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Software Piracy September 3rd, 2008
Solveig Singleton
A very interesting post about software piracy appeared recently in the computer game development world.

The post began with asking a question... "Why do you pirate my games?" And the author was surprised by the answers, which came down to
  • objections to intellectual property in principal
  • objections to price
  • objections to low game quality (bugs etc.) and
  • objections to DRM
  • objections to distribution channel (i.e. too cumbersome to outlets other than Steam and finally
  • people who admitted that they liked free stuff and they could get away with it.

The author intends to respond as much as he can, by improving the quality of his games, lowering the price, and leaving off the DRM. It will be interesting to see the results. (Obviously, if the responses to the questions above are trustworthy, results should be positive... but for a variety of reasons the results might not be trustworthy... the self-selected sample of respondents might be biased, people are very good at rationalizing to make themselves feel good about what they do, etc.)

Now, here is some meta-analysis:

The possibility of piracy without getting caught sets up a feedback loop in content markets. Usually, if you put a product on the market and it doesn't sell, this is a signal to the producer that something is wrong. He needs to adjust the price, improve quality, distribution, or do SOMETHING. A savvy producer will experiment by doing different things with different product lines. Meanwhile, the would-be buyers are empty-handed, and out of frustration might even communicate their reason for not buying to the seller.

But suppose instead of not buying your stuff, people take the stuff without paying, and can get away with it.
  1. This, as Chris Castle noted recently in the music context, sends a massively mixed message to the producer. Is the product great, and everyone is just free-loading? Or WHAT?
  2. Furthermore the taker isn't likely to communicate with the seller--he isn't empty-handed and has got revenge of a sort, so he is less frustrated; or, he might feel guilty.
  3. The producer is likely to raise the price, to compensate for revenues lost to piracy. And slap on more DRM. Or invest less in perfecting games. Or close off leaky distribution channels. Which if the responses above are to be trusted, will mean MORE piracy. And so the cycle begins... possibly ending with the slow shrinkage of the industry, as with PC games.

So what do we do about this? End the cycle on the business side? Or do we need to hammer away on the policy/law end as well?

To end the cycle on the business side most easily, it would probably be necessary for unilateral action on the part of sellers to be enough break the cycle (unilateral action on the part of buyers so far seems to be part of the problem). I hope our game developer friend continues with his experiment to find out what the answer is above. But note that the answer will be good only for his media, his product. Because even if he tries to break the cycle with those who complain about price, quality, distribution, he is still left with those who are admittedly free-loading or who are philosophical objectors. Will he be able to tolerate this? Depends on the numbers. Maybe, maybe not. And because the numbers will differ across audiences, firms, alternative investment, other times, other media, one won't be able to generalize all that much from the answer.

Also, there might be feedback between his toleration and the size of the numbers. One reason might be, that when a law is not enforced or enforced fairly, the number of people who object to the law itself is likely to grow. That is, our observations about the enforcement of a law affect our judgment as to whether it is a good law. There might be other reasons as well.

Furthermore, even if the answers above are trustworthy, action on part of seller can break the cycle, only if buyers notice and/or respond in kind—and it just might be too much to ask. That is, if a buyer who thinks "games are not worth paying for" might continue to think "games are not worth paying for" simply because the game is not to his taste, even if the seller reduces the bugs to near zero and halves the price. Or if some games are lousy, he might generalize to most games. Then we still have a problem. All this requires a heck of a lot of alertness on the part of buyers and sellers, and may be too much to ask.

And, suppose, one does *not* attack the policy problems such as fixing enforcement. BUT most firms most of the time find the losses tolerable. Does this mean one could do away with copyright law entirely or leave boundary issues just unresolved? No, because it still defines the bounds of the market for those who feel themselves to be bound by the honor system. (Interesting. I started with the thought that there is little point to having a law that is not enforced. I suspect that this is a good general rule of thumb, and that exceptions are pretty rare, likely even here due to feedback between enforcement and philosophical objections).

So to my mind the question and its answers don't have a whole lot of implications for policy. One still needs to plug away at the policy problems, especially enforcement (by which I most emphatically do *not* mean, come down hard).

Food for thought.

Posted in  Intellectual Property  Technology  || 0 Comments »
Author: Solveig Singleton || Location: Washington, DC, USA

 

  
 
September 3rd, 2008

Software Piracy

Posted in  Intellectual Property  Technology 
Author: Solveig Singleton || Location: Washington, DC, USA

A very interesting post about software piracy appeared recently in the computer game development world.

The post began with asking a question... "Why do you pirate my games?" And the author was surprised by the answers, which came down to
The author intends to respond as much as he can, by improving the quality of his games, lowering the price, and leaving off the DRM. It will be interesting to see the results. (Obviously, if the responses to the questions above are trustworthy, results should be positive... but for a variety of reasons the results might not be trustworthy... the self-selected sample of respondents might be biased, people are very good at rationalizing to make themselves feel good about what they do, etc.)

Now, here is some meta-analysis:

The possibility of piracy without getting caught sets up a feedback loop in content markets. Usually, if you put a product on the market and it doesn't sell, this is a signal to the producer that something is wrong. He needs to adjust the price, improve quality, distribution, or do SOMETHING. A savvy producer will experiment by doing different things with different product lines. Meanwhile, the would-be buyers are empty-handed, and out of frustration might even communicate their reason for not buying to the seller.

But suppose instead of not buying your stuff, people take the stuff without paying, and can get away with it.
  1. This, as Chris Castle noted recently in the music context, sends a massively mixed message to the producer. Is the product great, and everyone is just free-loading? Or WHAT?
  2. Furthermore the taker isn't likely to communicate with the seller--he isn't empty-handed and has got revenge of a sort, so he is less frustrated; or, he might feel guilty.
  3. The producer is likely to raise the price, to compensate for revenues lost to piracy. And slap on more DRM. Or invest less in perfecting games. Or close off leaky distribution channels. Which if the responses above are to be trusted, will mean MORE piracy. And so the cycle begins... possibly ending with the slow shrinkage of the industry, as with PC games.

So what do we do about this? End the cycle on the business side? Or do we need to hammer away on the policy/law end as well?

To end the cycle on the business side most easily, it would probably be necessary for unilateral action on the part of sellers to be enough break the cycle (unilateral action on the part of buyers so far seems to be part of the problem). I hope our game developer friend continues with his experiment to find out what the answer is above. But note that the answer will be good only for his media, his product. Because even if he tries to break the cycle with those who complain about price, quality, distribution, he is still left with those who are admittedly free-loading or who are philosophical objectors. Will he be able to tolerate this? Depends on the numbers. Maybe, maybe not. And because the numbers will differ across audiences, firms, alternative investment, other times, other media, one won't be able to generalize all that much from the answer.

Also, there might be feedback between his toleration and the size of the numbers. One reason might be, that when a law is not enforced or enforced fairly, the number of people who object to the law itself is likely to grow. That is, our observations about the enforcement of a law affect our judgment as to whether it is a good law. There might be other reasons as well.

Furthermore, even if the answers above are trustworthy, action on part of seller can break the cycle, only if buyers notice and/or respond in kind—and it just might be too much to ask. That is, if a buyer who thinks "games are not worth paying for" might continue to think "games are not worth paying for" simply because the game is not to his taste, even if the seller reduces the bugs to near zero and halves the price. Or if some games are lousy, he might generalize to most games. Then we still have a problem. All this requires a heck of a lot of alertness on the part of buyers and sellers, and may be too much to ask.

And, suppose, one does *not* attack the policy problems such as fixing enforcement. BUT most firms most of the time find the losses tolerable. Does this mean one could do away with copyright law entirely or leave boundary issues just unresolved? No, because it still defines the bounds of the market for those who feel themselves to be bound by the honor system. (Interesting. I started with the thought that there is little point to having a law that is not enforced. I suspect that this is a good general rule of thumb, and that exceptions are pretty rare, likely even here due to feedback between enforcement and philosophical objections).

So to my mind the question and its answers don't have a whole lot of implications for policy. One still needs to plug away at the policy problems, especially enforcement (by which I most emphatically do *not* mean, come down hard).

Food for thought.