Measuring Meat lost to Pirates

A friend of mine pointed out this article to me. It is written by Tommy Refenes, one of the developers of Super Meat Boy, on the joint topics of losses due to piracy and consumer confidence in a game studio. His points on the value of consumer confidence are spot on. Having a good reputation with your customers is key for them trying new games you produce & continuing to support your current offerings. Tommy considers keeping consumer trust as far more valuable than worrying about pirating. I completely agree with him on this. My disagreement with the article stems from his reasoning on why piracy is not a problem.

Essentially Tommy believes that piracy is not a problem because we can't precisely calculate the loss. As we can't pin it down exactly ever, we shouldn't even try to estimate it. An implication of this logic would be we should not come up with theories to try and figure out any counter factual. The problem is that coming up with theories, working out their testable implications, & then testing them is the basis of the modern scientific method. That is why to me his main argument can be summed up as giving up.

Really anyone can come up with rough bounds on the loss due to piracy, [0,Price*Pirated Copies]. The power of theory is then tightening these bounds, especially the lower one, as that is more relevant to the DRM worst case cost-benefit analysis. Granted the theory is only as good as you think the assumptions are. But we can compare games with different pricing strategies & types of DRM to try and separate competing assumptions. For example, comparing a game with a fixed price to one that has periodic, but randomly timed sales, which should allow us to understand how sensitive piracy is to price. I am sure with the data most companies collect quite a bit could be said about the true costs of piracy.

Returning to why piracy is less important than consumer trust, essentially piracy is a good problem to have. If people want to pirate your game, they must find it fun enough to want. So if people want to pirate your game, you clearly have some player confidence that you are delivering a quality experience. Granted you can have cases where the reason to pirate is the DRM is invasive and it is easier to play without the DRM on. But these are cases of companies throwing the baby out with the bathwater due to not understanding user issues and being overzealous in piracy elimination. So barring MMOs, which almost have perfect DRM by definition, there must be an optimal level of piracy & DRM where one balances increasing trust with providing just enough barriers to piracy to deter some people.