Video game piracy costs overstated?

A press release on gi.biz going by the title “Brunel Study Reveals Portrait of A Videogame Pirate” suggests that video game piracy costs the industry almost $5 billion a year. I guess they mean $5 billion US. I found a market summary (pdf) that suggested that by 2007 the total industry earnings would be $30 billion. So Brunel is suggesting that the industry is loosing 16 odd percent of revenue a year to piracy? That I doubt.

Something that I hate about the way the “anti-piracy lobby” describes piracy is that it is described as a “loss”. How exactly is it a loss? A loss suggests an expense. In traditional businesses you have to sell something to make a loss on it. ie, I bought 10 apples for $10 and could only sell them again for $8 so I made a $2 loss. How can you make a loss off stuff you don’t sell? By definition a pirate copy of a game is not sold. The only “loss” you’ve made is the lost *opportunity* of making a sale to the person who obtained the pirate game. The anti-piracy lobby seem to have this incredibly simplistic model for working out their figures. It goes along the lines of:

millions of sold games * percent of pirated titles * average retail price = loss to piracy

Eh? Anyone with even a tenuious grip on statistics and economics will tell you this is completely flawed. This formula presupposes that every game pirated would have been bought had the pirate not had access to a pirated copy. It also presupposes that pirates don’t buy legit copies of games they pirate.

I’d argue that some pirates “try before they buy” but that this percentage is pretty minimal. But I do know from personal experience of observing game pirates that piracy is, in general, an act of opportunity rather than premeditation. The pirate spots a copy of X for download or Y game is lent by a friend and it is easy to copy so the pirate does. If on the other hand the pirate has no way of duplicating or downloading the game the likelyhood of them actually going out and forking over the $50USD to get a legit copy is miniscule.

I’ve seen articles suggesting that the average “attach rate” for games to consoles for example is only between 5 and 10 games per console during its entire lifetime (one or two games a year). However the pirates I have observed horde games like crazy. It would not be uncomon for a pirate to have 50 to 100 pirate games for a single console. For the key priate demographic of 15 to 19 year olds to maintain a purchase rate that high is just financially impossible.

Also, out of those 50-100 pirate titles only a small amount can actually be played with any level of serious dedication. I would suggest that it is only these games, that the pirate is actually playing consistently for extended periods, that the games industry is missing out on. If the ease of piracy was reduced then it would only be these games that the would be pirates would buy. Even then the pirate has to be able to afford to by the game. If they can’t afford to purchase a game then the game industry is never going to make that sale even if the pirate wanted to buy the game.

I’m a hardcore gamer, I own hundres of legit games. I’m a statisctal annomoly though. Piracy of games you would otherwise buy is bad. Piracy of games you wouldn’t otherwise buy however is probably beneficial in that it exposes you to alternatives to the main-stream popular titles. It certainly does no other harm. Other than perhaps the harm of making piracy seem normal and “OK” because “everyone else is doing it”.

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