Software piracy hurts

A couple days ago, Brighter Minds Media reported that it was filing for chapter 11 bankruptcy. The news of a game company hurting in these financial times isn’t unexpected; however, what is surprising is that Brighter Minds Media is the publisher of the World of Goo, which cracked the US top 10 best selling PC games list.  Brighter Minds isn’t Activation Blizzard or Electronic Arts, it’s one of the little guys, an independent game publisher in the shadow of giants. So the timing of its sales success and its chapter 11 announcement is particularly bittersweet.

This gets to the issue of software piracy. There’s no escaping the fact that piracy hurt this small game publisher. Joystiq reported that World of Goo had a staggering 90% piracy rate, that only 1 copy out of 10 out in the public were legitimately purchased copies. For a small independent game publisher, that must have stung, and stung hard enough to cause a chapter 11 filing.

Now this post isn’t a moral tirade about the evils of piracy and its economic effects. You’ve probably read those already on other blogs. No need to repeat them here. Bottom line: piracy hurts, and not just giant game companies but the small guys trying to produce innovative, non-boiler plate titles.

What I’m interested about is the effect of all this piracy on the future of PC gaming. The PC is my preferred gaming platform. While I dabble in consoles, I always go back to the PC. I like the keyboard and mouse combination for controls. I like the fact that PC based games tend to be more flexible about saving configuration files, preferences, etc. I like consoles for sports titles and shooters that I can play with friends, but I find that when I want an immersive title, I’ll want it on the PC.

Given the rampant amount of piracy on the PC, I’m rather surprised that anyone develops for it anymore. The 90% piracy rate isn’t the first time I’ve heard of the incredible scale of theft that occurs with many PC titles. Michael Fitch, a developer of Titan Quest, made a lengthy post on how piracy contributed to the closure of his game studio. Go read it, it’s a worthwhile read. One thing that that will jump out at you in his post, is this statement:

Two, the numbers on piracy are really astonishing. The research I’ve seen pegs the piracy rate at between 70-85% on PC in the US, 90%+ in Europe, off the charts in Asia. I didn’t believe it at first. It seemed way too high. Then I saw that Bioshock was selling 5 to 1 on console vs. PC. And Call of Duty 4 was selling 10 to 1. These are hardcore games, shooters, classic PC audience stuff. Given the difference in install base, I can’t believe that there’s that big of a difference in who played these games, but I guess there can be in who actually payed for them.

Let’s dig a little deeper there. So, if 90% of your audience is stealing your game, even if you got a little bit more, say 10% of that audience to change their ways and pony up, what’s the difference in income? Just about double. That’s right, double. That’s easily the difference between commercial failure and success. That’s definitely the difference between doing okay and founding a lasting franchise. Even if you cut that down to 1% - 1 out of every hundred people who are pirating the game - who would actually buy the game, that’s still a 10% increase in revenue. Again, that’s big enough to make the difference between breaking even and making a profit.

So with all this piracy, how are PC game publishers coping? According to Ray Muzyka, CEO of Bioware, game publishers are turning to the development of MMOs and casual games. MMOs and casual games can hedge a company against piracy and also tap into subscription and advertising based income that goes beyond the initial purachase of a game title.  MMOs are also much more difficult to pirate since they require play on a centrally controlled server. Casual games are offered either at a low price point or for free, making piracy a moot issue. To make up for their low initial cost, many are either loaded with advertisements or are, in some cases, blatant advertising disguised as a game (see Doritos.com).

So does that mean that game company’s will shirk at publishing non-casual, single player games on the PC? I think that’s probably a safe bet. What many gaming companies have discovered is that anti-piracy code put into most single player games may deter a casual player from stealing but doesn’t deter determined thieves. Within days of a game’s publication, many sites advertise the game installer, a set of license keys (or even a license key generator) and hacks to defeat any anti-pirating code within the game.

Game developers either have to turn to more sophisticated anti-piracy controls (which in turn, canabalizes dollars that can go towards actual game development) or make their games run off of a central server like a MMO.

I think it will be interesting to see what Blizzard Activation does with their upcoming Starcraft II and Diablo III titles. Both are set to be single player games with a multi-player option that runs against an Internet-based server. My guess is that both games will run a check against the license key when the game gets code updates or connects in multi-player mode much like a MMO does. It won’t suprise me in the least that to take advantage of many aspects of play that both games will require an Internet connection and account registered with Blizzard. They may even charge a monthly subscription to play the multiplayer versions (pure speculation here, Blizzard hasn’t announced any fees).

Anyway, I am saddened to see the demise of single player games for the PC. I’ll still play MMOs, probably never play any of the casual games, and will increasingly turn to consoles for titles I’ve previously only found on the PC.

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