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This post has been dissected from http://blog.wolfire.com/2010/05/Another-view-of-game-piracy, while I have tried to preserve the file formatting, WordPress would not allow it! Still the text is here, the wolfire blog is indented twice and in Dark Red, and my reply not indented and in black!

There is no ill will towards David, and I hope he takes none! But still this is a pretty common argument on the internet. One that I all too often see from many others like David, this is supposed to be serious and almost a justification for piracy. Here I have tried to debunk claims with some sensible arguments, and I hope I have shown this!

Another view of game piracy

201 comments By David Rosen on May 6th, 2010

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

It’s not about the declining PC sales; it’s that the profit margins are so small that it doesn’t make sense to release to the PC markets. This is the cause of piracy, to reduce a small market even further, to the point where publishers no longer see it as a viable option! Remember all companies are businesses first and PC gaming publishers second! That’s how they make their money, and it’s all about money!

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

No, this isn’t a common assumption, and you have taken the 90% from one estimate and applied it across the board! Like saying 90% of Toyotas never break down, so 90% of Fords never break down either.

In fact people who always use this claim, “That one illegal copy doesn’t equal one legal sale” are illegal downloaders or Pro-Torrents. While I do agree that most pirates are gluttons. That some even download vast amounts because they can, and not because they have the intention to steal or even buy. However, if I had to bet, I would say that pirates would buy “like an average consumer” if they stopped downloading PC Games.

Let’s be honest, if you used this excuse, your mom would clip your ear and tell you to “Stop acting so childish!” And it’s true, if we continue to illegally download, and it’s gotten to record numbers, what can we expect from PC Publishers? Why would you want to start a business where you product will be taken off you, and you have no control over it?

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

Hang on a second; a moment ago you were just saying that it was wrong for publishers to go assuming that 90% was wrong! Now you’re assuming that it could be 50%! No you have to rewrite that, and this time try a level headed attitude! Something like: “We have no idea what the actual piracy levels are! Could be 50, 90, it’s anyone’s guess!”

iPhone piracy

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

 

 

 Hey in the graph, where you got the figure for USA: 5%, it clearly says China is 38%! So how can you say “The highest estimate I’ve seen is that 10% of worldwide iPhones are jailbroken.”

 

It all comes back to the percentage figure again, saying 10% – 50% – 90%, really means nothing until you match a unit figure. Such as the number of devices that are jailbroken, stated in the report you have referenced, but forgotten to mention, so I’ll just remind you:

“To date, Pinch Analytics has received data from approximately 4.0 million jailbroken devices.  About 38%, or around a million and a half of those, have used a pirated application.”

http://www.pinchmedia.com/blog/piracy-in-the-app-store-from-360idev/

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

Simple! One minute you’re saying not to make assumptions, next you’re telling us that the answer is simple!

While I do agree, that pirates probably consume more than the average gamer, what I fear is the rate of growth! Let’s take torrents as an example; the technical ability of downloading is fairly simple, after that, it becomes very easy. Now everyone is at it, and soon no one will buy a PC game. (Or at least I fear one day this might become a possibility?)

You probably seen the torrentfreak top 10 most downloaded on bittorrent:

 

 

Spot Number 2008 2009 Increase of
1 1,700,000 4,100,000 241%
2 1,070,000 3,200,000 299%
3 940,000 2,350,000 250%
4 860,000 2,100,000 244%
5 830,000 1,850,000 223%

 

But what you have to really see is the increase between the spots. Across the top 5 figures you can see the downloads have increased dramatically. Nearly 250% for each case, which means that the numbers of pirates are growing…! It will be interesting to see this year’s figures in December 2010!

Let’s consider the following scenario. Because game pirates can get apps for free, they download a couple new games every day — or about 500 games in a year. On the other hand, normal gamers tend to play the same game for a longer time — buying an average of 5 games per year. If this seems low to you, then consider that you are also reading a post on an indie game developer blog. You are probably more hardcore than the average gamer. Anyway, given these statistics, if the market consists of 10 million gamers, then there are 500 million pirated game copies, and 90 million purchased game copies, From the perspective of every individual game, 80% of its users are using pirated copies. However, only 10% of the market consists of pirates.

Why are you comparing the piracy of iPhones to the piracy of the PC Platform? Why don’t you compare something on a similar par, Say the piracy levels of an Xbox 360 Console against the PC! Surely that would make more sense?

It’s strange that you haven’t referenced any data in that paragraph. You taken previous assumptions and other guesses and mashed it together as a “word problem” which you advise people to skip? This is exactly what you accused the Game publishers of doing, making assumptions!

 All is based on assumptions you believe to be true!? There is no real evidence here, just what looks to be right! “I watched Superman once, and you can clearly see that Lois is flying, holding up superman.” 

The “Try before you buy?” paragraph towards the end of the document you have referenced clearly states the following:

The average “lite” to paid conversion is approximately 7.4%. In other words, about 1 in 14 people who try a free ‘lite’ application go on to purchase the paid version.

If application pirates are purchasing applications in order to try before they buy, we would expect to see a similar conversion ratio.  In fact, pirated-to-legitimate conversions are approximately 0.43%.  About 1 in 233 installations of a pirated application eventually become a legitimate purchase.

PC game piracy

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

No, you are missing the point from the business side, and to take your figures here:

Average gamer buys 3 games a year!

10 million gamers worldwide!

20% are pirates, so out of 10 million, 2 million are pirates!

2 million pirates buy 0 games a year, but download 500 games a year!

So at worst publishers are losing out on 2 million average users who would have bought 3 games a year, but now they are pirates that download 500 games a year, but buy nothing!

I would also suspect that the average pirate is not an average gamer, so they would buy a whole lot more!

2 million customers x 3 games = roughly 6 million units.

An average PC game sells at $50 (?) which means 6 million x $50 = $300,000,000

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

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

There you go again just with the statistics 4% of what?

Elephants, giraffes, 10, 100 …? How many are we talking about?

 http://www.next-gen.biz/news/npd-four-per-cent-of-us-gamers-admit-to-piracy

 “the four per cent piracy rate represents over six million consumers when the data from 8,000 online survey respondents is weighted and projected to be representative of the US population.”

 6 million average games buy 3 games a year, at $50 per game = Do you see where I am going with this word puzzle?

 http://news.bbc.co.uk/2/hi/technology/8354166.stm

“Online reports suggest that as many as 600,000 gamers may have been affected.

Microsoft confirmed that it had banned a “small percentage” of the 20 million Xbox Live users worldwide. “

 

“4% of PC gamers in the US admit to pirating games, a number that is comparable to XBox 360 piracy statistics”

( 600,000 / 20,000,000 )  x 100 =  0.3%

How can 0.3% be compared to 4%, and in real terms, how is 6 million+ compared to 600,000 gamers!

“Game developers would be losing 20% of their revenue to piracy.”

  $300,000,000 (PerYear)! The bloody cheek of Game Publishers, for complaining, chump change!

But would pirates really buy games?

Anecdotally and from studies by companies like the BSA, it’s clear that pirates for the most part have very little income. They are unemployed students, or live in countries with very low per-capita GDP, where the price of a $60 game is more like $1000 (in terms of purchasing power parity and income percentage). When Reflexive games performed a series of experiments with anti-piracy measures, they found that they only made one extra sale for every 1000 pirated copies they blocked [7]. This implies that their 90% piracy statistic caused them to lose less than 1% of their sales.

That is the million dollar question! But your use of the word anecdotal is laughable, when you consider the liberal brush you used here!

Forget about using other poor countries to justify a rich countries need to download pirated material. They have a legitimate claim, nobody can say that they don’t, and I too believe it is outlandish the prices charged for software!

Another million dollar question! When Reflexive Games tries to block pirate copies, how many sales does it generate? Of course this is a tough question to answer, but when you look at the games want value, in this case I think we all know that classic game Ricochet Infinity?

This is the nature of the crackers, as they can pretty much crack software on the go. If you use SecuROM (as 90% of game publishers are claimed), any updates afterwards are so easy removed. The company is wasting their money going with a DRM in the first place!

Would anyone care to have a guess if Modern Warfare 2 couldn’t be cracked! A game that was highly desired? What the unit sales would have been for the PC?

Why are PC games really losing sales?

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

Yeah when a homeless man steals a loaf of bread … it’s the shopkeepers fault! He should have given it to him!

Only we aren’t talking about an item of necessity, we are talking about an item of luxury! Let’s put this into perspective, we are tarring all pirates as poor, but entitled to be able to download games for free! That they have nothing better to do other than play 500 games a year. But not poor enough to have a fast PC machine, to run said games. Or a fast internet service to download these games.

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

What about the good, bad and the ugly? Because this paragraph suggests that only bad “Not Fun!” PC games are pirated. That the good ones are not pirated as much?

That games designed for the console, Ported, are not fun to play with keyboard and mouse! These are really weak arguments and it almost beggars belief!

Ports: All games are designed on the PC and are just compiled for their respected console or on the PC Platform. It is very easy for developers to do this; there really are no more ports these days!

There are plenty of games that play well on the PC, over the console version. RTS, MMO, Puzzle Games, and even FPS. Is that all of them? I don’t know of any games that fill the criteria “are not fun to play with a mouse and keyboard, and don’t work well on PC hardware”!

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

Blizzard, the makers of World of Warcraft, I must admit you choose well! Out of all the companies you chose the one where the game is actually online. Where the DRM is to be able to play on their server, so there is no way to circumvent this! So if you do something illegal or against the rules they have the power to kick you out! Making this unique compared to a single player game, where once it has left the factory, the developers have no control over it!

With the Humble Indie Bundle promotion we’ve seen that when we treat gamers as real people instead of criminals, they seem to respond in kind. Anyone can get all five DRM-free games for a single penny, and pirate them as much as they want — we have no way to find out or stop it. However, in just the first two days, we have over 40,000 contributions with an average of $8 each! Would we have seen this much support if the games were console ports that only worked when connected to a secure online DRM server? We’ll never know for sure, but somehow I doubt it.

The question is: Will pirates treat you with respect?

If you have something they wanted, do you think that you would be treated any differently?

While over a million and a half in sales is a very respectable number, you should be very proud of yourself. I wonder how you would feel if you had done this on a larger scale and to see your effort goto waste!

Good Luck in your endeavours!

Having been to your site and seen what you are about, I must admit you deserve it. You have done well, and there is no animosity to you in anyway! Just as you are passionate about anti-DRM, I am the same about anti-piracy!

 I particularly love your YouTube vid!

James

Piracy is bad? Isn’t it?

Yes of course, but what I am talking about here is how bad is it? This is one of the main problems with Piracy! Any figures or statistics are hard to measure, hard to quantify, and even harder to get. Anyone looking into Piracy will know about the game “Call of Duty: Modern Warfare 2”. Not because it was the most pirated, or that it was one of the best selling game of 2009. But because of all the attention, people have actually gathered some piracy and sales statistics for it. So when people talk about the scale of PC Game piracy, people always refer back to Modern Warfare 2.

The Game itself had as much praise as it did criticism. Some people loved it, and some thought it was not as good as the last, however good or bad people still kept talking. The story for this game doesn’t end just with its piracy story. However if you would like more information I suggest reading it from this very informative site. (http://www.modernwarfail2.com)

Call of Duty: Modern Warfare 2
Modern Warfare 2 is a first person shooter developed by Infinity Ward, and published by Activision. This game was highly anticipated, because it was the sequel to the bestselling Call of Duty 4: Modern Warfare. During the release months it received much critical acclaim and lots of TV advertising. You can read more here at Wiki.(http://en.wikipedia.org/wiki/Call_of_Duty:_Modern_Warfare_2)

 

What does that mean? Is piracy a big problem?
Yes, but it is not a clear cut answer! One of the main ways game publishers can tell if a copy is pirated is through support. For example, as cheeky as it is, even people who download the game illegally will sometimes require tech support. From this, and the suspicious questions asked, Publishers can guess as to the number of illegal copies that exist in the market.

The best way to see the problem is to compare the sales and piracy pattern. When Modern Warfare 2 for the PC is matched against the XBox 360 version, we find an almost trend reversal. That the sales for the Xbox matches the piracy level for the PC; and the Xbox piracy figures matches the sales for the PC. Of course the scale is different, but it does give an insight into the sales that should have been for the PC, if Piracy wasn’t a problem.

 Picture taken from PCFormat, Issue 239, May 2010, Article: A World of Piracy, by: Tamsin Oxford.

 

So there is a problem?!?
But no one is sure how big the problem is! Most pro-torrent sites will point out that an illegal copy won’t mean a direct sale. Also arguing illegal copies are people speaking out about the restrictive DRMs bundled with the software. Claiming that if Game Publishing companies removed the DRMs, resulting sales would go up. There is no evidence to support this, and even evidence to support the opposite.

The PC Game “World of Goo” suffered a 90% piracy rate at the hands of illegal downloaders. The fact is even more shameful as this was the first release from a small independent games company. The game itself was released without a DRM protecting its media, and also received critical praise as being one of the best puzzle games of 2008. Did resulting sales increase? No, a shame, but a lesson learned!

DRMs aren’t too restrictive, are they?
But the customers have a point … DRMs ARE restrictive! They generally only annoy the customer, but the illegal downloaders rarely experience any DRM issues.

In 2008, Assassin’s Creed was released for the PC. What is significant, is the game’s DRM, which was badly cracked, and thousands of illegal downloaders got their hands on this game. DRMs have security features that if someone attempts to remove the security protection, the game will fail. In this case, this is exactly what happened; the resulting bug was called the Jerusalem bug. (Referring to the place “Jerusalem” that when entered into during the game, would cause it to crash! Not the actual living insect, yes there is one!) But of course this wasn’t discovered until much later and Ubisoft received the full brunt of blame, not the people who tried to remove the DRM.

Is it right that DRM’s are on the game in the first place? No.
Is it wrong that companies use DRMs? Again the answer has to be No!

So there is nothing the Publishers can do?
Two horrible words, Cloud Computing! For many reasons, this is the worst thing to hit the PC gaming industry since the … DRM. Don’t get me wrong the technology is very clever and has much potential, just like the …DRM. But honesty I can’t blame the Gaming Publishers for wanting to protect their products. What is really troubling is that OnLive beta across America in June 2010, and I feel that this is too early.

Cloud computing, for gaming, the game sits on a server and is streamed by video to the user. There are a hundred and one benefits to the game publishers, and nearly none for the customer. But what I don’t like about this the most, is you will never own your game in any way.

What’s the Answer then?!?!
We have it, and we want to tell you all about it! We have all the benefits:
• Not an intrusive DRM!
• A complete Piracy Solution, a Strategy!
• Benefits for Customers and Game Publishers!
• New Markets!
• New Control over your products!
• Low Costs, High Returns, Larger Profit Margins!
Come find out what we are talking about!

Information Sources:
Wikipedia Review of “Call of Duty: Modern Warfare 2”
Modernwarfail2.com: Sales flop in the UK!
Gamespot.com: Five-day sales hit $550 million
TorrentFreak.com: Most Pirated Game of 2009!
Arstechnica.com: A Crying Shame, World of Goo piracy rate near 90%

Picture taken from PCFormat, Issue 239, May 2010, Article: A World of Piracy, by: Tamsin Oxford.