New Entertaining Times
I’m sorry there’s been a bit of a pause in the posting here. We’ve successfully gone through the process of finishing up our first internal demo of my new project (nope, not telling you what it is… yet), and I’ve been introducing a new AI coder to the Frostbite codebase. It’s kept me more than busy… but now I’m back in business with a few days off, and I figured it’s time to reflect on some of the news of the last few weeks.
So, earlier this week the news hit of a dutch study performed by the researchers at TNO on behalf of the Dutch government, showing among other things that people that do illegal file sharing in general buy more entertainment media than those who don’t. A good summary of it is available over at MarketingVOX. A similar study was been done before by the Canadian government and concluded that there was a positive effect from the illegal downloading of music.
Looking at sales, the album that sold the most on downloads last year was Nine Inch Nails’ Ghosts, even though it was given away for free. And recently, Monthy Python sales on Amazon spiked by 23,000% as all of their material became available for free on youtube.
So there are two interesting questions that come out of this research… first of all, the big music businesses aren’t stupid when it comes to making money, usually, so how come they’re ignoring this research? And second, why is the PC games sector being killed by piracy if this is true — shouldn’t it apply to games as well? Or was all of that just a big lie?
The answer to the first question is rather obvious: The big music companies aren’t the ones making money. Their business model is based off a tightly controlled music sector where big hits like Britney Spears are produced over and over by a very small set of producers. They’ve been able to select who gets to release an album for a long time now, and they’ve taken most of the profits from the sales themselves.
Now, in contrast, smaller bands and artists are profiting. The money from Ghosts took a much more direct route from consumers to Trent Reznor, and none of it ever landed in the pockets of EMI or Sony. New talents are emerging through other routes than the record labels. Not strange these companies are trying to stop the flood, but rest asured that the result will only be drenched music industry lawyers. Musicians are freeing themselves from the clutches of big business, and profiting from it.
The second question is more tricky. Are we wrong? Do the people who pirate actually buy more games? No, obviously not as a general case, because we’re losing money on selling PC games, and the industry as a whole is moving away from it. So what’s the difference?
I think one key thing to consider here is the cost of games. The currently high cost of games is a large enough barrier that I’ll think twice about buying something. If I hear a song and fall in love with it, the cost of a download or a CD is low enough that I might buy it impulsively just from that entertainment value. In contrast, I’ve looked at buying Call of Duty this month, thought about it and decided not to on the basis of cost — and yet most of the people we expect to buy our games probably have less money to spend.
Why do games cost so much? With Steam and other digital distribution channels there’s no need to make a DVD, print a manual, make a box and ship it across the world… so the download should be cheaper, right? Of course it should, but enough people still buy games at retailers like GameStop and Game to let them bully the industry. Whenever a company wants to sell a game’s download version cheaper, the retailers step in and say “No, if you do that we wont sell your game” (“so people have a choice” — wait, what?). The sooner you stop buying games at retailers, the sooner we can break this evil lock-in and lower the price of games.
But I don’t think that’s all to it. I think at least part of the issue has to do with replay value. If I download an album from a torrent site, I’ll listen to it for a while, start loving it, and buy it because I’ll still play the album hundreds of times after I bought it. With some games, there’s next to no replay value. The point of “love for game starts” is very close to the point of “game ends”, and thus there’s a very short period in which there’s a high incentive for the player to go and buy the game.
The online portion of games counter this. Comparing the play time of a singleplayer game to a combined SP/MP or a pure multiplayer game, there’s a huge increase in replay value. Sadly, that does nothing to save the singleplayer experience, so the only reasonable way forward is to bring down the cost of games.
Especially as downloads fix another major problem in the process: that games aren’t available to some people at release.
So what’s the conclusion to all of this? Simple: buy your games online, help break the retailers’ stranglehold on the games industry.
The Games Industry | slicedlime | 
Saturday, January 24, 2009 16:45
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By HomerJ, Sunday, January 25, 2009 @ 16:57
The reason these reports are being ignored is because they are based on incorrect statistical techniques. The Canadian report you quote is based on surveying users themselves, which is highly inaccurate when dealing with illegal activity. Asking someone who downloads music whether they also purchased more music as a result is not in any way, shape or form an accurate method. It’s like asking people in prison how many of them are innocent.
I can’t read the second report as it’s in Dutch, but I suspect based on the description that it too is based on similar types of surveys and false deductions.
Suffice it to say that the conclusions drawn from such studies are not only inconclusive, they are being very generously and often deliberately interpreted in support of piracy.
Consider for example the concept that the age group and type of people who download entertainment media are, by virtue of their very demographic, more likely to purchase entertainment media in the first place, regardless of piracy. Consider then that piracy only reduces the amount this group would have purchased. The net result might still be positive, but it will be a lower positive than in the absence of piracy.
By slicedlime, Monday, January 26, 2009 @ 0:25
That’s an interesting claim. I certainly don’t know exactly how the studies where done, but I’d be very disappointed if all it came down to was “find someone who downloads, ask them if they also buy”.
Anyway, if something is inaccurate there’s plenty of ways to disprove it rather than ignoring it. Ignoring studies like this usually isn’t done if you can come up with proof of what you claim here. In fact, being able to disprove the study would be extremely good for the music industry… instead there’s nothing solid, only claims of lost income of this or that many billions.
Looking at the hard numbers, you can clearly see an increase in album sales that is very tightly coupled with the number of users on Napster, back in the day. At the time, there was still talk about how Napster was killing the record industry. Those two facts don’t mesh, and that’s also ignored.
So… if having access to free music makes people buy less music, how do you explain that people bought tons of the free music from NIN, Radiohead and Monty Python?
By HomerJ, Monday, January 26, 2009 @ 13:41
You’re mixing a whole bunch of things together. Lots of people buy products from NIN, Radiohead and Monty Python regardless, because these are popular products, corporate advertising and distribution has made them popular before the Internet revolution came along.
Having free samples of monty python on YouTube is not the same as being able to download their entire collection for free; one can boost sales, the other will be a perfect substitute for a sale.
The “radiohead experiment” was a failure. Read this article: http://www.comscore.com/press/release.asp?press=1883 Basically most people freeloaded and paid either nothing or next to nothing for the music. Radiohead still made some money out of it, but way less than they could have via normal commercial channels. Here’s a telling quote:
“I am surprised by the number of freeloaders,” said Fred Wilson, managing partner of Union Square Ventures and well-known music aficionado. “The stories to date about the In Rainbows ‘pick your price’ download offer have been much more optimistic. I paid $5 U.S. and had no reluctance whatsoever to take out my card and pay. It’s a fantastic record, the best thing they’ve done in years. But, this shows pretty conclusively that the majority of music consumers feel that digital recorded music should be free and is not worth paying for. That’s a large group that can’t be ignored and its time to come up with new business models to serve the freeloader market.”
Free music doesn’t necessarily lead to more sales, in fact it can result in the exact opposite. It’s just a spin that people put on this to justify piracy. It’s up to you if you want to buy that spin, I certainly don’t.
Also, how can you disprove or prove the accuracy of piracy statistics? Unless you watch every single person in the world and record their every activity, you can’t possibly know what the true scale and effects of piracy are. There is no accurate method to measure piracy right now, which is why it leaves room for so much garbage to be generated on this topic.
I can ignore a study when it says that it is based on surveys. I don’t need to disprove it because the underlying methodology is known to be too faulty and biased for usage. Of course pirates don’t particularly care, they’re happy to use anything to support their freeloading.
I suggest you read that original Canadian study and see for yourself, and I also suggest that you think a bit more deeply on this topic.
By Thomas Tvivlaren, Monday, March 8, 2010 @ 0:26
@HomerJ: In regards to Radiohead you are incorrect to call their experiment a failure.
First, about 40% of the 1.2 million downloader actually paid an average of 6 USD. That totals to almost 3 million USD. Without excessive distribution costs, without a multitude of middlehands…
Add to that that the big bucks are generated on concerts these days.
If only we could all make that kind of failures, don’t you agree?