Posts tagged: DRM

Selling Copies in a World of Hyperdistribution

Comments to my post recently about Project $10 made something clear to me — a revelation of sorts. I’ve previously commented on the issue of hyperdistribution in connection to DRM, in You cannot take that away from me: from the business side, companies are so used to selling copies of games that they will keep doing that regardless of whether or not it still makes sense. In a world with hyperdistribution, all it takes is one guy or girl who breaks the protection scheme for all the world to benefit.

So while I’ve spent the last few years trying to find a way to get some sense into circles of business leaders and politicians, I’ve never thought much about the consumer side of the same coin. It makes perfect sense in hindsight, but I didn’t see it at the time: many consumers are just as clueless about the changes we are going through. I don’t mean that as a slight to anyone — we’re living in a social and political revolution brought on by a technological leap forwards. It’s hard to understand this new world.

So let’s take a look at that statement from the consumer side then: It no longer makes sense to sell copies of digital culture. The music and movie industry is extremely reluctant to realize this, but pioneers in those segments still have, which is why we see things like streaming music services and donation-funded movie productions, generally from newer artists not already settled in old business models.

It has excited me then to see a some of the big game publishers move towards newer business models. EA is notable with things like Battlefield Heroes and other new models. Others are hellbent on locking in their old “sell-copies” mentality by introducing DRM that requires you to be online all the time, for instance.

I mentioned in the post on Project $10 that game resales are causing much of the same problems as piracy for publishers. This is tightly related to the fact that the industry is used to selling copies of things and that consumers are used to buying copies of things.

Fundamentally, though, a game is not a tool or a utility which you are bound to keep, or a consumable that you use  up — a game is an experience. It makes sense then for the consumer to trade in the disc, since he or she has already “used up” the experience on it, but it still has value for someone else.

When a publisher fights for the right to sell copies or when a consumer is fighting for the right to resell a game, they are both doing the same fundamental mistake: they’re mistaking the game as being a plastic disc rather than as an experience. Back when copying was hard and game resales not much of a deal, the game basically became the disc (or cartridge), just like the music tightly associated with the CD it came on.

As soon as this connection is broken, old business models fail, and people inevitably complain. Publishers complain that people copy or resell their discs, consumers complain that publishers are greedy and think they have some sort of “right” to be paid more than once for each game.

What is happening now is a rough period of trying to invent new ways of making game development business work. It does not involve companies thinking they “have the right” to be paid, but the simple fact that the companies need to be paid or they will go out of business, which would be bad for everyone involved.

The problem now is that we’re in the middle of the transition. We’re in a world where we cannot expect everyone to be able to download a game from the net, which means we need to sell copies. At the same time, hyperdistribution is a fact and game resale is abundant.

From my point of view, seeing EA try to find a way forwards with a middle ground of things like project $10 to earn money off resales and more “free downloadable content” included with the boxed products to start an ever so slight move towards providing services.

To see retailers complain about the move is expected — after all, they must know just like we know that we’re moving fast towards a world where music and games are not distributed on pieces of plastic anymore, which means that there wont be a need for a store to buy the pieces of plastic in.

Still, I said this in one of the posts I started off referring to, The future of PC Gaming:

Then he fails to grasp the core points of what makes Steam popular: It gives something back to the customer. It’s that simple — the other DRM schemes are all for the benefit of the producer, while Steam has loads of nifty features for me as a consumer that have “Future” stamped all over them.

This also goes back to the other post and human nature. People have come to expect being able to trade games back in for a part of the value towards a new game.

There is a disconnect here really, since the problem for publishers is that the same disc is used twice (which means disc != experience), but the problem for the consumer is that not letting the disc be used twice would stop his or her ability to hand in the game disc, essentially making games more expensive.

I’ve suggested that a solution to this would be to include a game disable function in a Steam-like digital distribution system to fill this need. Once you’re done with a game, you could disable it for a piece virtual currency. You could then use the virtual currency to buy new games if you have enough, or fill in with regular money.

Even more likely though, I think we’ll see more transitions towards games being cheaper content platforms and that part of what you get is tied to an account. Transitioning from a producer of boxed game products to service providers needs to happen for game publishers to survive, but I’m sure we can find ways to do this with both sides benefiting.

Of course the middle men are unhappy, but as soon as they’re out of the way we can live in a happy world where the price of games isn’t so outrageous.

Standing in the Way of Culture

The reasoning behind the introduction of copyright was the establishment of a law which would make sure there were incentives for creating culture. There was a fear that if there wasn’t some form of exclusivity, middlemen with a large capacity for distribution would easily be able to grab all works of art, produce and distribute them more effectively than the creators themselves and thus getting the lion’s share of the profits. This was a time when the printing press was the hot new thing, and writers feared publishers would easily steal all their hard work.

The fear was that if this kept happening, the people creating works of art would tire of creating culture and seeing others profit while getting nothing for themselves (a reasonable assumption), so copyright was introduced, giving authors an unlimited right to association with their works and a limited economical exclusivity with regards to production and distribution. This would make sure middlemen would not be a problem in the production of culture.

Sadly, in this exclusivity now appears an effect that goes in the direct opposite direction related to the original intent. To explain what I mean, let’s discuss something of high cultural value — commercials. Leading up to the fifth season of The Deadliest Catch, Discovery Channel created a trailer. A music and sound design studio called Musikvergnuegen were hired to create a soundtrack for the trailer.

The trailer aired, and something somewhat unusual happened: People heard the music and rushed to the TV in order to see what it was about. On Musikvergnuegen’s blog, under a fairly short and simple post about the trailer, people started gathering in the comment fields with fantastic stories about how they reacted to the music.

Let me tell you my story of this song. I wasnt even in my house but i heard this music come through the surround sound so i darted inside to find out it was a commercial for my favorite show. But wut really mattered was this music. The celtic sailor feel and sorrow filled sound makes this one of the best pieces of music ive ever heard.

The blog post has more than 40 comments, with people asking that the song be released somewhere so they can buy it and listen to it. Several other blogs have called attention to the music and linked to the post on Musikvergnuegen’s blog.

The studio appreciate all the attention, but answer that sadly Discovery owns the rights to the soundtrack, and that  because of that they can’t sell it. Instead, they’ve mailed Discovery, and urge others to do the same. The only problem is that Discovery doesn’t reply.

So, here’s a middleman blocking the flow of culture between the author and the consumers, stopping the people from getting the culture they desire. Recognize this problem? This saga ends on a slightly upwards note, as Musikvergnuegen takes matters into their own hands and add the music to their demo reel, which means it’s now possible to stream it from their web site.

Another example of the same kind of cultural blockage is how music giant Universal let its lawyers loose a few weeks ago to prevent the performance of a theater play at the City Theater in Stockholm. Not, as you may have thought, because they hadn’t paid for it, but because Universal wanted even more money for it, claiming the music was a central theme in the play. However, it turns out the author of the songs in question, Paul Simon, doesn’t agree with the middleman that the play should not be performed.

Abandoned Goods

A similar development has been in effect when it comes to computer games for a long time (and here it’s even more clear). The whole concept “Abandonware” exists to denote older games which are no longer on the market. There are websites that specialize in catering to people feeling nostalgic about games. As with many other kinds of culture, there are a whole lot of people who long for the good old days — the older games have a higher level of quality, they claim. Others still just want the ability to play “the classics” — just like there are classic books and movies there are classic games… the difference is that you can’t get the classic games anymore.

The fact that games can’t be bought doesn’t mean the copyright on them has expired, however. The rights to various games and game intellectual properties are bought and sold between different companies and often you’ll find the rights to games far away from the people who originally created the games after a studio closed its doors.

The fact that they’re no longer selling the games doesn’t prevent companies from having a go at web sites providing Abandonware. Sometimes, whole web sites are the targets of attempted shutdowns by lawyer, at other times, only certain games are targeted and removed. But the games themselves are not sold, so the people who wanted to play them are left empty-handed.

Sometimes, people get so desperate for their old, lost games that they even gather up the people needed to form a team and go through the enormous effort of creating a remake of their classic game of choice, only to be shut down by the rights holder.

There has been a long debate about this in gaming circles, sometimes with thunderous accusations from big games companies. People who download abandonware are called pirates, and blamed for some form of loss of income, even more absurd than the normal kind of calculations.

The Upper Hand of the Middle Man

In addition to all the problems outlined above, the cost for both creation and distribution has brought back something a situation which is very similar to the world before the introduction of copyright: middlemen dictate the conditions they like and grab large parts of the pie, since the authors are so completely dependent on the chain of distribution. In these negotiations, one side has sharp lawyers with years of experience of writing contracts, fine print and cost vs revenue calculations. On the other side are inexperienced, often young talented authors with no experience of writing or even reading contracts.

The imbalance becomes extremely obvious in the average record contract. In normal venture capital business, investors come in with capital, taking a risk with that money in exchange for a slice of profit if the gamble plays out (highly simplified). This state of affairs is a quite reasonable starting point. Looking at the music industry, their standard contract is very different from this — it is more like a loan than an investment… but a loan that turns into an investment once repaid.

Let me explain. The musician or band gets money for recording an album, creating a video and other needed things. The album is released, and all the profits go directly into the record label’s pockets until the entire loan has been repaid. Only then does the artist get a first dollar for his or her hard work. At a glance, this seems incredibly skewed, and it’s just as skewed as it seems. If things had ended there, it would have been outrageous but somewhat real, but that’s not where it ends. In addition to these expenses, there needs to be marketing for the artist. Reasonable proposition if you want to sell the album, but the marketing money also comes out of the “loan” to the artist. Only it’s the label that controls the marketing spend.

So the standard contract is a shared partnership where all the risk is held by one part. In a normal start-up business, this situation would be interpreted as the artist talent and work having no value  at all (and thus should have no part of the income). Add to that the fact that the labels have binding contracts for the artists, but are free to pick and choose how they want to act themselves, and we’ve ended up incredibly far from the original intention of copyright. Let me explain further with two examples:

The New York-based band October Project created some beautiful (but hard to classify) songs during the 90s. They released two albums that were quite successful. Then, without a warning or official explanation, the record label terminated the contract, which killed the band. Two of the band’s founding members went on to start the “November Project”, a band which collected all the money they needed for their recordings themselves, directly from the fans on the Internet. On the homepage for the band, founder Emil Adler urged the fans not to buy the October Project records — “Not a single penny goes to the band”, he wrote. Not a penny, even though one of the albums had hit top-50 in the US.

Another band, Splashdown from Massachusetts, looked to have a bright future. They signed a contract with a child label for Capitol records and released an EP, which quickly sold out. The band made a song on the soundtrack for the movie Titan AE, and expectations were high. They recorded a new album, “Blueshift”. Once done, the label decides not to release the album. After a long fight with the label and because of the fear that Capitol would own any future songs, the band chose to call it quits.

Authors giving up on creating new culture because of middleman behavior was exactly what copyright laws was supposed to prevent in the first place! Something is wrong here. Instead of acting as a guarantee for the flow of culture into society, the effect is a draining of culture.

It’s Broken, Fix It!

There are already political forces in parts of the world that are growing stronger campaigning for a reformed copyright. In Europe, the Swedish Pirate Party has won a seat in the European Parliament. The German counterpart looks to be going strong in the coming elections for the national parliament. Support for both parties is extremely high among young voters.

Taken to its edge, you really could wonder about why the rights to works of art should be something that can be bought and sold at all. There seem to be plenty of problems that would go away if an author could never sell the actual right to their works.

There seems to be some very simple things to do though. Digital distribution has brought down costs of distribution by several orders of magnitude. This somewhat breaks the hold the middlemen have over the market, but there is still something of a monopolized market. Things are starting to change, but what is needed is a much more direct approach, fans meeting artists, players meeting developers directly. This has already started happening more and more in the computer games industry, and I believe we’ll see much more of it from musicians in the future.

Another thing with the Internet is that there is never any really good reason to stop selling something. Put all vintage titles you own the rights to online for a small fee. Even a fee of $5 or even $1 per game means a horde of people would buy them, and it would make you a whole lot of more money than any amount of lawyers sent hunting abandonware sites. Oh, and while you’re at it, skip the DRM. The new market is on the consumers’ terms, and with a direct connection to fans comes the responsibility of treating them like customers, rather than potential thieves.

The Future of PC Gaming

I just finished reading a long article on piracy by Koroush Ghazi from tweakguides.com. It’s an interesting article, and certainly one of the best researched articles out there on the subject, so I do recommend that you read it if you’ve got the time… but, I do also need to address some fundamental problems with it. If you’re sort of short on time, I advice you read the first half of it.

There are a few problems with the article, and while it’s quite possibly the best research done by anyone, it’s certainly not the best written article or best analysis. I’d love to have read the same article written with a fair bit of scientific method. I have the benefit of a background in Computer Science, and while I do understand that without it you’re likely to make that mistake, it still saddens me to see all that research presented in such a way.

Some background may be in order. In scientific papers, there’s a strict separation of source material and the authors’ own progressive works. Everything which is claimed is backed up either by a reference to source material or as conclusions of the authors’ own research. Generally, the papers themselves are split into sections where some are clearly dedicated to going through source material and others are entirely dedicated to the conclusions drawn from the research.

Ghazi makes no such distinction, but rather mixes and matches as he sees fit. This is an approach that is more similar to a short article you’d find in a newspaper than to a scientific paper or even, to grab a subject closer to the tweakguides home, to a hardware test on one of the hardware guide sites out there.

Added to that is the problem that he mixes logical conclusions to different levels in a way that shows a somewhat clear bias in the message he’s trying to tell. All honor to that message (hey, I make my living relying on these things too you know) of how destructive piracy is, but such information tends to have a better punch if it’s actually founded on the correct conclusions. In fact, any article that spends so much time telling you how objective and unbiased it is should probably flag a warning somewhere in the reader’s mind.

Let me take an example. In the section on The Economics of Piracy, Ghazi extrapolates the source information “there is a chance someone who pirated a game would buy it if piracy was unavailable” into the conclusion “there is some potential loss of income to the producer”. Fair enough, that’s a reasonable conclusion to make (the assumption that the chance being larger than zero implied).

However, he then goes on to present the source information “there’s some chance a person who pirated the game may cause a sell of the game by word of mouth”, only to argue that the chance is in fact near-zero through a complicated series of arguments without any actual proof. This is not only a flawed argument, it’s also inconsistent. The logical conclusion is that “there is some potential gain of income to the producer”. It can be argued that this potential gain of income is smaller than the previously mentioned potential loss of income, and in fact I’m fairly convinced it is. However, to make such a claim in an unbiased and well-founded way you really do need to back it up with some data, which simply put, the article doesn’t even attempt.

As the article gets closer to its conclusion, it also seems to lose more of its brilliance and good foundations. Ghazi spends two long pages examining not DRM techniques but DRM products, and then draws conclusions about the techniques based on the observations about the products. This bares some resemblance to looking at Super Mario Bros, Doom and Command & Conquer, and then drawing far-reaching conclusions about the merits of platform games vs shooters vs strategy games from it. He also falls into the logical trap of not understanding the single tier of effort of today’s networks.

About DRM techniques, the article fails to separate the concerns of small scale and large scale, and comparing the invasiveness of the techniques. For instance, the lock-down to only allow 3 installs of a product (small scale) is motivated by the fact that a restriction on number of installs is needed (large scale). This misses the very obvious point that any number would harm large-scale piracy as much. Allowing 5, 7 or 15 installs would likely have unmeasurable impact on piracy levels or sales, but would likely have caused much less of a PR disaster for a game like Spore. At the very least, with no conclusive evidence either way you can’t make a claim of 3 being a necessary number.

Ghazi then goes on to make some very perplexing claims about Steam. Let’s examine things: Steam was released and forced down the throats of very unhappy gamers, and was near-universally hated. That far, he has his facts straight. He then goes on to try to explain how Steam became accepted, without acknowledging the fact that Steam has changed. The reason people hated Steam was because Steam sucked. For the machines and bandwidth of the time, Steam was a horrible bloat.

Then he fails to grasp the core points of what makes Steam popular: It gives something back to the customer. It’s that simple — the other DRM schemes are all for the benefit of the producer, while Steam has loads of nifty features for me as a consumer that have “Future” stamped all over them.

His recommendation that Steam may be a danger because it may turn into a monopoly is also somewhat strange. Several games companies including EA and Ubisoft have already started moving towards Steam, not because they like the product but because they like the technique… but Valve is several years in the lead. Even if I’m sure Ubisoft would rather use their own Steam-like tech, they’re stuck with Steam for the time being. The royalties they inevitably end up paying Valve should be more than sufficient a reason to fuel the development of their own tech.

Finally, the article turns into something more suited as a flame war forum post on some fanboy forum. Ghazi claims that various groups of people do various things intentionally with absolutely nothing to back such a claim up, and the tone turns rather ugly. The illusions of grandeur on display also somewhat leave a sour taste, when he claims to have made Microsoft take action on a previous issue. Anyway, consider the following from the beginning of the article:

Other articles take the easy path by slapping together some unsubstantiated opinions and dubious arguments which merely follow whatever the popular sentiment is on this topic, and come to the usual conclusions. Let me be clear: I won’t be doing that here. I’ve invested a great deal of time into actually delving into all the various aspects of this issue, thinking through all the issues and getting a good handle on the situation based on a large amount of publicly available data. Consequently throughout the article you will find numerous references to reputable data sources and first-hand information rather than just hearsay and conjecture.

Now compare that to the following, found on the last page:

Fast forward to the 21st century, and piracy has apparently somehow become a political struggle, a fight against greedy corporations and evil copy protection, and in some cases, I’ve even seen some people refer to the rise of piracy as a “revolution”. What an absolute farce. Truth be told I have the greatest respect for the people who simply come out and just say that they pirate because they can, no more, no less. At least then I know I’m dealing with someone who’s being honest and has got their head screwed on straight.

Balanced and unbiased articles do not call people of different opinions dishonest or say they don’t have their head screwed on straight. This is the same kind of name-throwing that continually hinders the piracy debate with anyone trying to argue logically about DRM gets called a thief. It’s counter-productive. Don’t do it.

So what do I really think about the future of PC gaming? I think that two things will happen — There will be a clear shift towards online-only titles or titles heavily focused on multiplayer… adding to this, you’re unlikely to see titles ship with the option of running private servers. The cost of maintaining servers is so much lower than the cost of having your game pirated that the solution is obvious. I also think that Steam or Steam-like networks will become the dominant distribution channel, and with this software around it’s likely that pirate software will be detected more often.

The development may go two ways from there… one way would enforce a shareware-style culture where pirated titles would cause an annoying reminder to please buy the game. The other would actually hinder the user in some way, like closing off access to other games or areas of the network. And reasonably, the games industry never learnt from these things before, so the second approach is likely to be tried first, have a huge backlash followed by more debates before we finally arrive at the first approach. But I’ll be happily surprised if we can be smarter than that.

In the mean time, singleplayer games are likely to become near-extinct on the PC market.

You cannot take that away from me

I was going to do some introductory post for this new blog… but of course, something much more interesting is available as a subject, so of course I won’t argue with that. In this case, the ever-hot subject of piracy and DRM is at hand. Jeff Atwood noted the rule that software creators live by, but that’s almost taboo to speak of loudly:

But let me be absolutely crystal clear about one thing: as a programmer, if you write software and charge money for it, your software will be pirated. Guaranteed.

The core of this issue is that people are people, so there will always be some that can’t afford it, some that have some agenda that justifies their piracy (“EA is evil!”), or maybe they do it simply for convenience. There’s a hundred different reasons, and it’s all about how human beings react to things and about our feelings. As such, it’s somewhat silly to think that we can solve the problem using technology alone.

Technology and all the advancements we’ve made is there simply to improve things for us as people living our normal lives. The better technology gets at cooperating with humans, the more likely it is we’ll use it and be pleased with the results. However, as soon as we start trying to employ technology to combat human nature, human nature is likely to win.

Take the DRM discussion for PC games as an example of this. It’s an obvious failure for that very reason — instead of providing assistance to the people that use it, it’s trying to combat human nature. Not only does it not work (games are still getting copied), it annoys people. It’s another one of those bad ideas that is repeated over and over. It’s pretty simple to see why all kinds of technology meant to combat human desires is destined to fail really… in a world where duplication of contents is essentially free, there’s only one tier of effort.

Let me explain what I mean by that through a few examples.

Consider a scenario where a record label is trying to protect their music by applying copy protection to their CDs (I know, madness!). It would seem like a clever thing to do at first glance, but here’s where there’s only one tier of effort. Once one person out there cracked the copy protection or even ran the music through his sophisticated all-digital stereo equipment back into recording software, it’s shared and completely effortless for everyone else. Well, the record labels eventually (yes, it took a good while) learned that it was pointless and started actually providing services to people instead.

Forward a bit in time, and you get DVD region locking. Hardware locks this time, can’t break that can you? Well, all it took was one brilliant man with alot of time and equipment to open the format up to the world. Again, once open the effort is gone… and as a result, region locking is a joke nowadays.

And still we end up here, with Spore. The game was on pirate sites before its release, and turned out ot be one of the most pirated games of 2008… yet legitimate owners who pay for the game can only install it on 3 computers and there’s no tool for moving it onced installed. Okay, so I get (in all ways related to DRM) a better product from a bittorrent site than I get from EA Store, and history repeats.

These things are all about how people work, and not at all about how technology works. Human ingenuity and stubbornness means that there will always be some brilliant computer wiz nutcase out there who will take on the challenge of breaking your scheme… and since there’s only one tier of effort, all it takes is one person (or group of people).

And more on how people work, you cannot take things away from people that they perceived to be theirs without them feeling let down. People used to be able to buy a game, and play it on any computer. The fact that only a tiny percentage of people actually want or need to use the game on more than 3 computers is irrelevant, because lots of customers will still feel that you’ve taken something away. And you cannot take things away from your customers.

McDonalds in Sweden tried a trick several years ago when they introduced those tiny boxes of sauce you can add to your menu. When they introduced the sauce, they removed the ketchup dispensers. If you wanted ketchup, you had to ask for it on while placing your order. Clever trick to get people to buy more sauce, you could think… but in reality, the only thing that happened was customers getting annoyed, even though you could still get free ketchup. Reflect for a bit on why? Indeed, there was a time before the ketchup dispensers were put in place, and people still flocked to McDonalds like moths to a spotlight on a summer night. But once there, people got used to them, and you cannot take things away from your customers. Regardless of how you try to motivate it or how few people actually used the particular feature you removed, people will feel cheated.

From a business point of view, it makes absolutely no sense to pay money (and lots of it) for something that provably doesn’t work, and annoys your customers to boot. Yet business leaders keep holding on to DRM and all these others restrictive ideas. Why? Human nature again — just as people will feel cheated when you try to take something away from them, a perception that someone is stealing something from you provokes a very emotional response within most people, who react to protect their property. This reaction is so strong that anyone trying to challenge it immediately get categorized as a thief or someone who thinks stealing is a fine thing to do.

Letting this sort of primal reactions of protective fear control the actions of a company worth billions can’t be a good state of affairs. There’s a lot of talk about the lost potential income of pirated games… so how come no one is talking about the lost potential income of games that customers shy away from due to invasive DRM measures or due to the bad PR in connection to it?

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