Thursday, February 14, 2013

Why the video game industry needs piracy

A great debate that is popular among video game enthusiasts is what it takes for a video game console to become the number one seller.  I’m by no means an expert on video games, but the other day I did develop a theory on what it takes.  My reasons are based on the years I have been around friends and peers that are into gaming.  So what does it take for a video game system to become a best seller?  Well I believe it is the unscrupulous opportunity to play pirated games.  It’s almost been a maxim since childhood that all the popular systems are the ones that let individuals play pirated games.

The first system I noticed that allowed people to play pirated games was the NES.  Back in those days kids would own less than 5 video games, and would either play rented games or borrowed games if they wanted to try other titles.  Then when pirated games came along, everyone discovered that you could now own 5 or more games on just one cartridge.  While the NES really didn’t have any competition at the time, pirated cartridges created a culture that made people expect a black market for video games.

After the NES, I owned the Sega Genesis and I never heard about pirated games for that system or the Super NES.  So in a way, both those systems were on an even playing field because none of them had the pirated game advantage as far as I knew.    After those systems Sega, Panasonic, and NeoGeo all released highly advanced consoles, but they never sold well because they were extremely expensive.  As a result, pirated games were never made because no one owned the systems.

Eventually the N64 and Playstation were released and the video game market was drawn between Nintendo and Sony.  On one side the N64 had Nintendo characters, games that were fun, and still used cartridges.  On the other side the Playstation used CD’s, had amazing graphics, introduced soon-to-be-classic characters, and emphasised a more adult theme.  Both systems were great, however the Playstation was able to be modified and as a result led many of my friends to purchase a Playstation.

I owned the N64 because I really did love the games, and thought they were masterpieces.  Yet the wait period for good games to release was very long, buying games became very expensive, and if I had spent my money on a game that sucked I would have had to wait a long time before I bought another game.  It was around this time that the grass started to look greener on the other side.  Playstation owners got to play from a large diverse library, games were coming out constantly, and buying burnt games made it easy to play any game you wanted. 

Now let me explain the advantage of having pirated games on a console.  Well to begin with, if you’re introducing a new console (such as Sony was) at a time when people only bought one system, you would do anything to make sure you’re the one chosen.  That’s one less customer for your competition, and also profit for you in selling your console and gaining a new customer.  While piracy does hurt you in games not purchased, it is still better to have games not purchased than to not even have a chance to make games because the system is a failure (such as the Panasonic 3DO).

Just getting people to buy your console leads you to have the most popular system and eventually be the most sold.  When people buy something, they usually buy a product that is a winner, and rarely take their chances with something that might be discontinued.  Being the most popular means all kinds of people will buy the console, from people that just want to play pirated games, to a large majority that will buy the system because it’s popular and will buy legitimate games.  Heck, even the people that played burnt games would eventually buy a couple of legitimate games as well; either because of the exclusive content, they want the real game, or because the burnt copy would malfunction.  Eventually the loss of pirated games evens out when you start to get more legitimate customers buying because of the console’s popularity.

The second round between Nintendo and Sony came when the GameCube and Playstation 2 were released (this round also introduced the Microsoft Xbox).   While the first couple of years the Playstation 2 lacked the ability to play pirated games, their strong relationship with past Playstation customers allowed for an easy transition from one system to the next.  When the PS2 could finally be modified it just meant more people would buy it, and more people would leave Nintendo behind.  Having a strong relationship with their fans and being able to play burnt games (which people now expected to have on a system) led the PS2 to basically be the only console of that generation and best selling of all time.

I hate to admit that piracy is needed in the gaming industry but, the same advantage was next seen in the handheld market.  This time it was between the Nintendo DS and the Sony PSP.  The DS used cartridges that became easy to modify and play pirated games, while Sony tried to prevent piracy by using a bizarre UMD disc.  The piracy advantage led the DS to eventually become the 2nd best-selling video game console/handheld of all time.  By the time the PSP could be enabled to play modified games, it was too late for the PSP to catch up.  This same piracy advantage pattern is still being seen today as the Nintendo 3DS (which can play DS pirated games) is outselling the Sony Vita.  Unfortunately lack of handheld sales means lack of developer support, games, and the possibility of discontinuation.

The next round for the video game industry became even more interesting because Nintendo was at the bottom, Microsoft was determined to come out on top, and Sony was extremely confident in its product and customer loyalty.  This 3rd round was between the Wii, the Xbox 360, and the Playstation 3.  The advantages of each console was that the Xbox 360 was released a year earlier, the Wii was the most affordable and most appealing to customers of all ages, and the PS3 appealed to the hard-core gamer.  Yet, in those early years only the 360 and the Wii would be able to be modified.  This made them best sellers because people now expected to play modified games on their console, and would only buy the system that ‘provided’ those features.  I still remember walking into a Chinese mall at the time, (seeing numerous stores that provided the modification service, and sold burnt games) and seeing queues of people with either a Wii or 360 in their hand.  The piracy advantage paid off very well for both the 360 and the Wii, though I believe the 360 had results that were more favourable to gamers.

The initial failure of the PS3 can be said to be attributed to numerous issues; the success of the PS2 making it difficult for gamers to upgrade, the price tag, the lack of stock, the lack of rumble in the controller (for me at least), the lack of games, lack in maintaining exclusives, and Sony’s outright war against piracy.  The PS3 was a great system, but because Sony became too confident and dropped the ball at first, the competition was able to take their customers away.

2013 will be a very interesting year because Nintendo was the first company to release its next generation console, and Sony and Microsoft will also try to release their console this year or early 2014.  The big debates among Sony and Microsoft is whether to terminate the resale used game market, and if video games should only come in the form of downloadable content.  Now to me, preventing the use of used games on a console seems like the same issue of preventing the use of piracy.  Sony and Microsoft are basically making sure that anything that is their content, they will make a dollar or profit from.  Just like they lose profit in piracy, they also lose profit in used games that are not sold by them, and having to share profits of games sold by using a middle man (Wal-Mart, EB Games, Toys-R-Us) to sell their games. 

By trying to make my justification for why the video game industry needs piracy, I am also comparing it to the used game market.  For Sony and Microsoft both piracy and the used game market are losses that limit what they actually could be earning.  Though in my opinion the used game market is more harmful because these aren’t customers that want pirated content, they just want the legitimate games at a discount.  So unlike pirated game users, used games users represent customers that don’t purchase games from Sony or Microsoft directly.  From the customer’s point of view, you would think just buying the real copy of a game would make it okay, but obliviously for Sony and Microsoft it isn’t okay unless you buy it from them.

So if the future of gaming does move towards downloadable content what is my opinion?  I am actually okay with never having to buy tangible products again.  The reason I say this is because after having owned an MP3 player or an Ipod, I don’t think I could go back to having to buy each music CD individually and to carry them around.  The same as with my media player, I just load up all my movies and TV shows on there and I don’t have to worry about not having enough space to fit my DVD collection.  Downloadable content is simple, clean, and easy.  Now getting back to the issue of piracy, if the next gen system does enable individuals to play pirated content, then I believe the first system to do that will be the system that will be the best seller in this new generation.  Regardless of graphics, games, and technology, if the people support their technology it will be the one that the masses will come to.

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