Another View Of Video Game Piracy

Maybe we're thinking about video game piracy wrong? David Rosen, whose Wolfire Games is presenting a copy-protection-free/you-name-the-price Humble Indie Bundle of stellar computer games this week, makes his case. The problem, he argues, is wildly misunderstood.

We've been hearing a lot about game piracy recently, with big developers inflicting draconian online-only DRM systems on their users, and blaming their declining PC game sales entirely on piracy. I'm not questioning that piracy is common, since even honest, DRM-free, indie developers like 2DBoy[1] report a 90 per ent piracy rate. I am, however, questioning what this means. How much revenue are developers actually losing to piracy?

The common industry assumption is that developers are losing 90 per cent of their revenue. That is, pirates would have bought every single game that they downloaded. From personal experience, I know this is not possible - most pirates that I've met have downloaded enough software to exceed their entire lifetime income, were they to have paid for it all. A more plausible (but still overly optimistic) guess is that if piracy was stopped the average pirate would behave like an average consumer.

This means that to calculate the worst-case scenario of how much money is lost to piracy, we just need to figure out what percentage of the target market consists of pirates. For example, if 50 per cent of the market is pirates, that means that it's possible that you've lost 50 per cent of your revenue to piracy. So how do we calculate what percentage of the market consists of pirates? Do we just go with 90 per cent?

iPhone piracy

iPhone game developers have also found that around 80 per cent of their users are running pirated copies of their game (using jailbroken phones) [2] This immediately struck me as odd - I suspected that most iPhone users had never even heard of 'jailbreaking'. I did a bit more research and found that my intuition was correct - only 5 per cent of iPhones in the US are jailbroken. [3] Worldwide, the jailbreak statistics are highest in poor countries - but, unsurprisingly, iPhones are also much less common there. The highest estimate I've seen is that 10 per cent of worldwide iPhones are jailbroken. Given that there are so few jailbroken phones, how can we explain that 80 per cent of game copies are pirated?

The answer is simple - the average pirate downloads a lot more games than the average customer buys. This means that even though games see that 80 per cent of their copies are pirated, only 10 per cent of their potential customers are pirates, which means they are losing at most 10 per cent of their sales. If you'd like to see an example with maths, read the following paragraph. If word problems make your eyes glaze over, then I advise you to skip it.

Let's consider the following scenario. Because game pirates can get apps for free, they download a couple new games every day - or about 500 games in a year. On the other hand, normal gamers tend to play the same game for a longer time - buying an average of five games per year. If this seems low to you, then consider that you are also reading a post on an indie game developer blog. You are probably more hardcore than the average gamer. Anyway, given these statistics, if the market consists of 10 million gamers, then there are 500 million pirated game copies, and 90 million purchased game copies, From the perspective of every individual game, 80 per cent of its users are using pirated copies. However, only 10 per cent of the market consists of pirates.

PC game piracy

Does this also apply to PC (Windows/Mac/Linux) gamers? Many PC game developers find that about 90 per cent of their users are running pirated copies - does this mean that piracy is killing PC games? Let's try our alternative explanation and see if these statistics are possible even if only 20 per cent of worldwide PC gamers are pirates. The average PC gamer worldwide only buys about three games a year, and plays them for a long time [4] . I buy many more than that, and you probably do too, but again, we are not average gamers! On the other hand, game pirates might download a new game every few days, for a total of about 125 games a year. Given these numbers, games would see 90 per cent piracy rates even though only 20 per cent of gamers are pirates.

Are these numbers accurate? The NPD recently conducted an anonymous survey showing that only 4 per cent of PC gamers in the US admit to pirating games [5] , a number that is comparable to XBox 360 piracy statistics [6] . However, since piracy is inversely proportionate to per-capita GDP, we can expect piracy rates to increase dramatically in places like Russia, China and India, driving up the world-wide average. Let's say to 20 per cent.

This means that if all pirates would otherwise buy as many games as the average consumer, then game developers would be losing 20 per cent of their revenue to piracy.

But would pirates really buy games? Anecdotally and from studies by companies like the BSA, it's clear that pirates for the most part have very little income. They are unemployed students, or live in countries with very low per-capita GDP, where the price of a $US60 game is more like $US1000 (in terms of purchasing power parity and income percentage). 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 [7] . This implies that their 90 per cent piracy statistic caused them to lose less than 1 per cent of their sales.

Why are PC games really losing sales?

While many game developers blame piracy for their decreasing PC game sales, it is clear that this is not the problem - relatively few gamers are pirates, and those that are would mostly not be able to afford games anyway.

However, it's easier for these developers to point their fingers at pirates than to face the real problem: that their games are not fun on PC. The games in question are usually designed for consoles, with the desktop port as an afterthought. This means they are not fun to play with a mouse and keyboard, and don't work well on PC hardware. Their field of view is designed to be viewed from a distant couch instead of a nearby monitor, and their gameplay is simplified to compensate for this tunnel vision.

Blizzard is one of the most successful game developers in the world, and it develops exclusively for desktop computers. Why do they succeed where everyone else fails? They create games that are designed from the beginning to work well with the mouse and keyboard, and with all kinds of desktop hardware. If developers spent more time improving their PC gaming experience, and less time complaining about piracy, we might see more successful PC games.

With the Humble Indie Bundle promotion we've seen that when we treat gamers as real people instead of criminals, they seem to respond in kind. Anyone can get all five DRM-free games for a single penny, and pirate them as much as they want - we have no way to find out or stop it. However, in just the first two days, we have over 40,000 contributions with an average of $US8 each! Would we have seen this much support if the games were console ports that only worked when connected to a secure online DRM server? We'll never know for sure, but somehow I doubt it.

David Rosen is the founder and lead programmer of Wolfire Games.


Comments

    Thank you for this information that I'm sure a great many gamers knew in some form or another but couldn't put into words nearly as well and with as much backing information as you have.

    I personally have pirated PC games before, I can freely admit that. What percentage of those games would I have bought if I couldn't pirate them? I'd say less than 10%. Most I would have hired on a console for a few days and then taken it back.

    A pirated copy of a game does not immediately equal a loss of a sale.

      I agree. David Rosen has just earned himself much respect in my books. I've been saying much the same thing for some time, though not as well and my audience usually only consists of people who already know it anyway.

      I would acutely go one step further, I believe there is another important factor when game companies are looking at how many sales they lose through piracy, advertising.

      As Jason pointed out, if a game is pirated 200000 times it doesn't directly cost the publishers a cent, yet now there is a minimum of 200000 people out there who are aware of their product, they have just gotten themselves a truck load of brand recognition.

      Some of those people may find they like the product enough to buy it when prior to playing the full version they didn't think it was worth the money. Others will have people watching them play, they will talk about it with friends generating yet more interest in their product.
      Word of mouth is still an extremely effective means of advertisement, possibly the most effective. That's why companies shell out ridiculous amounts of cash to have celebrity endorsements, to give people the feeling that someone they have some sort of relationship is saying, "Hey, buy this shit, it is good!" It's the next best thing for them next to having you're best friend tell you the same thing. If you have a product worth buying this effect should generate at least as many sales lost through piracy, perhaps many more. (This could also be why Ubisof is so scared of piracy as worth of moth can cut both ways if your product is sub-par, though people do say there is no such thing as bad publicity).

      I'll use Stargate as an example, we all know that video piracy is at least as bad in the video game industry. I hadn't watched Stargate since i was a kid, then one day i was at a friends place who was watching episodes he'd downloaded, that got me interested in it again. I now own all 10 seasons of SG1 and have started on Atlantis, plus most of the movies.
      I would estimate that if i hadn't been exposed to so much media through piracy both my dvd and game collections would be at least 20% smaller. Perhaps i should have done that same for this post, wonder if anyone will read the whole thing.

      I've pirated a truck load of games, but any that I really love I go out and buy. On the other hand I've bought a truck load of games, and many have turned out to be rubbish. So it probably balances out - I take from them, they take form me etc etc

    If a warehouse had 1000 boxes of goods stored away and someone comes along and steals 20, you are left with 980 boxes. They are stealing physical items which mean loss of sales to the company as they can only sell 980, plus a loss from manufacutring something that isn't sold etc. If a video game is pirated, it's just a copy. The developer has not lost any physical medium, so they don't suffer any loss in that respect, they can still have the same potential sales. More than likely the pirate would have had no intention of purchasing the game anyway, so the dev has not lost a sale there.

    So you have a situation where developers have lost absolutly nothing and yet they spend millions trying to prevent it. It's rediculous.

    On another note, how does game rental come into all of this? Blockbuster purchases a few copies of a game, then they get rented out thousands of times by people who are not going to buy it...isn't that a loss of sale? maybe even on a larger scale than piracy...why don't they try and put an end to video game rental with as much enthusiasim as piracy?

      Yes, I've been wondering that as well. I think the developers see that as a potential income source. i.e. They may assume that the person renting is considering purchasing a copy of the game. So, even if they don't buy a copy, they probably had no intention in the first place.

      I personally have done exactly the same thing with pirated games. World of Goo is a perfect example. I finished a pirated copy, but have since purchased another, legitimate copy. You could say that I have just 'rented' the illegal copy.

      It is definitely a grey area, and I don't think that there will be one definitive answer any time soon. And I definitely don't think the poorly implemented DRM that is currently around is the answer.

    Renting games is a necessity as a LOT of games are really really bad and just not fun enough for what retail stores ask for.

    Also, there's different pricing for each country. Australia's retail stores have prices set way too high when compared to those in America. A $60US game is charged $100-110AU typically even when the $1 AUD trades for $0.90USD recently. (I know there is shipping and other costs but that much of a price difference is rediculous.)

    I bought MW2, Bioshock 2 and L4D2 for less than $50AU each. And those are the only games I've purchased in the last few months. The upcoming Halo Reach Legendary is $199... jeez.

    There are lots of kids who cant afford the insane prices, I know I couldn't when I was one. I wanted a Saturn, Dreamcast, Psone and so. I had to wait til I was 18 and actually earning something.

    The other problem is retailers selling second hand games higher than retail games. I went to EBgames and wanted to price match another store's catalog. They only had a second hand copy and refused to price match it. I thought that's stupid, why would a second hand game cost more than a brand new game? But from reading articles on Kotaku I realised that second hand copies are basically their income. what a stupid way to do business.

      Only once was I seriously confused for this when I went in:
      Ebgames:
      ArmoredCore2:Another Age $49, last retailed at $30
      ArmoredCore Nexus $15, Last retailed at $50

      If its rare and in demand they charge more :/, its decided centrally and doesn't always make sense, probably uses a model. On the flip side you can tell how good a game really is by how many preowned copies they have.

      I went to trade in Goldern Eye Wii limited edition:
      For the full set; $6 trade value
      For just the game: $11 trade value

    I think that the hiring/renting of video games is just as bad for the developer as piracy is, but hiring/renting seems to happen on a much larger scale with almost no effort to stop it. I think companies that hire games should pay royalties to developers for however many times their game's get rented.

      thats stupid. royalties for all rentals should go to the developers? worldwide? so if someone rents a movie, should royalties be paid for that too?

        I see your point but that isn't the same thing. Rentals for games and real game come out at the same time, therefore people are renting the game and completing it instead of buying it. Whereas with movies they are released in the cinema for some time before they get put onto dvds. Therefore if you want to see it you have to go to the cinema or wait several months. Then when it does get released for rental it is no longer in the cinema so that's the only way to see it.

        I bet that the video hire companies have very different agreements with the film companies as they do with the game companies. If a game took a few months before it went to rental, perhaps things would be better. Otherwise I do think developers are losing money through people renting a game and just powering through it.

    The critical point is that DRM costs them more sales than piracy. Few potential customers, people who would want the game enough to hand over their hard-earned, are tempted by piracy. However, restrictive DRM like Ubisoft's actively punishes customers for buying their game, and makes what is supposed to be a leisure experience stressful and unpleasant. And who's going to pay good money for that? (Other than cinema-goers, obviously.)

    I bought the bundle for $2.

    It's a shame really. I was on 4chan and there was a thread about the Humble, links were dumped for the games within the first few posts.

      You were on 4chan... what did you expect?

    OK, there is another thing about piracy of old games, like the super Nintendo and Nintendo 64. I have over 700 of these types of games, and I don't really have much problem with it, I mean the games are quite old, I mean you don't see Super Mario all-stars in stores anymore do you? I use an emulator to play these games on the PC, they work very well, so I don't have much problem with it at all. But,I do have a bit of a problem with pirating new games. If I have the game already then its fine, since I'm just basically playing that same game on the PC. But if I don't have the game, then I won't pirate it.

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