The games industry’s pet peeve for decades was piracy. The issue dominated discussions at industry conferences. Countless hours were spent creating and enabling various forms of copy protection. Industry studies claimed billions of dollars in lost sales due to pirated copies, though the amounts were always speculative. The issue has become less critical, being replaced in prominence by the issue of used games and how that represents lost revenue for publishers and developers.
Piracy and DRM is still an issue in certain quarters. Certainly DRM can cause a fierce reaction on the part of consumers. Look no further than the furor over Sim City’s requirement for an online connection, or the original Xbox One requirement to check in with Microsoft every day. Yet for many companies, worrying about DRM or piracy is a thing of the past. Rather, piracy has become a desirable means of product distribution — when your game is free-to-play, you want as many copies as possible in the hands of players.
DRM has become a non-issue for many games primarily because those games are tracking each individual user. It’s really another form of digital rights management, but it’s invisible to the user. For instance, League of Legends is free-to-play, and has no DRM in the usual sense. Anyone can download and play the game, or give a copy to a friend. The game, of course, tracks each individual player — and once you purchase a Champion or a skin, you can use that whenever you log in from any computer. What you can’t do is give that virtual item you purchased to your friend. Hello, that’s digital rights management in action.. the dreaded DRM that can put so many consumer knickers in a twist when implemented clumsily. Here, no one notices or complains — it just seems obvious and reasonable.
Similarly,used games are a common cause for complaint among developers and publishers, since a used game sale returns no revenue to the original developer. GameStop derives the majority of its profits from used games, which causes much teeth-gnashing amongst developers and publishers. Solutions are already being implemented, but it’s not solving the “problem” of used games per se — because that’s not the real problem. The problem is getting sufficient revenue from games for the publishers and developers to make a profit.
Pricing is constrained by consumer reluctance to pay more than $60 for games, especially when there’s no way to return a game if it turns out you don’t like it. That leads to consumers being cautious about what they buy, or buying a used game initially to reduce the amount of money at risk. Publishers would dearly love to raise prices for next-gen games, but you see no move afoot to do that. What you see instead is an increased amount of downloadable content (DLC) with many games even offering it on day one of a game’s availability.
Here we see one part of the solution at work, thanks to the reality of digital distribution. A publisher no longer has to include everything in a boxed product because bits can be sold online. New content can be created and sold to customers on a regular basis without the need to create physical product. The industry can go further, though.
Digital distribution sets pricing free. There’s actually a continuum of pricing options to be explored between free-to-play and $60 up front. Why not try $20, or $10, as an initial price Will Wright sees free-to-play as just another form of demo for many games. The question becomes how much demo you allow before charging for it, and that’s a marketing and design issue. When the boxed retail version of the game is seen as just another way to package and price the product, rather than the only version of the game that exists, many possibilities spring into being.
Digital pricing can be changed instantly, with no awkward price protection that’s required when you’re dealing with packages sent to retailers. Just look at Steam sales to see how discounting can drive amazing boosts in sales. Gabe Newell has reported increases of 3,000 percent or more in sales, with no effect on retail store sales as far as can be determined. Overall revenue from such sales can be much greater than the usual revenue for the game at a ‘normal’ price.
You could provide a $60 package that is sold at retail while still providing a basic game for download at $10, with DLC that adds up to $75 or $100. The $60 price then becomes a great bargain (that’s ‘anchor pricing‘ in action). Perhaps you could ‘window’ availability, similar to how movies appear in theaters, then after a month or three they appear on a premium cable service, then perhaps on Blu-ray and then streaming. A game might follow a similar strategy by splitting its content into various pieces or collections.
Microsoft, Sony and Nintendo are already looking at selling the full retail version of a game digitally, on the same day the game is first available in stores. It’s happening with some titles now on the 3DS, and next-generation consoles will see that as standard. Sure, not everyone has the bandwidth needed to make that an easy option, and boxed products will be a major part of game revenue for years. Still, the change is beginning, and we’ve only just begun to see the impact.
Ultimately, sitting around complaining about how some general industry issue like piracy or used games is a waste of time. Looking for an industry-wide solution is also generally unproductive. The best answer is to figure out a solution that your company can implement, and then implement it. That may not work for some other company , but let them figure out their own solutions. There’s not one right answer, but there are a variety of possible answers that will help to a greater or lesser degree. Focusing on solutions is going to benefit all of the industry in the long term.
