"relatively few gamers are pirates" : sadly, I don't believe that. I work in the games industry and I am surrounded by people who pirate. They also buy a lot of expensive games too, but they continue to pirate games and movies.

"Blizzard is one of the most successful game developers because create games that are designed from the beginning to work well with the mouse and keyboard" : Blizzard are successful because they created the first main-stream, polished MMO. MMOs are the future of games exactly because the server component cannot be pirated.

Blizzard was already incredibly successful before World of Warcraft. The foundation of World of Warcraft is the brand Blizzard started to build in 1996.

MMOs are the future of games exactly because the server component cannot be pirated.

I'm not sure what you mean by this. There are tons of private World of Warcraft servers. And you can be sure the same will happen for Starcraft 2. It's the social aspect of the server, not the server itself, that can't be pirated.

    the brand Blizzard started to build in 1996.

The man speaks truth. Look at China's game industry, where it is virtually impossible to buy games because folks stole them so much the industry gave up trying to sell them. Instead, everything is a "free-to-play" online game, with monetization through in-game purchases to get through the heaping helping of sucky grind added to the base game. US gamers are voting for this future every day with their purchasing habits -- namely, stealing anything that isn't nailed down while simultaneously making Blizzard and Zynga rich beyond the dreams of avarice.

I'm not in games but I do desktop software and web apps. It seems hilarious to me these days, but I used to actually worry mildly about piracy of my application. Three of the top ten search suggestions Google gives (which are created from popular search terms) for my product's name are incitements to theft, even in my decidedly non-technical niche.

Hah, those were the days. Now I sell SaaS. And just like that, poof, piracy vanishes from my radar.

To your second point: As devinj pointed out, there are a number of private servers that enable playing MMOs without connecting to the servers, albeit with a scale of a few hundred players. A few of them even tweak experience or drop settings for a "more entertaining" experience. In addition, Blizzard was well-known, successful, and loved before World of Warcraft so I'm inclined to lean more towards the notion that there success is because of quality design rather than MMO/DRM implementation.

That is the interesting point: gamers aren't divided between full pirates and full legit. Many people are both. In the case of the pirates who surround you, I notice that a significant part of their budget is devoted to the legal game market. So, if they suddenly couldn't pirate any more, would they buy more? To what extent?

Anyway, the fact that people aren't either full pirates or full legit can't hide the elephant out in the room: pirating behaviour is way more effective at downloading than legit behaviour is at buying. So 20% of piracy behaviour accounting to 80% pirated game doesn't sound odd: it just mean that when legit behaviour buys you one game, pirating behaviour downloads you 16.

Also, a gamer which is 80% legit and 20% pirate will download 4 games for each one he buys. And if you turn his pirating behaviour into legit behaviour, he won't give 400% more, but 25%. Significant, but not the catastrophe music majors would like us to believe.

Finally, 20% of pirating behaviour doesn't necessarily mean a 20% decrease in legit behaviour (and 20% revenue loss). It could just be a 25% increase of gaming behaviour (and 0% revenue loss). This is not all. Sometimes, games are pirated prior to purchase, to try them. Sometimes, players buy the game when they are finished playing them, because they liked it. And sometimes, not pirating the game would just mean not playing it at all.

I won't deny that piracy doesn't cause revenue loss. But we can't deny that the loss is much, much lower than the rate of pirated games. I bet that like in the music industry, the biggest costs are middle men. And the internet makes them less and less useful.

I suspect I'm not alone, and there's a large market of gamers who were more hardcore in high school and college who don't want to deal with the shit they're shoveling, and are quite content with the games we bought years ago.

These days, I have no idea what games are coming up (except biggies like Starcraft 2 that make it to HN). Since I will only buy one or two games per year, it is not worth the effort of keeping up with the latest developments.

What I mean to say is: with the lower cost because of piracy, it is easier to keep an enthusiasm for gaming going, which could ultimately lead to more sales. Also take into account friends talking about games they might have pirated.

Not counting 3rd world countries, where people wouldn't be able to afford non-pirated games anyway.

There are private server instances for World of Warcraft, actually.

Even so, this breaks down: this effect is (as you have noted) not just limited to MMOs. It actually applies to all games/services that use some kind of centralized network to connect players/friends. This means everything from Team Fortress 2 to Warcraft 3.

Yes, it's not as good as the real thing. Neither is running Starcraft without Battle.net, which doesn't stop it from being a fun game even in pirateable form.

Actually, a game being PC exclusive plays a part in my game purchasing decision. Not because of the control, though I have at least two console ports with absolutely HORRENDOUS (un-remappable..) controls (one even tells me to press the green A button to continue...), but rather that I find most (though obviously not all) console games of the kinds of games I like seem to lack depth. I don't know if they cant fit the content into RAM or what (Im sure that cant be it), but for some reaosn a lot of console games feel kinda cheap and lacking to me... I can only assume that its just in my head...

Also, some, though again not all, obviously, console games don't let me raise the resolution over the low low HD.

As a long time game industry veteran, allow me to tell you that this is simply not true. In fact, that is actually the internet's straw man counter argument, which is fueled by a couple poor PR incidents where a few people have made it seem that way.

But the reality is that there are a lot of lost sales, and if you can prevent someone from pirating it, there is a nonzero chance that they will go out and buy it instead of waiting.

What is that number? Who knows! But it's certainly greater than zero, and there's certainly enough impact of piracy to make it worth it to explore methods of minimizing that impact.

I have other issues with the article, such as the assertion that most pirates can't afford the games. Well, my counter anecdote is that I have a bunch of friends who pirate, who make plenty of money and could easily afford the games. They pirate them because they can.

I would expect that everyone knows pirates, and I would expect that everyone knows pirates who make enough money to pay for (most of) the games they play.

(These are my own personal opinions and not necessarily those of my employer)

I thought that was fueled by industry produced reports that blamed losses on piracy and assumed a 100% conversation rate between piracy and sales. (That may be more the music industry than the game industry, though)

What is that number? Who knows! But it's certainly greater than zero, and there's certainly enough impact of piracy to make it worth it to explore methods of minimizing that impact.

Yes, that number is greater than zero, but just how much greater than zero it is, is not insignificant. All methods used to reduce/eliminate piracy inflicts a cost of some sort. DRM annoys customers and is mostly ineffective in discouraging piracy.

For instance, Blizzard removed LAN from Starcraft 2. How many fans did that annoy enough to cause lost sales? How much piracy will that prevent? Especially since it seems there are BNet server emulators on the internet already.

Sales are lost to piracy, and it is always beneficial to find ways of turning pirates in to buyers, be it DRM or some kind of added value. I'd prefer it be the latter, but that's a much longer, harder, and more expensive route, as it requires added development.

Really, the only thing this affects (in terms of the entrenched game industry) is the PC. Piracy on consoles is low enough as to be nearly insignificant, due to the hoops required to pirate on console, coupled with the potential downsides.

I wish for a magic non-intrusive drm for PC so we could use it as a primary platform again. Sure, shoddy ports aren't helping, but at the end of the day, even non-ports have serious issues if they don't ship with a major online component.

I am completely anti-drm on most medias, but with games, there's a catch: They have no other means of income. When a TV show is pirated, well, they still get money from TV ads and dvd sales. When a movie is pirated, they still have the box office sales. When a cd is pirated, the artist still makes money at concerts.

When a game gets pirated, well, too bad so sad I guess. It's a difficult situation for everyone.

You keep making that claim without giving any rationale to it whatsoever? If your way of turning pirates into buyers turns off other honest buyers, it could be a net loss.

Probably all small costs on their own, but they add up.

Where are the numbers? Well, why should they release them to someone who isn't part of their own company?

I don't know what the solution is. I guess the best one is to just make a multiplayer game on the basis of continuing to sell and support it for years at a stretch, like Valve. But that limits what kind of games you make, and would also put you in direct competition with Valve. Which... is probably just as bad as not doing it in the first place.

From article:

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

Besides if you successfully lock away pirates you loose all the good publicity that they give you on forums (provided that your game is any good of course).

> Fix 1 – Existing Exploits & Keygens made obsolete – Sales up 70%, Downloads down 33%

> Fix 2 – Existing Keygens made obsolete – Sales down slightly, Downloads flat

> Fix 3 – Existing Cracks made obsolete – Sales flat, Downloads flat

> Fix 4 – Keygens made game-specific – Sales up 13%, Downloads down 16% (note: fix made after the release of Ricochet Infinity)

...the first time they fix their DRM they get a 70% sales boost. Another time they see a 13% sales boost.

Now there are probably some other factors involved that they don't mention in the article (plus they don't say how long the increased period of sales lasts), but surely a 70% spike in sales is worth chasing?

Why should it be greater than zero? There may be cases where people use a pirated copy as a `demo' and decide to properly buy the game later on. I concede that this effect is probably minor--but its existence suffices to justify the need of data before you can assume that the number is non-negative.

There's support cost (some pirates are for sure dumb enough to call/email support even though they didn't pay), then there's the cost of infrastructure. Depending on the type of your game this can just be hosting a high score list or much more on the server side.

So depending on your game, a pirate isn't just lost revenue but it will actually cost you some amount of money - in some cases a significant one.

In reverse, that means that honest players are in a way paying for the pirates as the developer of the game has to ask honest players for enough money to run the infrastructure for everyone - including the pirates.

But in most cases an insignificant one. I expect a very small number of pirates are dumb enough to contact or email support. And I expect most pirating is distributed over bit torrent, and are hacked so that they are pirated so that they don't ever report back home (that's half the job, right)

It would be interesting if wolfire too a look at this aspect but i doubt the result is significant.

If someone exchanges 3 hours of pay for a game how is it fair for them that the guy sitting at home doing nothing gets it for nothing and it goes down to he wouldn't have been able to afford it anyway.

The article didn't justify piracy in a moral sense by talking about people who wouldn't have bought it. He was trying to build an argument by saying most pirates wouldn't buy the games in any case, so that describing pirates as potential customers is erroneous, and therefore high piracy rates are not necessarily the cause of poor performance in the market.

The example of the iPhone was particularly good, I thought. From the numbers, it seems self-evident that app piracy isn't actually a big problem, even when most apps are pirated.

And for what it's worth, fairness has little to do with anything outside of childhood; there's no daddy you can go running to saying "it's not fair!", only economics, courts and politics, each with its own dynamics, but mostly coming down to power in bargaining.

Also,

> Isn't that how our economy works? You either have the money for something and you buy it or you don't have to money so you don't get it.

No, that's how a scarcity economy works; the people who don't pay don't get an X so there are Xs left over for the people who do want them. An information economy works completely differently: the best possible "solution" to distributing an information product is to have everyone in the world owning it at the maximum price they're willing to pay, on a value gradient all the way from $billions to $0.

Using this comparison, one piece of fine art is no different in value than the other because the value of the paint used to create each is the same.

"that's how a scarcity economy works; "

I keep hearing this argument and it's just wrong. Just like art, the scarcity isn't in the bits that you can copy. It's in the talent, time, and energy used to arrange those bits on a higher level.

When anyone can create (not copy) Photoshop CS5 in a few hours on their computer, you might have a point.

"An information economy works completely differently"

I like how software, music, and movies are called "information" only to make the argument that it should be free.

"the best possible "solution" to distributing an information product is to have everyone in the world owning it at the maximum price they're willing to pay, on a value gradient all the way from $billions to $0."

If you want to make a living, this doesn't work. If people are given the choice of paying $100 or $0, most will pay $0. This is why business doesn't work on the basis of donations.

The product itself _is_ the set of copyable bits, and this _is_ scarcity-free, due to having zero marginal cost of production.

In a non-scarce market, people pirating your game is economically equivalent to e.g. people reading books instead, or spending their time writing their own games. Pirates are just another category of people who aren't your customer.

The best possible solution to piracy is to _ignore_ it, and focus on identifying your actual paying customers and developing products for them.

But if you absolutely must think of piracy as lost sales, then use piracy volume as an input into your demand curve and adjust your pricing model accordingly.

But don't waste your talent, time, and energy trying to fight a Quixotic battle against a macro-level phenomenon that you have no actual control over.

It doesn't have a $0 cost of production. Did it cost Microsoft $0 to develop windows?

"The best possible solution to piracy is to _ignore_ it, and focus on identifying your actual paying customers and developing products for them."

I disagree. While it is good to focus on paying customers, if an industry ignores it, they will quickly put themselves out of a job.

"But don't waste your talent, time, and energy trying to fight a Quixotic battle against a macro-level phenomenon that you have no actual control over."

It's the people that want free stuff that are trying to tell me I have no control over it. I know for sure that adding copy protection for software increases sales.

The other issue is with search engines like Google. If the pirates get organic keywords that are higher than a legitimate source and offer the same thing for free, many users will go to the illegitimate source and never purchase.

It's okay though. With the Internet getting faster and cheaper, I see most software apps going to a service eventually.

You skipped over the word "marginal," which was the most important word in that sentence. http://en.wikipedia.org/wiki/Marginal_cost

Most pieces of software cost millions to develop, so I don't think it even applies.

Software does have zero marginal cost of production, so someone making an illegal copy of your software does not create any actual cost for you in the way that someone stealing your physical inventory would. So the impact of an individual using a pirated copy of your software is the same as that individual not buying your software for any other reason. The macro-level impact of piracy is the same as the impact of any other macro-level factor that discourages people from buying your product, e.g. a competitor offering an equivalent or better product at a lower price point.

I'm not saying that you shouldn't assert your copyright in the face of brazen piracy. But the best way to earn your ROI for developing the product is to maximize the value that it creates, and thereby maximize the number of people who will willingly pay for your product. Focusing on pirates, who are manifestly unwilling to pay you, is a dead-end. Spending money on DRM is a waste of capital that could be used to improve the product and attract more paying customers.

This isn't true. When you steal physical goods..the original owner loses just the cost of the physical item. It doesn't change the value. Digital goods are different. As more and more people pirate it, the perceived value approaches $0, which has the potential to destroy a business. Even worse than this, if it's not stopped, more and more people will just start assuming that software is free (and will not want to pay for it). Piracy hasn't just destroyed a business, it's destroying many industries.

You may be fine with this. However, it will just result in more forms of DRM and an increase in services where you don't get to install it on your computer. I don't see the people bitching about DRM offering any kind of alternative. Most people, like you, won't even admit there is a problem with piracy.

You also can't say that the owner doesn't lose anything. I have been involved with too many businesses that have seen piracy directly effect their business. With my own business, my sales dropped 40% when there were cracks readily available. When I disabled the cracks, sales went back up to normal.

"Will customers buy my product, and if so, at what price?" is an enormously non-trivial question, and the entire discipline of marketing revolves around trying to answer it.

How much weight would you give to piracy against all of the other relevant variables in assessing the potential market value of a product?

Very true. However, if you have sites on the Internet that are more popular than yours giving the same thing out for free, eventually you won't have to even ask the question. It will be answered for you: $0. Most people take the path of least resistance. If they are given the choice of downloading something for free or buying it for $50, many will always find a reason to justify not paying for it.

If the pirates were actually coming out with something innovative and competing (an example would be creating independent labels to compete with recording industry) the industry would truly have to worry. Instead, content is just copied for free and spread around. The only real defense to is to add more protection. Since the demand is just as strong, the industry doesn't really know if a loss of sales is because they are putting out shit or because of freeloaders.

It actually may prevent good movies, music, and software from coming out and hurt consumers in the long-run. But, most people don't care. They just want free stuff and will go to great lengths to justify it.

The fact that many software products do well on the market despite rampant piracy illustrates that there are plenty of customers who are willing to pay, and see the value in buying the product even when pirated copies are available.

So if your product isn't performing as well enough to be viable, and you don't know whether to attribute it to (a) pirates copying it for free, or (b) the possibility that your product isn't very good, what response is more likely to generate positive value? You can (a) fight the pirates, incurring additional expense and/or diminishing the value proposition for your paying customers; or (b) improve the quality of your product in ways that actual customers will appreciate anyway.

If the answer is (a), and the target market for your product is composed mostly of freeloading jerks, you're probably focusing on the wrong market.

Or you find a way to get it cheaper. Countless innovations throughout history have their roots in someone wanting something, but not being able to afford it. Piracy is just an unfortunate side-effect of this driving urge.

I think the result will be drastically lower budgets to the point where someone can make a dollar selling the content for a dollar or putting ads around/before it online. It's just a matter of whether we can accept that, it may be a good thing? The budget models for movies right now does seem to be a bit out of whack.

More importantly, neither of them require online interaction - you can set Steam to an "Offline Mode" in case I want to go an airplane or my Internet connection isn't doing so well. On top of that, I regularly max out my downloading speed when moving games around on Steam. In Steam's case it's much more convenient than pirating (don't have to check for quality, no cracks to apply) and adds even more value (checks for updates automatically) to the game. On the flipside, it's exceptionally difficult to bundle up games shared from Steam - but the gifting codes are just as easy as buying the original game. Blizzard hasn't yet made it too difficult to bundle, share, and upload a downloaded game (other than multiplayer not working due to CD-Key issues), but I find a lot of my value in the multiplayer component.

That kind of direction, where DRM adds value to the game rather than adding layers of complexity, is the direction I wish DRM would go in.

It will become an issue once steam goes away.

As an example how copy protection can bite you years later: I have some old DOS games that verify the CD-ROM. Not if you try to run them in DOS-Box or something, you will have to find a DOS driver for your CD-ROM drive (at least I had the issue once, when I still had an SCSI drive. Not sure what it would be like now). Needless to say, I haven't played those games again. One of them was "Little Big Adventure" - it is a shame that such gems will eventually be lost forever.

As TechDirt says about music, obscurity, not piracy, is the problem for many artists. As someone that enjoys playing games, I find this often to be the case when trying to find good games.