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Valve: Piracy Is More About Convenience Than Price
Valve: Piracy Is More About Convenience Than Price
October 24, 2011 | By Frank Cifaldi

From the perspective of Valve, software piracy is caused more by convenience than it is by the cost of games.

That's according to co-founder Gabe Newell, who recently spoke at the North to Innovation conference in Seattle, giving a very frank and open outline of the modern economics of video games.

According to Newell, Russia -- which is often ignored as a market due to its high level of piracy -- is one of Steam's highest grossing countries.

"Russia now outside of Germany is our largest continental European market," said Newell, adding that "the people who are telling you that Russians pirate everything are the people who wait six months to localize their product into Russian."

"The easiest way to stop piracy is not by putting antipiracy technology to work. Itís by giving those people a service thatís better than what theyíre receiving from the pirates," he said.

Valve's Surprising Free-To-Play Numbers

Earlier this year, Valve officially went "free-to-play" by offering its popular Team Fortress 2 as a microtransaction-supported game.

According to Newell, the move increased the game's online userbase by a factor of five. Surprisingly, where most companies are claiming free-to-play conversion rates -- that is, the percentage of players who end up spending money on in-game transactions -- are between 1 and 3 percent, Newell said Team Fortress 2 players convert far more frequently.

"We see about a 20 to 30 percent conversion rate of people who are playing those games who buy something," he revealed.

"We donít understand whatís going on," he admitted. "All we know is weíre going to keep running these experiments to try and understand better what it is that our customers are telling us."

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Mihai Cosma
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And this is just one ability a self-funded company has once free of publisher reign.

Jeremy Reaban
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It's not clear if they are talking revenue or game sales, but one thing that has grown up of late into a massive industry is retail cd re-selling.

People buy retail copies of Russian (or other low cost region) games, grab the cd keys, then re-sell these keys which can be entered into Steam (though this often requires you to run a program faking your region). The prices are probably close to half the retail of typical Western countries, and that's with significant profit for the reseller.

It's fascinating to see how accepted this practice is. The legendary game forums NeoGaf, for instance, constantly has threads calling for game developer employees to be treated better and paid more, the industry unionized, etc, yet they constantly have threads for these grey market key re-selling sites, where the publisher only gets a small fraction of the retail price

Christopher Enderle
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Wow, just reading about how that works was more effort than I care to expend on getting a game. Is it really taking off? It might be worth the trouble, but people will pay a premium for no trouble in the first place.

Dmitry Alekperov
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That's not correct. As I see you know nothing what are you talking about. If you search, you will find that Steam decreased prices (not for all games) in Russia region only in middle of September.

Sean Farrell
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I do that really often and here is why. First off I am in Germany and the getting uncut versions of a game on steam is impossible. The only other valid option is importing the game and that has its problems. First the game is more expensive than the retail version in the US or UK and second there special provisions to follow. For some games it is outright impossible (and illegal) to get them, such as Left 4 Dead 2. Having folks like really saves the day.

The second reason is that I basically wait for a game to hit a certain price point before buying the game. I will simply not pay 60 EUR for most games. The games often start off at half price on launch day. This is a way of voting with my wallet that really suits me. Going through a Russian VPN for 30 seconds to auth the game is really less of a hassle than waiting half a year.

Dmitry Alekperov, the versions sold are normally retail versions that benefit from steam redemption. So technically it has nothing to do with Steam's prices in Russia...

Peter Barry
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I think the broad idea put forward has credit. Elements of the music industry have taken that sort of view as well and profited from it. With any luck companies will follow suit but that hasn't happened in the past. I can't help but feel DRM and the like is here to stay if only to make companies feel like their "doing" something.

Sergio Rosa
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I don't see myself ignoring any country as a possible market due to piracy since there isn't really a way to stop piracy, but as an indie developer I don't consider localization an option at least for the time being :-/

Daniel Martinez
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You can't spell LOVE without VALVE... er... sans one V and an A plus an O.

Mathias Burmeister
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I think Valve has got it spot on with Steam. In fact, there are a lot of games that would not be doing half as well as they have if it wasn't for the flexibility and comfort Steam offers its customers.

Matt Cratty
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Playing online in many different games over the years, I've met a lot of people that pirate for one reason only - its free. They tolerate the bugs and the wonky issues that you get with files from such sites simply because they don't want to pay. That's it. And there was very little sheepishness about the discussions. Is that representative of all piracy? I'm sure it's not. I don't know the percentages and I don't have any statistical data other than my own empirical (and limited) experience which isn't useful for anything but a discussion over coffee (or a web forum).

I personally, would never, EVER think of doing something so short-sighted as I want to support companies making things that I love, but pretending there's not a significant number of people that would pirate no matter what the publisher does is not realistic. I cannot comment on what "significant" means other than to say in my own experience, probably 1 out of every three people I've known to admit to pirating, do so for everything they play, except where its a huge headache to do so - typically in online-only games. Usually they say its for "financial reasons" when I give them the riot act about piracy.

It would be fascinating to have someone without a massive bias look at the issue and get statistically useful data about piracy. I'm sure it exists somewhere, but its not going to come from a game publisher.

Re-reading, this is probably not a very useful post, and if anyone takes issue with that, vague apologies are offered. But, if anyone knows of a paper, or a site with unbiased data regarding this topic, I'd love to see it/read about it.

Abraham Cubbage
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I'm sorry I don't have any links for you, but there are unbiased studies about piracy. Essentially the conclusion that they have all come to is that pirates are the largest purchasers of the products that they pirate. For example, person A pirates music, person B does not. Person A, spends 3 times as much on music every year than person B does.

Those numbers are an illustration only, but that is essentially what the research says. If you want to learn more about the subject try TorrentFreak. It's a news and editorial site dedicated to this subject.