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Eran's blog

Fight Piracy with Innovation, not DRM

We’ve all been saying this to the music and movie industries for quite a while. More DRM does not translate to more sales, Innovation does. It seems that the gaming industry is now learning a similar lesson:

As we believe that we are decreasing the number of pirates downloading the game with our DRM fixes, combining the increased sales number together with the decreased downloads, we find 1 additional sale for every 1,000 less pirated downloads. Put another way, for every 1,000 pirated copies we eliminated, we created 1 additional sale.

Though many of the pirates may be simply shifting to another source of games for their illegal activities, the number is nonetheless striking and poignant. The sales to download ratio found on Reflexive implies that a pirated copy is more similar to the loss of a download (a poorly converting one!) than the loss of a sale.

It’s good to see another company learning that the standard rhetoric about how piracy equals lost revenue is almost completely false. Most people who pirate your product would probably never have bought it in the first place. So why ruin your paying users’ experience by more limitations? Instead innovate.

In Korea game piracy has long been a problem. Gaming companies in that market turned mainly to two other business models:

  1. Subscription. Works great for WoW! Moves the authentication and authorization work over to the server and makes pirating your content much harder. Also it gives you a steady revenue with which to keep developing new content, getting your users to stick around longer, pay you more money, etc. Unfortunately for the Korean game market this method did not seem to work very well over there which is many have switch to this second model
  2. Free to play games with micro-transactions. Download the game for free, send it to your friends, install it on as many machines as you’d like then come check out our in-game market, it has some nice power-boosts and unique items that you can’t get anywhere else. This model has been fantastically successful in Korea and is now slowly infiltrating US markets as well.

What’s next? It seems like casual gaming inside social networks (read: facebook) is set to grow but with a so far unclear business model (ads? microtransactions?) That’s fun but here’s what I’m waiting for: with Guitar Hero and RockBand sales going through the roof, I’d love to see the next music CD that I buy come with a bonus Guitar Hero or RockBand track so I can Rawk Out with my friends to some cool new music. That’s the kind of innovation that would actually get me to buy CDs again.

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