The Content Industry Will Never Get It

Subject: Editorial, General Tech, Systems | November 10, 2012 - 04:47 PM |
Tagged: piracy, kinect

We do not like straying from our usual topics into the music, movie, and console gaming industries although I will make an exception for this. It has a computer hardware angle, I assure you.

So I came across an article this morning regarding a patent which Microsoft filed about a year and a half ago. This patent describes a process where a device can monitor the number of people viewing a copyrighted work and permit “remedial action” should that number increase beyond some arbitrary level. In other words, the technology would prevent or adjust the price of consuming content based on the number of people in your private residence.

Hey if you want to bring your significant other over -- that’ll cost you!

drmsucks.jpg

Hey did I tell you about this awesome DRM we're working on? Huge success.

It routinely frustrates me when people side with the content industry because they know that one-or-so unapologetic pirating acquaintance who they feel is ripping off the whole system. The problem is that all evidence which I have seen to suggest whether or not a pirate has actual damages actually shows sales increases or is wholly based on junior high school-level statistical errors.

The content industry does not demand for you to pay them for their content: they demand that you pay them for their content under specific conditions. There were no less than two services present at CES 2011 which allowed users to input a movie title to find out where it is legally available. If it was in Vudu, Hulu+, Netflix, in Theatres, which theatre, what show-times, as a DVD or BluRay on Amazon, on TV soon, and so forth.

Everyone I discussed those services with, thus far, were amazed with how useful that would be.

I then ask them: Why is it so hard to give them money that we need services to instruct people how to legally license content?

What if the person watching the content at a friend’s house ends up purchasing it? They are attempting to open up extra streams of revenue by controlling the system more aggressively. When the system gets too convoluted for users to abide by they blame that loss in revenue on piracy.

You could imagine this occurring for video games as well: what if a publisher decides that split-screen gaming is a premium service to be licensed on a per-controller basis? The content industry is attempting to focus their licensing arrangements as granularly as possible. This is bad for you, it is often bad for them, and it is terrible for society.

Do not assume that a copyright holder will act sensibly. It is not about cheap people. It is often not even about revenue despite whether they believe it is or not. Just look at Ubisoft’s DRM “success”. An exodus of 90% of your customers should never be called a success and yet they genuinely believed it was.

Source: Mashable

Frictional Games Doesn't Have Too Much Friction over Piracy

Subject: Editorial, General Tech | September 11, 2012 - 02:54 PM |
Tagged: Amnesia, piracy, DRM

Frictional Games, the developers behind the Penumbra and Amnesia franchises, commented on the two years since the release of The Dark Descent through their company blog. Frictional has finally released the development budget for Amnesia which rings in at just $360,000 USD which is less than a tenth of their revenue. They also have not even thought about piracy in over a year: they are paid in sales not piracy figures – and paid they have been.

It is so nice when common sense prevails.

As I have discussed in my “Video Games Do Not Want to Be Art?” column, there are some developer-publishers who find their content intrinsically valuable and aim for long-term steady sales. Frictional Games appears to be one of those companies. Amnesia: The Dark Descent is possibly the most terrifying game in existence without compromising on their highly engaging story.

They also have not even thought about – let alone get frightened of – piracy in over a year.

amnesia.jpg

Or maybe after making Amnesia these Swedes are not scared by anything lurking in shadows.

There is room for both blockbuster titles as well as enduring content with intrinsic value. Over the course of the last two years Amnesia has sold just shy of 1.4 million units. Amnesia currently – 2 years after its release – sees a steady 10,000 units sold each month excluding bumps in sales due to discounts. This revenue is over ten-fold larger than the $360,000 development budget.

The developer kept the topic of piracy brief with a simple statement:

It has been over a year since we even thought about piracy. With sales as good as above we cannot really see this as an issue worth more than two lines in this post, so screw it.

That is literally all that has been written about piracy.

Whenever I discuss piracy I feel the need to preface my statements with, “The solution is not to condone piracy.” I do not condone piracy nor has Frictional Games. If you wish to acquire a game – pay for it. If you do not wish to acquire a game – ignore it. Still, from the developer or publisher’s point of view, do not concern yourselves with piracy figures. Piracy figures are horrifically inaccurate and – most importantly – not a measurement that pays you one way or the other.

Worry about what will increase your sales – such as adding mod tools or design to sell your product indefinitely – because that will be what puts the roof over your head.

If you lose customers because of your paranoia – companies like Frictional will be there. Good on them.

This is why anti-piracy is not simple and intuitive...

Subject: Editorial, General Tech | May 4, 2012 - 10:07 PM |
Tagged: piracy

The Pirate Bay has recently been blocked by a number of British ISPs but single-day traffic increased to the highest it has ever been. If there was a need for yet another example of where intuition opposes reality when it comes to content piracy, please -- let this be that so we can move on to actually solving problems.

The biggest issue with anti-piracy campaigns is that so many have opinions but so few have acknowledged facts -- even when proposing litigation.

The intuitive perception is very simple: see a quantifiable amount of what could wrongfully be considered theft and assume that sales were reduced by some factor of that value. Also, if you block access to that cesspool of theft then most of the theft will go away or move somewhere else. Both of those suggestions are fundamentally flawed statistically and have no meaning besides feeling correct.

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Content companies: Do not blame piracy. Sales before sails -- think before you sink.

In reality there are many situations to show that an infringed copy has counter-intuitive effects on sales. More importantly to this story is the latter situation: blocking The Pirate Bay appears to have substantially increased their single-day audience by 12 million views. This seems to be yet another conundrum where no action would have been the optimal solution.

If you were to take away a single point from this article it should be the following:

Just because something seems right or wrong does not mean it is. You should treat intuition as nothing more than a guide for your judgment. Never let instinct disrupt your ability to understand the problems you are attempting to solve or ignore completely valid possibilities at solving them.

Objectivity really is a good virtue to embrace.

Epic talks a storm of bullets. Piracy hurt the sequel?

Subject: Editorial, General Tech | April 10, 2012 - 10:45 PM |
Tagged: piracy, epic games, bulletstorm

Mike Capps of Epic Games, among many other developers and publishers, completely misses the point about piracy. No-one can control piracy, they can only control factors which influence it -- but controlling those factors is meaningless if sales are sacrificed in the process. No-one gets paid by not being pirated; people get paid by making sales.

Frequent readers of my editorials are probably well aware that I am quite vocal about many topics including piracy, the consumables model of art, censorship, and used content sales. I take a very mathematical approach to a lot of complicated topics. Unfortunately, a lot of what is considered common truths is based on fundamentally invalid statistics. It gives me a lot to write about.

Mike Capps of Epic Games was interviewed by GameSpot during PAX East and at some point in the discussion the topic floated across Bulletstorm. On the topic of its lower-than-expected sales, Capps added that the PC version was adversely affected by piracy.

bulletstorm.png

Piracy gnashing its teeth?

Similar statements have been made for countless other games at countless other times. Each of those statements makes a subtle but gigantic mistake in formulating the problem: piracy is not something which does, piracy is something which is. Piracy does not affect your sales, but whatever affected piracy might also affect sales in one way or another.

The intuition is that sales decrease as piracy increases and vice versa. That assumption is nullified by counter-example: do not release a product. Piracy and sales, if you do not release a game, will trend in the same direction: to zero. It is now obvious that sales and piracy do not always inversely correlate.

As Mike Capps also stated in the interview, Bulletstorm had a very rough launch and lifespan on the PC. Bulletstorm required for Games for Windows Live, encrypted its settings, and did other things to earn a reputation since launch as a bad console port to the PC. Customers complained about the experience on the PC which fueled an inferno of uncertainty and doubt for potential buyers.

Being pirated is not losing a sale, but losing a customer before their purchase is.

I was personally on the fence about Bulletstorm and this negative word-of-mouth lead me to ignore the title. I did not purchase the game, I did not pirate the game; I ignored the game. Perhaps those who pirated your title did so because they were interested, became discouraged, but were not discouraged enough to avoid giving it a chance with piracy?

What I am saying is -- piracy cannot reduce your sales (it cannot do anything, it is a measurement), but perhaps whatever combination of factors reduced your sales may also have increased your piracy?

Piracy is an important measurement to consider -- but it, like sales, is just that, a measurement, nothing more. Strive to increase your sales -- keep an eye on your piracy figures to learn valuable information -- but always exclusively strive to increase your sales. It is the measurement that will pay your bills.

Source: GameSpot

Ubisoft announces dropping DRM from Rayman Origins PC

Subject: Editorial, General Tech | March 1, 2012 - 08:10 PM |
Tagged: ubisoft, piracy, DRM

Ubisoft has been known to aggravate their fan base on the PC. Several off-hand comments have been made which claim that most PC users of their titles do so without paying. Ubisoft attempted to mitigate this alleged problem by aggravating their legitimate customers with progressively more annoying DRM and embargoing the PC platform.

Ubisoft’s sales have suffered massively as a result of these initiatives including a drop of 90 percent with the decline attributed to their in-house DRM. Despite their claims that their DRM was a success, Ubisoft is dropping DRM from their Rayman Origins PC release later this month.

drmsucks.jpg

DRM Sucks.

The Steam product page originally made no claims about 3rd Party DRM earlier this week which led to questions about whether Rayman Origins would be free of DRM outside of Steamworks. Those questions were answered when the product page was updated to directly state No 3rd Party DRM. The typical convention is that no mention of 3rd Party DRM implies that there exists no 3rd party DRM on the title. Whoever updated the product page, however, probably believes that some clarity is necessary with Ubisoft’s track record.

While I give credit to Ubisoft for trusting in their customers, Rayman Origins has been quite delayed from its counterparts on other platforms. I hope that sales of Rayman Origins for the PC are quite good and show Ubisoft that their customers are always right whether they believe they are paying or not.

Source: Steam Store

Gabe Newell gets Steamed up over piracy discussions

Subject: Editorial, General Tech | February 20, 2012 - 08:08 PM |
Tagged: valve, piracy, Gabe Newell

Ben Kuchera of Penny Arcade caught an interview with Valve Software’s managing director and co-founder, Gabe Newell. The topics were quite typical for a Gabe Newell interview and involve working at Valve, the future of gaming, and DRM. Gabe also joined the beard club; welcome Gabe!

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Photo Credit: Giant Bomb

A little over halfway through the interview, Penny Arcade asked Gabe whether they believe that they sidestepped the problems of used games and piracy with Steam. Gabe instead responded to the premise of the question, rather than the question itself:

You know, I get fairly frustrated when I hear how the issue is framed in a lot of cases. To us it seems pretty obvious that people always want to treat it as a pricing issue, that people are doing this because they can get it for free and so we just need to create these draconian DRM systems or ani-piracy(sic) systems, and that just really doesn’t match up with the data.

This quote echoes a problem I have had with the piracy discussion for quite some time. The main problem with the concept of piracy is that people wish to frame it in a context that seems intuitive to them rather than experiment to discover what actually occurs. Piracy is seen as a problem which must be controlled. This logic is fundamentally flawed because piracy is not itself a problem but rather a measurement of potential problems.

Gabe continues with an anecdote of a discussion between a company who used third-party DRM for their title and himself:

Recently I was in a meeting and there’s a company that had a third party DRM solution and we showed them look, this is what happens, at this point in your life cycle your DRM got hacked, right? Now let’s look at the data, did your sales change at all? No, your sales didn’t change one bit. Right? So here’s before and after, here’s where you have DRM that annoys your customers and causing huge numbers of support calls and in theory you would think that you would see a huge drop off in sales after that got hacked, and instead there was absolutely no difference in sales before or after. You know, and then we tell them you actually probably lost a whole bunch of sales as near as we can tell, here’s how much money you lost by bundling that with your product.

Gabe highlights what a business should actually be concerned with: increasing your measurement of revenue and profits, rather than decreasing your measurement of piracy. You as a company could simply not develop products and completely kill piracy, but that would also entirely kill your revenue as you would have nothing to gain revenue from.

Before we begin to discuss piracy, the very first step is that we need to frame it as what it really is: a measurement. While violating terms of a license agreement is in fact wrong, if you focus your business on what is right or wrong you will go broke.

If you believe that there is value in preventing non-paying users from using your product then you will only hurt yourself (and if SOPA/PIPA taught us anything, innocent adjacent companies). It is possible that the factors which contribute to piracy also contribute to your revenue positively as well as potentially negatively. It is also entirely possible that increased piracy could be a measurement of a much bigger problem: your business practices.

You know, it’s a really bad idea to start off on the assumption that your customers are on the other side of some sort of battle with you. I really don’t think that is either accurate or a really good business strategy ((…)) we’ve run all of these experiments, you know, this has been going on for many years now and we all can look at what the outcomes are and there really isn’t – there are lots of compelling instances where making customers – you know, giving customers a great experience and thinking of ways to create value for them is way more important than making it incredibly hard for the customers to move their products from one machine to another.

Source: Penny Arcade

Control versus Revenue: Round 2 -- Ubisoft

Subject: Editorial | October 7, 2011 - 10:11 PM |
Tagged: ubisoft, piracy

A couple of days ago I posted an editorial discussing videogame piracy and secondary sales. During the discussion I postulated that the primary issue with publishers is the logical leap made between controlling your market and the amount of revenue made from the market. The failure in that assumption is that you ignore the cost, in market size and otherwise, spent to acquire that control and immediately attribute the negative consequences of that to piracy or secondary sales. PC Gamer has weighed in on the topic with an interesting addition: Ubisoft, since the introduction of the DRM method, has not only shrunk piracy but also shrunk sales by 90%.

Jack Blackbeard... the one who all pirates fear. Just kidding, that's fiction.

In terms of the sense of control, PC Gamer quotes Ubisoft prior to Driver’s release:

“It’s difficult to get away from the fact that as a developer, as somebody who puts their blood, sweat and tears into this thing… And from the publisher’s point of view, which invests tens and tens and tens of millions into a product – by the time you’ve got marketing, a hundred million – that piracy on the PC is utterly unbelievable.”

So Ubisoft's PC gaming sales are down 90% without a corresponding lift in console sales. If only they gave up some control for some revenue, right? A smaller number of pirates might make you sleep better at night, but with an empty stomach and no roof over your head. As always, the solution is to lure customers to your content; do not condone piracy, but pretty-much do not enforce it. I realize that you may feel violated by your non-paying customers but as a company you should be concerned about revenue, not bad feelings; the two paths occasionally diverge. The customer is always right.

Source: PCGamer

Intel and Eurogamer discuss videogame piracy: listen

Subject: Editorial | October 5, 2011 - 09:52 PM |
Tagged: used sales, piracy, Intel

Matt Ployhar of Intel recently wrote in their blog their thoughts about Eurogamer’s piracy and secondary sales editorial. Piracy and Secondary Sales are hot-button issues with publishers these days as many publishers are looking for ways to maximize revenue; we will discuss that in just a second. Talking to many people of the general public over the last few years it seems as though there are two dominant camps of ideology: piracy is alright because I am not hurting anyone; and people are getting screwed and pirates should not be allowed to enjoy the content. Humorously enough, plotting that sample space statistically would yield an overlapping Venn diagram. Personally, I believe that both sides are wrong.

venn-piracy.png

I’d sing “Stuck in the Middle with You” but… copyrights; also, this is a text-only article. And I’m not.

Piracy and Secondary Sales are difficult concepts to fully grasp as information transactions have sharp analogues to material value without actually having any. The most obvious application of this concept is that theft is impossible: a copy is a copy and not a move. Publishers make the analogy to physical goods which can be stolen and this fight perpetuates ad-infinitum. Secondary sales are where these arguments break down, however: publishers actually desire for their products to be consumable. The entire entertainment industry is constructed around the concept of consumable entertainment. This leads into the true issue with information content revenue: control.

There is an intuitive link between control and revenue: if you increase your control over your market than you will increase your revenue. That is a dangerous untruth. Assume that you add a DRM that limits your customer’s ability to pirate your product as stated in Intel Blog and Eurogamer: did you make the pirated product more appealing than the official one? Have you cut off potential buyers? Did you increase development and maintenance costs for yourself? How will future product sales be affected? Assume that you remove the ability for your market to purchase second-hand: how are you distribution partners affected? How will future product sales be affected? Would those people ultimately learn how to pirate your content if they do not entirely ignore it?

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Warning: Anti-Piracy methods may lead to loss in revenue beyond $250,000

The danger in this untruth is that intuition often takes over and these failures are attributed to a lack of control rather than a superabundance of it. This arms race quickly escalates the non-issue to government legislation which is not even remotely focused on the fundamental problem. Perhaps try a little of what Monty Python and Steve Lieber already have? Intelligently release some control and let your market reward you. Conversely, a customer who cannot pay for your services for one reason or another -- will not -- at a fault of none other than your personal business practices.

Source: Intel Blog

Piracy costs the industry $59 Billlion, BSA reports

Subject: Editorial, General Tech | May 12, 2011 - 07:40 PM |
Tagged: piracy, bsa

Piracy is a sore spot for the entire intellectual property production industry. The infinitely reproducible nature of information creates real challenges for collecting revenue particularly if taken from the mindset of a time where content was much more difficult to copy and theft had to occur for content to be in someone else’s possession.

Slightly NSFW, and Monty Python wouldn't have it any other way.

The Business Software Alliance released last year’s report on software piracy through 2010 and found that piracy has reached the highest level yet. Their report, based on a survey of 15,000 business and consumer PCs (servers were excluded from this survey), claimed that the difference between sales and estimated total dollar value of installed software was $59 Billion.

The sharp increase in piracy shows just how impossible it is to survive in the current mindset of acquiring content for free. Piracy affects content creators both big and small. Analysts fear that a continued mindset of acquiring content for free will devaluate the amount spent on content.

The biggest hurdle towards tackling piracy is confusion between revenue and control. Control is a resource that is not free and implicitly paid for by potential market share. A business model that limits your market without increasingly monetizing the control you gain with that model is a total loss. An unfortunate consequence of this confusion is that lost revenue as attributed to a lack of control rather than a superabundance of it. As Gabe Newell discussed with Tippecanoe Valley High School, businesses need to experiment with their business models because theory cannot necessarily be grafted to any given situation. If you are not seeing what you are expecting, it might be because your expectations are incorrect and you should test the market to determine what you should expect.

Source: PCMag