Gaming Company Sees Massive User & Revenue Growth Because Of Piracy

from the pirates-unite dept

There is a very strong divergence in the games industry. On one hand we have developers and publishers who look at piracy as a cancer that needs to be cut out and on the other we have those who look at it as an opportunity. We illustrated this point recently with a mock debate between Ubisoft and Valve. Edge brings news of yet another player in the games industry who has joined with Valve in treating pirates as underserved customers rather than thieves.

John Goodale, Unity's general manager of Asia, told Edge that Unity has seen a 258.7% growth in revenue in Asia over the last year. He puts much of this growth down to piracy of the Unity3D development platform.

How can it possibly make money from people "stealing" its products? It does so by selling additional content to the users whether legit or not.
It's not talked about often, but we have a product called Asset Server that allows large teams to share assets more effectively, and according to the sales reports that I get we sell far more Asset Server in Asia than we do in the west.
As far as I can tell, Unity is looking at those who pirate its software in much the same way it looks at those who download the free version of the software, as customers. Goodale explains the flexibility he has been given in reaching out to the Asian market is the primary driver of this success:
Throughout my 25 years of doing business in Asia, I've seen very few companies be so dedicated to that region, or give me the flexibility and tools that I need to be successful. And as a result, I am just having way too much fun!
I really hope this line of thinking grows and penetrates the games industry even deeper. It is something I have argued and debated multiple times on games industry news sites and blogs. There are many people who feel the same way and many more who are dead set on treating piracy as a criminal offense. I don't blame them for the way the feel as it is their livelihood at stake. Yet, I can't understand their desire to hold onto an ideal that in the long run will fail -- especially when there are so many examples, like this one, of a company discovering it can make more money by adapting, rather than by trying to stop infringement.

Filed Under: asia, copyright, embrace, infringement
Companies: unity

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  1. identicon
    Anonymous Coward, 3 Oct 2011 @ 3:57pm

    Re: Re: Re: "We don't condone it..." and NOT making money from piracy.

    "He comes to the conclusion that: "The fixed costs DO NOT MATTER in pricing decisions.""

    This is sort of where Mike falls down. In the classical supply and demand equation, The price is set entirely by those two figures. However, Mike often ignores that there is a minimum price at which the product can be sold, below which there is no longer a sustainable market for the producer(s) involved.

    That floor price isn't just the marginal costs, but it is also the marginal costs plus whatever is needed to cover the sunk costs over the expected market sales. While this is not part of the marginal costs, it is part of parcel of any discussion of selling price, because without the ability to recoup that money that was invested up front, there is no way the company is in business to produce the product.

    Now, in classic terms, the sunk costs were often low. X thousands of dollars to design a chair, and then $10 a chair in marginal costs to produce it, and so on.

    In IP terms, this all falls down. Mike can see it, but he wants to ignore it. There are few (if any) actual marginal costs in reproducing software, music, or movies. At best, the costs involved the box, the "shiny plastic disc", and so on. If you sell it online, the marginal costs are effectively nil. By those standards alone, the price should be very low.

    The problem faced with this new economic situation is that the sunk costs, the development costs, the costs to write the software, to make the movie, or produce the new album are all "before production". Further, when you reach the point of potential infinite production (they point where your marginal costs are so close to zero as to be negligible), the pricing model falls apart. It was not and can not produce functional results at the near infinite ends of it's scale.

    The ability to reproduce something "for free" is no longer relevant for figuring out what you need to sell it for in order to make a profit. The whole discussion of marginal costs, of supply and demand all go out of the window because they no longer calculate a number, and no longer pay any attention to the high end costs of having made it to production in the first place.

    Like it or not, the high fixed costs / sunk costs to get to production do represent a significant part of the pricing decisions on these products. It may not be part of the classical "supply and demand" calculation, because that really isn't relevant and no longer gives a functional response to the current situation. We aren't making widgets anymore. The production costs of widgets is nothing. The machine cost 100 million. So the minimum market price that is acceptable isn't based on marginal costs, it is based on the fixed costs.

    It goes against "basic economics" as Mike would say. But he fails to address why a broken model should be applied to modern times. It's the buggy whip of price calculations, not longer relevant in this sort of situation.

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