Why piracy isn’t hurting gaming industry… sort of

Whether a person gets pirate copies of games or not is somewhat irrelevant when it comes to sales. Copying game as an action does not affect sales. What is relevant whether this person buys games or not. Not buying (whether he pirates games or not) means he is voting that this industry should not get money.

If he buy games, then he is voting that this industry (or let’s say certain game development company) should get money.

Introduction
I’ve been honing up my economics knowledge, and I must say that I’m starting to lean into accepting that piracy as is, is not necessarily hurting our gaming industry. In fact, I feel that it can be proven quite easily that a “pirating games” as an action alone does not hurt the industry.

Here’s example. If there’s a person who is not spending any money in games, then whether he pirates games is quite irrelevant. Whether he pirates or not, then our Trout Slap Studios example gaming studio is not getting any money from the pirate.

But Trout Slap Studios is not getting money from many other people, who don’t play games.

The direct effect of piracy as such, does not mean that we lose sales. The same way as my dad is not playing nor buying any games, the same way random pirate is not buying any games. If pirating games as such means sales are lost, then equally well can be said that thanks to my dad who buys no games, games industry is losing sales.

Think this for a moment.

The mere act of piracy is equivalent for not pirating and not buying the game
If we whine that piracy means lost sales, then we can equally say that the fact that some random guy at the streets is not buying our game means we are losing sales. And since piracy here is not relevant – only “not buying” is relevant factor, we can conclude that piracy can be removed from the equation and simply state that “not buying” is the important factor here.

Let’s say there’s some random student living in some poor country where he barely had money to buy the computer and eats only cheap tuna fish. He has no money to luxury products such as games, so he pirates. He was putting 0 dollars in the system, and now pirates, still putting 0 dollars. Whether he pirates or not, is irrelevant for the industry: since he has 0 dollars to give to the gaming industry, gaming industry cannot benefit from him.

There are cases where piracy might cause the situation where sales are affected. We will be getting there soon. For now, just let’s try get our minds around the fact that “pirating a game” is not automatically a lost sale.

This is when piracy is not hurting anyone:
Let’s look at the next example: let’s suppose there’s a person who has kept buying NHL games. He bought all games from ’94 to ’12… spending 50 dollars (just conveniently picked sum) each year. This means the following is happening:

Gaming industry as a whole is getting 50 dollars in the system each year, and the makers of NHL game benefit the 50 dollars (I leave any other middleman and taxes and transactions and whatnot cost away to simplify the example).

He has no money left to other games, so here’s what can happen:

He pirates all other soccer games He doesn’t pirate any other games

If he chooses first option, that means soccer games maker isn’t receiving any more money (since the chap spent his 50 dollar budget to NHL game).

If he chooses the second option, that means soccer game maker isn’t receiving any more money.

This suggests that act of piracy alone doesn’t necessarily hurt gaming industry, if we accept that there is certain budget that the pirate is using for gaming. His budget is 50 dollars, which he gives to certain games – and that’s it. Whether he pirates or not doesn’t have meaning to the profit of other gaming companies.

In this case, piracy might hurt the industry:
Only the following types of piracy can hurt gaming industry:

The guy who was previously giving money to gaming industry stops giving any money to the gaming industry. He stops spending 50 dollars to gaming industry. Since everybody is pirating games, he concludes, he too can pirate everything. Now the guy doesn’t pay for the next years NHL game, but pirates it. A guy who was just about to click “order” heard his buddy saying that he can get the game free by pirating it, cancels the order. He was about to buy the new NHL game and bring 50 dollars to the industry now decides not to put any money in the industry. This means possibility of piracy has made this person to decide not to give money. If there wouldn’t have been possibility of piracy, then this chap would have purchased the game.

The direct consequence of this is the following:

Makers of the NHL game will not receive 50 dollars from either chap – so they are getting hurt (when you compare to the situation where this chap was always spending 50 dollars, or to the chap who was about to click “order”) Soccer game devs don’t get that money either, same situation as the previous year.

So… does it hurt the industry or not?
Now, whether piracy hurts our industry (or at least the developers) boils down to this question:

Did the possibility of getting the product free mean that the guy is decreasing his gaming budget?

There’s two potential answers to this:

If the guy who was spending 50 dollars per year thinks he’ll just buys shoes instead, and that he will from now on get all games as a pirate… then yes, in this case 50 dollars is leaving the gaming industry. Thus, it’s the loss for the gaming industry. It means gaming industry will have less money. If on the other hand the guy who was spending 50 dollars per year thinks he keeps spending that 50 amount and pirates other games then no sales are lost.

I repeat this bit differently: we all have some limit on how much money we spend to games. For some people it might be 10 dollars per year. For others, it’s 400 dollars. Or 0 dollars.

If we keep spending that money – as much as we can (no excuses here) – then piracy is not hurting our buying habits. If we keep buying then it’s quite irrelevant whether we pirate some other games too or not. Since we have used our budget, we have put the money we can to gaming industry.

Act of piracy – aka downloading game for free – alone is not hurting anybody.

Of course there’s the “budget” that is tricky.

Some might use this reasoning to conclude that they “wouldn’t pay anything anyway” and keep on pirating, and I would suspect that people who say so don’t necessarily really mean this. They just use it as an excuse not to pay for games, so that they can get other stuff…. but if games would be impossible to pirate, would this force them to buy game? If the answer is “yes”, then piracy is hurting sales. If answer is really “no”, then piracy isn’t hurting sales.

Some pirates say that “they don’t buy because it’s not convenient to get the movie, so they pirate it to rebel”. In reality, these pirates could very well pirate the movie, and buy the movie too. This way they would support the makers of the movie AND would get the movie conveniently. I don’t know if this happens, but I do get the impression that usually pirates who claim the “they would support but…” don’t really do so.

The conclusion is this:

If piracy affects “where we put our money”, then it affects industry too
Only if piracy means that the person who consumes games is putting less money in to the gaming industry (and decides to do something else with the money) because he figures out that he can get all stuff free, in that case piracy hurts the industry…

…for short term.

I repeat: only if piracy means that our mr. pirate does not bring any money to gaming industry (money he would have otherwise put there), then industry gets hurt.

Short term impact is that developers of games software (and of course many other groups that are connected with the system) don’t get the money. If everybody is pirating games, and nobody is giving money to developers – this means that developers are in trouble.

Long term effects of piracy?
Long-term effect of piracy will be interesting to see. The raise of different pricing systems like free 2 play or gaming bundles are here to stay.

Gaming industry has about 2 choises here. One option is to stop making games. Let’s close shoppe and start all making something else if nobody is interested in paying for games. We can all start making shoes and hope that people buy them. That sure would stop gaming piracy, as there would be no games to pirate.

Or alternatively – if developers and publishers are willing to take the challenge – the industry must adjust. The industry must find ways to produce fun to people, and somehow get necessary money to survive, and to develop more and better game.

It’s similar when somebody has made an invention that benefits the mankind. If the founder is given money from all the people who are allowed to use the invention, then that will be bloody harsh for the world and the inventor benefits. But if the inventor let’s everybody else use his technology for free, we all (except the inventor who got no money) will be happier. The inventor might get pissed off and stop inventing (tough for mankind)… or he could try figure out if he could get money in some other ways, so that his masterbrain could be focussed on new inventions. (Of course economic cycle will be quite complex to draw, but at least the short term effect is pretty much as described – I’m not trying to be academically accurate here to make a point)

With digital delivery, it is possible to share games to wider audience than ever in the history of gaming. The possibility of being able to connect with billions of human beings who can enjoy fun games sounds great.

I think developers and publishers need to take piracy as a challenge, and focus on figuring out what people are willing to pay for. If that means more gaming bundles then so be it. In societies, I feel people must be given right to vote with their wallet.

I do think that those pirates who are reading this, read the text fully. If you pirates like some games, then purchasing those games means you are contributing to the industry and helping developers meanwhile the developers try figure out new ways to adjust.

I still like the idea of being able to show my influence by purchasing games. I don’t mind if people pirate games, but I would hope that these people would also consider buying some games. Since players have the ultimate power at their hands about the future – after all, we all can decide where we put our money (well, at least as long as government doesn’t mess the developing market by supporting the industry in different ways…) – this means we also have the responsibility.

Piracy doesn’t necessarily hurt sales, but it isn’t helping either
If we want more fun new gaming experiences, then we try show our support to those developers. One way or another, game developers must get their money if we want to see more games from them.

Whether you get pirate copies of games or not is somewhat irrelevant.

Whether you buy games is relevant. Not buying (whether you pirate games or not) means you are voting that this industry should not get money.

If you buy games, then you are voting that this industry (or certain developers) should get money.

If you enjoy games and want and can support the developers, then do so.

This entry was posted on Tuesday, December 20th, 2011 at 2:18 am and is filed under Game Development. You can follow any responses to this entry through the RSS 2.0 feed. You can skip to the end and leave a response. Pinging is currently not allowed.

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