Valve Exec: Pirates Are Just Underserved Customers

from the and-then-you-see-the-opportunities dept

We've had a ton of people submitting this, so figured a quick writeup is in order. Jason Holtman, the director of business development and legal affairs for Valve, was speaking a video game conference, when he noted: "Pirates are underserved customers." This is a point that plenty of folks have been making for a while, but having an exec at a company like Valve make it is important. But, even more important was his next sentence:
"When you think about it that way, you think, 'Oh my gosh, I can do some interesting things and make some interesting money off of it.'"
This past weekend at the MidemNet conference (on which I'll be writing much more), I heard a few music industry folks say something at least somewhat similar to the first part of the comment: talking about how they had to learn to bring "pirates" back into being legitimate customers. But, then they missed that second part. As one attendee said, the music industry execs kept freaking out about how much money they will lose, while ignoring how much money there is to be made.
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Filed Under: jason holtman, pirates, underserved customers
Companies: valve

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  1. icon
    PaulT (profile), 20 Jan 2009 @ 2:38am

    Re: Pirates are underserved customers.

    Well, you do kind of miss the point. First, RTFA:

    ""We take all of our games day-and-date to Russia," Holtman says of Valve. "The reason people pirated things in Russia," he explains, "is because Russians are reading magazines and watching television -- they say 'Man, I want to play that game so bad,' but the publishers respond 'you can play that game in six months...maybe.' "

    "We found that our piracy rates dropped off significantly," Holtman says, explaining that Valve makes sure their games are on the shelves in Moscow and St. Petersberg, in Russian, when they release it to North America and Western Europe."

    In other words, people were pirating the games because they were forced to wait 6 months, during which time they were refused the real thing. Offer the real thing, and piracy drops. Not rocket science, is it?

    There are currently 4 major kinds of "pirates" when dealing with games:

    - People who want to "try before they buy"
    - People who want the game but can't afford the $60 full retail, so download a copy to use until the price comes down.
    - People who want to download a product not currently available in their region, a language not supplied on their region's disc, want a cracked version to not have to jump through DRM hoops, etc.
    - People who download with no intention of ever paying for the product even if it was available for $1.

    Now, a lot people who are anti-piracy assume that the latter group is the largest. Many others believe that the first 3 groups are the largest.

    The problem here is that there's no way of really knowing. However, what we DO know is that the anti-consumer tactics used by the industry such as regionalisation, DRM and repeated activation actually makes less people willing to pay for the final product. Make the "real" version more attractive to paying customers than the pirated one, and they'll pay. The big problem right now is that a non-region-restricted, DRM-free pirate copy of a game is actually *more valuable* than the real thing!

    Also, your example of iTunes is a bit of a red herring. Yes, 99c/track is too high, especially for older tunes, and prices for full albums can be nearly as high as a CD. The DRM stopped any competition from taking place for a number of years, meaning that iPod owners could only but from one monopolised outlet. Now that this monopoly has been removed by removing DRM, we are starting to see market forces take place and prices reduced. Everyone can now sell songs that can play on an iPod, and iTunes are being forced to rethink their pricing. If they could just stop the idiotic regional restrictions, then we'll be seeing real progress.

    Once the idiocy is removed from PC games, we should see some real progress there as well. Valve is showing that by serving an under-served section of the market, they reduce piracy and increase sales. What's the problem with that?

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