Tobold's Blog
Thursday, August 23, 2012
Why companies aren't selling videogames any more

Rohan is musing about a Penny Arcade comic on Free2Play models, where the punchline is "I think I liked it better when companies sold videogames". But that is the one-sided point of view from the gamer's side. Interestingly it is easy enough to imagine a game company CEO stating exactly the same: "I think I liked it better when customers bought videogames". The simple fact is that the business model in which companies sold videogames to customers was undermined by people who were neither the companies nor the customers. And that to a point where the revenue from selling videogames didn't cover the cost of making them any more. Given the choice between stopping to make videogames or finding a different business model, the companies fortunately went for the latter.

The factors that killed the "selling videogames" model were the following:
  • Piracy: Ubisoft CEO Yves Guillemot recently said: “It’s around a 93 to 95 per cent piracy rate, so it ends up at about the same percentage as free-to-play”. The business of selling videogames can only exist if people actually buy them instead of stealing them.
  • Resales: If I buy a used car, I get a car that is not quite as good as a new one. If I buy a used videogame, I get the same pristine play experience for less money. In most places the law decided to treat those two cases the same, insisting on a customers right to resell games. Third party companies jumped in, buying and selling used games, making the business of selling new videogames less profitable.
Arguably both of these problems share the same root cause: The digital nature of videogames. The business model of a company selling goods to consumers is based on physical goods which deteriorate with use and can't be easily copied. Game developers tried different other business models, like "give me money if you like my game", but those horribly failed. So out of desperation was born the "videogame as a service" business model. You could say it was the MMORPGs fault, but to anybody in the industry it was quite obvious that games like Everquest or World of Warcraft had far less problems with piracy and resellers, while earning far more money per customer. And the law said that if you buy a service, you don't have the right to resell it. You can't resell a haircut or used movie ticket. Thus we are currently experiencing a transformation of the industry, in which in various ways videogames are transformed into services.

Item shops are a rather curious intermediate step between buying a good and buying a service. Buyers tend to think of them as buying a good, as in "I bought a mount in WoW". But legally they are only buying a service, as in "you pay for the right to use this mount in WoW". The day the law changes and decides that players have property rights over the virtual items they buy, item shops are going to disappear, being replaced by more obvious "renting" agreements.

The Internet is not the most logical place. Every news of how some game studio went broke or laid off game developers is greeted with a gnashing of teeth. But at the same time people argue loudly for piracy, against copy-protection, for sharing, copying, reselling games, against game companies making profits. Apparently most people can't understand how the two sides are connected, how game developers can't be paid if game companies aren't profitable. If the business of simply selling videogames is dying, it is as much the fault of the players who refused to pay for the games they played as it is the fault of game companies. Ultimately we'll all end up renting videogames, or parts of videogames like virtual items, because that is the only way how game companies can technically and legally assure they get money for their product and pay the people who make the games.

I would really, really love to see how Ubisoft came up with that number. It smells like bullshit.

And that digital good don't degrade can be seen as a "problem" or a "feature". Games used to have a very good solution for that: Remember games like Ultima, that came in an actual box, with a cloth map, and other tidbits? But nobody does that any more (except for collector's editions for some games) because putting all your games in the ugly one-size-fits-all DVD boxes, with one disc and a one-page "manual", means much less money is "wasted" on those pesky consumers. Or they just go digital and save even more expenses.

I have neither a "boo" nor a "hoo" for the companies that take all the benefits of going all-digital and then complain that there are also downsides. Can't have the cake and eat it, too.

A problem is the music and movie industries did such a poor job of embracing new technology and change that being dubious of companies is quite natural.

"The digital should be cheaper" customer expectation also complicates things. Even if the digital sales and delivery cost a penny, and it costs non-trivially more than that, how many customers understand the economics. E.g., how much should a game that cost $50m to develop and costs $0.01 to distribute sell for? Unless you are selling > D3 numbers, the dev cost is far more important than the distribution cost. But some people focus on the fact that the $2 package can now be distributed for $0.50 and not that $10m game budgets are now $50m.

It also may not be a coincidence that the segment with the most innovation and quite cheap prices is the iOS market where piracy is much less.

I forgot to mention on the cloud gaming post that renting cloud gaming time to customers gets around all the resale factor.
I would disagree on the point that "those horribly failed", as the pay what you want model is pretty much proof that it can work.

Even more, taking into account that I do not put any moral value on pirating a game essentialy every time I buy is because I want some of my money to reach the developer/publisher with no real value afforded to me that I could not get by pirating. Knowing that the valuation of my steam account makes my wallet shiver.
The link in 'those horribly failed' seems to indicate said add failed due to the fact that there was no indication of something needing to be unlocked and if you knew, the option was hard to find.
the piracy is not the problem at all and in many cases piracy helped companies to become famous...Lets say a regular gamer may play 10-15 single player games in a year but pirated. If he had to buy them 50 euro each how many do you think he would have played?maybe zero..yes zero!so a small companie that will release a mediorce game, thousands of people will play their game and they will know about that company the next time..also if they are smart enough and put some advertisements inside the game they will make some profit.

The problem is the price of the game. A single player game that you will finish in 1-2 days cannot cost 50 must cost 8-10 euro maximum. If I can buy a game at 8 euro I cannot even think to pirate...

I never bought a single player game without play it/test it first pirated. at the end of the year I always buy some games that I liked very much when their price have normalized. Especially now, that there is so many MMO and a lot of free AAA MMOs, do you believe that piracy is the reason for single player games downfall?

This year, if I had to buy a single player game, it would be skyrim and only skyrim...and I am not 100% sure of this yet, since I didn't played it more than 1 day.

last year bought Oblivion platinum edition for 10 euro from Steam..I never played yet since I bought it, but I had played many hours of Oblivion when it wasn't "outdated" and once I saw the good price i took it for collection. I have bought many games like I first played to death for free and then I bought them to have them to my collection, as a respect to the company that made it.
A single player game that you will finish in 1-2 days cannot cost 50 must cost 8-10 euro maximum.

As I mentioned, the Internet is not the most logical place. Sigh!

Your personal level of disposable income is completely irrelevant to the question of what a game "must" cost. The only relevant calculation is what it did cost to make that game, and at which price enough people will buy the game so that the revenue is higher than the cost to make the game.

If that results in a price you can't afford or don't want to spend, that does not give you the right to pirate. You can't steal a Mercedes and claim that this is legit because Mercedes are too expensive for you to afford otherwise. If you can't afford a game, you have absolutely no right to play it. If you pirate a €50 game you are a thief, exactly as if you stole €50 worth of goods from a supermarket.
When you sell digital the cost for the company is 0.01. If they sell for 10 euro that means they profit 9,99 euro per sale. If they sell 100 pieces , they make 1000 profit.

Now if they sell the game for 50 euro, they need to sell 20 pieces in order to make the same profit.

Now my opinion is, that if they sell at 10 euro they will make much more profit and the piracy will exterminate because there will minimum reason to exist...

Also the car example is not good at all. I can go at Mercedes and have a test drive, 1,2,3 times before I decide if I want to buy the car or not...If you can finish the 95% of the single player games in 1 day then this is a test drive.

Also you didn't answer, if the piracy didn't exist, how many games an average player would play/buy per month or year?

It is always easy to blame the customers...

In a capitalist system when everything is about profit and human value is almost zero, thiefs are not 100% responsible for what it happens..and I am not talking for the gaming industry specifically..
Piracy and the second hand market are certainly not in the interest of the studio/publisher/distributor, but tend to be exaggerated to push their interests.

There is ample incentive to offer a clearly described and limited service or license instead of virtual or actual goods. Consumer law protects customers against lemons and shoddy goods quite well. This protcection is avoided with varying success by offering services or licenses instead of selling goods.

Think about authentication and game servers being available for a limited time only (EA measures this as percentage of peak lifetime traffic for individual titles irrc), Error 37 and not being able to do anything with a game license you bought if you didn't like the game after all.

Example: I bought Fable 3 because I loved a previous title in the series. I hated Fable 3. I'd have loved to be able to return it or resell it at a loss, but thanks to the complex schemes used in the distribution, I cannot. In the publishers book I'm indestinguishable from a happy customer.
Of course the customers will complain against DUMB copy-protection schemes, like "you must be online at all times to play".
I mean, if I need to be online to run Skyrim, and after the game checks that my copy is legitimate it's over, I can live with that.
But when a short-time disconnect causes Heroes of Might and Magic VI to interrupt my game in any stage, even at the end of multi-turn tactical combat (where no saving and loading is possible), I absolutlely HATE Ubisoft's copy protection. In this case, I think that pirated game with broken copy protection would be much more convenient to play.
I have and will always continue to be skeptical of piracy statistics, especially when they come from the game companies themselves. The most common mistake is to assume that every instance of piracy is lost revenue. It's not. Just because I pirate a game doesn't mean I would have bought it.

Blaming lowered game revenue on piracy and the second hard market is a cop-out. Market over-saturation, huge development costs that require a bazillion sales to break even and the ever-present desire to maintain control (companies used to spend millions on copy protection that would be quickly broken anyway) are much more plausible reasons we now have a video game rental model.

Back in the post-Napster days, record industry execs were petrified that people could copy and share songs so easily. The RIAA went sue-happy and there was a big push to clamp down on online music. It wasn't until iTunes started offering reasonably priced music that the online music industry took off. Now most services have even removed all DRM from their tracks. And guess what!?! Sales are booming. Piracy is still an option (and maybe easier than its ever been) but the industry isn't suffering. And you get to actually BUY and KEEP your music unlike with today's video games.

So why has the music industry finally realized that DRM-free content at a reasonable price is a good business model, but the video game industry is still 10 years behind blaming piracy/second-hand markets?
Gabe Newell of Valve maintains that piracy is a service problem. If you provide better service to your customers, more will be willing to pay for your product.

iTunes revolutionized digital music sales as it was the first service to make it quick and easy to get exactly what you want. The only people that had made it even close to that easy before them was Napster et al.

From a personal standpoint I have found Steam to have done the same thing for gaming. It is easy to use, automatically updates your games and provides good support. My level of game piracy has dropped drastically since Steam became my main method of game purchasing. Ubisoft uses utterly horrendous DRM that causes far more issues for paying customers than it does for the pirates.

If pirate groups make it easier and smoother to play your game, that's where your customers are going to go.
Most sources estimate that piracy is more around 40%, which admittedly is still a large number.

If companies can live off free-to-play, where roughly 10% of the players actually put up any money, why is 60% of players paying a box price such a problem?

And if the Ubisoft guy is right and their piracy is closer to 95%, it sounds to me like their oppressive DRM isn't working very well at all and would save money by just getting rid of it.
Caveat: the greed and incompetence of many game and non-game publishers has been staggering.

Still. "We have met the enemy and he is us." [q.v.]

@giannis - your opinion is that 10 $/e would make the game developer more money. Well, the opinion of the industry experts in the company who do market research is that $50 would make them more money. These companies have no incentive to charge $50 if $10 would make them more profit. And I am sure they have more knowledge of the game economics than most forum posters.

I submit that by people responding to something different than OP, they are confirming Tobold's post. I.e.,regardless of could/should/better, piracy is pushing publishers away from selling products and into selling services.

Due to the actions of people similar to the responders, the future of gaming is for a lot more DRM, probably "always on."


As an aside, for all those people referencing Steam, you do realize that the imminent Windows 8 has a Windows store and that Newell has called it
"a catastrophe for everyone in the PC space" "we'll lose some of the top-tier PC/OEMs, who will exit the market. I think margins will be destroyed for a bunch of people."

As a Mac user since 1994 who bought a PC in 2011 but is still mostly Mac, I submit that if you want to see money extracted from customers and publishers, Micro$oft will be far better at it than game publishers ever were.

Go back and read what Hagu wrote earlier. Then read it again. Hagu is not stupid, he knows what he's saying (not that I know him but, well, he's right :)).

Then read what Tobold wrote to you, twice.

Making a game costs money. The happy/enthusiastic/slave driving bastards (pick one) who make that game all hope that they can recover that cost. So, you know, they can make a living. If they don't recover the cost, they won't make more games. Or more music, or whatever.

I won't lose much sleep over your morality here. But please don't try to justify it as some sort of righteous move. You steal stuff to have fun for free. Fine, we've all done that. It wasn't right and you didn't help anyone but yourself by doing so.

Oh, and if the Mercedes thing didn't do it for you: do you think it's cool to jump the line and ride the subway for free every day too?
Oi vey.

Piracy: The statistic of "piracy rate" is a rather silly one to even look at.

Just look at any basic economics 101 demand curve.

As price tends to 0, demand is going to tend towards infinity. When comparing the demand for your game at $15-60 against the demand for your game at $0, the ratio is always going to be ridiculously high, as it should be. It's the basic laws of economics.

A fuller explanation:

Insert "a pirated game is not a lost sale" meme here.

Let's also not forget that Ubisoft has had a notorious history of shoddy PC ports and overbearing DRM.

Is piracy even a big issue on consoles? I highly doubt that a significant percentage of users even have modded consoles, let alone pirate.

Resales: Last I heard, consoles were still doing rather strong. Triple A titles still get multi-million sale numbers, and I haven't heard anybody saying that they would abandon the console market because of resellers.

Is resale even a possibility on computers? Digital sales already eclipsed box sales a couple years back, and I think DRM ruins a lot of the possibility for resale.
@Tobold: You can't steal a Mercedes and claim that this is legit because Mercedes are too expensive for you to afford otherwise. If you can't afford a game, you have absolutely no right to play it. If you pirate a €50 game you are a thief, exactly as if you stole €50 worth of goods from a supermarket.

The problem that I have with this is that it somewhat changes the argument. While I don't think it's moral to pirate for any reason, it's also irrelevant to the question "why companies aren't selling videogames any more".

Objectively speaking, if a pirate can't or would never pay for your goods and only pirates, he isn't hurting your bottom line at all. He doesn't cost you anything. It is immoral and possibly demoralizing, but in objective terms he has done nothing to you.

The only people that can hurt your business are those who have the means to pay the price and will agree to buy at the price, but decide to pirate instead. Those are actual lost sales and hurt your bottom line.
I don't see anyone here arguing that piracy is acceptable. Especially given the large amount of free games of all types there are now, it doesn't seem like a rational thing to do. However, this also leads me to cast serious doubts about claims to rampant piracy. Who are all these people stealing all these games when there are so many legally free ones?

What people seem to be arguing here is pricing models, to which I would say two things.

First, any game company is obviously entitled to price their games any way they want, even if that pricing is "wrong."

Second, the $50 price tag is temporary. What you are really complaining about is that you have to wait a year for a Steam sale. I would guess 3 out of 4 AAA games I buy are under $10.

Referring back to the first point, it seems perfectly rational to start your price at $50 and get those sales, and then reduce the price later to get those sales.
If Ubisoft are still getting pirated 95% of the time then get rid of their stupid drm thats inconveniencing the 5% of us that actually paid.

I just got back into D3 with 1.04. I start playing at 10:30 (Aussie) at 11:00 exactly I and everybody else starts lagging out. Quit.
Last night I start playing at 7.30,8pm its down for a 3 or 4 hour maintenance, Sigh.

Oscar lets look at it from a ebook perspective since i have not pirated a game in the last 15-20 years.

I have brought and paid for perhaps 200 ebooks. Its not like I have a problem paying for them.

Ok this (good author) uses this publishers who does not do a all in international rights deal. So instead of easy mode amazon, itunes etc I have to buy it of a local distributor who despite being advertised as ereader compatible the reality is all locked up in DRM.

So to read a book in Australia published in England, written by a American author I am supposed to use some Application written in German that does not WORK. Or I can spend 60 second on google and download it for free.
I believe in supporting authors and game publishers but if I am paying and I can't actually use what you sold my patience is going to wear out pretty fast.
The 'lost sales to piracy' argument is always the biggest load of bullshit I can imagine. I'd believe them if maybe they touted some reasonable figures, something that didn't equate each pirated copy to one 'lost' sale.

The very simple fact is that just because the game was pirated, doesn't mean it would have been purchased. If the figures the music, film and games industry keep chucking at us about pirates were true, then there are literally trillions of dollars of disposable income out there which aren't being accounted for.

The amount of consumer purchasing power is finite. If someone was getting your goods for free, that doesn't mean they'd shift their spending from something else that they're willingly paying for, just to get your goods not-free.

I'd love to see someone actually sit down and tackle this ridiculous logical fallacy to try and bring some kind of reason to discussions of piracy. We might see less absurdly overreacting measures to restrict it if people in power actually knew how little it was actually impacting the industry.
What makes you believe that the movement towards F2P and cash shops and the like are the result of consumer piracy and not simply smaller, more nimble game companies out-maneuvering the larger ones? Seems to me that these novel business practices exist not to recover lost profit, but because the AAA games industry have raised the barrier to entry so high that the only way for indie studios to break in is to try something new - namely by not trying to compete at the $59.99 price-points.

And as it turns out, many people prefer things like $0.99 apps to $50 Gameboy games.

Piracy is a red herring, although I would LOVE for the courts to go all the way down that rabbit hole. Because at the base of things, the piracy concern is that someone experienced the product without paying for it. Which means if you invite a friend over to your house to play Xbox, every game he plays that he doesn't own himself is an incident of piracy. Same for members of your family, or letting him borrow the game. If you listen to music in your dorm room, everyone who walks by your door is guilty of piracy.
Ultimately the game company doesn't care whether the "lost sales" are due to piracy, or resales, or people just not wanting to buy the game. The number that counts is not the lost sales but the won sales, and if the revenue from those sales isn't sufficient to cover the cost of development, the company stops developing games and fires people.

If YOU don't give enough money to game companies, game companies won't produce games for YOU any more. It is as simple as that.
I have to wonder if the claim of 'piracy' is simply self flattery and selfishness.

For example, if the people who 'pirated' a game, if they were somehow forced to either not play the game or buy it, how many would buy it?

If a large percentage would, okay, the idea of piracy being an issue is valid.

But if only a small percentage would buy it, then to continue with the idea of piracy being an issue is self flattery that people would buy the game and also a petty selfishness, that even though it costs the developer nothing, other people just can't have that game just because.

I suspect piracy is the great superstition of our times. But it warrants some kind of test as to that.
That sounds like a huge logical fallacy to me. Why would "I wouldn't have bought it anyway" be a legitimate excuse for stealing? I would never buy a Ferrari, does that entitle me to steal one?
Always a highly inappropriate analogy, Tobold, on account of the fact that something of value has been taken from someone else.

In purely distribution terms, it's more like listening to a busker, enjoying their music, and not putting anything in the hat.

The only reason people talk 'theft' is because of the law, which is where Azuriel's comment is highly appropriate. Where does that limit stop? Are we allowed to play games at a friend's house? We sure didn't pay for them. So, if a friend lends you a copy of a CD, is that piracy? What if a stranger does? That line is different in various peoples' eyes.
Of greater relevance: If I buy a game, install it on my PC via steam, I am not a pirate.

I can play my game on a friend's machine, using my steam account, and I am still not a pirate.

If I go back home and play that game, and my friend uses my steam account via its included 'offline mode' to play that game... that's when they're a pirate? Or am I the pirate?
(Follow up to the law comment.)

People LIKE to say the law is cut and dried.

...It's not. It's precedent, and circumstance, and the discretion of the judge. EVERYTHING is open to interpretation, and the law is only as black and white as the cases before it.
Always a highly inappropriate analogy, Tobold, on account of the fact that something of value has been taken from someone else.

And you are totally wrong in believing that nothing has been taken away from somebody else if you pirate a game. Even if I could copy that Ferrari for free, it would still diminish the value of the Ferrari for those who bought one. Why do you think companies making luxury handbags are trying to stop those who make fake copies, if the copies didn't hurt the real thing?

Just check the other thread where somebody said he didn't want anybody having an easier way to get to the level cap, because that would "diminish the value of his level cap character". And how do YOU feel if you bought a game on Steam and on the next day it is available on promo for 75% off? Somebody else getting the same thing for cheaper or free is always going to diminish the value of the real thing.
Tobold, you have to stop containing yourself! You're already not stealing Mercedeses, and now it's Ferraris. The world is too safe already without you not stealing all those sports cars.

Ngita, I live in Sweden. We're in pretty much the same shape as you are here on that. I agree that it's frustrating and annoying with all the stuff you can't do because of the inter-country rights lockups. And I completely understand how that drives us to download a free copy rather than paying for it. Doesn't make it right, of course, it's just that we feel out of options. And (if we have to be honest with ourselves) that we start from the assumption that as members of this earth community, we are entitled to consume these entertainment products now.

This bit about running out of options ties nicely into what others have been saying above concerning the statistics. When you take that e-book, Ngita, it will be counted as a pirated book but it most certainly isn't a lost sale.

The whole piracy debate is such a mess. The point has been made by several of you above and I want to chime in my agreement, if nothing else just to moderate my earlier comment.

I'm don't claim to know anything special about the entertainment industry, but the way I see it is this (I'm sure you'll tell me where I'm wrong). The publishers invented this exceptionally weak argument over piracy and lost sales in the seventies, when all the kids started copying records to cassette tape. Their case was arguably even weaker back then, before digital and 1-1 copying. But, and here's the key: it worked. They got governments all over the world to impose levies on the sales of cassette tapes. As other recording media was introduced, the levies were expanded. And the system lives: according to a 2011 report, total media levies in the EU from 2001 through 2009 was just north of €4bn. While four billion euros over nine years may not be all that much when spread across the entire industry, it should be kept in mind that (a) it's "cost-free" revenue and (b) that the industry as a whole has seen significant revenue drops over the last decade. My guess is that this income has not been something to sneeze at.

And now it's going away. These levies are mainly attached to old media (cassettes, recordable "music" CD:s, DVD:s etc), which is... not selling so well anymore.

So what's an industry to do? Well, the rational thing is to bring up the same old argument again, of course. The kids are stealing our stuff and look how much money we would have if they weren't doing that. It worked 30 years ago, so why not now? And indeed, some countries have introduced new levies on hard drives etc.

God, this is a long post. Anyway, tl;dr: the "lost sales" argument was always weak, but it helped the industry get some free cash. They want to keep that revenue stream, so the keep the flawed argument.

Cough. In all honesty, though: actual music sales dropped by 50% in that same period (in absolute numbers, i.e. not even adjusted for inflation) that I mentioned above. I have no doubt that the industry overcharged for music 15 years ago and that the current price levels for recorded music (as well as the newly emerging lower price points for other entertainment) are more "fair" overall. But clearly, it must be admitted that there is at least an element of truth to the lost sales argument?

Your comment about the law is interesting. If Tobold actually did take that Ferrari, wouldn't that too be "theft" only because of the law? What, from the point of view of pure principle, is the difference?
(Damn, I'm hijacking now. But Cam wrote three in a row just above too!)

Azuriel, your thought exercise is fun, but ultimately I think the red herring is yours alone. Go down there and you'll hit bedrock. There is nothing uncertain about those examples that you bring up. And no, they are not instances of piracy.
MMOs are the main reason why I haven't bought anywhere near as many games since 1998 as before. Ultima Online and World of Warcraft have kept me entertained sufficiently that I wasn't interested in getting into some 10-20 hour games.


"You wouldn't steal a horse!"
"You wouldn't punch a baby!"
"Buy now or you're a fucking terrorist!"

The posturing is just ridiculous.

A photocopy of a AD&D rulebook or a copy of an audio CD do not deprieve the owner of the original of their property. The main association with car theft is that the rightful owner loses their car and is deprived of what they paid for. That is not the case with unauthorized copying.

A knock-off product such as a fake designer handbag with inferior properties can dilute the brand of the real product. However, most pirated copies are superior to the original - no forced trailers, online requirements, DRM checks, etc.

Both theft of physical goods and production and sales of imitation goods are different issues from unauthorized copying. That's not to say it's ok or not a problem!

Instead of the owner of the product which was copied without authorisation, the seller, distributor, manufacturer, rights-holder are affected - in two ways. 1) Potential loss of sales opportunity. Someone with access to an unauthorized copy is less likely to purchase an authorized copy than someone without unauthorized access. People may decide to buy the original after all. Secondly, they may have never been viable target customers, for example due to insufficient purchasing power, no sales in their region and a number of other factors, such as price theory.
2) Advertising effect. Unauthorized copies are still copies and get the word out. Judging a book by it's cover or sales spin may result in no purchase, while a recommendation may result in a purchase instead. Neil Gaiman changed his mind to seeing unauthorized copies as advertising.
Also, appropriately:

The 'stealing diminishes the value of a product' is pretty weak. The main difference is that the product still exists, and the existing users can still use it. Which is, after all, the crux of the product's purpose.

Getting rid of cheap knock-offs has always been a pretty back-seat priority compared to theft, drugs and violent crime. Mostly because the problem sorts itself out to a certain extent: cheap knock-offs are renowned for being inferior quality products, harder to find, and cheap. That's 2 out of 3 areas where the real deal has the upper hand.

But with illusory, artificial digital borders in place restricting content, making it harder to source legally, out of control pricing (in Australia anyway) to prop up retail stores in a digital medium, and inferior quality products such as movies that feature 5-10 minutes of studio promos and anti-piracy ads (which only affects paying customers, in the most ridiculous irony still perpetuated), real purveyors of official goods are failing at all 3 out or 3.

And then they wonder why piracy is a problem in their industry.
The value of a ferarri is in the rarity and the price. It's a status symbol. Games aren't status symbols. If I own a game and someone else pirated it, my copy of the game is exactly the same, and still as fun as it was before. If you were arguing about pirating collector's editions, then there might be something to that, but you're not. You're suggesting that a mass market, highly-duplicated good is somehow diminished by it being... duplicated.
No, I am suggesting that your valuation of a good is diminished by somebody else getting the same good for less or even free. If piracy of games was both legally and socially acceptable, there would be no more sales of games. People don't spend money on the games they play if they don't feel they have to.
Tobold: "If piracy of games was both legally and socially acceptable, there would be no more sales of games. People don't spend money on the games they play if they don't feel they have to."

You don't need to go for hypotheticals. It is perfectly possible to obtain unauthorized copies of computer games today, albeit with a tiny legal risk and potential issues for your computer's security.

However, it's simply more convenient to just buy the game on Steam.
@Tobold: If YOU don't give enough money to game companies, game companies won't produce games for YOU any more. It is as simple as that.

Right, that's exactly what I'm saying. The part that you're missing is that since these guys don't hurt your bottom line, you cannot use them as a reason why you're not getting enough money.

No, I am suggesting that your valuation of a good is diminished by somebody else getting the same good for less or even free.

This only applies significantly to luxury/prestige goods.

We should also mention that many video games benefit from a strong ecosystem of players, whether it be word of mouth, generating interest through forums, or establishing a solid player base so that people can play with each other. Each of these things add value for the game, and in the case of a broke pirateer, have given intangible benefits to your game when he otherwise would not have.
Not to mention that critical mass is already here. We DO already live in a world where pirated games are cheaper, more accessible, and often superior products.

...And yet people keep buying games. Lots of them.

Exactly how much more attractive does piracy have to be to completely obliterate the game industry? I don't think it could actually get more prevalant unless the industry starts producing an even worse product than the pirates offer, or restricting it even further. They can't beat the third option, price point, so they really need to work on the other two options.
If piracy of games was both legally and socially acceptable, there would be no more sales of games. People don't spend money on the games they play if they don't feel they have to.

Sure, that's why kick starter has been such an utter failure.

Much like football teams, where people don't have to spend money to support a sports team, people still go and spend money on their team.

The people who buy games are supporters. The people who don't support - quit pretending you could have gotten money from them.

Even if I could copy that Ferrari for free, it would still diminish the value of the Ferrari for those who bought one. Why do you think companies making luxury handbags are trying to stop those who make fake copies, if the copies didn't hurt the real thing?

Because you're totally certain those people would have bought the more expensive handbag if they were forced to buy or go without.

Or, maybe not at all. Maybe this diminishment thing is simply superstition.

Just check the other thread where somebody said he didn't want anybody having an easier way to get to the level cap, because that would "diminish the value of his level cap character". And how do YOU feel if you bought a game on Steam and on the next day it is available on promo for 75% off? Somebody else getting the same thing for cheaper or free is always going to diminish the value of the real thing.

That's really nothing to do with companies making money, it's just consumers little pet peeves. Are those consumers going to get disenfranchised and quit being a supporter? If not, sorry, it's just noise. The issue companies raise about piracy isn't about how consumers feel in their heart of hearts.
So would you be willing to not receive a salary any more, but only get paid by your "supporters" inside your company in the form of tips?
Again, all fairly pointless hyperbole. If management are paying their employees based on the number of people who are playing a game, instead of the number of people who will buy it, that's shitty management.

They need to base their numbers on the realities of now, or find a way to reduce piracy. Quick tip: It's not through prosecution or DRM. Prosecution, the only winners are the lawyers. DRM... works for maybe a day or two. If that. And pisses off paying customers.

People need to spend less time bitching about how bad the problem is, and how they wish it were different, and more time thinking about how to address it in effective ways.

The definition of stupidity is doing the same thing repeatedly and expecting a different result, right?
If companies can't increase sales to offset rising budgets, then they're the ones that need to examine whether these rapidly increasing costs are worth it.

It's funny, because I think more people are selling games than ever before, with the rise of indie developers.

A "piracy rate" doesn't tell us much of anything. Are they including regions in Russia, China, or Europe where piracy is the norm? Even if piracy went away tomorrow many games would still not be selling much better than they are today. That's the reality.
I'm sure noone reads these comments anymore, but for the record: Ubisoft appears to agree that their DRM isn't helping. Interesing!
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