Gaming Piracy - Separating Fact from Fiction

I’m sure most of us have all seen and heard the news recently that’s flared up again on Gaming Piracy and DRM issues.   I’d like to address what I feel is one of the most misunderstood, and taken out of context issues that’s plagued this industry for years; and it’s time to put a put a nail in the coffin on this issue.   PC gaming is not being pirated to the tune of 90% by any stretch of the definition.

First off what is Games Piracy?  I think most of us can agree on one thing and that in overly simplistic terms it’s a form of acquiring a game that is being sold for (n) price, by some method, without paying for it.

Why the flare up?  Ubisoft’s CEO (Yves Guillemot) recently made the following statement that created quite a stir and put a spotlight on this issue that’s been picked up all over the news.

“On PC it’s only around five to seven per cent of the players who pay for F2P, but normally on PC it’s only about five to seven per cent who pay anyway, the rest is pirated. It’s around a 93-95 per cent piracy rate, so it ends up at about the same percentage. The revenue we get from the people who play is more long term, so we can continue to bring content.”

When we see and read articles from industry leaders stating things like this I have to say ‘perhaps not so fast’.  Clearly, in Ubisoft’s experience, something is going on leading them to believe that less than one in ten gamers is legit & paying for their content; and the other nine are pirating it.  To be fair, you have to read the entire article to get the full context.   (Please see the Reference section provided at the bottom of the thread for just a few of the articles I referred to for this piece).   In short: Yves makes a case for the Free to Play business model, but is also chomping at the bit for a next gen Console release believing in the false hopes that that it’ll somehow reduce Piracy.  I’ll prove why this won’t be the case later.

Let’s dig into the numbers a little bit to see if there’s any math behind all this that actually supports their claims.  The short answer is that it’s highly unlikely Piracy is anywhere near that high on PC Gaming for more than just a few reasons.

  • Sources: I spent a ton of time pouring over the NPD, VGChartz data, along with several other public sources on two of their biggest franchises’ life to date sales.  Far Cry 2,(FC2)  & Assassins Creed 1 & 2. (AC1 & 2)  (Note: NPD & VGChartz do not track digital sales)
  • Both franchises have performed better on the Xbox 360 & PS3 over PC at Retail. 
    • FC2:  PC Retail ~.43mu.  360 Retail ~1.52mu & PS3 Retail ~1.26mu.   All released on the same date.
    • AC1:  PC Retail ~.71mu.  360 Retail ~5.13m & PS3 Retail ~4.42mu.   Note: The PC SKU was not available that holiday & released 5-6 months later.
    • AC2:  PC Retail ~.25mu.  360 Retail ~4.82m & PS3 Retail ~5.02mu.  Note: Again the PC SKU was not available that holiday like the Console SKUs & released 3 months later.
    • Note: The fact that we’re missing the Digital Distribution numbers here is disturbing especially since that’s been one of the core strengths of the PC’s performance for years.

However; here’s where the claim that PC gamers are pirating their games at 90% rates begins to fall apart.

  • In tracking the TorrentFreak Statistics from 2009, 2010, & 2011.   There are no Ubisoft games making the top 5 list.  I’m not even sure they make the top 10 list.  (Is this because they have better DRM solution than the EA & Activision titles I see leading the charts?  I don’t believe so.)  In all cases the volume of games being pirated in the top 5 list for 2011 typically varies from between ~2-4mu apiece.  So the grand total for PC Games pirated in the top 5 equals 17.66mu.  (It’s important to keep this # in mind for later)  For the Xbox top 5 pirated games it was ~3.89mu.   They don’t state the data stat for PS3; but it’s probably safe to assume it’s also somewhere near what it is on the 360 since they’re practically tied for the #2 spot behind Wii.
  • Even seeing Console Piracy occur at all is very significant.  Primarily because while it appears to be a smaller amount than the PC – the fact that it’s happening at all on a platform that has at least ¼ of the Install base should be very disturbing to the Console MFG’s & anyone that signs up to ship a game on those platforms.  Consoles pride themselves on their ability to curb piracy and it’s perhaps their #1 selling point to a Games Publisher/Developer.   Alas; not any more.
  • Consoles now suffer from Piracy+Secondary Sales+Game Loaning.   This amounts to huge losses that are not being properly reported or accounted for.  Only on the Console do you get this triple whammy effect.
  • Let’s assume that Torrentfreak is at best tracking ~50% of the down-loads.   We still have to factor in a ton of other things that throw those stats out whack.  Examples are:  Anti-Piracy sites propagating tons of bogus games content to spoof would be Pirates, multiple downloads, legitimate gamers downloading hacks for their games to create digital copies, legitimate gamers removing the DRM so their games perform better and so forth.  There’s a ton of triple, quadruple, etc, accounting going on with these DRM sites.

So let’s revisit that number we stated before of 17.66mu of the top 5 most pirated PC Games in 2011.  To put this into broader context:

  • Nearly every game pirated, as reported by TorrentFreak, was shipped by a Western Hemisphere’s games ISV or targeting a Western Hemisphere customer.
  • There are no Free to Play games on that list for obvious reasons.  (Take hint Game Devs)
  • Several of these games were not even made available in a lot of Retail channels globally.
  • None of these games are native or targeted for, the PRC Market.  Where ostensibly a lot of Piracy occurs.  This is relevant primarily because the Eastern Hemisphere’s Games ISVs adopted the Free to Play business model (PRC is 99% F2P) a long time ago.  It definitely puts them far ahead of the curve over their Western Hemisphere competitor counterparts.
  • 17.66mu across 5 games is still a large volume!  Ok… but realize that World of Tanks has at last count ~32 Million Registered users.  That’s just (1) Free to Play game being played on the PC that hasn’t even been launched yet into some very key Geo’s.  (Interesting Side-Note:  None of the F2P games like this show up on NPD or VGChartz.  In missing the tracking on Digital Sales & the F2P market this poses huge data gaps for contextual data tracking purposes).
  • To put this into an even broader context.  Estimated Global PC Sales(Retail/Digital)/F2P-Users/Subs/SNS-Games for 2011 is as follows:
    • Between 240-310 million units = $18.6b in revenue.   Note that these unit/user volumes are roughly about 2x that of any individual console such as the Xbox 360 or the PS3.
    • If you add in and plug the supposed pirated volumes that are lost (+17.6mu) into the lowest estimated PC Unit Sales/Users volumes you’d end up with ~257mu total.  Or put another way about ~14.6% of total unit volume is being lost.   This is actually a far more accurate portrayal of the total volume of game units/users lost & the impact to sales due to Piracy.
  • IF PC Games Piracy really were 90% then that’s like saying the following:
    • The real PC Unit volumes should be 2.4 billion units/users/subs!
    • Or.. that’s also presuming that instead of .43mu Far Cry 2 units sold Ubisoft is saying that 9-10x that volume was pirated?  For a total of 4.3 million units?  Really?
    • Same goes for Assassin’s Creed 2 for example.  Applying the same logic then is like saying 2.5 million units were pirated on the PC.
    • Yet.. this isn’t feasible since again as we noted earlier in order to see those kinds of numbers pirated you’d have to make the top 5 list on the TorrentFreak list.  Which  Ubisoft doesn’t.
  • Let’s stop picking on Ubisoft for a moment and apply this logic to some other games we know have performed really well on the PC that have exceeded 5 million units.
    • We know at least 5+ million Skyrim units have sold through on PC.   Does that mean that there are 50 million pirated copies out there?  After all… 90% of the PC Gamers are supposedly playing pirated copies of the game – right?
    • What about Battlefield 3?  Another PC Games title that’s moved somewhere in the neighborhood of 5 million units.  So.. now we have another 50 million BF3 pirates!?
    • How about Diablo 3?  We know it’s moved, or will move north of 7 million units.  So apparently there are also another 70 million pirates?  They surely can’t all be playing these games at the same time can they?  
  • That’s a lot of Pirates!  With apparently nothing better to do in their spare time except to play games 24/7.  Personally; I don’t buy it.  The point is simple. There really can’t be that many pirates in the world.   Especially when we also know that it’s next to impossible to exceed those kinds of game volumes for most franchises in their entire history of released games in their portfolios.   To get those kinds of Piracy claim volumes we’d now have to start counting toddlers, moms, & every other conceivable demographic which all of a sudden would have learned to Pirate games.   It simply doesn’t add up.

Here’s where this presumption further falls apart.

  • There are 7 billion people on this planet
  • There is at least ~1.4b or more PC owning Consumers in about 640 m households; and around ~2b or more PC users total with access to the internet.
  • Of that there’s an estimated 300-500+ million of these Consumers with access to Broadband.  Depending on how you define broadband.
  • Only around 500-600 million of the total number of Consumers even like to play games on either a PC & or Console.  (Some estimates place it at between 650-700m ‘gaming’ consumers)
    • Bear in mind that in order to get to this volume we have to count everyone that plays a game on a PC (Farmville to Crysis) and on Consoles.  Console HH’s mostly have PC’s in them as well.  So we have to be careful to not over-count.
    • At least 250 million of this number has a Discrete GPU, the other 350 million have a mix of older GPU’s or Integrated Graphics solutions.   (If we place the total number of gamers at around ~600m.  PC + Console)
    • There are also around 230 million7th Gen Consoles shipped to date between the Wii+360+PS3.
      • Wii:  ~96m,  Xbox:  ~67.2m, & PS3: ~63.9m.   (Total Sold)
      • Factoring in for double, triple, etc attach rates, failures, refurbs, & replacements the combined active 7th Gen Console Install base is likely closer to ~180-190m Households.  Sure, there can be more than one gamer per HH, but let’s not over-count the fact that we’re being generous by grouping (3) distinct platforms.   Most Console HH ostensibly now have 1.3 or > PC’s in them as well.
    • PC unit volumes may seem low when compared to the total TAM (Total Available Market); sitting at between 240-310 million game units.   This is caused by such things as subscriptions where gamers tend to play games for longer periods of time, Console cannibalization, etc.
  • IF the total volume of Gamers across the PC and Console is 600 million.
    • Most Console Owners also own PC’s.  So at a 90% Piracy rate does that mean that there are 540 million people out there that would rather be Pirates & Pirate the game?   If so then that’s over half a billion people sending a clear message that there’s something amiss with the Retail business model.
    • Should we also assume that because a Game SKU released on the Console first… that the Console industry was able to keep those consumers honest & convert them better to being paying customers?  <Nonsense – again… look at the rise of Piracy on Consoles, Secondary Sales, & Game Loaning>
  • Last but not least let’s turn this around for a minute.  What would happen *if* Consoles had the same Install bases as the PC?  After all what’s fair is fair and to make it more apples to apples we’ll only look at the GPU PC install base of ~250m users.
    • Wii’s top 5 Pirated Games for 2011 = 5.05 mu.  On an install base of ~90 million units.
    • 360’s top 5 Pirated Games for 2011 = 3.90 mu.  On an install base of ~60 million units.
    • PS3’s top 5 Pirated Games for 2011 = 3.90 mu.  (*Est: On an install base of ~55 million units)
    • The Total here is 12.85 million Games being Pirated across the Big 3 7th Gen Console Platforms.  As compared to 17.6 million PC Games in the top 5.  Does this constitute a  success story?  Not really; if for any reason remember that Consoles individually are fractions of the install base for PC Gaming.
  • SO… WHAT IF each of these platforms individually equaled the GPU Install base (250m) of PC Gaming?  (Assuming the same rates of Piracy per penetration of the platform).
    • Wii’s Pirated Units would then be at least 14 million units
    • 360 would be 16.2 million units
    • PS3 would be 17.7 million units.
    • Combined:  Piracy rates between these 3 platforms in the top 5 would be nearly 48 million software units if they eachhad install bases relative to the GPU PC Gaming Install base.  Remember: the PC ‘s top 5 pirated games amounted to 17.6 million games.  That figure doesn’t sound so big now does it?
    • Should we be irresponsible now and jump the gun by making the claim that Console Gamers are as big, or bigger pirates than PC Gamers?  (That seems to be the conclusion that some people would jump too)
    • If Consoles ever did reach the same Install base levels as the GPU + APU (Integrated Gfx) ((est: 600 million Gaming Install Base) market combined for gamers, and Piracy rates stayed as high as they are on each Console today – then Piracy would actually be far worse on Consoles than it is on PC’s today.
    • Clearly… if Consoles had the same Install base as their PC counterparts, they have then failed to put a dent into Piracy rates.
    • See how statistics like this can be abused?

Are there other sources of data we can also point to? Yes… some of it is proprietary.  We have some of this in the PC Gaming Alliance.  Additionally; there is some publicly available numbers that I think are interesting and worth point out as well.  Let’s refer to Valve’s Steam Data.

  • Go here:  http://store.steampowered.com/hwsurvey  Then scroll down to the App’s that are commonly installed.
    • You will note ~4+ Torrent clients.  Examples are MicroTorrent, Bit, Vuze, etc.  As you can see at least ~30-35% (1/3rd) of the Steam Users profiled are showing this kind of downloader installed.
    • Can we assume then that at least 1/3rd of Steam Users are Pirates?  Probably not.  I suspect that most of those users are downloading other things either in addition to, or in place of games.  (e.g. Porn, Movies, Music?) We can only guess.
    • The point is this though…. The volume of users, while still quite high at 1/3rd the User’s, is still nowhere near the 90+% rates we’ve heard claimed earlier.
    • Also; I don’t believe we can characterize the typical Steam User as being a Mainstream or Casual style gamer for the most part.  So it should be safe to assume that Steam is representing users who tend to be a little more ‘tech-savvy’ than the average PC user.  Which means….. 30% or less of these users is likely pirating games in a worst case scenario.  Again… where are the other 60% of Pirates going to come from?

 

 

 A question to come back to & ask ourselves here though is why? Why do Cross Platform SKU’s more often perform better on the Console sales-wise over their PC equivalents for Ubisoft?  Is it really because of Piracy?  I believe it is far more complex for just a few of the following reasons:

  • It’s never fair to compare ‘Ported’ Game sales to any other SKUs unless they all launched on the same date and had the same level of promotion, marketing, pricing, and placement on the shelves.   50% or more of retail sales occur during the Holidays.  There can be exceptions to this rule but it’s rare.  Shipping the PC SKU post-holiday is going to typically inhibit its ability to be fairly compared.
  • ~80% or > of any games sales potential primarily happens in the first 30-60 days.  Earlier if the game is available for Pre-Purchase.  After 30 days most games’ sales have a tendency to drop off of a cliff in terms of sales potential.   Gamers want to be on the inside track.  Offering a game later is often seen as insulting in some circles.
  • Platform and Genre:  It’s interesting to note the sales differential between FC and AC.  The first is a 1st Person Shooter, the second is more of an Action-Adventure RPG style game.  From a play style perspective the 1st person shooter genre has always performed admirably on the PC.   Whereas the Action-Adventure style games are great fit for Consoles where gamepads reign supreme.   While I can use a gamepad on my PC, and I do it all the time, I sadly find that a lot of cross-platform games actually don’t even support a gamepad on their PC SKU version!  What’s up with that?
  • Frontloading:  I’m not going to endear any big Western Hemisphere games ISVs by saying this, but let me just say it anyway.  The key reason why the Western Hemisphere’s games ISVs prefer to ship the Console SKU before the PC SKU is quite simple.  They have an exorbitant royalty (Tax) they have to make up for.  In other words, their break-even points have to be much higher now in order to compensate for that royalty, and other costs.  (Hence the “I have to sell between 1-3 million units to hit break-even)  So it absolutely behooves them to try and recoup their costs on a game on a Console SKU first; and then release it to the PC much later in an effort to capture any remaining revenue they can from the PC Gaming crowd.  It’s almost like hedging one’s bets.   Can we blame them?  My personal two cents is that historically we shouldn’t be too harsh on judging this.  However; in today’s world with newer business models, robust digital distribution, technology advances, globalization etc.  The plain and simple truth about Consoles is that they are not ‘Agile’ enough to stay relevant.   Being on a royalty free platform has far more upsides

In closing:  What have we learned, and what are some solutions we can look at that might address all this and bring it back into focus?  Here are the key points to remember about Piracy.

  1. Lots of bad data, or reading into what data is out there?   It’s also possible that there is some misrepresentation of the facts in order to further agendas.   You be the judge.
  2. Piracy has risen substantially on Consoles.
  3. Piracy is decreasing on the PC – when F2P is being implemented and where better Services are being applied.  (Typically via Digital Distribution)
  4. There is no Piracy occurring on Free to Play games.   I’ve spoken now to 3 Games Developers shipping their F2P games up on the Torrents.   This flips the whole notion of Torrents being bad upside down; as now legitimate F2P games are being propagated.  Think of this as a free digital distribution service.
  5. There is little to no Piracy occurring at Retail for ‘Collectors Editions’; and a few other niche corner cases.
  6. Free to Play games can in fact have much higher conversion and attach rates than ~5-7%.  Wargaming.net has proven this with World of Tanks.  They’re seeing the conversion attach rates for micro-transactions now reach between 20-30% or > in some cases.
  7. When there is no conversion or attach and the gamer opts to play for free.  There can still be some value add in the form of advertising. 
  8. We’re not counting Pirated games the way we ought to be.  There is no 1:1 relationship between the Torrent downloads and cracked DRM Games on the PC.  We have to account for double, triple, quad, etc attach rates, legitimate Anti-Piracy/DRM spoofing, legitimate purchasers seeking to remove invasive DRM, and so forth.  However; on the games pirated for Consoles there actually is more of a 1:1 relationship.
  9. Localization is critical for reducing Piracy on any platform.
  10. Offering services that a gamer can’t live without is also a crucial element to success and being able to foster good will towards your consumer.

 

I hope you’ve enjoyed this piece.   In no way am I trying to slam Ubisoft, or any other games company or even Console Platform for that matter.  I have an immense amount of respect for everyone in this industry; and Piracy is not something that should ever be condoned.  I do however feel it’s critically important for us all to have a better handle on all the issues and trends around Piracy; as well as the most accurate data and statistics available.  I dived into a small portion of my data for this piece that I hope you all find useful.

Best regards,

Matt

 

Reference Material and Recommended Reading:

Yves Guillemot (CEO Ubisoft)

Forbes: http://www.forbes.com/sites/davidthier/2012/08/22/ubisoft-ceo-yves-guillemot-pc-gaming-piracy-levels-up-at-95/

Game Industry International:  http://www.gamesindustry.biz/articles/2012-08-22-guillemot-as-many-pc-players-pay-for-f2p-as-boxed-product

Joystiq: http://www.joystiq.com/2012/08/22/ubisoft-ceo-claims-93-95-piracy-rate-on-their-pc-products/

VG247:  http://www.vg247.com/2012/08/22/ubisoft-pc-piracy-rate-around-95-f2p-is-the-way-forward/

Chris Early  (VP Ubisoft)

Venturebeat:  http://venturebeat.com/2012/09/05/ubisoft-shifts-its-digital-rights-management-stance-from-stick-to-carrot/

Several other great reads I recommend

 TorrentFreak:  http://torrentfreak.com/top-10-most-pirated-games-of-2011-111230  & http://torrentfreak.com/ubisoft-blames-piracy-for-non-release-of-pc-game-111124/ & http://www.destructoid.com/here-are-bit-torrent-s-top-pirated-games-of-2010-190459.phtml

Wolfire Blog:  http://blog.wolfire.com/2010/05/Another-view-of-game-piracy  Check out the very first comment.

Volition/Red Faction:  http://videogamewriters.com/red-faction-armageddon-developers-unconcerned-with-piracy-pledge-full-pc-support-5081 Eurogamer:  http://www.eurogamer.net/articles/2011-09-30-how-bad-is-pc-piracy-really-article?page=2

Gamasutra:  http://www.gamasutra.com/blogs/EZacharyKnight/20111021/8709/New_Research_Brings_Much_Needed_Objectivity_To_Game_Piracy_Numbers.php  This is an excellent view of what’s going on and clearly shows that it’s not possible that 90% of PC Gamers are pirating games.  IF there are only ~12.6m unique peers.  Please note that there are at least between ~500-600m PC Gamers in total.

Gamasutra: http://www.gamasutra.com/view/news/39922/Why_Rovio_thinks_piracy_can_be_a_good_thing.php  Rovio’s view on Angrybirds & how Piracy can be  good thing.

PCGamer:  http://www.pcgamer.com/2011/10/25/gabe-newell-on-piracy-and-steams-success-in-russia/

Gamasutra:  http://www.gamasutra.com/view/news/39033/Two_Weeks_For_A_Russian_Launch_Lose_50_Percent_Of_Your_Sales.php

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