Industry Insider - June 2008

How Piracy Hurts YOU, the Customer

by Eric Marlow

Ouch!

When I think about the direct implications of piracy on the end customer, all I can say is “ouch”. There are so many issues with regard to the issue of piracy, it’s tough to find a place to begin the discussion. Certainly there have been hundreds of articles that decry piracy and the effect on the game industry. And those who know me know this is something I speak against repeatedly.

In a recent interview with consumer website PC Play, Crytek president Cevat Yerli (the company behind the Far Cry and Crysis games) recently said the company will no long be making exclusive games on the PC platform.

“We are suffering currently from the huge piracy that is encompassing Crysis,” said Yerli. “We seem to lead the charts in piracy by a large margin, a chart leading that is not desirable. I believe that’s the core problem of PC gaming, piracy. To the degree PC gamers that pirate games inherently destroy the platform. Similar games on consoles sell factors of 4-5 more,” he added. “It was a big lesson for us and I believe we won’t have PC exclusives as we did with Crysis in the future. We are going to support PC, but not exclusively anymore.”

Ouch!

It can be argued that the game Crysis suffered from other faults and that piracy wasn’t the only reason for lower-than-expected sales. But clearly piracy is an issue in gaming, and it is something that must be dealt with.

Some companies are trying to deal with piracy actively. EA will be introducing the SecuROM system for its upcoming PC titles Spore and Mass Effect. But in a show of consumer disdain for this method, the gaming “community” rose up and made their feelings known. EA has since backed off their plan to require SecuROM activation every 10 days, and will now require it only at installation. SecuROM as you might recall is the copyright protection scheme that caused so much consternation during the Bioshock release.

Recently Titan Quest developer Iron Lore announced it was shutting its doors and ceasing development operations due to a lack of funding. THQ’s Creative Director Michael Fitch placed the blame squarely on piracy. Said Fitch, "If 90% of your audience is stealing your game, even if you got a little bit more, say 10% of that audience to change their ways and pony up, what's the difference in income? Just about double. That's right, double. That's easily the difference between commercial failure and success... if even a tiny fraction of the people who pirated the game had actually spent some $^^&#(#@! money for their 40+ hours of entertainment, things could have been very different today."

According to THQ’s numbers, the USA market has roughly a 70-85% piracy rate, and those percentages go even higher in Europe and Japan. The actual piracy figure varies widely according to which study you wish to recognize, but the common thread is that the MAJORITY of people playing the game didn’t legitimately purchase the game.

Ouch!

Let’s look at things in real terms as it affects you the customer, and I will do so as it relates to the primary maker of the products – the game developer. A typical game developer deal may yield around $2 USD per sold copy in revenues for that developer. Depending on the game, it may conservatively sell between 200,000 and 500,000 for a decent “hit”. So in real terms that could be between $400,000-$1,000,000 depending on the deal the developer is able to obtain and the success of the product in the market.

So let’s crunch a few numbers. And for the purposes of our analysis let’s assume a very conservative piracy rate of only 50%. If a product only sells 100,000 units and they were due $2 per copy, that would mean $200,000 that is due to the developer that they will never see. Depending on the size of the studio, this could be between four and six months of operations cost here in the Philippines. That 4-6 months of costs would then be used to support the development of the next game, or more practically be used to maintain the studio until the next product’s revenues start to come in. Where my own studio is concerned, that is the livelihood of 20 people who have dedicated themselves to making great interactive entertainment products. Take that away from them, and you are not only keeping them from producing great products for you the customer, but you are putting them out of work too!
There are real effects to real people when people pirate games. You are not just sticking it to the “big bad publishers”, but you are also penalizing your friends and next door neighbors too. So don’t think for a second that this won’t impact you – it already has.

Ouch!