Companies really can't do anything about piracy. The text books never mention piracy in the product life cycle, but in reality, piracy has a very important role in the business model: when companies innovate, say Apple, they can penetrate the market with high prices and huge margins for profit. Not everyone can afford such technologies.

What piracy, or just blatant reverse-engineering, is able to do is release the same technology for a lower price and also adding in features that weren't there before. This makes high-innovation and large budget companies jump ahead to the next big idea. This is the main difference between pirates and innovators: innovators make new things while pirates copy and make old things cheaper, thus widely available.

I like to see this as a symbiotic relationship as it forces innovators to keep on innovating while pirates supply the general public with cheap and cutting-edge technology.

Sure, businesses could be earning helluva lot more than they are now... but that's just the nature of the tech business--demand will grow when prices drop. Without piracy aka competition, I'm sure that the rate of innovation would be far lower than it is now.

@awkm: I don't know, making your games take up 25 gigs certainly does something to prevent it. Then only have like 5 or 6 good ones.

Sony has figured all of this out. Geniuses, all of them.

//Laughs

Whatever they do to prevent piracy, people will find ways to counter it. I don't see it ever ending sadly. Of course, it's worse for the movie industry.

@awkm: so theft is okay by your book? the endemic plague of software piracy that's rampant throughout china will take generations to address (if not longer). the government clearly seem unable (or unwilling) to put a stop to these kinds of practices.

to totally contradict myself, there are some instances where piracy has actually benefit the consumer; many years ago before the proliferation of the internet and file sharing services became mainstream, i remember when a typical music album CD used to retail for £15-18 (~30 USD), an utter rip off by today's standards i'm sure you'd agree. as of now i'm currently enjoying paying significantly less these days (£7-10) than i was several years ago.

@as702ecs: maybe if games werent so expensive people wouldnt be as willing to buy pirates

Piracy in some countries actually sells console units...

I'll be damned if 30% of those 120 millions PS2s arent modded...

sony = blue ray
pirates need to use blue ray burners ....$$ to sony anyways...
i will always say that sony uses new technology in their consoles to sell that too, they know there is piracy and they use it to make money too...

@nolifedopestar: "maybe if games werent so expensive people wouldnt be as willing to buy pirates"

not entirely sure if this would benefit anyone long-term. the production values and resources required for typical titles these days is considerably higher than the analogy i used for the music industry, containing a comparatively smaller user base and narrower profits to skim off the top. if the margins became too small you'd not only see the likes of EA dominate the industry with volume releases (smaller companies wouldn't be able to absorb the development costs), and it would most certainly stifle innovation in the same stroke.

i was thinking china's government may be deserving praise for not so much folding to piracy but for instead paying it so little attention. most of us agree piracy is a problem but i can recall almost countless instances throughout life when people all over would always say something to the effect of why worry about one problem when there are so many more bigger problems to worry about? if you aren't following then just remember whenever the united states spends dollars on a bridge or fighting marijuana dudes all over would get angry because that money wasn't being used to feed the hungry. the chinese government may be on their way getting their priorities straight? who knows?

@anakin3: "I'll be damned if 30% of those 120 millions PS2s arent modded...
guilty. living in the UK i import a lot of titles from Japan and US.
- dam, my english is teh sux 2dayz :p

@nolifedopestar:

Funny how many pirates admit that they can afford to buy legit products. Funny how many of these pirates don't see what they are doing as theft or making crappy knockoffs. They come up with such baseless excuses to make themselves not feel like scum that NAMBLA looks more dignified when that pedophile organization says that they are not pedophiles since boys as young as three stalk them to have sex and that they the members of NAMBLA are the victims.

People who know how to manage financies and look for bargins can get thousands if not tens of thousands worth of stuff for far less without any stealing whatsoever. Perhaps people should trade games with their friends. More games for everbody, you don't steal them and it encourages the group to buy games.

When you pirate you don't show support for the people that make the product. It costs money to make stuff. Ever wonder why comic series, book publishers etc stop making products? It's because when the goods are pirated sales drastically decrease.

Stores know how much they lose to thrift it's called inventory. Game and music companies do have a pretty good idea how much they lose to pirates because of confiscations of pirated goods and due to monitoring of locations frequented by pirates.

@awkm:

It's called a patent. It is supposed to grant the innovator exclusive rights for a period of time, where they can make money as a monopoly, and then after the patent has expired, anyone can copy an innovate on the idea.

When the patent time is too short, there is no drive to create something new. When patents last too long, there is no need to innovate because there is no competition.

In China, weak patent laws lead to lots of copying, and very little innovation.

@as702ecs: When you take it to the next step, as has been the recent trend, companies are even treating legit consumers as if they're pirates.

See: Bioshock limited-install DRM, Valve banning Orange Box purchase accounts for being international rather than domestic.

Companies are doing their damndest to make people spend their 60 bucks per game, then turning around and punishing them when they do. Meanwhile, those who pirate it get off scott-free, without worrying about any of it.

However, I have seen one recent PC game company that actually did something surprisingly interesting. For The Settlers - Rise of an Empire, Version 1.0, the shipped version, had fairly strict and difficult copy protection on it. It wasn't fully cracked. Yet, the day after the game hit store shelves, they issued a patch, that covered many important issues the game had, as well as removing the entire CD-check, resulting in a copy protection that required live, online validation, including random re-checks to ensure it's a valid install.

What does this do? Well, in its own way, it defeats piracy. People can get the core game, with bugs in it, but you can't update it at all, ever. Meanwhile, the cracking community leaves the game alone. With no overbearing copy protection and no requirement for No-CD cracks, or even to have the game's image on the hard drive, there's no market for their methods.

Pirated copies are copies that don't exist. People who would only play it casually anyway, are the ones who wouldn't have paid for it in the first place. Those who want the whole package, will pay.

If a company cannot do something to find a non-obtrusive way to protect their games without destroying a user's hardware or software, they shouldn't be around. For them to not be around, that means their stuff shouldn't be purchased. But, that doesn't mean it's not quality enough to play.

@theovercoatthatsgogol:

China's goverment has major corruption issues. They pay more attention to piracy since they know what outside bussinesses to develop and they want their products sold. See they aren't concerned about piracy because those were foreign products being pirated and they didn't want the money from the peasents to go outside China. It has nothing to do with what is legal or illegal it's about nationalism.

You can bet that if the pirate gangs were killing Chinese officals or making China look real bad they would crack down on it. Taken the pirates and their enablers en masse to a soccer field a week after sentence and then shooting them in the back of the had. Then the organs were harvested to be sold to foreigners to be used in transplant surgeries.

Now China may turn on the pirate criminals when their regular sources of criminals for organ harvesting dry up. I mean there is only so many criminals you can exectute for murder, rape, arson before you have to turn to lesser crimes.

@Yetanotheruninspiredscreename: i agree you should support developers etc but we are being grossly overcharged at £40 pounds or 80 of your US dollars in this country for games
sure games can be expensive to make but if they charged even half for them piracy would be significantly reduced
sure many pirates can afford to buy games, it's whether they feel they'd be the ones being robbed in doing so

@SilverStar95: Bioshock limited-install DRM, Valve banning Orange Box purchase accounts for being international rather than domestic.
i can't really comment on the PC side of gaming since i don't really play them. the way i understand it is the commercial pressures publishers face when releasing PC games is even more strife with piracy than it is for console manufactures, so i suppose developers feel compelled to enforce even tighter regulations to combat the phenomenon. i can't quantitatively (or qualitatively for that matter) speak on what one would classify as acceptable on such matters for the reason given above.

"Those who want the whole package, will pay.
while some would, i'm guessing the majority would see the value proposition a pirated copy offers as a no brainer.

@nolifedopestar:

Maybe you should ask your goverment to not put laws requiring several languages on the same disc, that drives up costs for the developer since it means a lot more debugging since whenever you add a new language text to the game it can cause bugs that have to be fixed. This is why Super Paper Mario had a bug that got through.

You also have taxes on luxury items that guess what support certain programs you take advantage. Ever wonder where a good portion of the tax money comes from that makes your health care system so good and cheap? Games for one.

You have two choices. Choice A means games cost far less and so do a lot of luxury items but the result is that tens of thousands of people die because they cannot afford medical treatment. Insurance you say funny how a lot of people who can afford it still have to pay hundreds of thousands of dollars for medical treatments that without the HMOs driving up overhead would only cost you several thousand dollars. Half of all bankruptcies would be due to medical bills, your families would have to decide wheter or not to pay for medical treatment for a relative since it could make them financialy destitute meaning no house, no college, no medical care for other family memebers.

Choice B means you pay far more for games, luxury items and the far less piracy the more people get medical treatment, the less bankrupticies, deaths occur.

What choice would you make?

Europeans that complain about high prices on games remind me of the people in the states who swear NASA which is 1% of the budget at the best of times is responisble for their tax increases when it is the military paying 300 dollars per hammer that is responible.

Just be thankfull for your high prices in other words because once you realize what it gets you, you are more willing to pay.

How much does a blu-ray burner cost?, like several grands, no? or are the readers also burners?

Anyway, it's that, plus downloading games that the developers didn't bother compressing and buying blu-ray discs, it's really 'spensive.

@as702ecs:

Wasn't the orange box only released in the states so far and the steam service only setup to handle the US?

The orange box would be released in other terrorities in a matter of weaks so I don't see what the deal is.

Bioshock DRM was a debacle they admitted and removed. Of course the pc owners found out they got shafted due to the pixel requirement. Lots of pcs don't have the graphic card that could play bioshock.

@Scuba Steve:
Wait, are you saying 360 has more than 5-6 really good games that aren't multi?

@tehFluffzComeback: "How much does a blu-ray burner cost?, like several grands, no?"
nah, you can pick up a x4 writer for between £250-300. the problem is the price of media (~£10 per disc). prolly about on par with what DVD technology was at back then.

@Yetanotheruninspiredscreename: like i said, i have no clue on PC gaming. however, i think we can all agree that it's bloody expensive whichever way you slice it.

@anakin3: More, way More...

Yeah, piracy is harming gaming, why let's look at that Nintendo DS, you can get the complete library on one disc for about 12 dollars according to this article, and we all know how unprofitable and unsuccessful the Nintendo DS has been, right?

So someone run it by me one more time, how is piracy harming business when the DS and the Wii, the two easiest machines to pirate games for are the two most successful at the moment?

@tehFluffzComeback: I wouldn't know, I'm only comparing my PS3 library with my PS2 library.

@Yetanotheruninspiredscreename: or alteratively publishers/retailers could charge less for their games
the average budget for a 2 year development is $15m, or so im told
say a game sells 1 million units at $50 retail
even factoring in advertising costs etc you can't claim most worthwhile publishers/developers are in poverty
don't act like their isnt an element of greed involved in what is charged. i think what it boils down to is the same as the music and film businesses, the artists arent generally bothered that people pirate their work, they're just happy to be earning a good living doing something they love, it's the publishers that contribute nothing creatively that lose sleep over the amount of extra money they could be making

@Cruithne: well said :)

@nolifedopestar:

Actually it is closer to 40 million when you add in advertising, worldwide release.

Also most games don't stand up to 50 dollars the whole time they are on shelfs. They drop in price hence more copies have to be sold. A developer at most gets 10 dollars when a 50 dollar game is sold. Most games get a million copies sold in their lifetime. At most they get 100,000. This is from successfull publishers and most of the sales occured at the 20 dollar price tag. So how much money do they get each 20 dollar game?

Nearly zip. Most game companies have gone under from the old days either from piracy hurting sales so much they had to shut down period or had to have a larger publisher buy them to keep afloat and the ones that don't count on one or two games selling a million or more to compensate for the ones that sold 100,000. Wonder why Westwood, Origin, Sierra Online lost most of their greatness? They were bought out and the old staffs left. Once in EA or whoever's clutches they had to conform.

Lots of articles have been written about this. It shows why piracy is an issue and does harm game studios. Piracy majorly hurt the Dreamcast and the psp game sales are in the toilet. When publishers see they are heavily pirated on a certain format and other formats they can put the same game on they go to that format.

You should talk to someone from valve in their tech support about how many admitted pirates call for tech support as opposed to regular customers. Ask the Psychonauts developer how he feels about pirates.

It does severly hurt the industry. Pirates don't care about supporting games at all.

@Cruithne:

Funny that when searches for pirate torrents the DS is far far far far far far far far far far smaller then the psp.

PSP owners don't seem to buy any software whatsoever and on the forums pirates frequent they always admit they pirate the psp games.

DS owners are largely nongamers who don't care about pirating stuff. A DS game has to sell far far far far far far far far less copies to make a profit then a psp game. A DS game can be made on a 50,000 dollar budget while your average psp game costs 15 million to develop.

A profit is made each DS sold while a loss is incurred on each psp sold.

The same goes for the Wii. A large userbase who doesn't frequent therby lacking the know how or doesn't care to pirate.

Amazing how you would fail every single logic class in existance with the exception of creationist or moronic theif.

@Yetanotheruninspiredscreename: yea it's sad that devs get bought out, smaller devs go under etc, but this is a business world we're talking about and it comes down to the psychonauts team making a game that they can't have expected to sell well in a million years - good games or not, they have to be aware that their actions have consequences, spend money wisely etc
also i wouldnt have said most games had a $40m overall budget, certainly not ones from small devs

@Yetanotheruninspiredscreename:

Let's leave the personal comments out of it.

Simply put, it takes less than twenty minutes to locate, download and install a DS game.
That, in my opinion, makes it the easiest machine to pirate for.
The DS Vs PSP argument is bogus, one has had massive success, one has fared rather poorly, both are easy to pirate for, so I simply don't think it's logical to say piracy is the problem.

Compare the PS3 to the 360, which is the easiest to pirate for?
Again, there is no correlation between simplicity of pirating and games sales.

What is true is this, good games will sell, or at least ought to. I think games companies do more to harm the industry with big corporate practices, rehashing of tired franchises for decades on end in the case of EA, and simply unimaginative games. And don't get me started on the bribing of games journalists.

so many problems with this quote.

"Not too much demand for PS3 here...ergo no modding or pirated games that I know of."

This is misinformation. The ps3 up till now has been unhackable. That is the reason why there is low demand there. Not the otherway around as the retard PR suit would have you believe. Oh yeah, as stated in the article it was made by some idiot named Frank Yu that employed by microsoft of course.

Also at present the stealth firmware dvd hack for the xbox 360 can not be detected by microsoft and there is absolutely no need to buy or install a modchip for the xbox360 to run downloaded games. It's even easier then it was to initially hack/modify the original microsoft xbox.

I find it amusing that the same individuals that get their panties in a bunch about video game piracy are the same ones that have no problem downloading music off the net. The Chinese aren't the only ones that pirate media not by a long shot.

I found this october 24th 2007 article very interesting [www.demonbaby.com]

@Heihachi.vs.Kazuya: Sony hardware's pretty hard to crack, eh?

lol @ PSP

Ever record a TV programme?

Uh, isn't that piracy? My my its a wonder the TV companies don't go out of business...

@Heihachi.vs.Kazuya: great article, thanks for the link

@blacksamurai87: Uh. I didn't say sony hardware was hard to crack the ps3 however is. Can you not read and comprehend?

@nolifedopestar: Glad you enjoyed it mate. ^_^

So much free information. I noticed from some of the comments on kotaku and other game sites and blogs that most of the incentive to read for the majority of gamers comes strictly from video games and comic books etc.

I have to remember that many of you are the same ones that are on xbox live calling people fags and various racial slurs.

HEIHACHI.VS.KAZUYA :

I'm the frank yu of this article. I didn't say downloaded games can't be played. I said that Xbox Live can detect you. You can play all the DVD games you want and even downloads from the internet but you cannot go on Xbox Live. I know many people who own Xbox 360's and PS2...not a single one who owns a PS3 here in China. It cost twice as much as a 360, 2x more than a wii and 3x more than a PS2. Most of the popular games are on 360 and PS2 anyway.

You must think everyone in Nintendo, Sony and MS are stupid..they're not. In fact many of the people in this industry end up working with either our competition or our partners evenetually anyway.

Piracy is only a problem if one has a culture that doesn't believe in paying the original creators for content one enjoys... like China.

However, I feel the real problem with China isn't piracy at all, but bootlegging. People who buy bootlegs are either victims of fraud (if they aren't aware that the products are illegitimate), or don't understand the purpose of buying something (showing support to the creators). Bootlegging is much more dangerous, people who pirate are either unwilling to pay for something, or may pay for it later. People who buy bootlegs have shown that they are both willing to pay money for something, and aren't going to buy a legit version later... and they gave the money to the wrong people.

@Heihachi.vs.Kazuya:

it's because music doesn't cost anything to produce, video games cost millions of dollars to develop.

it's just that simple.

musicians can easily recoup their costs of 'development' via concert sales alone...

or how about movies? the movie industry could survive off box office sales alone.

obviously if the only way for game developers to pay off the costs of development is by selling copies of the game, then it should be morally wrong to pirate games and destroy the industry.

@Heihachi.vs.Kazuya:

Brilliant article, no one should be allowed to comment on the piracy issue unless they can prove they've read it.

@Heihachi.vs.Kazuya: "I have to remember that many of you are the same ones that are on xbox live calling people fags and various racial slurs."
- i don't use xbox live. ZOMFG, i am teh liberalz1!!!