DRM, Game Piracy & Used Games

The most important lesson of Facebook is that a lot of people will trade their sensitive personal information for a virtual hat.

Game companies regularly have trouble ENFORCING good behavior. DRM systems being the most extreme examples, but also dealing with cheating and, in a recent incident, using your customers as a peer-to-peer distribution system.

Givem' a hat. or an affiliate program, or a referral reward, or a contest, or a coupon.

Transparent rewards for good behavior - carrots and honey - can encourage good behavior and be a great marketing tool. The key is that the rewards be real and that they are not substitutes for services that users expect from the game (the danger of charging for multi-player and Project $10).

"Game Publishers Using Stealth P2P Clients", http://games.slashdot.org/story/10/09/03/2047247/Game-Publishers-Using-Stealth-P2P-Clients

B. Parfitt (2010), "THQ talks premium online multiplayer, tackling pre-owned ‘impact’", http://www.mcvuk.com/news/40360/THQ-talks-premium-online-multiplayer-tackling-pre-owned-impact

M. McWhertor (2010), "Machinarium Maker Offers Amnesty To The 85% Of People Who Pirated Their Game", http://kotaku.com/5606886/machinarium-maker-offers-amnesty-to-the-85-of-people-who-pirated-their-game

Digital Rights Management. Anti-Piracy. For legitimate players, these words send a shiver down their spine promising onerous registrations, re-install limitations, and annoying game play restrictions. For publishers, they are an elusive Holy Grail - promising additional revenues and punishing pirate players... but always in the next release or product.

If you've read my blog or bought my book, you know that I have been a very harsh critic of anti-piracy and DRM as I've often seen them as expensive and ineffective.

I'm here to change my position.

Somewhat.

Piracy is a real problem. It does cost revenue. For PC games, 80 percent of the total players of a game did not purchase the game. For console games, we just don't have good data, but console piracy has caused publishers to seriously alter their platform strategy.

My view of anti-piracy tech is colored by its business model and implementation strategy. Anti-piracy firms have usually gotten paid per copy printed or, at best, registered, and the "anti-piracy" policies seem to be focused on punishment.

When I speak on the topic, I've argued that when we are talking DRM we should be talking Digital Revenue Maximization.

At least one anti-piracy firm (alas unwilling to be named as yet) has actually used this strategy.

Their model is simple and should be irresistible for any game developer: they get paid only for pirated copies that convert to legitimate sales.

From a security perspective, this is brilliant. The security firm is rewarded for being effective in detecting pirated copies and not being circumvented.

Pirated copies simply become "Informally Distributed Demos".

From a business perspective, pirated copies become an additional market channel for their products with zero cost distribution and money coming in because of effective security.

The numbers that I was told were impressive. The return on investment was much, much higher for the security firm than they would get from charging their usual rate of between 5 and 50 cents per copy, even with a substantial revenue share back to the publisher.

There are a lot of devils in the details of this approach, and it does not address the customer's issues with draconian security systems directly, but it does make anti-piracy a credible part of a business strategy and, equally importantly, make anti-piracy systems a much more viable business. The nice thing is that even if the system is imperfect, the incentives are correct for everyone and partial hacks simply delay the point at which the player is offered the chance to make their usage legitimate.

Finally, it does answer the question that bedevils game developers:

What do you do when you detect a pirated game copy?

Offer to sell the Player the game, of course!

The R4 cartridge, which allows regular SD cards to be used instead of Nintendo's proprietary cartridges, has been replaced by a new version that works with the Nintendo DSi. These cartridges are often used by pirates to download stolen games onto SD cards (used in cameras and cell phones) and then use them with the cartridge. There is an inherent "removable media" problem for console games that is very hard to stop.

It will be interesting to see what Nintendo does with its new 3DS cartridge to stop (or at least slow down) this problem.

"R4 SDHC Team Releases New v2.10T Card", http://www.prlog.org/10744119-r4-sdhc-team-releases-new-v210t-card.html

Namco Bandai's CEO has come out in support of Ubisoft's Continuous Connection strategy for fighting game piracy.

The re-engagement of the game industry on the issue of piracy is interesting to note - last year, it looked like DRM was on its last legs and everyone was moving to very loose policies for their PC games. It could be the economic hard times for the industry has a whole or a re-emphasis on PC games (or the first move in abandoning PC games) by the major game publishers.

Of course PC games outside of the major publishers are in more than a bit of a renaissance. The vibrant MMO market, the up & coming social games market, and a growing range of indie games that are optimized for the PC, not to mention classic PC titles from Valve and Blizzard perhaps making the traditional game publishers rethink their PC game strategies.

B. Parfitt (2010), "Namco backs Ubisoft’s DRM", http://www.mcvuk.com/news/39196/Namco-backs-Ubisofts-DRM

Sony's PSP has been a poster child for the problems of piracy. The handheld game platform continues to sell reasonably well (excluding the "Go" version), but publishers have avoided it. Sony has attempted to fight the worst piracy methods with operating system updates, but these seem to be circumvented almost as soon as they are released.

The operating system hacks allow a player to bypass any form of security that is added to a game much more easily.

Sony is now discussing some sort of "protective code" that can be embedded in a game that will help fight pirates. One strategy that might work is that the game could attempt to check to see if the console's operating system has been hacked (this would be limit Sony's ability to further update the operating system, though there could be some clever ways around this).

Other options would be to implement some sort of online registration, but this is not necessarily a given for most PSP games.

As always with the PSP, it should be interesting to watch.

A. Yoon (2010), "Sony offering PSP developers code to 'slow down' piracy", http://www.joystiq.com/2010/05/21/sony-offering-psp-developers-code-to-slow-down-piracy/

C. Nutt (2010), "The Sony Situation: SCEA's Rob Dyer Speaks", http://www.gamasutra.com/view/feature/4709/the_sony_situation_sceas_rob_.php?page=4

THQ and Ubisoft are apparently considering joining EA in their strategy to fight used games by charging for online play (EA's Online Pass requires a $10 fee to pay if the game is pre-purchased).

Of course the "Used Game" market has been fueled by the very same focus on consoles that virtually every major publisher has embraced - reducing the number of platforms that need to be supported and making the game play experience virtually an "instant on" proposition is good for development, good for a customer experience, and an enabler of easy used games.

Is the game industry fighting used games because it is possible?

In some sense, the rise of the "anti-used game" movement has corresponded with the rise of online play and value-added, post initial sales services. In the last generation of consoles, used games were not seen as a huge problem because there was nothing that COULD be done about them. Nintendo is still more focused on piracy than used game, perhaps because of its lack of focus on online services.

Certainly, the book industry, at least until very recently, had no real concern with the "Used Book" market, or even libraries, except as a peripheral argument.

In some sense, the used game market problem also corresponds to the relatively high prices paid for used games (compared to used books) and that the experience doesn't "deteriorate" (say, as with a "musty" used book).

Of course, locking out online play makes piracy worse as online services are one of the best ways to battle pirates by forcing game copies to be legitimate.

There are other anti-piracy and anti-used game strategies. Collectors editions can work. Ultra mega collectors editions that are true and truly limited editions create substantial additional value for modest cost. The problem with the collector edition strategy as implemented by most game companies is that the collector's editions are pretty cheap. They don't offer much of a perceived value and seem to be done without any passion.

I spent some time on the Nine Inch Nails' promotion strategy in my book Protecting Games as well as other collectors edition and promotional strategies. My sense is that different versions of a game can be used as a quite powerful anti-piracy and anti-used game service by creating real value for customers and real scarcity.



B. Dutka (2010), "More Publishers Looking To Charge For Online Play", http://www.psxextreme.com/ps3-news/7120.html

B. Parfitt (2010), "SCEA ‘frustrated’ by pre-owned sales", http://www.mcvuk.com/news/39128/SCEA-frustrated-by-pre-owned-sales

Most anti-piracy measures are pretty expensive for a developer or publisher. You've got your DRM licenses, your customer support, the risk of bad reviews due to technical glitches or server outages.

There is another way however, get the government to handle anti-piracy for you. This may require some lobbying and campaign donations, but, once you get things rolling, you've got an anti-piracy system that will run for years and years.

The US FBI and Department of Justice are kicking up their enforcement of Intellectual Property laws with 15 Assistant US Attorneys and 20 FBI special agents who will be working around the country to fight IP crimes.

This won't be all about music, movies, and games, but will also address counterfeit physical goods like computer equipment, medicines, and car parts..

M. Cooney (2010), "FBI, DoJ suit-up 35 new agents; lawyers for intellectual property battle", http://www.networkworld.com/community/node/60517

via "Your Rights Online: FBI, DoJ Add 35 Positions For Intellectual Property Battle", http://yro.slashdot.org/story/10/04/26/1855210/FBI-DoJ-Add-35-Positions-For-Intellectual-Property-Battle

EA's "Project $10" was designed to fight used games by tying free online content to the initial purchaser via a one-use activation code. If you buy used, you'll have to pay $10 to get the same online content.

EA reported that over 70 percent of new game purchasers used the code while used game purchasers were only spending buying up at a "single digit" pace.

The real question is whether used game prices and sales have gone down... I guess we'll have to wait for GameStop's numbers.

You may want to have 2 activation codes:

One that gives each copy of a game a unique identity and another that is one-time use (perhaps).

In some very important sense, it is important to know how many times the same copy of a game gets activated. There should be rewards for this to encourage registration (or transferred game saves or some such). One could combine this information with used game prices to get an estimate of how many players are buying used or borrowing copies: basically, a capture, recapture system. Especially, if you can tag different registration numbers to different sales channels.

The second activation code would then work like the current "Project $10" code.

More to ponder here. Bill Harris over at Dubious Quality proposes a "2 use" code with an interesting argument.

Oh, and Ubisoft has jumped on the "Project $10" bandwagon. I hope EA filed a patent on it or something

Of course, the easy way to fight used games is to go back to selling PC games (or move into digital distribution and MMOs)... used games are pretty much purely an artifact of consoles.

K. Brice (2010), "EA: Project $10 saw over 70% of new buyers redeem code", http://www.gamesindustry.biz/articles/ea-project-USD10-saw-over-70-percent-of-new-purchasers-redeeming-codes

J. Batchelor (2010), "Ubisoft to join pre-owned assault?", http://www.mcvuk.com/news/39060/Ubisoft-to-join-pre-owned-assault

Avatar breaks another record with 200,000 pirate Blu-ray downloads in the first 4 days of its release.

So much for Blu-ray's anti-piracy characteristics...

Now, I'm sure the Blu-ray dudes will come out with some sort of fix for the hack.

But that won't do James Cameron any good.

B. Parfitt (2010), "Avatar ‘most pirated Blu-ray ever’", http://www.mcvuk.com/news/38742/Avatar-most-pirated-Blu-ray-ever

Sony's Playstation Network is rather different from Microsoft's Xbox Live in that games are tied to an account instead of a console. PSN players can install a game on up to five consoles. Clever users are "timesharing" games using a single purchase to install games on five consoles and share the game... basically buying a game for 1/5th the price.

Capcom has added a layer of "DRM" to its PSN game, Final Fight. This retro game requires players to login with the account of the person who purchased the game originally in order to play and in order to login, the player has to be connected to the PSN.

So, Capcom is requiring the same continuous connection that is getting Ubisoft in trouble, but on a console instead of a PC.

Account sharing may also be a problem for other online services like Steam.

J. Fletcher (2010), "PS3 Final Fight: Double Impact requires PSN connection", http://www.joystiq.com/2010/04/21/ps3-final-fight-double-impact-requires-psn-connection/

via

" Final Fight Brings Restrictive DRM To the PS3", http://games.slashdot.org/story/10/04/23/0536246/Final-Fight-Brings-Restrictive-DRM-To-the-PS3

"Capcom's Response on the Final Fight DRM", http://boards.ign.com/ps3_general_board/b8267/191330467/p1/