For those of you just joining the conversation, go read the original article. Don't worry, it's pretty short and we'll wait right here for you.
Back already? Great. I'm going to expand upon my original theory, and then test it out on a few new case studies to see what kind of explanatory breadth it has.
The "four currencies"
The basic point of my article was to look at the discussion in a new way*. The old model (which so many senators and CEO's buy into), naively equates "cost" with money-dollars. This model does a poor job of explaining human behavior, however, because humans care about more things than money- namely, they care about time, pain-in-the-butt, integrity, and a million other things. Furthermore, the value of each of these things is different for each person - including money! A model that acknowledges that these other, non-monetary "costs" exist is better at accounting for how and why human beings make choices. This is what the "four currency" theory is all about.
I chose my specific "four currencies**," not because they form an exhaustive list, but because:
Gauging by the intense reaction the article received, I think this theory has legs. Since I'm just a random game developer and blogger, I'll leave the hardcore analysis and scientific testing of this theory to any grad students out there who need a thesis topic.
*The idea is still "new," but I'm not the first to posit it. This 2010 article proposes almost exactly the same idea with slightly different wording.
**Money-dollars ($M), time-dollars ($T), pain-in-the-butt dollars ($P) and integrity-dollars ($I) for those of you who didn't read the original article :)
Things I didn't cover
There's a few things I left out in my original analysis, which I'll touch on real quickly here.
What I'm Not Saying
Let's clarify what I'm specifically not saying.
I don't think we can (or should) use the $M+$T+$P+$I formula to quantify or "put a price on" things like our time, pain-in-the-butt, and integrity, or come up with "conversion rates" between, say, $M and $I. Even if there is some not-terrible calculation, it's use is limited because the values keep changing, and it's hard to compare values between people. And even if you account for that, we still wind up at the original problem - considering only those values which we can reduce to numbers, which leaves out all the squishy stuff that influences human behavior.
So, when I assign numeric values to the four currencies, they're not precise. It's more about "what moves the scales" rather than how many "pain-in-the-butt dollars" equals one "integrity dollar."
What I Am Saying
This comic strip about a guy trying to watch the new HBO series A Game of Thrones is a good example of what I am talking about. I'll annotate a few of the panels showing the relative 4-currency costs of pirating vs. buying legitimately, as the character perceives them.
You can see that $I cost of piracy starts off very high. Even though he could pirate and get the show for free, he's determined to "do the right thing." Also, he knows piracy incurs a small amount of time and hassle, so he'd much rather just spend the money, which he hopes will earn him a quick and painless buying experience. It's not clear exactly how much he's prepared to spend, but from the looks of it money-dollar cost is less of a concern than the satisfaction he'll get from buying legitimately.
His attempts at buying are frustrated. Additional $T and $P costs are added to the legitimate side of the scale. The perceived cost of piracy stays the same. He tries iTunes, Amazon, and Hulu Plus before finally going directly to HBO:
Turns out, the only way to legitimately access "A Game of Thrones" is to sign up for cable service and subscribe to HBO. This is an enormous pain-in-the-butt, it's really expensive, and if he has to schedule a visit from the cable guy, that will eat up a lot of time. $P, $M, and $T skyrocket*. The cost of buying legitimately just went way up.
*If he's opposed to cable on principle, the $I cost just rose, as well, which isn't reflected in the picture.
At this point, he's still averse to piracy, showing how highly he values the perceived $I cost of doing something "illegal" and "wrong." He's still not sure what to do - but the scales are on the verge of tipping.
Hesitantly, he considers piracy, and is surprised by how quick and painless the procedure is. $T and $P costs for piracy plummet, reflecting his new perception. Furthermore, by this point he's been so frustrated by HBO's inferior service that the $I cost of piracy shrinks as well (he doesn't feel as bad about it). The scales tip, and his decision is clear. Piracy it is.
What's worth noting is that it wasn't until the very end of this process that the customer decided to pirate. If HBO had made any effort whatsoever to making this content available in a customer-friendly way, they would have likely gotten a sale out of this person and others like him. Instead, their inferior service drove him to piracy.
I'm Not Justifying Piracy
At this point, I imagine DRM advocates will accuse me of trying to "justify" piracy. I am doing nothing of the sort. I make games for a living, and I happen to think piracy is just flat-out wrong, so the $I cost of doing so is near-infinite for me.
That doesn't mean, however, that I'm willing to fork out the money-, time- and pain-in-the-butt- dollars that movie and AAA game studios demand, though - given the choice to buy legitimately or pirate, I just refuse to do either.
Most people aren't like me, though, and have a point where $P, $T, and $M will override $I and make them consider piracy. The above example is one such case.
Some of these people could be our customers. Not all of them, sure - but some of them will most definitely buy our games if we make a service that "costs" less. We can complain about pirates "stealing" our content and waste our efforts on burdensome hardware, software, and legal protections in a mostly futile attempt to stop them, or we can try to understand what drives their behavior and respond accordingly.
Piracy. Is. Not. Theft.
Also - Piracy is not "stealing," for the record.
Piracy is the unauthorized access and duplication of copyrighted material, such as a movie or video game.
Stealing is the unauthorized taking of some thing, such as money, horses, or sandwiches, which deprives the rightful owner of said stolen thing.
When you pirate Defender's Quest, you are violating my legal right to monopolize its distribution for a limited period* of time. You are not, however, "stealing" it, because I still have my copies of it, and so do all the other customers who bought it. Piracy and stealing are two different things.
*Well, copyright used to be limited, at least. It's basically forever, these days.
More Nuanced Examples
I used the 4-currency model to explain why DRM Is A Bad Thing, but some astute readers pointed out that in some cases, my model could actually justify DRM. Let's take a look at a few of those cases.
Case #1: Steam
First, let's consider Steam. Steam uses DRM, but instead of making people angry and driving them to pirate, it's captured an enormous and dedicated base of players.
The 4-currency model explains this pretty well - Steam costs only a small amount of $P and $T to set up the service - comparable to buying anything from some random website for the first time, after which every transaction has a lower $P and $T cost thereafter. They already have your credit card info, so your wallet is already open, so to speak. The only hurdle to overcome is the first purchase.
Steam is one of the very few cases in which the only "cost" being evaluated is $M for most players. Steam is a service that competes magnificently well with free, as their recent success in Russia, previously written off as a haven for pirates, demonstrates.
The simple act of making someone open their wallet and pull out their credit card is a pretty big $P cost in and of itself, and Steam has removed even that from their buying process. This is the "Steam Lock-in Effect" - once you're over the initial hump, it usually makes more sense to keep buying from Steam.
EA's competing service, Origin, whose DRM is much more onerous and restrictive, does not benefit from the "Steam Lock-in Effect." They may already have your credit card info, but they do nothing to make the experience less painless, so the second purchase is just as much a hassle as the first.
Case #2: Consoles
The second case is that of dedicated gaming consoles. Let's roll back the clock to 2001 and the era of the PS2. Steve is thinking of getting Final Fantasy X and has no qualms whatsoever about piracy. Let's say money's tight and he'd rather not pay $60, and that this alone is enough to drive him to piracy if all it took was downloading a torrent file. Were Final Fantasy X to be released on PC, he'd pirate it in a second (or several hours, at 2001 download speeds).
However, this isn't the case. FFX is only on the PS2, and he'll have to do more than download it to get it running on his PS2. He'll also need to burn a DVD from a downloaded ISO file, assuming he knows how. Then, he'll need to hardware-mod his PS2 to run unsigned code.
This is pretty daunting for non-techie Steve, so he just shells out the 60 bucks and decides not to buy any other games that year. Even though he doesn't feel guilty about piracy at all, just forking over the money is easier*.
*Of course, if there was a store that sold modded PS2's and pirated discs in his area, it'd be tough to get this guy to go legit.
This anti-piracy strategy is the one the RIAA, the MPAA, EA, Activision, and congress pursue - they assume none of us have scruples, and that if they make piracy hard enough they will force people to go legit. In some cases, this model works. It works for when customers:
First, it's ridiculous to think nobody cares about $I. There's plenty of people who don't, but you will almost always lose them to piracy anyway, and there's no reason to drive all the honest people away, too.
Second, as time goes on technology improves, stuff downloads faster, and more $P and $T cost can be off-loaded to crackers who then make the product available for piracy. The "good ole days" of hard-to-pirate console games are fading.
Third, as consoles move to digital distribution, the more their piracy problems start to resemble that of PC's, where piracy keeps getting easier.
Fourth, quality of service matters. If I had the choice of selling our game on XBLA or Steam, I'd choose Steam in a heart-beat, on sales considerations alone. And why is Steam selling so much when the PC market was supposed to be dead? Because their service is better, and customers love them for it.
Finally, even if DRM advocates win the day and invent something so strong that piracy somehow just isn't an option, the customer can always walk away. Who needs video games if they're such a pain-in-the-butt?
See You in Part 3!
That's all for today! In future articles, I'll cover some more case studies - namely MMO's, Free-to-play games, and our own title, the Indie tower-defense / RPG hybrid, Defender's Quest.
You can follow my blogging here at fortressofdoors.com, or at gamasutra. My twitter handle is @larsiusprime, and you can see how we applied this theory to how we market and sell our own game at www.defendersquest.com.
PS: Free Goodies
You've been a lovely audience, so here's some free goodies for y'all. First, here's an animated gif of the comic and my analysis I put up there earlier.
Second, the "four currencies" images I've made are hereby released under a CC attribution license.