The video game industry is perpetually plagued by piracy and DRM issues. The eternal problem with software piracy is, of course, the unauthorized copying and distribution of programs, leading to a loss of profits for developers, publishers, and retailers. Hence, copy protection is the principle use of DRM by game companies. Copy protection concerns have long outdated the development of DRM, as evidenced by this Public Service Announcement from 1992:
While copy protection in gaming has thankfully moved beyond cringe-inducing PSA’s, DRM in many cases is far more intrusive and burdensome on consumers, despite offering a similarly ineffective impact on piracy rates.
The Economic Impact of Piracy on the Software and Video Game Industries
In order to gauge the effectiveness of DRM, it is first necessary to understand the scale of piracy in the software world. While there are relatively few groups publishing data on piracy in the gaming sphere alone, there is a great deal of relevant data on software piracy generally. For example, the Business Software Alliance industry group compiles data on the economic impact of piracy both worldwide and within the United States. In their most recent piracy report, the BSA found that 26 countries had piracy rates that led to over $250M in losses for developers, with the United States topping out the list at a staggering $8,040,000,000, despite having the lowest rate of piracy worldwide.
In their report sampling piracy rates from across the United States, the BSA found that one out of every five pieces of software installed domestically is pirated, and that piracy cost the 8 sample states a combined 53, 892 jobs and roughly $1.7 billion in state and local taxes.
While there is no reliably publishable data on the economic cost of piracy for the games industry in isolation, one can get a sense of the problem by examining the size of the industry and the rates of piracy of certain games.
According to the Entertainment Software Association, the private regulatory body that oversees the video game rating system, the video game industry added some $4.9 billion to United States GDP in 2009. This number is expected to grow year-over-year, as the industry enjoyed a 16.7% annual growth rate from 2005-2008 (though that average shrinks to 10.7% when adding 2009 and the economic downturn to the equation). This is compared to a 1.4% growth rate for the entire US economy from 2005-2009, and to the 2.5% growth rate of the entire IT sector over that same period. Clearly, the games industry is already a large industry, and it is growing in its importance in the software and entertainment sectors.
Piracy has grown alongside the gaming industry boom. For example, the most illegally downloaded video game of 2008 was Electronic Arts’ Spore, topping out at 1.7 million downloads, with the top ten most downloaded games totaling at nearly 9 million.
By comparison, the most downloaded video game of 2011, Crysis 2, was pirated a total of 3.9 million times alone, and the top 5 most pirated games totaled over 17.7 million, an over 300% growth in piracy amongst the top 5 from 2008.
Use of DRM to Combat Piracy in the Video Game Industry
DRM copy protection takes numerous forms across the gaming landscape. the most prevalent incarnations are as follows:
One of the oldest and least complicated forms of copy protection DRM, CD Keys are long strings of numbers and letters included with copies of a game. Upon installation, the program will request that the user enter the CD Key to continue. Without the key, installation is impossible. There are considerable drawbacks to this method for both consumers and producers. A consumer who loses her CD key, for example, is unable to install her legitimately purchased product without contacting customer service or turning to piracy herself. On the developer side, a simple Google search for “cd key crack” reveals several million results for many different games and products, indicating that it may be easy to bypass this form of DRM.
Limited Install Activations
Through a variety of methods, this technique allows the content creator to limit the number of times a piece of software may be installed. Upon installation, the software communicates with the content creator’s servers, verifies the software, and then unlocks the program for use on the computer. Once an installation is verified, the copyright owner may then limit the number of additional installations, usually to 3 or 5. This is inconvenient to the consumer for two principle reasons: first, if a consumer has more devices than the allotted installs allow, he will be unable to use the program on all of them; second, this method requires the consumer to have an Internet connection to install their game.
Persistent Online Authentication
This method is, in the minds of many gamers, DRM run amok. Essentially, this form of DRM requires consumers to be connected to the Internet at all times in order to play their purchased products. When the game is started, it establishes a persistent link with the copyright holder’s servers via the Internet. Pirated versions of the game, once connected to the server, will fail the authentication process, and the game will not run. Even if the game passes the initial authentication test, it must remain connected to the server for the duration of the game session. Any interruption of connectivity causes the game to stop working. For consumers, this presents serious problems and introduces many uncontrollable variables into the mix. This method severely limits the ability of the consumer to determine when and where to play the game; a person traveling by plane, for example, will be unable to play if there is no onboard Wi-Fi (or, in the alternative, will have to pay for such Internet access). If a player is at home, her Internet connection may go down due to a maintenance or hardware issue, rendering the game inoperable. Finally, even if her home Internet connection is stable, the content creator’s own servers may go down or off-line, resulting in an inability to play. This last example has played itself out recently, when a number of games from major game developer and publisher Ubisoft were unplayable for an “undetermined period of time” while the authentication servers were down for maintenance.
The Effectiveness of DRM in Stopping Gaming Piracy
If the numbers from the charts pictured above are to believed, the short answer is that DRM has had little impact in slowing down game piracy. Indeed, in some cases, use of DRM may make a game into a target for pirates. In 2008, for example, Electronic Arts’ Spore was singled out by pirates for having intrusive DRM, which resulted in it becoming one of the fastest and most pirated games of all time. There was also considerable backlash amongst consumers. According to a Forbes article published shortly after Spore was released, the game had an average of 1 star on Amazon.com, thanks to some 2,000 (out of a total 2,100) negative reviews citing the DRM restrictions as a major sticking point.
The ineffectiveness of DRM has earned it some detractors within the game industry as well. The marketing director of online retailer Good Old Games has come out against the technology, stating that:
DRM drives people to pirate games rather than prevent them from doing that. Would you rather spend $50 on a game that requires installing malware on your system, or to stay online all the time and crashes every time the connection goes down, or would you rather download a cracked version without all that hassle?
The CEO of game studio Paradox Interactive voiced similar concerns about DRM, noting that DRM punishes legitimate consumers and has a very small window of effectiveness:
If you take something like Sony’s DRM, SecuROM — it’s a waste of money. It will keep you protected for three days, it will create a lot of technical support, and it will not increase sales… I know this for a fact, because we tried it eight years ago, and it never worked for us. Two major reasons: it costs money and it makes you lose money, and the other is that it’s so inconvenient to customers.
Finally, the CEO of Polish developer CD Projekt RED recently echoed the above concerns while recalling the targeting of Spore by pirates, stating:
We release the game. It’s cracked in two hours, it was no time for [CD Projekt RED’s 2011 game] Witcher 2. What really surprised me is that the pirates didn’t use the [Good Old Games] version, which was not protected. They took the SecuROM retail version, cracked it and said “we cracked it” – meanwhile there’s a non-secure version with a simultaneous release. You’d think the GOG version would be the one floating around.
The intuition of the above developers is supported by empirical studies. For example, one study from researchers at the business schools at Rice and Duke indicates that DRM can increase piracy, drive up costs, and decrease sales. Their scholarship revealed that, at least in the context of music, “eliminating DRM restrictions can lead to an increase in sales of legal downloads, a decrease in sales of traditional CDs, and a decrease in piracy… This is in stark contrast to the view that removing DRM will unconditionally increase the level of piracy.”