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
    Mark, 27 Aug 2008 @ 7:25am

    Recognize Reality

    People need to recognize that every law in the world is only as useful as its enforcement. It's simply not possible to enforce copyright law on millions of tech savvy users who really want to download your software for free. There are simply too many of them. On the other hand, it is possible to enforce copyright law on companies. That's why Id was able to sell licenses for its 3D engine to other companies.

    Any company whose business model depends on the assumption that they can enforce copyright law on millions of people is doomed to fail.

    The original article makes a good point, but presumably the PC manufacturers recognize that the existence of high-end games will improve hardware sales across the entire industry, not just for themselves. Maybe Dell is afraid of doing anything that would improve sales for HP. The idea could work, but only if the PC manufacturers cooperate to make it happen.

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