Piracy, Customers, and Making Money
Posted by Ben Zeigler on March 20, 2008
Stardock Software developed and published one of my favorite games of the last few years, Galactic Civilizations 2. If you’re not a fan of totally awesome turn-based space conquest games (and if you aren’t you should be), you may have heard about their stance on DRM. Specifically, they’re against it and ship all their games without it. Starforce (a leading DRM provider) decided it would be nice to encourage people to pirate Galactic Civilizations 2 in order to send a message. Classy that. Anyway, Brad Wardell (CEO of Stardock) recently posted a great essay on Piracy.You should go read it now, it offers a really interesting perspective.
As Brad outlines, the PC Gaming industry’s insane focus on anti-piracy comes from a fundamental misunderstanding of the marketplace. The basic business plan of PC gaming is two phase: Get as many people as possible to want to play your game, and then get as many of them as possible to pay for it. The concept of “Conversion Rate” in the casual gaming space is an example of this sort of process. DRM makes perfect sense in this context, because it limits the number of people who can play your game without paying for it. Surely the increase in sales totally justifies paying some shady software company or large conglomerate high rates for DRM protection.
If only that worked. Copy protection is always beaten, and fairly quickly. In the most important point in the essay, Brad argues that you should make games for people who will buy your game. The absolute number of people who play your game is important for developer ego and bragging to our relatives, but it doesn’t necessarily make you money. The solution Stardock has is to make games within a profitable genre. There may be fewer fans of turn-based space conquest games, but almost all of them are willing to pay for their games, as opposed to FPS or RTS fans. Stardock also makes an explicit effort to cater to the needs of their paying customers as opposed to potential users. This is the same reason that the subscription-based MMO model works. Our job in the MMO market is to serve our customer base and give them something valuable and unique for the money they give us. Our job is not to sell packaged goods to people who don’t need them. Some people will steal your game, but basically you’re better off just writing them off as a lost cause.
It’s not safe to totally ignore pirates, though. Pirates perform one important task relative to your game: they talk about it on internet forums and to their friends. Early adopters in the PC space are often pirates, and they can be effective for word of mouth advertising. There are other ways to get this kind of publicity (demos and free trials are just as good), but pissing off pirates will just make them angry and spiteful. Michael Fitch, head of the recently closed Iron Lore Entertainment, posted his own essay about piracy. It’s an interesting read and offers a counterpoint to Brad Wardell, because they basically totally disagree. One of the points Michael made struck me as absolutely insane though: the copy protection on Titan Quest caused random crashes on pirated copies and didn’t inform the pirates of why it crashed. Let me make this clear: This is the worst idea ever. Apparently pirates started talking about their crashes on forums and the game became known as unstable. Michael blames the pirates for this, but I’m going to have to say that I blame whoever mandated this decision (probably someone at the publisher) for killing their own word of mouth.
The last important point Brad makes is that all of their games purposefully target lower system requirements. World of Warcraft also does this very successfully, and I strongly believe that the days of targeting only high-end systems is now over. It turns out that people who buy expensive high end systems are early adopters who all know how to download cracked games from bittorrent sites. They’re also the kind of people who don’t tolerate the restrictions of DRM. And there aren’t that many of them. So if you’re targeting higher-end systems, you are targeting the small set of users who have those machines, have enough money left over to buy games, and who are willing to jump through hoops to buy instead of download your game. This is totally obvious from a business standpoint, but it’s still hard to convince many in the game development community to buy in. The whole industry is still addicted to shiny new toys.
On a personal note, CD-based copy protection is basically the stupidest thing ever. You know what I do to every single game I purchase? I immediately download a no-CD crack and install it. I then return the CD to the packaging and never touch it again. Sometimes this fails, so I basically only download games from Steam these days.
In conclusion, trying to convert pirates into paying customers is basically always going to fail. Why would I buy and reinstall a game after I’ve tried it out using piracy? DRM is based on the theory of preventing people from being able to pirate in the first place, but this doesn’t work. Blaming pirates for the failure of your game is a waste of time, because the vast majority of them wouldn’t have bought your game anyway. The way to make money in the PC gaming industry is either to get as many initially paying customers as possible (by focusing on market segments with a lower rate of piracy and providing convenient download services like Steam), or by setting up a business model that is NOT about shipping packaged product. PC Games are not cans of Soup, and never will be.
UPDATE: I originally had a section about how it’s stupid that WoW has copy protection on it’s Cds but I appear to have confused my PC games. I should remember to check this stuff before blogging…