Bit Shift

Since the reports a few weeks ago about Ubisoft’s 93-95% claimed piracy numbers, Ubi has continued sending ambassadors out discussing how they are reducing their DRM away from the always-on requirements type to the just-activate-it-on-your-machine type. Tying a game to a machine (or even 5 machines) is still dumb, but not nearly as reviled as requiring one to always be online when server downtime or sunsetting is always a possibility. I guess that if we go from the fire back to the frying pan, we are supposed to be grateful.

It saddens me when I see video game publishers still wrestling over simple customer-satisfaction items like this that are pretty-well solved in the minds of average customers. I look at the video game world as a precursor to the inevitable digital mainlining of most media (mainly the PC gaming world, because the consoles are still acting anti-competitively).

Downloadable music still has a ways to go there, but it’s farther along than TV shows and somewhat movies. But most MP3 customers don’t understand DRM and really shouldn’t have to. Because of the early rifts in digital music rights, there remains a lot of misinformation about where you can play a song you buy on iTunes (the answer is anywhere, now, but at first it was not so) or what to do with music bought from Amazon (drop it into your music device, or import it into iTunes if you roll that way).

It’s odd to me, looking back, that Apple was content to throw away the Fairplay DRM that it developed and move into DRM-free music as soon as it could get the labels to agree to it. Contrast that behavior to Ubisoft’s cattiness when asked by RPS if their DRM had been a mistake. RPS thinks they’re protecting their shareholder’s perspective, but Apple saw a resurgence in its stock following the removal of DRM from iTunes songs.

In fairness, Apple wasn’t producing the music they sold, but their profits were still tied to sales. And, surprise, the world didn’t come down. And people still buy music on iTunes even at their relatively high prices. I suspect that Ubisoft still kind of believes that DRM works, despite all of the evidence to the contrary. And, even if it doesn’t work, as least they’re doing something. If that something alienates the people waving money at you instead of serving them, that something you did was wrong.

The notion of optical discs as a predominant storage medium of the future was dead before I wrote my first post on this blog. So it may seem a little obvious to everyone that companies would be throwing in the towel for their optical disc computer drives. But when Sony is the first major company to withdraw from the PC optical drive market (as of November), all of our eyebrows should raise. Why?

Sony was one of the first compact disc technology developers (the other being Philips) back in the 1970s, when everyone was still rocking 8-tracks or cassette tapes if you were modern. It also worked tirelessly in the subsequent 3 decades to replace its own technologies with more optical formats, such as DVD, minidisc, Super Audio CD, UMD, and finally Blu-Ray. The point is, you’d be hard pressed to find another player more invested in optical discs as a major business strategy for the last 35 years.

To be fair, Sony isn’t abandoning Blu-Ray or consumer devices. This is all about the PC drive division. But, it’s significant still because Sony is admitting that the optical platform isn’t going to expand outside of the consumer relationships it has now. That means, nobody is at home writing out DVDs and certainly not Blu-Rays for family video shows; it’s simply easier to publish it to Facebook or YouTube.

Naturally, Apple told everybody years ago that we didn’t really want optical drives and sold lots of folks on the Macbook Air and the iPad. The laptops that we’re seeing come out since then are going for lighter, slimmer profiles and that means cutting out clunky mechanisms like optical drives.

This all may seem troubling to physical disc collectors and especially the folks who replaced their VHSes with DVDs and hence their DVDs with Blu-Rays (hopefully you skipped HD DVDs). However, it’s actually going to be a good thing when the market shifts away from physical discs.

If you look at the PC video game industry in 2008, retailers were not willing to give shelf space to the small-market PC games when there were console games to be sold. Luckily, Steam was already in a position to sell lots of different PC games at that point with no shelf space concerns to worry about. The PC game market reinvented itself without much trouble at all, and now there is a huge variety of choice and price points.

After the physical disc sector burns off, there will hopefully be a much more interesting digital distribution phoenix that will arise (if it looks like Ultraviolet, something went wrong). And in the mean time, get the content you want on physical disc for cheap and store it on a cheap digital platform like Plex for your own use.

Some gaming commenters are up in arms over the nature of Ubisoft’s CEO’s pretty bold claim of 93-95% for his company’s games. Indeed, on its face that number sounds more than just a little on the high side.

Recurring BitShift readers remember the MadFinger Games 80% piracy rate claim for Dead Trigger (and maybe you heard their 90% piracy rate for Shadowgun). As I had explained during that fiasco, the piracy we might typically envision is an American college student downloading cracked versions of the $60 game on a whim and playing it for weeks on end. But that is flawed, because the bulk of PC software piracy is actually happening in countries that are less developed and more corrupt. I pointed to Armenia in this chart, because it has the highest rate and is known for a very corrupt government and banking system. 

So, intrepid link-clickers, what precisely is the PC software piracy rate of the country with the highest rate of piracy? Why, it’s 93%. If those numbers are to be believed, then it would seem that Ubisoft’s CEO, Yves Guillemot (am I the only one who knows how to spell Guillemot because of the old graphics card brand?), is actually only referring to those types of countries when he mentions this high of a piracy rate. Because if he included the other countries, all things being equal, the number would be much, much lower than 90%. In fact, the weighted average on that chart of international software piracy puts it at 59.9%. That’s because countries such as the United States, which has the lowest piracy rate at 20%, bring the average down quite a bit (33 percentage points).

So, is Guillemot including all countries in this statement? Well, it would seem not, since in the same interview, just before the most famous sound bite, he singles out only certain countries:

“We want to develop the PC market quite a lot and F2P is really the way to do it. The advantage of F2P is that we can get revenue from countries where we couldn’t previously - places where our products were played but not bought. Now with F2P we gain revenue, which helps brands last longer.

“It’s a way to get closer to your customers, to make sure you have a revenue. On PC it’s only around five to seven per cent of the players who pay for F2P, but normally on PC it’s only about five to seven per cent who pay anyway, the rest is pirated. It’s around a 93-95 per cent piracy rate, so it ends up at about the same percentage. The revenue we get from the people who play is more long term, so we can continue to bring content.” 

93% Software Piracy is a Real Thing… in Armenia

So, Guillemot’s statement about 93% actually matches quite a bit with the piracy rate in Armenia. Whether the number holds true for Ubisoft specifically is still not known. It may be based upon their company’s specific data or it could be off of these countries’ averages. But the intent here is that certain countries will pirate more, and that is almost certainly true. Therefore, Ubisoft wants to find ways to monetize the high-piracy countries. That is the context of his statements, and it’s getting buried in the furor over the 95% piracy rate allegations.

I don’t fully understand how his F2P model lets them charge people where the games were “played but not bought.” This may be a discrepancy from what I’ve read about the banking systems and what Ubisoft believes they can do. Somehow those 7% are paying for software, so it’s not impossible to do. I don’t mind F2P games in theory, if they are done right. Most of them are not. Time will tell if they are successful.

The real problem with Ubi’s response to piracy is that they are simultaneously doing nothing to bolster the community towards their side. My I-don’t-make-my-living-from-games stance has been that your support of the game for the sake of your actual customers (and pirates aren’t customers, remember?) builds the mutual trust bridge between you (the developer) and your audience.

Valve manages to build good will regardless of the pseudo-DRM that Steam carries (which isn’t impenetrable, either) because they have the world’s most incredible post-release game support. I think precisely zero people were mad when Team Fortress 2 went free-to-play after a couple of years of being a $20 retail product. Why? Because it surpassed its initial value many times over.  Contrast that to Dead Trigger, which was $0.99 but went free-to-play in less than a month.

So, instead of punishing the people who are willing to legally buy your games by adding in incredibly restrictive DRM that does nothing or by delaying the PC release for multiple months after consoles, how about finding new, exciting ways to serve your customers? How about being the company that finds innovative ways to make it actually pleasurable to be a customer?

What have you done for me lately, Ubisoft?

In one week, we can go from talking about mobile game Dead Trigger’s allegedly high piracy rate (and implying that MadFinger Games is not making much money on it, which I somehow doubt) straight over to the PC world: you know, that place where software piracy was born and continues to be nurtured.

PC piracy doesn’t seem to be declining at all (at least not in absolute terms), despite lots of new legislation across countries designed to discourage it. I don’t want to spend a lot of time on the piracy part again, but it’s worth noting that not everybody who uses software looks like you do (and I don’t even know what you look like). As I said in the Dead Trigger article, most of the pirating seems correlated to the east European, west Asian, or African  countries. And it shouldn’t come as any surprise; bootlegging is something of a national past time there. That might be terrible if this was 18 years ago and your game was only releasing in the retail shops of Armenia, where software piracy is 93%.

But in the actual world, a software developer has a far different reality. The same bridges that make piracy simpler, can also make it far less hassle to just legally acquire software for cheap… at least for countries who have non-corrupt banking systems (speaking of Armenia, it’s at least corrupt enough to have it’s own “Corruption in Armenia” Wikipedia article). My point, which I’ve made before, is that pirates will statistically be pirates, for all of the reasons that they are pirates already. It’s most likely tied to depravity of man combined with an immediate, connected global economy and nearly perfect anonymity. 

Because of that, I don’t know how useful it is for companies to track what percentage of their users are pirates (MadFinger decided to drop a number on us, too bad it was a percentage), because the pirate users aren’t customers. They’re effectively demo players until they enter into your court of legitimate users. The real hurt comes from deciding to tie in the networking components of an in-app purchasing system and possibly centralized servers for gameplay. Just like StarDock saw when Demigod was pirated upon release, that soaks up a lot of available resources and degrades the experience for paying customers. That game is made to be a multiplayer, connected game (and is a great game, by the way). Piracy swings the load around pretty heavily and can really hurt the profitability of the publisher if a circumvention isn’t applied.

So, with all of that said, it’s kind of thrilling to see Stardock enjoying a very profitable all-digital release of Sins of a Solar Empire: Rebellion. Wardell has always been very protective of shelf sales in the past, so his discussion of the digital sales response to the new Sins game is very encouraging.

Likewise, Minecraft got a little attention recently when PC Gamer inquired why Notch hasn’t moved it to Steam since a number of his concerns are no longer Minecraft easily doesn’t need Steam to be successful, since PC Gamer speculates it currently makes a million dollars every three days. I don’t really think that Minecraft is in a significantly different category of game than Dead Trigger, and it’s managing to be profitable without in-app purchasing and never had to worry much about its pirates.

Maybe, in a world where anyone can get any game, they only want to pay for the good ones.

The natural enemy of digital goods is digital rights management (DRM). One of the most hated forms of DRM among PC gamers is mandatory constant internet connectivity. Even if you the gamer are online all of the time (“all” versus “most,” btw), what happens when the production company decides it’s no longer worth it to maintain the authentication server and shut it down? It’s happened.

Or, what happens when the launch week is far more popular than tested for, and effectively does the same? It happened with Diablo 3, and somewhat still is. So much so, that South Korean gamers are demanding refunds and are being refused by Blizzard’s strict policy. Now the FTC is involved.

I’ve said before that DRM isn’t stopping much real piracy. The interesting thing about Activision/Blizzard is that they have such draconian ways of policing their game access, and yet the launch price of their games have never dropped to match. I’m glad when PC game makers can get more money for making a game, but it’s sad that the highest priced games also come with some of the biggest disappointments in their value and service to the customer.