A question about the gaming market

[Lagmonster]

I want to headline this thread by strongly reminding everyone that I'm strong in neither economics nor marketing.

When you make a game for the PC, you run the risk of that game being pirated. In the case of a pirated game, a developer makes smaller profits because they can't force all the people who actually play the game to pay for it.

When you make a game for consoles, you run the risk of that game being resold. In this case, a developer makes smaller profits because they can't stop gamers from handing their discs to whoever the hell they want.

My question is this: Is there any way to know which of these so-called 'lost profits' is likely to be larger?

[Bounty]

If a person owns a game and resells it, one other person can play it without paying the distributor directly.

If a person owns a game and releases it for piracy, thousands can play it without paying the distributor directly.

My gut says option #1 is going to be a much smaller revenue haemorrhage than option #2.

[General Zod]

If a person owns a game and resells it, one other person can play it without paying the distributor directly.

If a person owns a game and releases it for piracy, thousands can play it without paying the distributor directly.

My gut says option #1 is going to be a much smaller revenue haemorrhage than option #2.

The actual "loss" of income is highly questionable. If they're pirating it what evidence is there that they would have paid anyway as opposed to just not playing?

[Zixinus]

When you make a game for the PC, you run the risk of that game being pirated. In the case of a pirated game, a developer makes smaller profits because they can't force all the people who actually play the game to pay for it.

If faced with the prospect with paying for a game or not playing the game at all, what do you think your average pirate will do when he can't afford the game or doesn't think that the game is worth buying in the first place?

If people can buy the game and want to buy the game, they'll buy the game. If they can't afford it but still have the hardware, they'll just pirate it.

The only question in this, is statistics.

When you make a game for consoles, you run the risk of that game being resold. In this case, a developer makes smaller profits because they can't stop gamers from handing their discs to whoever the hell they want.

That is a risk you will have to take account in and will be present in all consoles. Forcing people to be only allowed to play one game on one specific console will be met with resistance and outrage. After all, whether this is the case legally or not, they brought the copy of the game: it is theirs and they can do whatever the hell they want to do with it.

My question is this: Is there any way to know which of these so-called 'lost profits' is likely to be larger?

Pirating. Console copies are traded and still sold, even if at the fraction of the retail price. Even trough the aid of the internet, this is still a physical process with limitations imposed by physical mechanisms: people may want to keep their used games, the game disk may become damaged, the console it is sold on may become obsolete.

Pirating is done over the internet for no money at all. Pirating also effects the console market, even if only less significantly. A digital copy may be distributed for years, even a decade after the studio announced bankruptcy, and is pure data that can flow freely between computers as long as there is an interest.

I know people that have mod-chipped their expensive console just to play games on it. They can afford the console, but not to regularly buy games for it.

Besides, from the developer's standpoint, their loss is a fraction compared to that of the publisher's. After all, it is the publisher that gets most of the money off sales, not the developers. Publishers paid the developers, publishers frequently own the developers (even if not the company/studio itself) and most of the overhead is from publishers.

[General Zod]

Pirating. Console copies are traded and still sold, even if at the fraction of the retail price. Even trough the aid of the internet, this is still a physical process with limitations imposed by physical mechanisms: people may want to keep their used games, the game disk may become damaged, the console it is sold on may become obsolete.

None of the money from resales go to the developers or publishers, only new sales do.

Pirating is done over the internet for no money at all. Pirating also effects the console market, even if only less significantly. A digital copy may be distributed for years, even a decade after the studio announced bankruptcy, and is pure data that can flow freely between computers as long as there is an interest.

Game studios tend to make most of their money within the first month of the game's release, so I'd question how much it really impacts their sales in the long-term.

[Zixinus]

None of the money from resales go to the developers or publishers, only new sales do.

Good point.

Game studios tend to make most of their money within the first month of the game's release, so I'd question how much it really impacts their sales in the long-term.

Again, good point, but pirated games appear as soon as official release but sometimes even before if there is a leak or if some pirate gets hold of the copy of the game.

I talked about decade-long uploads (or rather, the same pirated game resurfacing whenever there is an interest) just to compare traded copies that either end up in some collection or just become junk/useless.

[General Zod]

Again, good point, but pirated games appear as soon as official release but sometimes even before if there is a leak or if some pirate gets hold of the copy of the game.

I talked about decade-long uploads (or rather, the same pirated game resurfacing whenever there is an interest) just to compare traded copies that either end up in some collection or just become junk/useless.

Since we're talking purely about sales loss, I'm not sure why pirating would necessarily impact sales anymore than someone playing a demo and deciding not to purchase based on that (lol multiplayer only demos). Plus the chances are someone who pirates a game was never planning to purchase it anyway, so I don't really know if you could count that as a lost sale.

[Zixinus]

Since we're talking purely about sales loss, I'm not sure why pirating would necessarily impact sales anymore than someone playing a demo and deciding not to purchase based on that (lol multiplayer only demos). Plus the chances are someone who pirates a game was never planning to purchase it anyway, so I don't really know if you could count that as a lost sale.

My point was that it impacts it just as much as it does with its long-term sales. I admit that I misunderstood your statement.

[General Zod]

Since we're talking purely about sales loss, I'm not sure why pirating would necessarily impact sales anymore than someone playing a demo and deciding not to purchase based on that (lol multiplayer only demos). Plus the chances are someone who pirates a game was never planning to purchase it anyway, so I don't really know if you could count that as a lost sale.

My point was that it impacts it just as much as it does with its long-term sales. I admit that I misunderstood your statement.

So far virtually every study I've seen on the subject shows that piracy of goods that can be pirated digitally has minimal impact on actual sales. So I don't know why games would be significantly different.

[Stark]

Pirated games appear on day one. It doesn't take any real time to show up.

The difference between the options in the OP is that piracy is illegal. You can't stop people reselling games (even if it was as much of a loss in profit - ps, genius, you can resell PC games too) but you CAN attempt to stop people pirating your game, at least in the critical early weeks.

Is it just me, or is this thread just 'wah wah it's not piracy'? While Zod's right and there is little evidence pirates would ever what bought whatever they pirate, how can people expect boards and shareholders and decision-makers to look at 90% pirate keys and not think 'we need to capture some of that market'? People who think piracy doesn't drive decisions are retards, whether piracy is really lost profit or not.

[General Zod]

Pirated games appear on day one. It doesn't take any real time to show up.

The difference between the options in the OP is that piracy is illegal. You can't stop people reselling games (even if it was as much of a loss in profit - ps, genius, you can resell PC games too) but you CAN attempt to stop people pirating your game, at least in the critical early weeks.

Is it just me, or is this thread just 'wah wah it's not piracy'? While Zod's right and there is little evidence pirates would ever what bought whatever they pirate, how can people expect boards and shareholders and decision-makers to look at 90% pirate keys and not think 'we need to capture some of that market'? People who think piracy doesn't drive decisions are retards, whether piracy is really lost profit or not.

I don't think anyone's saying it doesn't drive decisions, but some of the routes companies take to stymie piracy make you wonder what the fuck they were thinking and whether or not that move didn't just encourage more people to pirate. So far there's a lot of "gut instinct" that piracy causes more loss but not a lot of actual evidence.

[Hotfoot]

Pirated games appear on day one. It doesn't take any real time to show up.

The difference between the options in the OP is that piracy is illegal. You can't stop people reselling games (even if it was as much of a loss in profit - ps, genius, you can resell PC games too) but you CAN attempt to stop people pirating your game, at least in the critical early weeks.

I know you can in Oz, but what about Europe? I know you can't in the US, which has a slightly higher relevance factor than the land down under.

[charlemagne]

Pirated games appear on day one. It doesn't take any real time to show up.

The difference between the options in the OP is that piracy is illegal. You can't stop people reselling games (even if it was as much of a loss in profit - ps, genius, you can resell PC games too) but you CAN attempt to stop people pirating your game, at least in the critical early weeks.

I know you can in Oz, but what about Europe? I know you can't in the US, which has a slightly higher relevance factor than the land down under.

You can do what in Europe? What you can do in Europe is resell PC games, and attempt to stop people from pirating games.

[Stark]

Yeah, reselling, not that silly return madness. Can't you sell them at all?

[starslayer]

Yeah, reselling, not that silly return madness. Can't you sell them at all?

If this was directed at Hotfoot, no you cannot resell PC games to retailers in the US (if this isn't a law, it is most retailer's policy). You can resell console games, and neither is restricted on eBay or something. Some PC DRM prevents reselling those games in any way, shape, or form, however (e.g., HL2).

[Laughing Mechanicus]

Speaking for the UK, the re-sale of PC games does happen but in vanishingly small numbers as far as I can tell. High street shops will not even let you return a PC game if the seal is broken, let alone take it as a trade in.

The only real market for used PC games are places like Ebay, but usually that tends towards older games, "unwanted gifts" or heavily discounted new games as opposed to the casual buy it/play it/trade it system many console gamers practice.

[charlemagne]

Speaking for the UK, the re-sale of PC games does happen but in vanishingly small numbers as far as I can tell. High street shops will not even let you return a PC game if the seal is broken, let alone take it as a trade in.

Yeah, big chain markets just assume that you made a copy before trying to return it to get the game for free. But it's the same with any digital media, you usually can't return CDs or DVDs after you've opened them, either.

Smaller shops and chains offer second hand PC games, though, just like console games.

[Oskuro]

And sometimes you can walk into a gaming shop, pick up a second hand title, and realize it is unplayable or heavily crippled because the cdkey has been used. I've seen game shops selling second hand copies of World of Warcraft, and other times been told that they can't be suire if the copy of BF2142 I was going to buy would work at all.


Regarding people who wouldn't buy a game if they couldn't pirate it, I understand what the Game Publishers are going for, they are counting on people's consumerism and the power of hype to make those users actually buy the game if they have no other option. And let's face it, a lot of people would end up buying the games rather than be "left behind". I mean, people spend thousands of Euros pimping their awful car to look even worse, and many of these PC game pirates buy consoles and console games.

Not that I agree at all with draconian DRM, and, in fact, I'm of the opinion that demos and even shareware versions of games should be used more often. Yes, people will get to try before they buy, and won't buy the game if it is shitty, but that's the idea, to have game developers create actually compelling games, instead of pieces of shit you find out you hate way too late. And again, let's face it, that's probably the intention of publishers, to secure the sell before the user can resort to its right not to buy a piece of shit.