158: Piracy and the Underground Economy

[wadark]

No one is saying it's legal. But what we're saying is that it doesn't make a difference. In these poor southeast asian countries, people cannot afford legitimate games, end of story. So what difference does it make if you stamp out piracy. You won't see your sales or profit jump much if at all. They would likely see more of a profit if they followed the idea here.

But then again, how do you keep those cheap games out of the hands of those who can afford them. Simply because people in a country make less money than in the U.S. doesn't change the exchange rate. 200 pesos = $5 there = $5 here. It is a delicate balancing act, and there are many subtleties to the problem. At least there are if developers/publishers want to see a profit.

Personally speaking, I won't cut costs on a game with cheap packaging. If I go into a gamestop and see that they have a used copy of a game that I want, but don't have the original case, I won't buy it. I happily pay a few bucks more for the "advertising." To me, it just looks better sitting on my shelf if I'm looking at cover art rather than some generic image. So you can count on me to not import these cheap copies. However, I can't speak for everyone else.

Its a slippery slope, my friends.

P.S. I think its funny to find that developers will complain about piracy but refuse to do anything about it. They just complain to a government which, like tendo82 said, has just about as much means as its population when it comes to stopping piracy.

 

[usernamed]

I posted on this very subject on the Sean Sands 'Sink the Pirates' article that Flionk has helpfully linked in his post. I buy my games legitimately, but feel that you've hit the nail on the head when you speak of the media companies having no concept of what a realistic price is on a 'per market' basis.

Unfortunately because piracy is rife, a realistic price means starting out at an almost identical price point to the pirated copies, and raising prices gradually once the pirates have turned their attention to more lucrative targets.

That doesn't solve the problem in established markets (UK/US etc.) although I believe affordability and availability are still the key issues. What may work is a few STEAM like games portals set up with a monthly subscription that gives you access to content (like satellite/cable TV)

Then the parent can decide what games are in the correct age range for their children and pay for that level of content.

That kills both the unaffordability issue and the 'I want it now but my parents won't take me to the game shop, so I'll download it' issue. Assuming you can get the parents to buy in of course...


I do have other points, but I'm already repeating my post on the other article.

 

[Diggit_6]

What game devs like CryTek who are whining about piracy need to realize, is that even in America, piracy is not hurting them. The majority of people who pirate these games would never buy them in the first place (if they even had the money). And it's not like they're actually stealing a game that could be sold. It's simply a copy that could be copied an infinite number of times. And the fact of the matter is, many people will pirate a game, test it, and then go out and buy the real thing. I tell you, once I'm able to get a job, I will definitely buy copies of all the games I've pirated. It doesn't hurt them as much as they'd like you to believe.

 

[Odius]

That's a very nice spin on the subject of piracy but when you boil it down it's still piracy. It's illegal and what they are doing is wrong regardless of why they are doing it.

And Diggit_6 just because they're not stealing an actual copy doesn't mean that they're not losing sales. Someone who has a pirated copy isn't going to spend money on an actual copy. I think you're kidding yourself if you think that after playing all your pirated copies you're going to go spend hundreds of dollars(or whatever your currency is) on replacing them with legit copies.

Perhaps gamers in developing nations should spend some time getting an education and bettering themselves instead of playing video games. All the time wasted playing video games you could have probably learned something useful in the meantime and picked themselves up out of poverty.

 

[DeathByMouse]

What I do not understand in this whole piracy debate is: if people in these areas of the world can not afford the games they are pirating, how can they afford the game consoles/computers they are buying to play the games on at only $300 a month in income? An Xbox 360 alone would be worth well over a month of income at that level, and a PC could equal several months of income depending on the specs.

 

[unangbangkay]

Perhaps gamers in developing nations should spend some time getting an education and bettering themselves instead of playing video games. All the time wasted playing video games you could have probably learned something useful in the meantime and picked themselves up out of poverty.

Way to miss the point AND make yourself look like an ass. The idea is that publishers won't suddenly regain the supposed losses they suffer by closing down pirates, because most of the folks who buy pirated in poorer countries would not have bought AT ALL. The markets they claim have been stolen by pirates were never open to them in the first place, because without the pirates the sales would never have happened anyway.

An Xbox 360 alone would be worth well over a month of income at that level, and a PC could equal several months of income depending on the specs.

Hardware is a one-time purchase, even for a PC with the right timing. A birthday gift, a single splurge, etc. We're not talking about shantytowns with HDTVs here, people understand their priorities when it comes to survival.

 

[NorCalSix]

Theft is theft. Have you ever done crunch for months at a time on a multi-million dollar console title? Do you even know how much they cost these days?

All my effort as a game developer put into a game.

The you say people are entitled to steal it.

Bullsh*t.

If you can't afford it you can't buy it. They are not *entitled* to *my* work.

 

[Odius]

Way to miss the point AND make yourself look like an ass. The idea is that publishers won't suddenly regain the supposed losses they suffer by closing down pirates, because most of the folks who buy pirated in poorer countries would not have bought AT ALL. The markets they claim have been stolen by pirates were never open to them in the first place, because without the pirates the sales would never have happened anyway.

I get what the author is saying. But if you can't afford the real thing then the real thing shouldn't be devalued so you can afford it. You can't afford it then too bad. And once again I'm sure you could find better things to do with your time than play pirated video games if you're that poor. Video games are a luxury, if you can't afford them then too bad. You don't see me trying to get Audi to devalue their product because I can't afford it.

 

[unangbangkay]

I get what the author is saying. But if you can't afford the real thing then the real thing shouldn't be devalued so you can afford it. You can't afford it then too bad. And once again I'm sure you could find better things to do with your time than play pirated video games if you're that poor. Video games are a luxury, if you can't afford them then too bad. You don't see me trying to get Audi to devalue their product because I can't afford it.

Fair enough. But keep in mind that games are (for now at least) still products meant to be sold, and if publishers want to sell to a market they believe is closed because of piracy, segmenting it according to economic and social realities is definitely a better way to open it up than including a version of SecuROM that sends a man to shoot you if it detects that DAEMON Tools is installed on your PC.

 

[Kronykus]

I don't condone stealing, and I won't say that anyone is entitled to anything, but.... The preceding post stating,

Someone who has a pirated copy isn't going to spend money on an actual copy. I think you're kidding yourself if you think that after playing all your pirated copies you're going to go spend hundreds of dollars(or whatever your currency is) on replacing them with legit copies.

is just absurd. Every game I have that I have bought legally, I have tried out the pirated copy first. I am currently studying software engineering, so I'm sure this will "supposedly" affect me in the future. Yeah, right. The plain truth of the mater is, I'm NOT going to spend $60 for a game without knowing how the gameplay is through more than a single "demo". To the developers out there... get over yourselves. If I like your product I'll pay for it, but don't expect me to take your word for it about what a great piece of software it is. Period.

EDIT: Another thing..... All this anti-piracy crap and drm out there only hurts the legitimate users. Software is software. Any program that can be written can be cracked. The pirates are the ones that get to play the games without any hassle while the legitimate customers have to deal various absurdities called "copy-protection" and "drm". Instead of complaining about how much you loose to pirates, think about how much money you waste on a wasted effort.

 

[Odius]

is just absurd. Every game I have that I have bought legally, I have tried out the pirated copy first. I am currently studying software engineering, so I'm sure this will "supposedly" affect me in the future. Yeah, right. The plain truth of the mater is, I'm NOT going to spend $60 for a game without knowing how the gameplay is through more than a single "demo". To the developers out there... get over yourselves. If I like your product I'll pay for it, but don't expect me to take your word for it about what a great piece of software it is. Period.

The difference is you have an actual job and are buying said items for pure demo purposes. The person I was responding to said in the future when he gets a job he's going to go back and buy legal copies. He's buying the pirated version to play all the way through and enjoying the product without purchasing the game. Saying that when you get a job you'll right all the wrongs you've done is sweet and what not but I don't see somebody spending their future paychecks replacing items they've already used.

EDIT: I agree completely that DRM and Copyright protection is a complete waste of time. It's just going to bug the crap out of me and make me less likely to buy your products in the future while piracy mcpirate is out their enjoying the game without the hassle.

 

[unangbangkay]

Reducing a product's price to help it sell in a poorer market isn't necessarily "devaluing" same. A movie ticket in the Philippines is about Php150. That's just under $4 dollars. When The Dark Knight comes out in Manila's theaters, is it suddenly worth only a quarter of what it's worth in the US, where movie tickets reach $12 or more? Is it a worse product for being sold for less in a different market?

If people want to make money by stealing back (or rather, finally entering) the spaces pirates currently occupy, the word we want is EQUITY, rather than equality.

I'm not privy to the cost-benefit analysis, but selling low in a low market whereas the same product goes for high in a high market is usually made up in volume. Once publishers and distributors strike that balance, everyone wins.

 

[ErinHoffman]

I obviously don't speak for the entire industry or all studios, but I kind of wonder who you guys are talking to when you make such generalizations as "studios say...", "studios paint pirates as...". The subject of game piracy is something that's been taken seriously in the development community for over a decade, but in a radically different way from how it's approached in other industries.

It's the same banner to which software developers, record labels and movie studios have been flocking for the past decade or so. They insist they're merely defending the rights of the developers and artists to get paid, and that continuing to support piracy is not only illegal, it also robs the very people whose products we enjoy.

Actually, it's pretty different. There are some parts of the industry and the ESA that are supporting a systemic and somewhat totalitarian approach to piracy (let's invade their computers, jail time for pirates, etc), but by and large the approach to piracy in the games industry has been from the inside out. An example of this is the approach the team on Spyro took to Year of the Dragon:

http://www.gamasutra.com/features/20011017/dodd_01.htm

(Wadark, you might want to read that.)

They devoted specific and significant resources to fighting piracy through design and function, and they did it very effectively for the time. They also did it with a realistic expectation not of stopping piracy but of DELAYING it long enough for the game to actually be purchased by those who would have purchased it, so their efforts might be the best thing we have so far in determining the actual effect of piracy on a game.

Piracy supports an underground economy and the livelihoods of thousands of people in Asia, especially in countries where most people live below the poverty line.

You could say the same for the opium trade. Just because something provides a living doesn't mean that it's good for society.

This underground exists primarily because its participants cannot afford the exorbitant prices charged by game publishers.

Actually, it exists because they can, because no one in Asia will stop them.

Don't get me wrong, I find the RIAA's approach to piracy obscene, shortsighted, and in some cases downright evil -- but there are other things that you're going to have to accept if you want to promote piracy as an ethical and valid force in the market.

How many console games do you see coming out of China and India? The answer is about 'none', or close to -- developers over there work for outsourcing companies that sell their services to the US. Or they work on MMOs. This is why MMOs became so prevalent in Asia -- the rampant piracy made it such that traditional game studios simply could not survive. I've spoken with hopeful game developers from India who say that it is impossible there and elsewhere in the Middle East to start a game company because of the pirates. So this is one of the costs of a society that does nothing to stem or fight piracy.

We would like to think that the western game market is too well established and too strong to be similarly subverted, that the difference in demographics means that people will keep paying for games. But the truth is we just don't know. The last DS game I finished was pirated THE DAY AFTER it was released; when I googled its name the first three responses were ROM distribution sites. DS piracy has exploded in the last few years. I try to take a broad view on issues of piracy, but let me tell you that until you've experienced it you have NO IDEA what it's like to put years of your life into a project and within days of its release see people stealing it. There are balancing factors -- the viral distribution of the game potentially influencing future sales -- but those, like the losses, are complete unknowns to us at this time.

No one thinks that every copy pirated would be a copy purchased; that's absurd. But it is equally absurd to say that piracy does not result in copies NOT being purchased. It certainly does. We just don't know how many, or how large the impact is. Or, at least, I don't, and I'm not sure how that data could be gathered.

Similarly, no one with a brain asserts that piracy can ever be completely stopped. The same attitude is actually taken with retail towards shoplifting; retail shippers account for a certain percentage of loss directly from stealing as part of their business plans. But just because piracy can't be stopped completely doesn't mean it isn't a problem, doesn't mean it's not being considered by developers, and doesn't mean we shouldn't be doing anything about it. It's fine to look at this from the ideological perspective of people who want a lot of free games, but you also have to consider the consequences.

 

[unangbangkay]

That's a good point about the potential consequences of developing in that kind of gaming landscape, one largely different from the one in richer nations. At the same time, it's the fact that the overall impact is so difficult to pin down leaves the possibility of many bad assumptions being made about what the best way to proceed is.

In the end, if there's any difference to be made it'll likely be made in the pages of a cost-benefit analysis, a business plan, and on a licensing board, assuming "traditional" game design doesn't die out.

I think what can be drawn from the article isn't that piracy shouldn't be stopped because it's an underground economy, but that the fight can best be joined by publishers, distributors and developers if it is joined on the same level the pirates operate at.

 

[hamster mk 4]

The thing is it is not the packaging the manuals or the CD's that are the reason games cost what they cost. Games cost what they cost because the people publishing them know they can get the most money if they set the dollar amount at X. From the economist point of view it they set the price at X- $1 more people will buy it, but not enough to make up the missing dollar from all the sales. Like wise if they set the price at X+1 the sales lost would not make up for the extra dollar made per sale. Now if there were a cheap/legit "Philippians Version" for $5.00 that math gets shot to hell as some copies make their way back into our rich American hands who would rather pay $5.00 instead of $60.00.

A better solution would be to sell older games that we no longer buy at the discounted rate, but we already do that. Also since this is a nitch market some developers could try and work in this space making $5.00 games purely for the Philippine market, obviously with lower production values as they would be making less profit.

One last thing, I am a bit higher than a junior programmer and I wish I made $60,000 a year.

 

[unangbangkay]

Now if there were a cheap/legit "Philippians Version" for $5.00 that math gets shot to hell as some copies make their way back into our rich American hands who would rather pay $5.00 instead of $60.00.

This kind of math is the exact reason for which region encoding exists, to segment the market so distribution, licensing, content and pricing can be tailored to fit regional economic and social realities.

Most consumers would love to see region restriction gone forever, particularly most european gamers, but if it's to continue publishers may do well to take advantage of its existence, which they have not done to any positive effect.

EDIT:
Spoke to an economist and he says the kind of product differentiation suggested in the article already happens widely in things like school textbooks. A textbook that's $45 in the US costs $5 in the Philippines, but is printed on newspaper stock and comes without a cover.

There are of course additional subtleties involved when it comes to electronic media as opposed to physical product, but this is the sort of thing Region Codes are for and publishers should leverage that to move product rather than deny customers.

 

[SenseOfTumour]

There was an interesting piece in Total PC gaming mag this month, and essentially he's saying, if you buy games regularly, go ahead pirate everything for 6 months, but put the money aside that you'd spend on games.

Then in 6 months, go spend all that saved up cash on the games you've enjoyed playing.

The games companies making good games don't lose a penny, you've tried before you've bought and then paid for the quality merchandise, and the companies knocking out shoddy stuff don't get rewarded.

I'm not condoning piracy, just saying it was an interesting viewpoint, and he also goes on to say that it doesnt help the industry's case when they say 'oh I see 5000 torrents being downloaded, multiply that by $60, we've lost $300,000 to piracy on one game.' Also that why should we go out and buy a game where we have to enter CD keys, install DRM, access a server and log in, etc, etc, if we can get a version that just installs and plays from a torrent site?

A genuine customer shouldn't get an inferior product to the pirated one, if you went back 10 years, that was the big advantage to an original movie/album/game, that you know you was getting a quality version, better than some copy. It just doesn't work and punishes legit customers.

For my money, Steam is my choice, I pay my money, I get full access with no cds or strings of numbers to keep safe, and say I am away, I can install on a friend's pc and play without any problems. I know steam isnt perfect, but its geting games out there, cheaply and easily, and in some cases, letting us get our hands on older games you won't find in a store.
(or on torrents, heh)

 

[Ryan Sumo]

You know what truly amazes me? That I haven't seen a proper troll yet.

There were lots of great points mentioned by previous posters, but let me highlight the ones I found most interesting and respond to them.

That's a very nice spin on the subject of piracy but when you boil it down it's still piracy. It's illegal and what they are doing is wrong regardless of why they are doing it.

Perhaps gamers in developing nations should spend some time getting an education and bettering themselves instead of playing video games. All the time wasted playing video games you could have probably learned something useful in the meantime and picked themselves up out of poverty.

I sort of resent the use of the word "spin" here. None of this was "spin" and was never meant to be. It's the reality that I have grown up in, and if you ever come by here I'll be glad to take you around and show it to you firsthand.

And that last stab at developing countries was really not classy. I'd make a crack about rednecks getting smarter if they didn't keep shagging their cousins, but I'll let that one slide. Oops.

Erin, thanks for sharing your thoughts as a developer. I'm a developer too, and frankly I'm also a little scared of the day our DS game is released and I see pirated copies all around me. However:

Comparing drugs to game piracy is a little unfair don't you think?

A market only exists when there are people willing to buy their goods. People are willing to buy their goods because they want to game and they can't afford original copies. Governments don't really want to clamp down on them because they need the tax revenue. These are the realities people need to consider. Saying "well that's just plain wrong" is all well and good, but doesn't lead to anything productive.

I have recently been very active in our local game industry, and I personally know and am good friends with game entrepreneurs whose dreams were shattered partly because of piracy. I understand that it's a sensitive issue, but I really believe that part of why companies in the South and Southeast Asian regions failed is because they wanted to make and sell their games according to western rules, and failed to take their own market into account. One of these days I hope to put up a studio myself with some friends, and put these ideas into practice. Then we'll see if I had it right all along or I was just a windbag who had no idea what he was getting into.

One last thing for everyone who argues that theft is theft and that piracy is just plain wrong and illegal. Laws are not immutable. They adapt and change and are molded to fit society as it changes through the ages. Every single day new laws are being proposed, debated, and enacted or vetoed according to what our government thinks is best for society at large. The Patriot Act being enacted post 9/11 to counter terrorist activities is an example of this. Do I think that there will be a similar "Piracy Act" to fix this problem of piracy? I can't answer that. All I can say is that laws can and will change to fit society.

 

[JonnWood]

Studios paint pirates as evil people who want the world for free. They love to harp on the fact that they are losing money, but that very argument always implies that the people getting games for free would have paid for them otherwise.

Some of them would.

This is rarely the case.

So that means that most pirates are people who obtain a sold product without providing the requested compensation from the producer. That sounds a lot like theft.

$60 is a lot of money for entertainment, and with some of the crap that's being developed, you really have to question how much entertainment you're getting for $60.

If only there were people who you could get the opinions of on given subjects? If only there were websites that would collect the aggregate scores of these "reviewers". Oh what a joyous day that would be!

Sure, sometimes you can rent them and see if you like them, but that's not often a choice with PCs, digital distribution, and subscriptions.

Would you like me to make my sarcastic "reviews" point again?

As always, the companies miss the big picture: lost sales can't always be made.

Would you like me to make my sarcastic "theft" point again?

Your example of a $60 game to a family with a $3400 annual income is perfect proof. It doesn't matter how good that game is, $60 is just not affordable. It's impractical. It's ludicrous, even.

You could always wait until the price drops, or even play mostly old games, like I do. I get just above minimum wage and I can still afford it.

The people the studios really need to hit are the ones who can and would pay for the game, but pirate anyway because it's easy enough and saves them $60.

Who's buying these thousand-dollar computers again? And when did video games become a necessity instead of a luxury?

There's no clear way to do that right now, especially because it only takes a crack from a single person to make a piratable by an entire population. This is the demographic the studios spend hundreds of thousands of dollars trying to thwart, and considering the numbers, it seems unlikely that that investement rarely pays off.

Like Tycho from PA said; you try telling stockholders that you basically can't stop people shrinking the value of their investment. Go on. Try.

 

[Ryan Sumo]

Regarding price drops, it seems as if there's a bit of disparity between Western and Southeast Asian markets. From what I've heard, it looks like game prices drop considerably a few months after release. In the Philippines at least, until even a year after the PS3 was being sold, old PS2 games were being sold at full price.