As gamers we all love playing games. As we’ve grown up, the sources of those gaming experiences have changed drastically. The technology used to create unique gaming experiences has also evolved at a breakneck pace. The only thing moving as fast as gaming technology is the methods used to illegally copy and distribute games. From music and movies, to television shows and video games, analog and digital media has always been under threat of piracy. So why is this discussion coming to head in the video game industry now and why should it matter to you, the gamer? In this article I’ll dissect the various views of piracy in the industry and explain how different situations change opinions about the value and validity of piracy.
Piracy in gaming is nothing new. PC games used to require text or codes from paper manuals or other materials, often printed in low contrast colors to foil photo copiers of the day. Console games used to rely on unique cartridges and proprietary hardware to lock down their systems. Today, piracy is easier as technology improves and systems use unified media and standards. Piracy has been a constant factor in the PC game market since the rise of the home computer in the 1980s. As the video game market expanded and console standards evolved, the Dreamcast, PSP, and original XBOX also became susceptible to piracy. This trend continues as more types of media move to the digital space, each becoming a target of illegal sharing and copyright infringement.
While there is little disagreement over the illegal nature of unauthorized content distribution, there are differing viewpoints of the overall impact of piracy on the market as a whole. On one hand is the pro-sharing camp who feel that increased exposure leads to more total revenue and increased brand loyalty. On the other there are groups that value control of intellectual property and view piracy as a theft of both money and brand. The positions vary greatly across the board and finding common ground on the issue isn’t any closer now than it was at the height of Napster in the early 2000s.
One of the most vocal proponents from any industry for the overall benefits of content sharing is author Neil Gaiman. In the following video, he succinctly states the reasons behind his belief that file sharing is a good thing. If you haven’t seen the video yet, make sure you watch it before you continue reading.
I agree with the terms Gaiman lays out, at least as they relate to the literary publishing industry, but are Gaiman’s views applicable to the video game industry as it stands now? The recent leaks of major titles like Killzone 3, Crysis 2, and Bulletstorm bring this question to the fore, but do the pro-piracy statements of industry luminaries like Markuss Presson of Minecraft fame demonstrate any parity with Gaiman’s view? If not, where do games stand in relation to the overall piracy debate and is piracy is something that will hurt or benefit the industry as it moves forward into the next generation of systems and play?
Outside of a few notable exceptions game development shifted from a singular pursuit in the 70s and 80s to an approach based on larger development teams as game complexity increased. There are a few exceptions to this outside of the indie game scene, but they have, for various reasons, become figureheads for their teams in addition to being designers. Designers like Cliffy B, Will Wright, or Tim Scheafer represent a group of people publicly in the same way that Blizzard, Rockstar, or Bungie does, and many of the same connotations apply. The author of a novel is in a similar position when editors and publishers are taken into account, but publicly, the author is often viewed as the sole producer of the work. For this reason, the opportunities Gaimain discusses for building authorial loyalty are no different than loyalty to any other brand. While this situation puts significantly more pressure on the author than would exist for a business, it also strengthens the position of the author as content creator.
It is starting to look like independent developers are moving up within the cult of video game personalities, and this is due largely in part to digital distribution models. The waning domination of the industry by publishing houses and the complex nature of game design still curtails the single developer model to some degree, but the industry position of the independent developer has certainly strengthened.
This shift from studio games toward independent games creates the current disparity in the piracy discussion. The stakes at which each party plays the game of development vary wildly across a two-axis spectrum of incorporated investment and personal investment. Within this spectrum, the threat and benefit of piracy changes significantly. I’ll be the first to acknowledge that this is an intentionally generalised view of content piracy but for that reason it can probably be applied to most industries and content, given specific caveats. For our purposes we’re going to stick just to its application to the video game industry.
The graphic above represents only monetary investment since it can be assumed that emotional investment is generally high across the board. Independent projects have a high level of personal investment and the individuals involved are far less insulated from the direct effect of piracy. They are also more directly connected to any possible positive purchase shift due to the increased exposure of content that piracy provides. Furthermore, independent studios are better positioned to reach the break even point on a game due to lower operational overhead. When Notch talks about how piracy helps designers, he’s talking about independent designers, not publishers or larger development houses. Conversely, when Sony files suit against people who hack the PS3, their concerns speak to the effect of piracy on a more traditional game developer/publisher model.
Similarly, if a recently leaked title like Crysis 2 does not make back its initial investment or establishes itself as a part of a viable franchise (which requires much higher sales numbers than an indie title, regardless of price) it can easily be viewed as a failure, directly effecting the viability of Crytek as a studio with respect to their relationship with their publisher. This risk of negative perception puts the developer of traditional AAA games at comparatively higher risk than the independent developer or publisher. The recent closure of landmark studios like Harmonix and Bizzare Creations are a testament to the power of perception and funding in the game design economy.
The last group that deserves a mention in this graph are “named” designers. If you saw Cliff Bleszinski’s talk at GDC on the subject this year he mentions this group pretty extensively and referred to them as “power creatives.” The named designer can arise from within a studio, as Cliff himself did, or enter the business through indie development channels, like Johnathan Blow. While the named designer may not have a large personal investment in a project (depending on their association with a studio) they are also at risk from piracy in more unique ways.
Understanding how piracy fits into the above framework as a risk or reward factor for each group helps to understand where the disparate views on piracy arise. The results of such an examination are where the whole debate gets tricky and somewhat counter-intuitive, until you understand that making games isn’t just about the initial investment or the return on investment of a single game, but is often about building a player base characterized by brand loyalty, community participation, and a sense of personal ownership.
Overlaying the varying effects of piracy onto the graph yields the awkward shape above. Studio titles are effected by piracy to the degree that the investment increases. Some titles that are massively popular or are attached to a named designer are significantly insulated from the piracy effect (like COD or Spore) and fall above the shape in the vertical and horizontal axises. These titles will do well because of pre-existing brand loyalty (in some cases to the developer themselves) or because they offer something beyond the traditional console or PC game experience.
Low investment titles of all kinds are reasonably well insulated from piracy and are more at risk from general market factors. It is important to remember that there is very little that can save a game which is simply bad. The traditional concept of cheap, mass-produced, low-quality shovelware fits pretty firmly into this category and can include the most pop-friendly titles. While these games may be highly pirated, they are also the titles that are purchased as presents and often targeted at a specific demographic. Additionally these are not the games into which development companies are investing astronomical sums of money, so their break even point tends to be lower.
Most at risk titles are those that exist in the middle space in terms of investment. These titles have a respectable budget, are definitely AAA titles, and need to sell accordingly to make back the money to cover the overhead of their production and promotion. Because these games are not often attached to an existing successful franchise, developer, or development studio, they are at a much more significant risk from piracy than titles which fall outside of that area of the graph. It can be difficult in general for these titles to make back an initial investment which makes them far more susceptible to the effects of piracy.
Independent titles are at less risk overall because the economies of scale at play in the game industry favor lightweight development. For as little as a few hundred dollars an independent developer can set up a small development studio and publish an indie game. Only a relatively small number of copies must be sold to ensure that the initial investment is made back. Often the creation of lightweight titles also serves to build a portfolio for the independent developer to sell their services on a contract basis for other projects or improve their own resume. While studio solvency is still a concern, making money on an investment which requires sales in the hundreds is much more reasonable than a game with a sales requirement in the hundreds of thousands, especially when you take into account the generally lower price of indie games in comparison with AAA studio titles.
The unique position of named developers is that while their personal investment may be high or low in direct proportion to their association with any specific studio, they are also more insulated from the direct effect of piracy because they have the additional cache of being a recognized force in the industry and have more options in the face of potential financial failure than unrecognized developers and sometimes even the publishers themselves. Individual reputation and industry-wide credibility are primarily what named developers invest in their games. If an early build of a game leaks and is buggy or unpolished, it can damage the reputation of the designer. Additionally, the named developer functions as a salesperson for their games. If the games don’t make back the money invested in them, or are not seen as profitable in other ways (such as by establishing a larger market), this could damage the named developer’s ability to get funding for future projects.
A strong reputation can give the named developer an advantage in the event of studio insolvency or individual game failure because they are generally able to capitalize on their resume and contacts to secure future employment. The result of this more direct relationship between the named developer and the publisher as a financier or patron is that as the relationship becomes closer and strengthens, the developer may begin to share the opinion of piracy (at least in business terms) of the publisher.
When you break down these factors, they result in the following set of responses to piracy: For large publishers, piracy cuts into their bottom line and directly damages their ability to make middling games. This is why there is such a reliance on sequels and established intellectual properties in the market. Likewise, smaller games on social platforms or game sequels using existing technology are quick to be funded because they are likely to demonstrate a more significant return on investment. As the market shifts toward more lightweight and agile independent developers, the economies of scale operate at a lower level and the word of mouth provided by piracy can boost legitimate game sales enough to make a title profitable. Piracy may also provide enough exposure to act as a key factor in moving the developer into the named developer space, providing added insulation against market effects. Ultimately, this is the difference between Noch and Sony when it comes to piracy. Sony sees their investment in jeopardy, while Noch sees returns in the form of more people playing and investing in his game. So while the industry is not in the same operating space as the literature market, there are factors at play that could potentially shift the roles of creators and distributors enough to diminish the negative effects of piracy.
The next step in examining the piracy debate is to look at how the different opinions of piracy shape the methods used to prevent and combat piracy. I’ll address those factors in my next article, but until then, do your part to shape the games industry. Keep buying the games that you want to see made, whether they are from an independent or major studio. The bottom line is that video games are a business and games that perform well in the market set the trends moving forward.
Read the second part of this article…