DRM-Free v. DRM-Stricken

World of Goo, a puzzle game, has a 90% piracy rate -- a rough estimate by the developer 2D Boy. What's interesting to note is that the developers reference the Russell Carroll study that I've written about before to show that the piracy rates between DRM-free and DRM-stricken games aren't any different:

this is in line with a previous estimate by russell carroll (director of marketing at reflexive) for the game ricochet infinity. russell estimated a 92% piracy rate and i found his analysis quite interesting (check it out here if you’re curious). one thing that really jumped out at me was his estimate that preventing 1000 piracy attempts results in only a single additional sale. this supports our intuitive assessment that people who pirate our game aren’t people who would have purchased it had they not been able to get it without paying.

in our case, we might have even converted more than 1 in a 1000 pirates into legit purchases. either way, ricochet shipped with DRM, world of goo shipped without it, and there seems to be no difference in the outcomes. we can’t draw any conclusions based on two data points, but i’m hoping that others will release information about piracy rates so that everyone could see if DRM is the waste of time and money that we think it is. [emphasis/grammar in original]

I think the more important sentence in the quoted text is this: "people who pirate our game aren’t people who would have purchased it had they not been able to get it without paying."

Game developers and publishers should keep this in mind because it means that file-sharing isn't the same thing as lost sales, which is the opposite of what most developers and publishers assume to be the truth.

Fallout 3 Sales and Piracy

Wired reported yesterday that Fallout 3 earned Bethesda $300 million, with 4.7 million units shipped between the PC, PS3, and Xbox 360 versions. The game was released on October 28, 2008.

But with just about 3 weeks before launch, the game had already been leaked and pirated on the Xbox 360. If we are to believe PC developers who claim that piracy of PC games makes them unprofitable, how are we to interpret this information? PC games are usually pirated the day of release, maybe a few days prior. Fallout 3 was pirated on a console almost 3 weeks before release!

I don't know the breakdown of sales between platforms, as that information doesn't seem to be available. So it's hard to say exactly, but I'll hedge my bets and say that piracy of Fallout 3 on the Xbox 360 did not negatively impact sales in the way that PC developers claim that such piracy impacts PC sales. I'd even go so far as to say that this is the kind of evidence that really puts that entire line of reasoning into question.

[UPDATE]: I just found this article in PC World, which states that the Xbox version of the game accounts for 55% of sales. This only further supports my conclusion.

Common Figures About the Impact of Piracy Likely False

Ars Technica debunks them.

EA Admits File-Sharing Does Not Equal Lost Sales

Gamasutra has the story. Mariam Sughayer of EA's corporate communications department states:

Stepping aside from the whole issue of DRM, people need to recognize that every BitTorrent download doesn’t represent a successful copy of a game, let alone a lost sale. [emphasis mine]

Dan Hewitt, the Entertainment Software Association's senior director of communications agreed:

It’s important to remember that it’s not a one-for-one equation. Our calculation isn’t such that we say that every game that’s been stolen [he means downloaded] is a sale loss." [emphasis mine]

This comes on the heels of TorrentFreak's analysis claiming that Spore has been downloaded from bittorrent file-sharing networks more than half a million times. Last week, EA reported that Spore had sold 1 million copies. Now, EA is trying to downplay the record number of Spore downloads.

I have to ask: EA, if a downloaded copy of Spore doesn't necessarily equate to a lost sale, what is the point of your DRM? Are your DRM schemes simply to stop people who wouldn't have bought your games from playing them? That's the only conclusion I can draw, since we can see that your inclusion of SecuROM did not stop people from pirating the game.

Muxtape Reimagined

The most interesting thing about Justin Ouellette's revealing post regarding the RIAA's take down of Muxtape is how the RIAA acted independently of the labels that the organization represents.

Over the next week I learned a little more, mainly that the RIAA moves quite autonomously from their label parents and that the understanding I had with them didn’t necessarily carry over.

As Ouellete points out, the labels understood the inherent value of Muxtape -- viral marketing and mouth-to-mouth promotion of music, which creates a consumer generated community organized in a central location on the internet. The fact that the RIAA moved autonomously of the labels signifies that the organization does not understand the cultural value its content has for consumers, and instead views this content as nothing more than "product."

This fundamental misunderstanding is also evident in their ongoing anti-piracy campaign against 12-year-old kids and grandmothers. Not only is such a campaign doomed to failure, but the industry is targeting its best costumers. The only such case to go to trial, Capitol Records v. Jammie Thomas, awarded damages of $222,000 to record labels. Thomas had shared 24 songs on Kazaa, a once popular peer-to-peer network. The ruling has been challenged, the punishment criticized as unfair, and the judge in the case has expressed doubts about the court's decision. The really interesting part about this case is the RIAA's efforts to solidify "attempted copyright infringement" into law. The RIAA doesn't understand that the "product" is much more than a cut of wax, a wound up analog tape, a plastic disc, or a series of digital bits to fans.

The emotional connection that people have with music goes back far in history, before copyright law and "intellectual property." Music transcends boundaries in ways that other mediums cannot. People have "played" with their culture continually throughout human history -- through sharing, modifying, or creating new works from existing works. The recent extension of copyright term limits has cut off people from these previously exercised abilities just at the same time that technology makes it easier to do so.

Muxtape served this emotional purpose well -- music fans were able to share their favorite songs to any interested party like never before. And on the business side of things, Muxtape provided the best possible form of promotion -- mouth-to-mouth advertising. People are more likely to make a purchased based on the recommendation of a real person, friend or stranger, than from record label advertisements on glossy magazine pages. All that potential, wasted. As I have said before, the RIAA is only hurting their own industry with these actions.

I think Muxtape will demonstrate the positives of sharing music through its new focus on the band feature. I find it unfortunate that Ouellette didn't try to reach out to independent labels exclusively and strike licensing deals while also barring major label participation. I think that such an action could have the effect of showing major labels that repressing people's natural desire to share will only hurt their businesses, while also helping out smaller labels experience more recognition and (hopefully) increased sales for their artists. (I'm confident that sales would increase; however, there's little solid data surrounding this issue. This could have been a great test case.) Perhaps this will occur anyway through the band feature. Only time will tell.

Piracy of Spore Extraordinarily High

According to Forbes magazine, Spore has been shared via bittorrent clients at an increasingly faster rate than other triple-A titles have been in the past:

As of Thursday [9/11/2008] afternoon, "Spore" had been illegally downloaded on file-sharing networks using BitTorrent peer-to-peer transfer 171,402 times since Sept. 1, according to Big Champagne, a peer-to-peer research firm. That's hardly a record: a popular game often hits those kinds of six-figure piracy numbers, says Big Champagne Chief Executive Eric Garland.

But not usually so quickly. In just the 24-hour period between Wednesday and Thursday, illegal downloaders snagged more than 35,000 copies, and, as of Thursday evening, that rate of downloads was still accelerating. "The numbers are extraordinary," Garland says. "This is a very high level of torrent activity even for an immensely popular game title."

TorrentFreak reported last Saturday that Spore had been downloaded more than 500,000 times, and at this current rate the game is likely to earn the title "Most Pirated Game Ever" within a matter of weeks.

EA can't be this stupid. They have to know that their use of SecuROM DRM schemes are not going to stop people from pirating the game. In fact, the Forbes article reveals that Spore was pirated a full three days before it was launched on September 4th, 2008.

But this may not be about piracy at all -- it may be about ending the second-hand market through technological means.

"Casual Piracy"

So, I've been keeping up with the Spore DRM fiasco, and I've noticed a number of comments from individuals who identify something they call "casual piracy." In a nutshell, these people believe that lending your legally purchased content to friends or family constitutes copyright infringement. I'm fucking speechless.

This bears repeating -- remember the First-Sale Doctrine. It's a hard fought-for right that grants consumers the ability to do whatever they wish with their copyrighted materials after the first sale. Consumers can give away, lend, or sell their copyrighted materials to whomever they wish without compensating the copyright holder so long as no further copies of the materials are made. This means that, and I can't stress this enough, lending your PC games to friends and/or family for non-commercial use is not copyright infringement.

Hold onto your rights, people!

We Are All Pirates

See more here.

PC Gaming and File-Sharing

I've written before about my opinion on copyright issues, usually specifically regarding music, but I haven't said much about copyright, piracy, and PC video games.

Over the weekend I bought the game Sins of a Solar Empire, a 4x (explore, expand, exploit, exterminate) real-time strategy game in which players create and manage a fleet of spacecraft and conquer different worlds within the galaxy. I went over the the Sins of a Solar Empire forums to get some starting pointers from more experienced gamers and I found this post, which points towards this post by Brad Wardell, President and CEO of Stardock Entertainment (publisher of Sins of a Solar Empire).

Wardell begins by acknowledging the existence of piracy in the PC game market, but dismisses any further discussion on that problem specifically. Instead, he gives a very intelligent insight:

When you blame piracy for disappointing sales, you tend to tar the entire market with a broad brush. Piracy isn't evenly distributed in the PC gaming market. And there are far more effective ways of getting people who might buy your product to buy it without inconveniencing them.

Blaming piracy is easy. But it hides other underlying causes. When Sins popped up as the #1 best selling game at retail a couple weeks ago, a game that has no copy protect whatsoever, that should tell you that piracy is not the primary issue.

In the end, the pirates hurt themselves. PC game developers will either slowly migrate to making games that cater to the people who buy PC games or they'll move to platforms where people are more inclined to buy games.

In the meantime, if you want to make profitable PC games, I'd recommend focusing more effort on satisfying the people willing to spend money on your product and less effort on making what others perceive as hot. But then again, I don't romanticize PC game development. I just want to play cool games and make a profit on games that I work on. [my emphasis in bold]

Sins of a Solar Empire is a game that shipped without any copy-protection at all, but despite this the game was the #2 top selling PC game of all February 2008 releases. Kieron Gillen makes the observation at Rock, Paper, Shotgun that Sins of a Solar Empire is one of the least leeched torrents on Mininova, the largest torrent site on the internet. The point that Wardell is getting at is that game developers should concentrate on the consumer market for games, not the user market -- i.e., make games for buyers, not players.

I don't disagree with Wardell's recommendation, and it's largely because the gaming market is very different from the music market. While research has shown that those who share music files are also the music industry's best costumers, I haven't seen any data to show that those who share PC games are also the gaming industry's best costumers. For example, it was revealed by Infinity Ward that a staggering percentage of online players for Call of Duty 4: Modern Warfare were playing on cracked/pirated copies of the game. Call of Duty has also been one of the top selling PC games since its release.

Of course, all of this is anecdotal evidence, and I know of no such comprehensive analysis of whether or not PC game file-sharing has affected PC game sales. It's difficult to draw any kind of conclusion with the available data, but what we can see is that sharing music and sharing games are two different beasts.

All of this led me to this forum thread at Quarter to Three, in which Michael Fitch, Creative Director of THQ, offered some commentary about the February closing of Iron Lore Entertainment. Fitch immediately assumes that piracy equals lost sales, though I'm not convinced. I'll get to that later, but suffice it to say that Fitch throws this claim out without elaborating. Here's the take home message of his post:

One, there are other costs to piracy than just lost sales. For example, with TQ, the game was pirated and released on the nets before it hit stores. It was a fairly quick-and-dirty crack job, and in fact, it missed a lot of the copy-protection that was in the game. One of the copy-protection routines was keyed off the quest system, for example. You could start the game just fine, but when the quest triggered, it would do a security check, and dump you out if you had a pirated copy. There was another one in the streaming routine. So, it's a couple of days before release, and I start seeing people on the forums complaining about how buggy the game is, how it crashes all the time. A lot of people are talking about how it crashes right when you come out of the first cave. Yeah, that's right. There was a security check there.

So, before the game even comes out, we've got people bad-mouthing it because their pirated copies crash, even though a legitimate copy won't. We took a lot of shit on this, completely undeserved mind you. How many people decided to pick up the pirated version because it had this reputation and they didn't want to risk buying something that didn't work? Talk about your self-fulfilling prophecy.

Discussing file-sharing can be tricky, because it's easy to get backed into a corner of defending theft. That's what happened later in the thread, as poster SirBruce boxed himself in. Ultimately, theft is not the issue, but the copy-protection schemes implemented by developers. Fitch's statement quoted above makes it very clear that the copy-protection scheme used caused a negative side-effect (whether warranted or not) of giving the game a poor reputation. Several posters in the thread hit on this point, and several others seemed to think that solution is more DRM and copy-protection. I'll make my case why this is an incorrect solution.

First, I want to argue from a practical standpoint. I'll need to lay out a quick-and-dry explanation of encryption history to get started. Afterall, that's what copy-protection is -- encryption.

Encryption systems go back a long time in human history. Encryption is used to protect information from being interpreted by people whom the author of the information does not want to give access. For example, say we have two warring nations. The king of Nation A wants to send a surprise attack order out to his/her generals in the field. Obviously, it would not be desirable if this information were to fall into enemy hands -- if Nation B were to get a hold of the message, the attack could be thwarted. So Nation A employs an encryption method -- the message is encrypted and the only way to read the message is to have both a decoder and a key. When the messenger is sent out of the castle gates, s/he is only given the message. Those in command positions will already possess the decoder and key. This makes the information within a closed system -- if Nation B were to intercept the messenger, they would have no way to read the message at all.

But modern digital encryption is quite different. Content producers encrypt their information to prevent unwanted copying; however, all this is for naught. In order for the consumer to be able to use the content, content producers have to provide not only the information but the decoder as well as the key! Using my example above, it is as if Nation A has sent the messenger out with all the necessary components -- message, decoder, and key. In the event of a Nation B interception, the information would surely be in enemy hands.

This is why copy-protection and DRM (Digital Rights Management) will always fail. There is no way to provide useful encrypted content to consumers without also giving consumers the tools to decode and interpret that content. Siva Vaidhyanathan's Copyrights and Copywrongs and Anarchist in the Library discuss this concept at length.

My point is that no matter what type of copy-protection is used, someone will always hack it. Implementing these copy-protection schemes only serve to inconvenience legitimate customers -- i.e., the people who have actually payed for the game. Shitting on your consumer base is never a good idea.

I can relate my own experience with overbearing copy-protection. When I attempted to install my legally purchased copy of BioShock, everything went fine at first. But when I attempted to activate my game through the online activation process, the program was unable to read my disc. I had to contact SecuROM, the company who authored BioShock's copy-protection, to figure out the problem. Eventually, I was forced to manually activate the game through a website they created because of issues like mine. It took days for SecuROM to get back to me. I had even further problems after I updated my computer and had to reinstall the game. This time, the copy-protection was causing some strange problem with my DVD drive -- basically, it didn't like the firmware and refused to read my disc. I am forced to run the game on my other DVD drive (good thing I have two). Again, the point here is that a legitimate customer is being inconvenienced, while at the same time the copy-protection hasn't done anything to stop file-sharing of the game.

The Titan Quest example is different, though, and thus failed for different reasons. The copy-protection implemented made the game appear to crash randomly, which caused the game to earn a reputation as buggy. It was argued that this was not to tip off the hackers about the copy-protection throughout the game; however, it had the effect of bad publicity. In the process of attempting to circumvent hackers, the developers instead turned away likely legitimate customers.

Second, I want to argue this from an ideological standpoint. The idea here is that these types of copy-protection and DRM schemes will do a disservice to innovation and creativity. As Vaidhyanathan also argues, excessive copyright protection in addition to technological quick-fixes will only hamper the people's ability to interact with culture.

Yes, software development is a part of culture. Putting up walls and protecting this information means that interested parties cannot use it for further derivative and transgressive works. I've seen how game developers and publishers will clamp down on modders who alter a game's code to make something different for non-commercial use. There is a much more protectionist attitude in the gaming industry than in music, to bring back my earlier comparison, in that music is more lenient about sharing and reusing information (though, now their are significant licensing fees for samples; see Copyrights and Copywrongs for more on this subject), but that is really for another post. My point in mentioning this here is that games are very protected pieces of culture. People enjoy culture because it is an interactive experience, and so, people will do what they can in order to interact with the culture they enjoy.

Furthermore, we are a democratic society. We should embody and encourage the values of democracy, which includes the free-flow of information. I am not against compensating the developers for their hard work; however, that compensation should only go so far. As with music, these works should eventually fall into the public domain. And considering the incredibly high rate of change within the gaming industry, the current model for copyright extension does not seem appropriate. I'll reference Vaidhyanathan again, as his books offer a unique analysis of copyright law and its effect on creativity and innovation.

Admittedly, this does not directly apply to the situation I've been discussing within this post. However, I add it because many of the posters within the Quarter to Three forum advocate more draconian measures to clamp down on unauthorized copying, while also neglecting to consider the real-world consequences that would have on a culture of open, distributed computer systems. Such measures are likely to increase the barriers to entry of the gaming industry for small, interested individuals. We have seen how such copy-protection has served previous industries, and we can see it in music today -- existing copyright law entrenches established artists while punishing emerging artists.

Finally, I wanted to comment on Fitch's statement that piracy equals lost sales. I'm not convinced of this because it has not been demonstrated that those who have participated in the file-sharing of PC games were likely to purchase the game at all. In fact, Russell Caroll investigated this regarding the casual game genre -- games like Bejeweled and Diner Dash. What he found was that for every 1000 pirated copies thwarted, they only gained one sale. The take-away here is that most people who download games were not going to purchase those games anyway.

This brings us back to the main topic of my post -- that game developers should take Wardell's recommendation to concentrate on making games for those who buy them, not just those who play them. It's a much better solution to the piracy problem than increased consumer inconvenience via draconian copy-protection that can easily be bypassed. Moreover, without the existing protectionist attitude it's likely we'd see more innovation and creativity in gaming titles, because the information to make those games would be available for others to comment on and improve upon.