Still Alive

You don't think Blizzard has a piracy problem with World of Warcraft? I'm not going to name names, but I know of people who have the World of Warcraft client and they play on servers that are illegitimate, not operated by Blizzard, and it's a problem for Blizzard. They would probably say it's not a huge problem, but it is out there and it does happen. You'll see the World of Warcraft client and all the updates on the torrent network just like you will every other game. They're successful in as much as most players, the overwhelming majority, don't pirate their game because it too hard to find a way to continue to play when you're constantly dealing with servers that are being shut down, but they do exist and it is a problem that Blizzard does have to deal with.

Well because anyone who makes a game does so for the reason that they're either passionate about making games and they want to share that passion or they actually want to make money. No one would make a game for the PC if there wasn't an opportunity to make money. The question is: can you secure your content well enough that the majority of consumers would follow the legitimate path of acquiring that content? That's my point about World of Warcraft, that's the case with online games in particular that require continual touch points, logging into the game, revalidation of your right to have the game on a regular basis. Those types of games definitely are the ones that are succeeding in the piracy market today - they're not being impacted.

There's even a school of thought that looks at what's happening in Asia, there's the largest market, on average, for piracy and you also see it as the largest market for revenues being generated for online games for PCs by an overwhelming amount. Our research, the Horizons research that we published, shows that coming out of Asia there's almost half of all the revenues generated for PC games software. Even though there's piracy there, there are local operators who have figured out a way to market their games and make games that will work in that economy and will not suffer at the hands of piracy. A lot of the trend is around free-to-play games, it's a growing trend even in the West now. I think we'll see more of those types of approaches, Battlefield Heroes, of course, probably being the most well known title that's about to launch in the western hemisphere.

I think it's bad. We're going to conduct some research to try and put some figures together and attempt to understand how that piracy is on a global basis and then, just as we did with our industry revenues reports, we're going to try carve it up by geography as much as we can.

Publishers want to hear that there's some tried and true methodology to protecting content while also protecting the interests of your customer, so as not to upset them and make them feel that they're criminals themselves. I'm not going to cite specific examples, your readers, your publisher audience, knows these stories well where consumers feel a lot of times that the DRM restrictions that are placed on games make it harder for them to install and play a game than someone who pirated the game. If you read forums and posts that's the common thread I see, that the amount of hoops you have to jump through with the DRM protection in order to install in on one or two machines in your home makes it more difficult to utilise the product for people that actually paid for it.

As an organisation, what we're going to attempt to do is try and put everybody in the same room, publishers, content protection companies and developers and hardware providers and say: 'here's what we believe the right recipe is, no matter what protection methodology you use lets make sure at least the experience is consistent so they consumers don't reject PC gaming as a platform, because digital rights management is so ominous and in the way of their fun'.

I'm sure Stardock would be happy to get the other 40 per cent of their audience that's playing their game to actually pay for it. Certainly as you traverse the landscape of major publishers, if they're going to make multi-million dollar bets on titles they've got to have a way to protect that investment and make it return the investment just like they would if they were investing in a triple A console title as well. Just what exactly is the piracy rate? I don't think it's 90 per cent for any game. I think it's high, and hopefully we'll be able to come out with some realistic reports so that those who are in the publishing side of things can actually look and see what the rates of piracy are. It may be on a title by title basis, have some good solid estimation on how badly their game is being pirated and whether the rights management scheme they're using is good enough or can be adjusted to protect them a little better.

I think that once broadband takes over your business model if you don't adjust to it then the consumers will adjust to it first. I think that music should serve as a lesson that if you're not ready to serve the audience that have an appetite for your product, that have the access to digital distribution methodologies then they're going to find a way. Napster being the first example. Can you really police effectively a billion people out there in the world who are freely sharing content from desktop to desktop without a centralised entity to go after? I don't think so.

I think its more of an issue of dealing with the source of the content or adjust your business model, ala Battlefield Heroes, to accept the fact that everyone's playing online anyway, why not just give the client away, forget about trying to monetise the client and monetise other aspects of the game. I think its important to note how well certain companies are doing well with that. In Korea there is no disc based version of FIFA available and instead Electronic Arts partnered up with a local game operator to develop FIFA Online, and according to Electronic Arts that's generating somewhere in the order of a million dollars a month in revenue. In an environment where if they released a disc game it would probably get pirated really badly and it would never come close to making that kind of money. A million dollars a month for a PC service based title is a really, really good success. I think the model can work in the United States as well.

I think Steam has a very solid approach to dealing with digital rights management. When it first came out there was a huge revolt against Half-Life 2 because no one really liked Steam because of its start-up issues but the market has adjusted and consumers accept it. It's convenient to buy games through Steam, it's convenient to download them, it's convenient to move them form machine to machine, so they serve as an example of what to do right. While they don't talk about their numbers, their piracy rates for their titles which ship exclusively on Steam are extraordinarily low compared to the rest of the market and more power to them - they serve as a glowing example of how to succeed in digital distribution.

No, not at all. The retail figures that we studied, when we formulated on our Horizons software research for PC games, showed that worldwide only 30 per cent of all revenues are being generated on retail today. So out of USD 11 billion in worldwide software and service revenue being generated for PC games there's only 30 per cent of those dollars coming from retail DVD sales, so the market's already moved. I remember just two years ago walking into a major publisher and having them say, 'there's no way we'll ever distribute our product digitally because Best Buy would stop putting it on the shelf,' that same publisher just had a day and date worldwide digital distribution release.