The Benefits Of Piracy Aren't Always In The Expected Places

from the and-that's-not-a-bad-thing dept

One of the issues that comes up when we discuss the economics of infinite goods is people too often falsely define the product that's being sold as the market, rather than the benefit. As we mentioned the other day, that's why the builders of horse carriages reacted the wrong way to the automobile. If they had realized they were in the transportation business, the automobile would have been as an opportunity to provide a better transportation experience. One of the side effects of properly recognizing the benefit is that it often shifts around the business model of the market you're in. The money may end up coming from somewhere entirely differently than before. The music industry is discovering this today (painfully). The money isn't in the product itself (music) but in the scarcities made valuable by the product (concerts, access to the artists, creating new works, etc.).

So, for folks struggling with these issues, one of the most important things to do after figuring out what your real market is, is to then figure out where all the scarcities are that are made more valuable by freeing up the infinite goods. The trick is to then position yourself to capture money in that market. But where this gets really tricky is those products may be surprising or appear to be in a totally different space (e.g., concerts rather than selling plastic discs) and that can be scary for those who are used to the old model.

I've had a few folks submit the GameIndustry.biz interview with Todd Hollenshead, the CEO of id Games, where he talks about the "hidden benefit" of piracy... but for computer makers, not video game producers. He's correct, other than the fact that it's not that hidden. There's a very real and admitted benefit to computer manufacturers -- but that doesn't mean that there also isn't a benefit for the video game makers themselves. Basically, when you look at the video game market, one of the big scarcities that benefits from free games is the computer makers.

But rather than somehow blaming them for not fighting piracy hard enough, why not take advantage of that? Get PC makers to finance new games, pointing out that if they give out the games for free it will help drive more people to buy the next generation of high powered PCs that are needed to run the games. In that way, everyone can benefit. The PC makers (or maybe even Intel or someone) can pay for the game, and then use that to turn in more sales of high powered computers. The video game developers get paid, the computer makers get a great tool to sell more new PCs and users get a free game with their PC. Everyone comes out better off and there's no "problem" of piracy.

Filed Under: benefits, economics, piracy


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  1. identicon
    Dewy, 26 Aug 2008 @ 11:56am

    People, no one is saying EVERYTHING MUST BE FREE... we're just saying you can no longer charge me for printing a disc, wrapping it in plastic and shipping it halfway around the world. That is waste in the name of the way it used to be done.

    Fine, sell me the software at a reasonable price, but don't try to charge me for shipping and handling when its not required for anything other than your antiquated business model.

    Free doesn't mean money doesn't change hands... it just doesn't come from where it used to anymore. sell the Game to PC makers to release with their new Pc's, license graphics from the game in a new cell phone commercial, host player conventions where you "rent" machines to play on...

    But stop suing the public you designed the game for... just because they have found a better distribution model than you have.

    I think its time we stopped using the word pirate to describe the partisans in the field of todays market.

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