158: Piracy and the Underground Economy

[unangbangkay]

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.

That's part of the reality of the game retail industry in developing nations. Virtually no games are sold "officially", meaning via fully licensed distribution partners, in many of the countries where piracy is most rampant. The vast majority of users who buy legit buy from stores that import from the west or from richer nations of the same region (such as Singapore). Therefore, officially sold "Region 3" games are virtually worthless since they either come in Japanese, or very long after even a European release date.

To recoup the loss retail outlets must continue to sell legit games at full price since the import costs are so ruinous. Admittedly, this is partly due to piracy (who'd buy an old game at full price in a region unlikely to match their own imported/modded system when they could get it almost free, sooner, and in English?), but also because publishers are simply unwilling or unable to officially distribute there.

Notice the recent E3 announcement that Sony was (finally) going to distribute PS3s in Latin America. The first reaction from the average gamer is "Wait, what? Aren't there thousands of PS3s ALREADY in the richer households all over the continent?" The answer is yes. Possibly millions of latin americans have undoubtedly gotten a PS3 or Xbox 360 into their homes as soon or shortly after launch in the US or Japan.

That's part of the region issue. As most Europeans would know, it's usually cheaper, quicker, and easier (at times) to import everything because the bureaucracy of the region system is so thick that it's usually better not to bother. And it's thick because publishers haven't bothered (which hasn't helped spur attempts to streamline its operation). It becomes a vicious cycle that helps to kill off quick and cheap distribution of titles to places that aren't region 1 or 2 (USA or Japan).

 

[Mistah Kurtz]

You're saying that piracy is good because it supports the livelihoods of poor people in developing nations? Game developers are trying to make a profit - not to give people a 'job' (stealing their work)

I got the idea that you think that it's unfair for a game company to charge american prices to developing nations since the people cannot afford them. This is nonsense - these are DEVELOPING NATIONS! Developing nations don't HAVE as many luxuries - every country has gone through a phase where only the rich had any sort of luxuries whatsoever. That doesn't mean that the price was unfair, it only means that there was not enough disposable income for everyone to afford luxuries. It's a sad and unfair world, but to defend piracy by saying that it helps poor people in asia and brings games to those who wouldn't otherwise play them? That's just a weak rationalization for theft.

Don't get me wrong, i've pirated my fair share of video games (never for profit) as I'm a college student who can't afford all the luxuries he wants. This doesn't excuse my piracy, but at least i'm willing to admit that I'm stealing.

 

[MosDes]

Another point of view I'd like to bring up is Open Source software. Why is there so much hate toward pirating when open source projects/programs/games "compete" just as much with the name-brand and are much more customizable? Open source is legal and is a very effective alternative to buying high dollar versions and/or pirating.

I do understand that many open source projects/programs/games may not be exact copies of the high dollar stuff, but I can often enjoy open source as much as I can enjoy high dollar.

 

[calinabris]

Wouldn't they only employ in the family if given a choice?. so by multiplying 5 * 20 * 4 = 4000 * 5 = 20,000 * 10 = 200,000 seems wrong to me, shouldn't it be 5 * 20 * 10 * 6 (the 6 is for the owner workers and kids.

 

[Ryan Sumo]

You're saying that piracy is good because it supports the livelihoods of poor people in developing nations? Game developers are trying to make a profit - not to give people a 'job' (stealing their work)

I'm not exactly saying piracy is good. That's the argument of people who say that piracy forces game publishers to look at alternative means of distribution that will empower the consumer.

I'm saying that it exists and there are reasons for its existence and that the current method of fighting piracy is costly and ultimately benefits nobody. Lastly, I offered a third world perspective because these people depend on piracy to make a living. It's not about buying luxuries but about making ends meet through a practice that is illegal yet totally normal in the context of the place these people live in.

 

[Ryan Sumo]

Another point of view I'd like to bring up is Open Source software. Why is there so much hate toward pirating when open source projects/programs/games "compete" just as much with the name-brand and are much more customizable? Open source is legal and is a very effective alternative to buying high dollar versions and/or pirating.

I do understand that many open source projects/programs/games may not be exact copies of the high dollar stuff, but I can often enjoy open source as much as I can enjoy high dollar.

Well, that's because (presumably) all open source software is created by the people who release it, so it's less catchy for industries to claim that they're losing ground to open source software. That would be tantamount to admitting they had an inferior product.

They can much more easily complain about piracy because it's their code, and their work that's being replicated and sold without their consent and without anyone making any profit.

 

[unangbangkay]

You're saying that piracy is good because it supports the livelihoods of poor people in developing nations? Game developers are trying to make a profit - not to give people a 'job' (stealing their work)

I got the idea that you think that it's unfair for a game company to charge american prices to developing nations since the people cannot afford them. This is nonsense - these are DEVELOPING NATIONS! Developing nations don't HAVE as many luxuries - every country has gone through a phase where only the rich had any sort of luxuries whatsoever. That doesn't mean that the price was unfair, it only means that there was not enough disposable income for everyone to afford luxuries. It's a sad and unfair world, but to defend piracy by saying that it helps poor people in asia and brings games to those who wouldn't otherwise play them? That's just a weak rationalization for theft.

Don't get me wrong, i've pirated my fair share of video games (never for profit) as I'm a college student who can't afford all the luxuries he wants. This doesn't excuse my piracy, but at least i'm willing to admit that I'm stealing.

The thought that this is some kind of a rationalization for theft, that developing nations should just up and "develop" themselves into a state where they can afford your luxuries is bigoted, narrow-minded, shortsighted and frankly quite offensive. I don't like to throw around the term "elitist" as it has its own positive connotations, but dammit, that's what this type of attitude is, essentially stating that if you can't afford it, you never deserved it in the first place. I'd hate to see what that same argument would imply if health insurance were considered a "luxury".

I don't mean to put words in Mr. Sumo's mouth, but as I understand it his article is merely a description of the realities on the ground. Rampant piracy has created a sort of underground economy that's become a matter of course for most gamers in developing countries, and for some, a matter of livelihood. Make of it what you will, but Mr. Sumo in no way attempts to excuse himself or his (and other poorer gamers') actions. It shows the fact that the issue of piracy, its impact, and solutions to it is more complex than many would like to paint it as.


Games are a commodity and a luxury, not a privilege or a right. Nobody, at any level of income or social status, "deserves" to own a video game or a video game system. All they can do is attempt to afford it. I think everyone here understands that fact. Piracy IS a problem and its pervasiveness in the developing world exacts its own costs on society, particularly in traditional game development and business models, as ErinHoffman put it.

The questions Mr. Sumo's article pose highlight the challenge publishers and developers have attempting to implement the exact same business model in "low" markets as they do in "high" ones, rather than attempt to excuse the act.

Is it worth it for publishers to attempt to distribute a no-frills version of a game for less in an attempt to steer away demand for pirated copies, as they do with school textbooks even now? That's a question for accountants and cost-benefit analysts. Will it work? Publishers will have to try (or analyze) and see for themselves. If companies decide that it's in their interest to distribute games with price discrepancies based on regional trends, it's their decision to make, not gamers'. In my own opinion, doing so would benefit everyone as it would open markets to publishers that were never open to begin with, and allow gamers everywhere to enjoy content without violating copyright. But that's me.

This is strictly a question of business, not entitlement. Get off your high horse.

 

[slyder35]

Even if developers sold their games for 1 lousy dollar to the pirates, in the end, the pirates would still just buy 1 game, and duplicate it illegally - because that $1 x 1000 games sold makes a huge impact on their income. You simply cannot win.

There is absolutely no excuse for piracy by any logic. If you cannot afford a game, you are not meant to play it. Just like if you cannot afford a BMW, then you are not meant to drive one.

 

[unangbangkay]

If you cannot afford a game, you are not meant to play it. Just like if you cannot afford a BMW, then you are not meant to drive one.

Jump the horse before you hurt yourself. No one is "meant" to do anything, especially with regard to purchasing something, but maybe (just maybe!) publishers would consider charging less for the same game in a different market, more people would choose NOT to buy pirated copies! ZOUNDS! No one is demanding anything, no one is implying they are entitled to games, that publishers should bend over to satisfy potential consumers if it doesn't benefit them. All that's being said is that the economic realities of the situation suggest a different, regionally-oriented business model to allow game providers to, well, PROVIDE.

 

[slyder35]

If you cannot afford a game, you are not meant to play it. Just like if you cannot afford a BMW, then you are not meant to drive one.

Jump the horse before you hurt yourself. No one is "meant" to do anything, especially with regard to purchasing something, but maybe (just maybe!) publishers would consider charging less for the same game in a different market, more people would choose NOT to buy pirated copies! ZOUNDS! No one is demanding anything, no one is implying they are entitled to games, that publishers should bend over to satisfy potential consumers if it doesn't benefit them. All that's being said is that the economic realities of the situation suggest a different, regionally-oriented business model to allow game providers to, well, PROVIDE.

No, I find this concept completely retarded. Why? Because how do you objectively judge one economy versus another to determine the price you sell to that market? Then multiply that by 150 economies. Then add the fact that economies are always going up and down. What a nightmare. This is absurd theory crafting, sorry to sound harsh but it's just not realistic in practise.

In addition, you would find game X being sold for $9 to country Y then all of a sudden 50 other countries gamer's are all hitting country Y for a bargain, presuming the game is not region locked - or are you suggesting we now have 150 region locks on games? It's a silly concept.

 

[olicon]

As Gabe Newell mentioned some time ago, the problem is less one of pirates "stealing" sales but of potential customers going unserved. Eliminating piracy entirely would only result in a token increase in sales for publishers, mainly because the vast majority of people who buy pirated couldn't buy "legit" in the first place. It's the same practically everywhere piracy is rampant.

Therefore, bringing equivalency to the market suddenly expands it exponentially. People who'd otherwise buy pirated would well chose to buy legit, mainly because they suddenly can afford the better option.

Quite fully agree. I live in Thailand, and I can tell you that most people here would simply drop playing games altogether if they have to pay full price. It simply doesn't make sense revenue-wise. That wouldn't kill anyone though.. a vast majority of people choose to play football (soccer) or drink in their leisure time anyway.

Personally, I like to play legit copies only. It gives me a sense of pride, a bit of ownership of the game I am playing. But I'm not the average player. Most people here buy games as social activities. It is not the act of playing, but the buying that is social. I know at least 10 Wii owner who never took the Wii out of the box. Most people don't even know what the hell they are doing in games. They just buy the strategy guide, and blast through the games as quick as possible.
Even if games take significant portion of my income, I wouldn't really care. I buy at most 2 games a year, and I barely have time to finish them. If they can afford the console, they can afford the game. Hell, they might even learn something about buying good games instead of trash too.

 

[unangbangkay]

Because how do you objectively judge one economy versus another to determine the price you sell to that market? Then multiply that by 150 economies. Then add the fact that economies are always going up and down. What a nightmare. This is absurd theory crafting, sorry to sound harsh but it's just not realistic in practise.

Simple. ANALYZE. Cost-benefit analyzes are there for a reason, and they work. Why do you think a movie ticket is sold for $3 in Manila where it goes for $13.50 in San Francisco? Those movies are exactly the same, and often come out on the same day, sometimes in better theaters in the cheaper countries. An IMAX ticket in Manila costs $10. How much does it cost here?

Charge the price you think people are willing to pay, and hope they pay it. It's how international businesses work, and how product differentiation works. If they won't pay that price, charge less, make it cooler for the same price, or cut your losses and run. That "run" bit seems to be what game companies have done, with a big side helping of whine. Maybe that cost-benefit ratio just didn't work out. I don't know, I'm not Activision/Blizzard or EA's CFO. I'm just a guy that'd like to see more legit games sold in the country I moved out of 10 months ago, but doesn't believe charging $60 for a game where people make $300 a month (and that's a good rate for the entry level) is good business.

 

[slyder35]

Simple. ANALYZE. Cost-benefit analyzes are there for a reason, and they work. Why do you think a movie ticket is sold for $3 in Manila where it goes for $13.50 in San Francisco? .

Because even if you sold a game for $1 in Manila - that is $1 more than $0 - hence if the culture is to pirate games, lowering the price will do sweet nothing, and you've just spent a ton of money 'ANALYZING' over 100 markets for nothing as well.

 

[unangbangkay]

Simple. ANALYZE. Cost-benefit analyzes are there for a reason, and they work. Why do you think a movie ticket is sold for $3 in Manila where it goes for $13.50 in San Francisco?

Because even if you sold a game for $1 in Manila - that is $1 more than $0 - hence if the culture is to pirate games, lowering the price will do sweet nothing, and you've just spent a ton of money 'ANALYZING' over 100 markets for nothing as well.

Did you even read the article?! THE PIRATED GAMES ARE NOT FREE TO THE BUYER. Pirate culture in the developing world is not one of torrenting games for no cost over the internet, as it is in developed nations, because the internet is too slow for that sort of thing. Maybe it'll change to what you think it is when cheap, fast broadband is absolutely available to every single person who might want a game, but in a country where you make $300 bucks a month, that's not quite the reality yet.

In Manila, you go to a local mall and pay $4 dollars a disc for a game. That's paying money. The difference is that it's less money than paying $50 for a legit copy. If companies were to sell games at $1 dollar and still make money doing it, at the same level of availability, what version do you think people would buy? The illegal version with a buggy crack, ripped intro and a bunch of trojans on a badly-printed disc, or the legit copy that was the same price or cheaper?

For that matter, even piracy rings have to pay SOMETHING for their trouble. They're businesses in themselves, with distribution networks, mass burning machines. That's what Mr. Sumo means when he refers to the underground economy.

Read the article before you start emptying your liver over it.

 

[CanadianWolverine]

When I read this article, for some subconscious reason I thought of Steam and Stardock: Do vendor "pirates" still incur any cost from downloading a game from a programmer "pirate"? Perhaps there is an opportunity there to provide a service, directly from the developers/publishers, so that things are in fact legit but in keeping with the reality of the market.

I can only speak for myself but I have accepted digital distribution more when I get it from a trusted source that doesn't give me viruses and what not with it.

 

[unangbangkay]

When I read this article, for some subconscious reason I thought of Steam and Stardock: Do vendor "pirates" still incur any cost from downloading a game from a programmer "pirate"? Perhaps there is an opportunity there to provide a service, directly from the developers/publishers, so that things are in fact legit but in keeping with the reality of the market.

I can only speak for myself but I have accepted digital distribution more when I get it from a trusted source that doesn't give me viruses and what not with it.

Vendors incur some cost. They pay a piracy ring's agent to supply them regularly with copies of new games, and stock according to potential sales. You're less likely to find copies of Oneechambara than you are of MGS3, just like in a legitimate retail outlet. They sometimes send back copies that haven't sold well, but of course they usually take a loss when that happens, because they overstocked.

Most pirate rings aren't the groups that do the actual cracking. Cracker groups rarely see (much) profit from breaking games. The large piracy rings simply pick the best working torrent, pack in the crack or serial, then get to copying. So "programmer" pirates are simply enablers.

Steam games have been pirated but at more difficulty due to the front end client and the fact that DD enables many people who want and can afford the game to get it legit (again, unserved customers).

Of course, Stardock games inevitably find their way to pirate vendors because they have no protection at all, but as you may have heard they make it up in goodwill, volume, and the fact that they practically own the niches they work in. Their model, which requires a unique serial and registration to obtain patches and updates also helps out, much in a similar way to the way work programs like MS office keep out the pirates (though the pirates and crackers work damn hard with those because business progs are the real moneymakers).

The system works almost exactly like a typical retail environment, only it's based in piracy rather than legitimate publishing and licensing. Again, the underground economy.

 

[slyder35]

How about you read my comments properly before losing your kidney over it.

I am not talking about BUYERS here, I'm talking about lowering the cost from DEVELOPERS to SELLERS (sellers being the pirates) - doing absolutely jack shit. If the SELLER (pirate) has option 1 to legally buy the game from the developer for $1, and has option 2 to illegally burn the game for $.20 - they will take option 2 every time. You clearly do not understand their mindset.

 

[unangbangkay]

Not if the publisher makes it worth their while. Illegally burning a game doesn't always work out the same way as buying a game legit for slightly more. A game that doesn't work or has a bad crack may not sell as well as a game that does work, needs no crack, and has multiplayer.

I know several vendors who switched suppliers (piracy rings) because the suppliers weren't providing good copies (bad CDs, broken cracks, etc). If a publisher can tap the network and offer a supplier a better option, a supplier may well take it.

Even pirate rings can make the better choice if it's worth it. As for judging whether it's worth it or not, I'm not a CFO.

 

[Muzz]

Good article and thread. A lot of stuff it's good to hear being said lately. I'd also love to hear more from Erin about what the industry really thinks about it (the wider industry besides Stardock and the Darwinia guys who do actually talk about it). It's a fascinating subject if only because publishing and the software industry general don't want the public to hear anything that could, however vaguely, be construed as positive about piracy. It's "Piracy's Bad Mmmmkay", generally speaking (although, as mentioned, this line actually comes more from journalists, critics and PR than from the industry itself).
We must be fairly sure that, as intelligent people, they must consider it in realistic and practical terms and not the morally absolute ones we usually hear. But people can't hear about that practicality very often because some kid might get it into his head that piracy is ok.
Can it ever really be discussed without people insisting that economic relationships are universal and morally sacrosanct? Does discussing it in realistic terms invite permissiveness, as so many seem to think? I don't know either way meself, it's interesting though.

 

[Ryan Sumo]

Even if games take significant portion of my income, I wouldn't really care. I buy at most 2 games a year, and I barely have time to finish them. If they can afford the console, they can afford the game. Hell, they might even learn something about buying good games instead of trash too.

Haha, off topic but I remember only buying pirated copies for the PS1, and I ended up having TONS of games, both good and total shit, and I finished maybe 10 of them. 10 out of literally hundreds of games. I'd end up trying them for a few hours and then moing on the the next game right away beause I was spoiled for choice. These days I buy legit and spend more time trying to finish a game, and I also always take a look at the bargain bin to see if I can find any hidden gems that are worth a try.