fashion. Is it any wonder that the meer acquistion of the games themselves has become an integral part of the bigger “GAME”. Just saying

  5. Actually, modern DRM schemes are keeping me from purchasing games. But I’m a bit of an anomaly in the spectrum of gamers. I’m a old curmudgeon boardgamer.

    So piracy continues essentially unfazed and enhanced DRM schemes are keeping away otherwise interested gamers.

  6. The question the industry needs to ask itself is;
    “How many of the 90% pirate players would actually purchase the game if they couldn’t pirate it?”

    It’s not all of them, I can tell you that. It’s probably not even the majority in most cases.

    As George Geczy is saying: “We even encounter the ‘oddities’ of pirates later purchasing the full version, and of course pirates of a first release purchasing the second.”

    This is the case with me and StarCraft. When I was a teenager I got the pirated version of the game from a friend. We played it in school, I played it at home. Later I purchased it and all the expansions, and when StarCraft 2 comes out I will purchase it. Probably all 3 parts of it.

    Most piracy is probably a case of the consumer not being able to buy every game he wants to play. It’s not financially viable for most really. This doesn’t really hurt the industry at all. Since a stolen digital item doesn’t remove a copy from the shelves.

    This month I’ve bought two games. Plants vs Zombies for 10 euro, and Defense Grid: the Awakening for 4.75 euro.
    EVE Online I pay for with ingame currency, a system where you buy so called PLEX’s sold by players who purchased them for $$.

    Though, now when I’m finally not unemployed anymore I will have a bigger budget for games, plus a new computer so I can play all the new shiney ones. So expect a bigger spending on games from this fella. 😛

  7. Amazing that there are so many free-loaders in the gaming population. Soren’s analysis seems both logical and intuitive—a majority of people would rather get a free ride. So the intelligent adaption is to capitalize on this?Restructure license payment and distribution so the benefit of pirating is trivial—i.e. the base game is free and social, and players make micro-transactions to get more out of the game? I.e. All games should have a server subscription/MMO-base to get the pirated income back?

    Sounds like the last minute change to EA’s Battleforge was, no?

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