Piracy, Secondary Sales, Account/Identity Theft: What’s the real story?

Honestly; I’m not sure anyone truly has a holistic picture of what the ‘real story’ is here. However; every once in awhile I’ll really stick my neck out and go out on a limb to air my opinions on the trends or impacts of piracy, DRM, secondary sales, account and/or identity theft issues in the gaming space. Admittedly it’s much easier to shy away from a discussion like this due to the ‘charged’ nature of the subject matter. Almost nothing becomes more hotly debated or contested that I can think of. Given this let me beg up front for patience and understanding since this blog is very much me sharing what I’ve been able to cobble together on these topics over the past 15+ years while working with hundreds of Games ISVs, OEMs, IHVs and the like.

Let’s start this out by pointing out a great article piece done by Eurogamer's (Robert Purchese) that a few of us just recently contributed towards titled: "How Bad is PC Piracy Really?".

I'd like to build and expand on this article and dive into this in a little broader context. My personal approach is to group piracy, secondary sales, account and identity theft all into one discussion bucket if for any reason I believe they’re all interrelated. A focused discussion on piracy and or DRM separately is extremely useful; but I shy away from this approach a little since it could run the risk of oversimplifying the issues and overlook the cause and effects going on inside the Gaming Ecosystems. DRM was a response to piracy. Just like Free to Play was a response to piracy and so on. Additionally; fears on Piracy and DRM are quick to point out the flaws in PC Gaming and the merits of taking one’s games to one or several of the proprietary Consoles. This is very ironic given that Piracy rates have been creeping up on those platforms for years. Secondary Sales are too often either overlooked, or not mentioned, and I really have to wonder why since it creates a massive revenue vacuum for the Games ISVs that opt to publish their games on those platforms. This is my case for grouping more topics, like Secondary Sales, and Account/Identity theft into this discussion since I believe it's a very complex and a bigger mix of hot issues that warrants a broader view and context.

Let’s cover some of the leading causes, and reasons I’ve heard over the years for why people ‘pirate’ or make a copy of a game (by no means all inclusive or stack ranked):

  1. They don’t want to pay for the game outright or feel it’s too expensive
  2. Not available in my region
  3. Wanted a digital copy of the game they legitimately purchased
  4. DRM was invasive and or degraded game playback & performance
  5. Bought the game, lost or scratched disk, didn’t want to repurchase
  6. No demo and or weren’t sure if they’d like the game
  7. To be malicious - don’t like the publisher
  8. Mafia, grey, and black markets, etc. - I’ve ‘heard through the grapevine that this is lucrative’
  9. Cracked the game because it was a challenge – wanted the bragging rights
  10. I’ll stop here.. I’ve heard some other pretty amazing & even comical excuses for pirating games

Here also are some other anecdotal things I’ve heard over the years 1st hand from the mouths of Publishers that might be worth consideration: (I’ll paraphrase)

  1. Some Piracy is expected and even acceptable. Would rather have them running a pirated copy of our content than spending mind or dollar share with someone else.
  2. Even a pirated game, if it’s good, can over time build into a relationship with that customer and hopefully convert them to a paying one. Can also create brand loyalty and extra product awareness.
  3. I’m able to write off some of my piracy losses.
  4. Piracy allows me to claim a larger Total Available Market
  5. Piracy forced me to make an MMO subscription-based game
  6. Piracy was so bad I changed my business model to Free to Play
  7. Because of piracy we decided to release our MMO or F2P bits up on BitTorrent. Free digital distribution that way

So where do we go from here? What’s the real story? I believe piracy, DRM, secondary sales, and account/identity theft are all creating a “cause and effect” that’s leading us towards an overall reduction in the rates of piracy. Here’s a good portion of my position statements on all these topics. (Note: these are roughly listed chronologically)

  1. Piracy spawned all sorts of things:
    - DRM
    - Authentication Activation codes and Server Side Authentication (e.g. Microsoft’s SSA
    - Consoles - to some degree (Emphasis on proprietary hardware and software solutions)
    - Collector’s Editions
    - Code Tampering Tech (e.g., Arxan)
    - Subscriptions based gaming ( e.g., MMO’s, Premium Gaming, etc)
    - Digital Distribution (e.g. Steam and BattleNet)  Which incidentally also created a massive shift away from Brick & Mortar Retail towards Digitally distributed goods.
    - Free to Play – with Micro-transactions
    2. Account and identity theft brought us:
    - Authenticators – like my Wow Key Chain fob that randomly generates #’s
    - Intel’s IPT (Identity Protection Technology)
    3. Secondary sales spawned:
    - Achievements and Points based gaming and tracking
    - Digital Distribution (Sometimes even as exclusives by not making the game available at Retail initially or ever)
    - Collector’s Editions again. This time with more unique digital goods than ever with one time unique goods tied to the user as a 1 time activation
    4. Most of the above brought us:
    - More legislation and invasive laws in order to help protect consumers/publishers/ISVs

I’m sure there are many more things I could include in the above but in the way that I’ve ordered the cause and effects, as well as if we follow what’s been taking place in the industry over the past ~15 years or so it leaves me with the following position statements. Some of these are tough to validate, but I believe over time will surface as being all or mostly true. (Source: DFC, myself, & other anecdotal conversations I've had with other ISVs. These are my stack rankings)

  1. Free to Play You can’t technically pirate an F2P game
    - Micro-transactions are the path to monetization in F2P.
    - Browser/Web Gaming – lends itself well to the F2P model. HTML 5 is able to provide some pretty compelling content.
    - Scales best on PC due to large Install Base – The going micro-transaction attach is around 5-10%. PC’s and SmartPhones for F2P make a ton of sense here
    - Massively successful in Asia today and coming our way. Piracy was so rampant in APAC that the only business models that could thrive locally migrated to F2P. To the tune of an estimated 99%! The games that are pirated in regions like Asia, LatAm, EEuro, etc are those games still largely reliant on optical disks and maintain a retail presence. (e.g. Consoles or PC Games shipping out of the W. Hemisphere)
  2. Digital Distribution (Largely replacing Brick & Mortar)– Also tougher to pirate
    - I’m sure we’ve all read the news. Practically every Retailer and ISV, due to costs & merits of digital content either have an online store, or publish on one.
    - Honestly; I personally like an optical disk and game box so am hoping that I can keep getting collectors editions that include the ability after authentication of accessing a digital copy of my game. For me this is the best of both worlds.
    - Where Retail tends to be more ‘fire and forget’; Digital Goods go a long way in helping the ISV track where a sale occurred, where activated, etc. These metrics really help provide real time tracking statistics that in turn really helps an ISV ship a better game in the future or respond to game issues much more quickly than ever before.
    - Buy Once – Plays on any Screen: (Longer term prediction) As the Games industry matures I believe we’re going to move more towards what the DECE – Ultraviolet initiative is moving towards for Movies. If we extend that line of thinking to include Games we get a lot closer to the buy once plays anywhere scheme that frankly just makes a ton more sense. This provides more value to Consumers
  3. Persistent Worlds and MMOs More expensive to Pirate & beyond most casual Pirates ability
  4. Social Integration into game (For legitimately purchased games) – Pirated games miss out here
    - These games allow for a myriad of ways to communicate or build social circles. Pirated copies of the game aren’t able to communicate broadly with legitimate servers.
  5. Achievements/Points/et alCan’t really pirate the bragging rights either
    - While the system can be gamed from time to time due to implementation it’s not typical. Users just like being able to track their stats, have bragging rights, etc.
  6. Streaming Solutions: (e.g. Gaikai, OnLive, etc) – Again tougher to pirate
    - Jury is still out here. However; I have heard some ISVs say they were miffed that some of their game IP/franchises died out with the death of 2 consoles in the last decade. They wished that games were more like TV shows that could be streamed.
    - Sentiments like the above make me wonder if there isn’t some writing on the wall when we hear announcements like we did last week with Microsoft signing deals for the Xbox 360 with Comcast and Verizon. Fun to muse on.

So I could keep going, but those are some of my top reasons listed that I believe that piracy is declining. Not to mention, that it just doesn’t add up most of the time. It’s pretty simple when you stop and think about it. When a games ISV adopts just one or even several of these above solutions I really don’t see how anyone could make the argument that piracy is on the rise with all the shifts we've been seeing; especially over the past few years. I’d say at the worst piracy is perhaps stalling out, and best case going to slowly decline as a result of more ISVs adopting and migrating not to one, but even several of these solutions in tandem over the next decade. The ISVs that I've talked too that have adopted the aforementioned are by and large seeing varying degrees of good to great results.

Thank you for following this story. I know this was a long post but wanted to share a good portion of what I’ve been exposed to on these topics over the years.

Thank you! I’d love to hear your thoughts and comments.


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