158: Piracy and the Underground Economy

[Ryan Sumo]

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.

Thanks for validating the article muzz. That's all I want really, for a proper conversation to be had. Ultimately we all know that the big publishers and companies would never even consider this idea. However there exists a unique opportunity for local game developers working in these areas to try to tap this network and thereby make money locally instead of forcing themselves to compete with the big boys.

 

[FatCatLim]

As a videogame magazine editor in a Southeast Asian country, I can absolutely relate to Ryan Sumo's article. I too also grew up in a similar environment (didn't know my games were pirated until much later), and thought that original games were way too expensive. Things are a little bit better here now as we have official distributors and some exceptions in legislation that allows PC games to be brought in without expensive taxes and import duties, but they're still pricey, especially for console games. There are 'budget' versions of PC Games, which allow us to get them legit, but they tend to be older or not very popular titles.

Taking a "Piracy is stealing according to the law and that's that" stance doesn't help to improve the situation of high game costs in developing nations. Laws are subject to revision, and it reminds me of a recent argument on the issue of copyright, and how one prominent law professor had used the analogy of the development airspace rights in traditional land law VS airplanes suit.

I know an old schoolmate who now runs a game shop in my hometown, and he sells pirated games. But he's not a bad person, nor is he some shady crook. He's just an ordinary, everyday guy, trying to make a living. Like he and many other people here in Malaysia, a high school education is all he has since a college or uni education is out of reach. So he turns to what he knows best, which is his decent knowledge of games. I don't know whether if he has a family to support, but selling pirated games is his main income. The same goes for other game dealers in the country.

Some local official distributors here have worked before with game stores that sell pirated games. In fact, it's not uncommon to find a shop selling both original and pirated games. Previously, some distributors even distributed game posters to such stores, so that if a gamer who goes to the store wants to buy the original copy, they can refer to the contact details on the poster to know where to buy the game.

I like the idea of game developers and publishers making use of the extensive distribution network of local game shop pirates, providing them with games with scaled down packaging and marketing. This in turn make the game shop vendors legitimate dealers, removing the fear of being constantly raided while not passing on the extra cost burden onto the consumer.

 

[FunkyJ]

Trust me, I understand your point about the price of retail games - I live in Australia and our games are $100 and the weekly wage, whilst higher than the Philippines, doesn't go a long way after the price of food, rent and petrol.

But:

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

Not in the slightest.

A market only exists when there are people willing to buy their goods.

Sorry to say, but this sounds like the exact same thing people say about drugs.

Governments don't really want to clamp down on them because they need the tax revenue. These are the realities people need to consider.

That doesn't make sense. The government would get greater revenue from selling games legally, just like they get taxes from legal drugs.

If you're burning games you got off the internet, where does the government collect taxes from it?

Apart from charging you from setting up shop in a mall, which I doubt very much is controlled by the government - at least not on a federal level.

You claim that families benefit as if this is like a whole heap of backyard people working off their own backs, using their own entrepreneurial skills, but I think you're wearing rose coloured glasses.

It's more common that these people are involved in organised crime.

These pirates have networks to supply them with disks and files, sometimes before the disks are released legitimately. The people on the streets are given loans for equipment (computers, store space) and then charged huge interest on it, so the pirates have to keep working for the organised crime outfits. It's classic extortion, and it's the exact same way drug lords work in Columbia and Afghanistan.

The answer to the problem is the same as it is to drugs - legitimise it.

Instead of working for "Players", the people on the street should be hired by the Publishers, say EA, should offer to set up stores (they provide for free or very little money) and give the product at cost price or lower, that the "pirates" can sell to game buyers for low cost and small profit for both themselves and EA.

And this is indeed what some publishers are planning to do in Asian countries.

 

[Sarienn]

To me, stealing means that you no longer have something, because it was taken from you. But when it comes to piracy, the issue has always been about the possibility to make more money than it's already made. I define this as greed.

Personally, I think many games are overpriced, and that it would be quite fair and responsible for the industry to review what (and how) they sell, and to cut costs down. Furthermore, I think piracy helps distinguishing a good game from a bad one. Maybe if more good games would be released, piracy would become less of a problem, because even though the world is full of bad people, there would still be many willing to reward good work by buying a good game after having a great time with the pirated copy.

I think a large chunk of this overpriced $60 goes into marketing costs, and that marketing (hype) is too often untrue to their clients when presenting the offer. It would be great and easy to make tons of extra money by jailing the pirates and those who *steal* games, but it would be fair to make more money (maybe not as much) by developing better games and selling them at a fairer price. This would cut marketing costs down too (no more need of a big, costly hype), and build trust amongst clients.

Bottom line, I think this problem can be viewed from another angle: it's the industry that *steals* from clients through unfair hype and too big a prices, and by eliminating piracy they just want to *steal* more.

This was indeed a very good and fair article. Thank you!

 

[schiz0phren1c]

I lived in Thailand for a year and a half recently and saw the same thing,same set up,
people simply can't afford the price tags put on games,so there is a thriving "black market" that is keeping thousands of people in jobs.
Although I was interested to also see that the legitimate games,from legitimate shops were ALSO half price in comparison to Ireland where I am from.

 

[cmdr_zoom]

FunkyJ: What the article describes is legitimate business - retail outlets, just like we have here. They're taxed, etc just like the ones we have here (okay, this is probably a simplification, but bear with me). The only difference is the distribution channels through which the store owner receives their stock, and the physical form of the media which is sold to the end customer.

At some point further upstream in the process, the specific act of theft/copying occurs. But at the stall-in-the-mall level, it's exactly the same kind (and reputability) of business as your local Gamestop. To most people in these regions, it's not a criminal enterprise in any way; it's just how you buy games.

P.S.: Speaking of Gamestop and business practices, try to imagine the reaction you'd get if you went into the nearest store and tried telling the kids picking through the used-game bin that if they don't buy every game factory-new, with shrink-wrap and foil seal intact, at two or three or four times the price, they're stealing from the game companies. You'd probably get stares of blank incomprehension or angry arguments, and you might even get asked to leave by the guy at the counter.

 

[beddo]

Of course the publishers are not helping anyone, including themselves. I think that if publishers were to offer lower region specific prices as suggested there would be a whole new wave of legitmate employment and income for the locals not to mention a whole new market and set of revenue for the publishers. I think copyright holders and authorities need to think about new ways to deal with piracy that can benefit all rather than punish the poor.

 

[cleverlymadeup]

i've read the article and i thought it was great. the issue i don't think most westerners don't understand is that most companies and industries do adjust prices to fit other markets. it's nice they want to make the most from these markets but the reality of it is they will have to cut their prices if they want to compete.

if you asked those who live in Asia how much stuff like a coke or mcdonalds and such were, you'd find they are a lot cheaper then they are in the "western" world

 

[Wavecutter]

I like how he equates piracy with survival. You don't need video games to survive. You can't eat a video game and a video game wont keep the rain off your head or feed your babies.

You steal because you are too cheap or lazy to accumulate the money needed. Period. End of story.

 

[ErinHoffman]

Wow, lively thread. That'll show me to log off and do work.

Ryan, re comparing video games to drugs, the comparison I made was specifically to illustrate that the argument that because a market supports a series of livelihoods it is valid and positive (which is your overall thesis from the article, right? the thing that you'd like us to consider as the foundation for piracy having a positive impact on Asia?) doesn't by default validate that market force. There are many *differences* between the drug trade and piracy, obviously, but one thing they have in common that impacts the people making a living on them is that they are illegal, and that illegality represents a danger to them. For one thing, because it's illegal, if they're discovered they can have their livelihood ripped away at any given moment, so it is fundamentally unstable. And because they cannot turn to the law for recourse, they are subject to other illegal activity (violence, extortion, theft) as part of the black market. If we're going to look at piracy as a black market and argue in its favor on the basis of economic positive impact on the beneficiaries, we must also consider the humanitarian damage done to those same people through their participation in an illegal trade. When you jump outside the law, there are significant consequences.

Muzz, as mentioned, I can't speak for the development community, only from personal experience. My general anecdotal experience from developers is that they don't want to see a bunch of people rounded up and thrown in jail for piracy (most of them), but they are also worried whenever it impacts their games specifically. Sales made on individual units of games have a more dramatic impact on developers than sales of movies or music have on their artists, or at least that tends to be our perception. Most game studios operate much closer to the redline than music or movie production companies, so piracy has a more direct impact when the royalties mean more.

At the same time, my sense is also that game developers have a much more realistic view on piracy insfoar as not expecting that the piracy market significantly subtracts from the mainstream market. However, this balance can easily tip out of control -- when Playstation game piracy became mainstream, it definitely had a significant effect on sales, and I strongly suspect that the same is now occurring with DS games. Piracy as an overall issue seems to be re-emerging after a quiet period following the release of the current three major consoles, but any console that has a long enough lifespan is eventually going to produce a pirate community, and the larger that community grows, the easier it is to access, the more of a danger it becomes to the industry's financial function. Because we HAVE seen what it's done in Asia, letting it run wild seems like a greater danger -- though to be fair there are all kinds of market forces (RMT, item based economies, downloads) in Asia that don't have the same force in the west, which should also be considered. But the bottom line from that fear is that piracy absolutely has had a significant effect in shaping the entire landscape of game development in Asia, opening some doors and closing a lot of others.

But developers are people, and their perspectives on this are wide, from a flat "piracy is stealing" to "piracy should be combated using software methods" (see the Spyro article I linked) to "piracy is a market force that should be harnessed". And this doesn't necessarily mean that any one of us, myself included, knows what the heck they're talking about. It's a complex issue. I think it's safe to say it's a concern to most developers, though, to varying degrees at any given time depending on the market.

 

[cleverlymadeup]

I like how he equates piracy with survival. You don't need video games to survive. You can't eat a video game and a video game wont keep the rain off your head or feed your babies.

You steal because you are too cheap or lazy to accumulate the money needed. Period. End of story.

actually no he's equating the making of money from selling pirated games to survival. says so right in the article many times

i'm guessing since you're so high and mighty if anyone looked at all the stuff you've ever owned they will not find one ill-gotten item? my guess is you'll find lots

 

[brazuca]

"These people make no effort to hide their wares, nor do they make any bones about the fact that these games are "copies," the more politically correct term for pirated material."

No in fact when we go to a store and buy DMC 4 original you just purchased a copy, not DMC 4. Capcom still owns DMC 4, you are now authorized to use a copy.

Loved the article, for me a brazillian I was very found of your reality. The main problem for the gaming industry is that every generation is becoming more expensive. 30,00US dollars PS1 games, well for me now 59,99US dollars plus taxes (120,00 dollars converting 190,00 R$).

They (gaming industry) must find a way to make games be around 30,00 bucks. And don't come with -wait to the prices fall! They could make 30,00 dollars right away or no money at all.

http://www.youtube.com/watch?v=Pc0mfw4EFEU

 

[CanadianWolverine]

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.

That really sounds like there is an real opportunity there for digital distribution to cut out 'the middle man' aka 'pirate', as it were - perhaps not directly to the customer in nations where we are developing better connection bandwidths, but it definitely sounds if a vendor/retailer there can and does shop around, why not deal with them directly, sell them the access to the legit copy and make a profit where there was none before, even if the margin is smaller.

Its not like local pricing doesn't happen in digital distribution, its an issue on Steam where Australians (unjustly IMHO) pay more to download a game from the service then Americans or Canadians (we just have to pay the currency exchange Steam presents us with) - though as I understand it, Steam does not set those prices.

So, it seems perfectly valid that one could sell directly to the vendor by offering a more reliable service at a competitive price of what the "competition" is selling for. What's better then fewer bad cracks bundled? How about no cracks at all.

 

[shMerker]

I don't know how relevant it is as a solution to the problem, but in Steven Kent's Complete History of Video Games, there's a discussion of the early days of Atari and how they dealt with what Nolan Bushnell called "the jackals", people who flooded the market with knock-offs of Atari games. Basically his solution was to flood the market back by constantly developing new games. Obviously this isn't an entirely analogous situation. For one thing making an arcade game that plays just like someone else's isn't illegal in and of itself(though many Atari knockoffs illegally bore the Atari name). Still, it seems like a good illustration of how a business can succeed by outperforming bootleggers and offering something they can't offer consumers. Basically it seems to me that any time, money, and effort being spent on pursuing pirates could potentially be better spent on finding ways to make a more enticing product. Hell, maybe you could come out on top by spending that money on bribing pirate to stop cracking your games(ok that idea is a little crazy).

One thing I'm wondering about is why so many seem to think it makes no sense to sell games for much less in developing nations. If it's a game you've already released in a larger market, say Japan or North America, presumably the plan was to recoup your development and marketing costs on sales in that market. This means that, minus expenses of opening a new market, additional sales are gravy. What are the costs of taking a game you've already released in the US and selling it in the Phillipines? Pretty much all of the development work is done excepting any translation which should be relatively minor by comparison. The only other costs would be marketing it and actually pressing and distributing the discs. I can't imagine that marketing and manufacturing a game for a developing nation costs the same or more than it does for North America, so why does selling the game for the same price still make sense, given that much of the cost has already been covered? Where is all this money going that a publishers can't lower their prices?

 

[teknoarcanist]

Or join the growing internet wave of artistic, democratic, communism 8D ( *checks deviantart for new messages*) As always, I have to give props to the escapist for a brilliant article that looks at a popular issue from a different angle.

 

[CMH]

I can't help but think that most people here who are condemning the whole idea of piracy outright are those whom aren't familliar with piracy at all (ie: people living in first world countries, earning >$50k/year).

I was from Msia, and during my time there, it was much easier to get pirated games than original ones, and even then, only older titles. In fact, to get an original game would probably mean doing some travelling, which may be hard if you're a secondary school student without personal transport, or relying on public transport which is absolutely crap.

Of course, then we get to the much debated issue of cost. Since some guys here said that it is fair to compare drugs dealing to piracy, let me put it this other way:
Should we just stop treating everyone with HIV/AIDS just because they cannot afford such treatment?
Okay, maybe you'd say that was a matter of life and death.
How about treatment for a debilitating disease, such as arthritis? Should we deny hip and knee replacements because people cannot afford them? Maybe we should tell them that they should live with the pain accompanied with every movement, because the right to a surgeon's time could only be accessed by the rich.



Tell you what, lets just restrict all the "luxury" items from the west from developing nations. The people living there just can't afford them at the prices people in developed nations are paying anyway, and its something they can live without.

And lets see what happens: A huge divide comes between the rich and poor nations. I can't imagine that doing any good for world peace.



Okay, so I admit, I bought tons of pirated games in my time in Msia. However, once I've moved out, and could afford original games, I have bought originals instead. I admit to still downloading pirated games, mostly for demo purposes.

I do buy older games without "demoing". I have enough spare income to do so, but not for AAA titles.



I doubt harnessing pirate networks to be the solution to the problem at all. Like mentioned, if they had a choice of distributing the real thing for $1 cost, or copying for $.20, they'd go for $.20. However, if game developers were distributing to the retail outlets which were selling for $5 apiece, and offering them legit copies, which they would have to sell for $10 apiece, I think consumers would prefer to pay $10 for a legit copy. Retailers would also prefer to stock the legit copy too.

I doubt that will happen though, since it would still have the problem of these games being "exported".


I can see another solution where the above scenario is played out, but have the games being "ad-supported". That way, you can export the game, but you'd be stuck with an ad-riddled copy of the game (which might make you watch a 10sec ad clip each time you die/load a game/etc).

Or just do away with the whole distribution system, and have games being totally ad supported, as has been talked about recently. In-game ads, built into the game itself paying for us. If they were free to consumers this way, there's no need for pirates.

 

[The Extremist]

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.

That really sounds like there is an real opportunity there for digital distribution to cut out 'the middle man' aka 'pirate', as it were - perhaps not directly to the customer in nations where we are developing better connection bandwidths, but it definitely sounds if a vendor/retailer there can and does shop around, why not deal with them directly, sell them the access to the legit copy and make a profit where there was none before, even if the margin is smaller.

I don't presume to know a whole lot about games publishing or distribution but this idea makes a lot of sense to me.

By reducing the price of distribution by reducing the unit price and the need to import copies of the game, the distributors can pass a (hopefully large) cost saving on to either resellers or end-users, depending on the distribution model in a particular country.

Even developing nations have some form of high-speed Internet with which they could connect to a publisher or studio's website from where they could purchase licenses (bulk purchasing could also be an option). Bandwidth usage in developing nations is typically very expensive compared to first-world countries so downloading DVD images from the publisher or studio's servers is impractical. But a single copyable disc could be imported by a distributor or reseller and licenses to copy and sell that disc could then be bought online.

EDIT (Forgot to say this, though I meant to): Publishers/studios will have to make it illegal/in contravention of the special copy + sell license for distributors and/or resellers that make use of it to sell outside their locality (don't know if that's a word but I use it to imply that a distributor might supply the resellers of multiple countries). I think this is the case with normal distributor agreements anyway because why would someone have to "secure the rights" to distribute something otherwise?

Second verse

On the "Piracy is stealing, piracy is wrong, we don't care what you pirates have to say" topic: I think your average anti-piracy proponent buys into the straw-man analogies presented by the games industry without thinking further. Your average pro-piracy advocate is just seeking justification for his sins ;-)

The word 'pirate' itself conjures an image that most people liken to classic thievery and IP (software, movies, music, etc.) piracy just isn't measurable in the same terms. If you steal someone's handbag (as those trailers on DVDs will have you believe), or a television out of the storerooms of LG/Panasonic/Sony then you deprive the victim of being able to gain utility of the stolen item. In particular, the TV manufacturer can no longer sell the stolen equipment.

To actually steal a game you would have to gain access to (hack) the publisher/studio's computers, copy the game in whatever form (source, disk image) and delete enough of it from all the computers with a copy of it to make it unusable to its creators/IP holders. Stealing a game disc from a store is still, naturally, stealing, but that's not what's being discussed here. Please note that this is not a *legal* discussion but a philosophical and ethical one. This analogy is still not perfect but it is much closer than "copying == stealing."

This is getting too long... So I reckon I'm just going to post it and see if it generates some interest/response before spending more time on writing stuff people don't want to read

 

[John Funk]

I like how he equates piracy with survival. You don't need video games to survive. You can't eat a video game and a video game wont keep the rain off your head or feed your babies.

You steal because you are too cheap or lazy to accumulate the money needed. Period. End of story.

This is a dangerous, elitist, and offensive stance to take.

In China, the average wage is much lower than say in the States - but that's okay, because the cost of living in China is much lower than it is in the States. For a semester, breakfast cost me 25c, dinner rarely ran more than $2, and I could find decent clothing for at the very most $5 (if I wanted to look in non-tourist stores). This isn't about impoverished people, homeless and in rags, wanting to play their shiny new PS3. This is about even the growing middle-class in areas like China and the Philippines and India, who otherwise are fairly well-off.

They have TVs, they have DVD players, they have computers - all of which are sold at prices fitting to the region. Cars? Price fit to the region and the average cost of living.

These are all luxuries, just like video games. These are luxuries that these people have - again, people who have a decently high standard of living in these developing nations - but they have because they're price-adjusted to the region they're sold in.

When I can get clothing for $5 and a good meal at a restaurant for $2, a $60 game is just absolutely ludicrous. Again, this isn't about someone living in poverty determined to play games, this is about people in developing countries who can *afford* many luxuries, but video games at standard retail prices are still out of reach.

For that matter... if they *did* start selling official copies of the games at $5 in these areas, would gamers import? Sure, some would. But I think you hugely overestimate how many would even *know* about it, let alone go through the hassle of importing all of your games from say Thailand when you can get it earlier just by walking down the street to a game store.

 

[shMerker]

I don't get why people keep talking about low cost copies being exported to other regions. Is that really a concern? Seems to me that the majority of game developers are in North America and Japan, and that their primary markets, where then games will be available first, are North America and Japan. I can already get a game late for significantly less than retail because used copies are so widely available.

As to the argument that piracy isn't really stealing because it leaves behind the original, I think you're missing the point. To a software company the software isn't a tool or a piece of entertainment, it's an asset for making money. If everybody already has a copy, that asset is effectively worthless.

 

[Ryan Sumo]

Or join the growing internet wave of artistic, democratic, communism 8D ( *checks deviantart for new messages*) As always, I have to give props to the escapist for a brilliant article that looks at a popular issue from a different angle.

Hey, can I get some of that credit? Or sarcasm, as the case my be. I jest.

Thanks for all the well thought out comments guys, I think I'm starting to see some of the weaknesses in the article now. If ever I do talk about this idea in detail once again, I need to make the distinction between the "people who make a living off of piracy" and "their market". There exists an overlap between the two, but for the purpose of calrity I could have done a better job of making them distinct from each other.

Also, I kind of assumed that people would understand that there would be region coding, and that these 5 dollar games would be specific to regions that are deemed applicable for that pricing. Next time I should just say it outright.

In the "Piracy is like selling drugs argument" I still fail to see how you can put two and two together. Erin made the most sense in comparing the two, but the bottom line is that their only similarity is that they are illegal and their practitioners can get into a load of shit for doing what they do. But seriously, on the list of heinous things to do, I think drug dealing far outweighs piracy. Piracy doesn't kill people, drugs do. Drug dealing can probably be compared to illegal arms dealing, while piracy can most easily be compared to stealing. And for everyone that throws out the "oh so even if it's bad if there are positive economic benefits let's make it legal" arguments, say hello to the tobacco industry.

Do you see how ludicrous this is starting to get? Let's stop comparing crimes here. I'm not smart enough to know what it's called, but in debating there's term for those kinds of arguments, which in layman's terms means "that shit don't got nothing to do with each other."

This is my argument in the most simple and pure form:

Piracy exists because people can't afford legit games. An underground economy has sprung up to sell people illegit games for prices they can afford. That economy supports the livelihoods of people in that region. Clamping down on this economy and rounding up the pirates will amount to naught, because people still can't afford legit games, and like an earlier commenter said, they'll probably just go out and play football/soccer (which may not be a bad thing, to be honest with you).

Lastly, I'll throw out another number at you guys, to put things into perspective. Taking the ratio of $60 (current gen game) to $3400 (annual Filipino income) and applying it to the annual American income of $46,000, you get the number 782. Imagine paying $782 dollars for a game, plus shipping costs and taxes that the vendor passes on to you.