Mac game company CEOs discuss piracy

MacCentral recently spoke with CEOs from three leading Mac game publishers to find out how software piracy impacts their business. MacSoft parent company Destineer Studios’ President Peter Tamte, Aspyr Media President Michael Rogers and MacPlay President Mark Cottam all participated in this recent roundtable discussion, refuting the most common justifications pirates use point by point.

Piracy’s repercussions and consequences

Although the issue of music piracy has been a focus of media attention and legal efforts, it certainly doesn’t end with music: The theft of software on the Mac and PC has never been more prevalent both in the United States and abroad. How do people get software without paying for it?

The ubiquity of CD-R and DVD-R drives, increased adoption of broadband access and constantly improving peer-to-peer file sharing utilities have all facilitated casual piracy by people who, a few years ago, probably wouldn’t have bothered. It’s trivial to get a friend to make you a copy of a CD-ROM, and it’s not terribly difficult to find, download and use freely available peer-to-peer file sharing software either. A quick query to a Web search engine can turn up dozens of matches for sites that either offer software or provide information on how to use such resources, as well.

“Piracy is the single biggest threat to the Mac game market,” Tamte said. He offered an explanation of how the game market works to explain his position.

“When all is said and done a publisher must make the determination of whether to bring a game to the Mac based on economics. Can the publisher recoup the costs of bringing the game to market? The way you do that is to look at earlier games in a similar genre to see how they’ve sold,” he said.

Tamte told MacCentral that in his negotiations with PC publishers, they consider the high water marks of Mac gaming to make such evaluations. Aspyr’s The Sims is one, as it’s been hugely popular in the casual games market, and MacSoft’s own Halo is serving as the current litmus test for how well an action game title can do. The more copies of Halo that are stolen, the fewer are sold — and that subsequently impacts the viability of future conversions for the platform.

In contrast, Cottam accepts piracy as a grim reality of his business, although he’s no happier to see it happen than others. “If you are going to do business in this market you have to recognize that piracy will happen. It’s easier now to replicate games and move them over the Internet, absolutely. Our goal is to avoid making our attempts to thwart piracy unpleasant for our valid customers.”

Tamte feels that piracy has already had significant consequences for PC and Mac gaming alike, as major publishers have shifted development budgets to video game consoles. Some PC game developers have closed or refocused their efforts on consoles as well. “The PC games market is down 12 percent in sales, and the console market is up 25 percent in sales,” he said.

While Tamte admits that a variety of factors are contributing to this decline in PC game revenue, he blames the bulk of it on piracy. “The console market has only a small fraction of the piracy issues they have on the PC,” he said.

Case in point: Halo

Tamte’s own recent experience provoked him to speak out. Over the holidays, MacSoft saw rampant piracy of their latest release, the long-awaited Mac version of Halo. Through extrapolation of the activity on file-sharing services like BitTorrent, Tamte said that MacSoft has witnessed more people stealing Halo than have purchased it.

“We’ve only been able to track a small percentage of the total people we think are stealing Halo,” said Tamte, “but from what we’ve been able to extrapolate, the lost sales are already in the millions.”

MacSoft’s response was to issue a recent patch that, while offering renewed multiplayer compatibility with its PC counterpart and other fixes, requires gamers to have Halo CD-ROMs in their drives in order to play. The move was met with cries of derision by some Halo owners on MacCentral’s forums and elsewhere. Some have demanded their money back or sworn off the game entirely.

Tamte admits that it’s an inconvenience, but said, “Almost all PC games and a very large portion of Mac games already require similar copy protection.”

Pirates use a variety of justifications for their actions. To no great surprise, none of these rationales hold much weight with these CEOs.

“I wasn’t going to buy it, so I’m not really stealing it.”

“You’re obligated to pay for a product that you use,” said Cottam. “Just like you don’t go into a restaurant and ask for a free meal.”

Rogers offered a similarly straightforward analysis: “If you’re playing it and getting entertainment value out of it, you ought to pay for it.”

“That rationalization is industrial age thinking instead of information age thinking,” Tamte said. “The bulk of the cost of bringing a game to market is in the development cost. Only about 30 percent of a game’s price is to pay for its packaging and distribution. And I haven’t gotten any checks from these pirates for the 70 percent of Halo that they’re enjoying.”

“The game costs too much.”

At $35 to $50 a pop, the cost of A-list games can be a bitter pill for students and others on limited budgets to take. What’s worse, Mac gamers often find the same titles selling for less for other platforms and available sooner. But it’s the cost of doing business, according to Cottam.

“We can’t afford to throw A-list software out there at a low price point and expect to make our money back. There are development and licensing costs we have to recoup,” he said.

“It gets frustrating to see how expensive software is, not just in the Mac market but everywhere,” said Rogers. “But that doesn’t justify the idea that you can just take it. If you just wait, the price will usually drop. [Aspyr’s] game prices often drop within a few months.”

A quick check of Aspyr’s Web site demonstrates Rogers’ claim — games that were selling for $30 or $40 when they were first released routinely sell for $20 or less. The company has also recently begun offering value-priced bundles of previously released titles, such as their “Leave the Lights On Compilation” and “Medal of Honor Allied Assault Deluxe Edition.”

Asking less for more games has another ramification, according to Cottam: It lowers the bar for the quality of the games you can expect in the future.

“With less revenue to work with, publishers have less resources to invest in licensing and developing games, and that means that not only will the games they work on be of lower quality, but there will be fewer of them too,” he said.

“There’s no demo available.”

Another common argument some Mac pirates use to justify their actions is that there isn’t or wasn’t a demo version of the game available at the time that they stole it. The CEOs are sympathetic to gamers who want to kick the tires before they buy, but they don’t accept the rationalization.

Now that Halo is finished and has been updated to version 1.03, Tamte said that MacSoft is focused on bringing forth a demo version of Halo.

“MacSoft releases demos for the majority of its games and a demo of Halo will be available shortly,” said Tamte. “Besides, regardless of why you’re stealing that game, you’re stealing, and it’s illegal.”

As to why it’s taken so long, Tamte explained, “We decided to allocate all of our resources — people working 18-hour days for months — to customers who wanted to buy the game. We deal with limited resources for development, and we’re going to put those resources into getting the finished game into people’s hands — that’s our first priority.”

Rogers told MacCentral that Aspyr similarly gets demos to its customers whenever possible. “We’ve been doing a whole lot more demos lately, and we do it every time we can,” he said.

Aspyr faces similar resources constraints and tight schedules as MacSoft, according to Rogers. And Aspyr also puts its money where its mouth is, for customers who buy games from its own e-store.

“On our store, we offer a 30-day money back guarantee. We’re happy to take a sale and refund the money if someone doesn’t like the game or it doesn’t work well on their system,” Rogers told MacCentral. “I would love for more retailers to do that. It’s less of a risk for consumers to buy the software to see if they’ll like it.”

“Stickin’ it to ‘the man'”

Some pirates proclaim a sense of justice when they steal software, suggesting that the companies behind the products they’ve taken — in some cases, billion-dollar companies — don’t deserve their money. This refrain has occurred more than once where Halo is concerned, as some gamers still hold a grudge against Microsoft’s purchase of Bungie and the resulting effect: Halo became an Xbox-only title for two years, after it was initially announced for Macs and PCs.

“Microsoft only sees a small amount of the revenue generated by Halo,” Tamte countered. “What you’re doing instead of ‘stealing from the man’ is robbing the Mac community of future games. And someone, somewhere, did not get paid for the work they did to bring that game to you.”

“We’re a small company,” said Rogers, “and that lost revenue affects us. If pirates think that a giant corporation won’t miss their money, they might be right. But it has a magnified impact on our business.”

What to do about the problem?

Tamte said that all MacSoft titles released in the future will require some form of copy protection. Tamte didn’t offer specific details about what that would consist of, but he told MacCentral that his company is reviewing several technologies.

“We need to get ahead of the problem somehow without punishing people who paid money for the game,” mused Rogers. “We’ll be trying to do some things that both improve the experience for customers and make it more difficult for pirates, like shipping some titles on DVD, for example. The installation process is easier than swapping out multiple CD-ROMs, and the volume is big enough that it’ll be a lot more to stuff an Internet connection with — maybe too much for casual pirates who do it now.”

Rogers also sees Aspyr’s in-house development staff — Aspyr Studios — as key to long-term anti-piracy solutions. Having developers in-house makes it more feasible for Aspyr to implement ways that offer better service to paying customers, while locking out pirates.

Cottam agreed with Rogers that dealing with piracy requires an equal balance of protecting intellectual property while offering customers the best experience possible. “At the end of the day, MacPlay needs to stay focused on bringing the best content to the users and trust that the user community will support us,” he added.

To people who still aren’t convinced that software piracy is wrong, Tamte offered a closing thought. “The main question I’d like software pirates to ask themselves is this: If I wouldn’t steal this game off the shelf of CompUSA, why would I steal it off the Internet? This isn’t a gray issue, it’s black and white. Stealing is wrong. You can’t choose which laws to obey simply because you don’t like them or find them inconvenient.”

Look for more MacCentral coverage of how piracy affects the Mac development community in the coming weeks.