The Real Cost of Piracy?
Russell Carroll, of GameTunnel.com and marketing director for Reflexive, posted a fascinating article on Gamasutra yesterday that a lot of people in the biz won't be happy about. It's about piracy. And - while still far from an adequate measure of the effects of piracy, bore surprising results.

Casual Games and Piracy: The Truth

Some fascinating numbers that I'm having some trouble getting my head around and reconciling, as they are surprising and don't follow my expectations whatsoever.

Did Anybody Actually PAY For This Game?
First of all, they discovered that - of the people playing their game, Ricochet Infinity, 92% were pirated copies of the full game.

NINETY-TWO PERCENT!

That means the pirated, illegal versions outnumbered the legal versions nearly 12 to 1. That doesn't include offline play - which might be similar numbers unless pirates are actually feeling less brazen as a whole. That is staggering and sobering. I've heard numbers like this before (in fact, I've heard numbers around 15:1), but I'm sure it's even more sobering when it's your own game - recognizing how many people out there have ripped you off.

While the entire article is fascinating, there are two more key percentages to pay attention to.

Better DRM = MUCH MUCH Better Sales. Unfortunately.
First of all - their best attempt at fighting piracy - fixing the DRM to close some pretty major loopholes (and developers who have sold games through Reflexive have been griping about those loopholes for years) - increased sales by as much as 70%.

This is pretty ginormous. Just think --- if there was one thing you could do at your job that would increase your salary by 70%, would it be worth it to you? Yeah, I probably would, too. If putting the correct TPS cover sheet on my reports would mean an instant 70% raise, I'd do it with a gusto.

This bugs me a lot, because - on the whole - I hate most forms of DRM / copy protection. And it's a shame that it works. This means it's gonna be harder to get away from either that, or from required online registration. I don't like that answer, either, because I'm one of those people who likes playing old games. Games that survived the company that originally created them. If those games required some kind of online registration with a server in order to play, I'd be S.O.L.

And that's just improving an existing DRM system, not a comparison of non-DRM versus DRM. You can make all kind of theoretical arguments you want here. 70% is a lot of lost sales due to piracy. I expect that when this article makes the rounds and discussions, this factor will get forgotten in light of the fact that this had a negligible impact on piracy.

So maybe DRM isn't the clear answer it seems to be.

Most Pirates Are Incorrigible
There are several ways of looking at that number, however, and none of them really follow anti-piracy FUD that equates every pirated copy as a lost sale, either. One way of looking at it is this: The pirates outnumbered the legitimate players in the above sampling at a ratio of 11.5:1. So if the DRM actually worked and every pirated game was a lost sale, then their sales SHOULD have increased over ten-fold!

Not even close. With a 70% increase in sales, that means that 0.7 out of 11.5 went legit with stronger DRM. That's less than 1 in 16 - or 6% - of pirates going legit when forced to.

Or, as Russell points out, you can also look at it as a conversion factor, which might be more telling. According to him, the ratio of decreased downloads to increased sales was 1000:1. There is a TON you can read into that one, too. Maybe the pirates all went to torrent the full game instead of brazenly using up Reflexive's bandwidth for a game they intended to crack. Who knows? But here's the kicker: the classic "goal" for downloadable games is a 1% conversion rate. Meaning 1 sale per 100 downloads. The DRM improvement kicked up that conversion rate by only 0.1%.

So in terms of conversion ratios, there are probably a lot better things you could do with your time and energy to improve conversion.

Conclusions... Still Murky
Now, there are a ton of "what if" scenarios that Software Industry scaremongers and pirates trying to justify their rip-off habits will use to throw these numbers into doubt and invoke apples-to-oranges comparisons. These are more casual games, for one thing, where piracy is a lot less mature. Who knows what the pirates were doing after the DRM was enhanced? Why didn't the other attempts to strengthen anti-piracy measures - like making existing keygens and cracks obsolete - have nearly as dramatic an effect? Would even better DRM have had a greater effect (Boy, you can get into a losing battle here...)? Did the pirates just move on to other games that were easier targets?

What are the long-term effects of piracy? Does the realization that I'm the only one who legitimately paid for something devalue what I paid for, or does it make me feel like a sucker or chump and resentful of the experience? Will we eventually run out of people willing to pay for games?

There's nothing conclusive here, but Russell has graciously provided the entire industry with some numbers that are really, really worth chewing on.

This says a number of things to me:

#1 - Piracy is amazingly widespread.

#2 - A tiny impact on piracy can yield a major increase in sales, but

#3 - DRM only makes a tiny impact in piracy, and is probably not a long-term solution, and

#4 - "Fighting Piracy" is only a part of the solution. If piracy could be entirely eliminated, software sellers would not be miraculously led to a land of milk and honey. While maybe more than the 1 in 1000 pirated versions mentioned in this report represent "lost sales" if all piracy avenues were eliminated, it's highly doubtful it would be anything close to 1:1. MAYBE it would be 1 in 100.

UPDATE: Russell has clarified that the four methods tried to curb piracy were consecutive, which explains why the second and third updates / changes had no effect on sales. He states, " The first fix with significantly increased sales was definitely worth the time put into doing it. It was a great growth for Reflexive that pushed us up to a new plateau. That moment is really clear in the growth of Reflexive over time, so it was worth it. It's possible that even the 4th fix was worth the time, it was recent enough that we're still looking at the long-term results." (On GameSetWatch )


(Vaguely) related stories of woe and desperation
* A Pirate Story
* A Better Way to Fight Piracy?
* PC Game Publishers: Hurt Me Some More!

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Labels: Biz

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