Demigod, Piracy And Good Business Models...
from the let's-walk-this-through... dept
Lots of folks have been submitting variations on the story about how Stardock's new game, Demigod, has been widely pirated, and that's resulted in server troubles for the company, as many of these unauthorized users try to connect to Stardock servers. Many are claiming that this shows that Stardock's customer friendly approach to video games fails. But, that's not true or accurate at all. It's just an issue of properly lining up the incentives and the infinite goods vs. the scarcities. In this case, one of the key scarcities was server access -- but Stardock set things up such that unauthorized copies could drag that down. The good thing, though, is that the company quickly got on top of the problem and has been implementing a technological fix rather than screaming and complaining about pirates. Meanwhile, some others have sent in links to the Demigod forums, where people recognize that many of the unauthorized users got the game to test it out, and are encouraging people to buy it to support Stardock and its fan-friendly attitude.In the end, though, it does seem like Stardock has set this up a bit as a "give it away and pray" setup, which we tend not to agree with as a good business model. Since a big part of the game is the mutliplayer aspect, where you have to connect to a server and play against other players, why not give away the software itself (many people are getting it this way already) and charge a nominal fee for access to the server. That access is a scarcity -- and then you can scale based on users, since more users means more money. It seems like that's a reasonable business model that aligns everything much more nicely.
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Filed Under: business models, demigod, piracy, video games
Companies: stardock
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That works really well unless some creative person reverse engineers your server-side protocol and then implements a workalike server. It has certainly happened before. I don't even think you could stop them under the DMCA without adding some DRM (and DRM is bad, right?) The workalike can offer the server access service to anybody (legitimate copy or not), and at a much lower price than Stardock, since they don't have to try to recoup the cost of development of the original game.
If we accept that people will find a way (legal, illegal, or gray-area) to drive things toward marginal costs, we have to accept that it's going to happen for both scarce and infinite goods. The drug industry knows this fairly well already.
Sounds like it would be in Stardock's best interest to rustle up some more scarcity.
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Not at all. That just puts the emphasis on making sure that the official server is better. Even though there are many other servers for WOW most people prefer the official one.
The workalike can offer the server access service to anybody (legitimate copy or not), and at a much lower price than Stardock, since they don't have to try to recoup the cost of development of the original game.
But they can't offer new features or the larger community that the official servers can offer.
If we accept that people will find a way (legal, illegal, or gray-area) to drive things toward marginal costs, we have to accept that it's going to happen for both scarce and infinite goods. The drug industry knows this fairly well already.
Which is why people still pay orders of magnitude more for brand name drugs over generics? Oops. Being the official and authorized provider brings in a nice boost. Always has.
Sounds like it would be in Stardock's best interest to rustle up some more scarcity.
Huh? There are always scarcities, but you don't "rustle them up." Fake scarcities don't last. You focus on the scarcities that already exist.
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Stardock isn't guaranteed the largest community, either: according to the article, 12% of the users connecting to the Stardock servers were legitimate. 12%.
The fact that people pay more for brand-name drugs than generic drugs is because they are dumb. There's no difference in active ingredient, effectiveness, or any actual, physical property. They buy brand-name largely because of mass misconceptions and the effectiveness of marketing. I guess that's proof that you can build a successful business model on stupidity arbitrage.
Huh? There are always scarcities, but you don't "rustle them up." Fake scarcities don't last. You focus on the scarcities that already exist.
You know exactly what I meant. To clarify, I'm just pointing out that there's not a simple, predictable business model here, and server access isn't really enough of a scarcity to build your business model on. If they're smart, they're going to have to come up with and monetize a bunch of other scarcities.
I like this term "fake scarcity." How would you define that? Can you provide some examples? Do you actually mean to imply that you can identify a fake scarcity because it doesn't last? If so, isn't server access a fake scarcity? Isn't the perception of difference between brand-name and generic drugs a fake scarcity?
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Given the nearly necessary properties of MMORPGs, the new features are largely implemented client-side, and that's the part they have to give away.
The server must have most of the logic of the game, it has to hold and manage all the state. The clients main responsibilities are to display pretty graphics and communicate with the server.
I like this term "fake scarcity." How would you define that? Can you provide some examples? Do you actually mean to imply that you can identify a fake scarcity because it doesn't last? If so, isn't server access a fake scarcity? Isn't the perception of difference between brand-name and generic drugs a fake scarcity?
A "fake scarcity" would be the client software. The marginal cost is basically zero. A real scarcity is server access. Server access involves bandwidth throughput, CPU cycles, memory usage... all of which are physically limited within a period of time. That's why you can't run WOW off your high end home computer and cable internet while expecting to compete with Blizzard.
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I'm guessing you'd be wrong, then, because I have a doctorate in Computer Science and I've been writing software for 20 years.
The server must have most of the logic of the game, it has to hold and manage all the state. The clients main responsibilities are to display pretty graphics and communicate with the server.
So all those high-fidelity Ultima Online shard emulators I linked above (and here) must not exist. I don't have personal experience with these, but from what I've read, these are in some ways even better than the official EA shards, because they let you play older versions of the game, or customized versions that EA doesn't offer.
There are also lower-fidelity emulators for World of Warcraft, apparently. I guess WoW keeps a little more of the game's complexity on the server, and so that part is harder to emulate.
A "fake scarcity" would be the client software. The marginal cost is basically zero. A real scarcity is server access. Server access involves bandwidth throughput, CPU cycles, memory usage... all of which are physically limited within a period of time. That's why you can't run WOW off your high end home computer and cable internet while expecting to compete with Blizzard.
Well, that means any infinite good is a fake scarcity (or potentially so). I'm not sure that's what Mike meant.
You are correct that bandwidth, CPU, memory, and so on are all scarce goods. But they're barely scarce. Companies like Blizzard and EA have to pay for these, too. But Blizzard and EA also have to subsidize the cost of the development of the games, which is fixed but very, very substantial.
What's very nice today is that you can acquire bandwidth, CPU, memory, and so on at very close to marginal costs from cloud computing vendors like Amazon EC2. You even buy it pay-as-you-go. If I have a high-fidelity emulator (as the UO folks do), and a little time and creativity then I can probably host UO at capacity simliar to EA's, for a cost very similar to what EA pays. If I weren't worried about being sued out of existence, it might make a lot of sense as a business model. I could charge far less than EA charges for the same access. Maybe, because CPU cycles and the like are so cheap now, I could just sell advertising and give away the server access.
Speaking of fake scarcity, isn't the server software also an infinite good? If I got a copy, I could set up a server for marginal cost, too, so maybe it's a fake scarcity? Should it be given away, too?
This is all somewhat academic, of course, but it raises interesting questions about the edges of the infinite/scarce dichotomy.
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In fact that exactly is Mike's position - "infinite good" is the opposite of "scarce good".
> isn't the server software also an infinite good?
Yes and no. Technically it's an infinite good only if it's released, but since these components aren't normally released it could be considered a scarcity of a sort. However since it can be leaked or reverse engineered it might not be a very good scarcity to base a business model on.
> But Blizzard and EA also have to subsidize the cost of the development of the games, which is fixed but very, very substantial
Yes, and you and others are correct in pointing out that these companies would need to charge a higher amount to recoup this cost, than someone else running a look-a-like server might have to. (Assuming they chose not to sell the client as they currently do).
However as Mike points out server access on it's own isn't the only scarcity at work here - the official servers usually offer a better experience because they are usually better supported and maintained and attract a larger community. They also get a head start when the company implements new features. Even with the help of EC2 it is still a significant undertaking to compete successfully with an official server.
Which is not to say it can't be done of course, and in fact if someone does set up and run a server that appeals to a people more than the official servers (like the Ultima example you give) then that's fair enough. They put in the hours to keep the server running and attract a community so they deserve to profit from it as well.
Just because a company writes some software doesn't mean they get a guarantee to be able to recoup the cost, that's a "business risk" and it's up to the company to figure out a way to make a net profit. That's no different than if you're running a shop and you spend a chunk of money buying stock - you don't get a guarantee you will be able to sell the stock and make a profit - it's up to you to figure out how to do this.
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Actually all those shard emulators are based off the release of the UO server code. Meaning all the logic is in the server. It mentions that in the Wikipedia link you provided above.
Secondly I never said nobody else could create an equal experience. It would still take significant work, and you would have to provide a reason to use your server over the official. That might be what is called competition. What you're basically saying is 'If I setup a restaurant, how do I know somebody else won't look at my menu and setup a similar restaurant down the street?!?'. The short answer is, they can and they should be able to. However they will be at a disadvantage to begin with and will have to offer something better than you in order to compete.
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Translation: you don't have a clue what you're talking about.
I've seen what they teach in "computer science" and can safely tell you that you don't know enough about the *current working state of computer science* by leaps and bounds.
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1 key per session approach
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Re: 1 key per session approach
Steam also has an interesting and successful approach. It's not so much that all DRM is bad, but that bad DRM is bad.
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private WoW servers
while they are useful for learning new classes (many start your char at the max level for that server), that's about it. besides, with the adjusted exp curve now on official servers, there's much less meaningless grinding, so your play is more towards learning the class rather than run-hear-kill-shit-rinse-repeat. long story short, just pay for the blizzard server play.
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I also give Brad kudos for coming forth and being honest about the level of piracy which he could've held back to shut the naysayers up.
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important thing that was missed by Mike
'On Day 0 there were around 140,000 concurrent users, with 18,000 validated users. The pirates couldn't update their game or play online, but they could still "touch the servers."
So the pirates couldn't play the game online but that still forced their hand on the server side because they were planning for 50, 000 users and got about 150,000 users.
Also, Gamestop started selling the game earlier than planned and I know that they didn't sell the majority of 150,000 copies but still each adds it's own weight.
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Stardock is validated.
I don't see anything wrong with the given model though. It is a variation of the long tail approach. Stardock now has an online verification system which they can use for future games beyond this and the quick patch will likely be formalized into the Stardock Validation System (TM somewhere) which will allow them to have a scalable validation system which won't get DDos'd by their own games anymore. This is the first try and they got bitten by the standard Murphy case, "something" will not scale as expected and blow ups will happen when you actually go public.
I see this as long tail because they have been gaining user base by not treating their customers as criminals, they have been releasing good games that people "want" to play. Having an obviously desirable online component in this case is "why" folks will actually buy the game "after they have downloaded it illegally". It is that last bit which is the "long tail" in my thinking. Anyone who pirates the game is not going to give them a dime unless Stardock "makes" them want to give them the dime. As has been mentioned around here in opposition to most industry funded research, a pirate copy is "not" a lost sale. In the way Stardock is approaching things every pirate copy is a "potential" sale because obviously the pirates want the online component.
Playing devils advocate, in this case, without DRM etc, they have lost 100k sales somehow. Bullshit, they have 100k potential buyers and a good number of those folks "will" buy because they like the game and want to play online.
Different from Mike's free game idea, I think this is the long tail model you actually want. (Outside of MMO's.) I make games you want to play, I charge "x" for a proper license to the game and allow you to play more of the same game online against other folks. (MMO's are an exception as you can't play at all offline.)
Using Stardock as an example, they have 120k interrested folks they can try to sell to even if they only have 10k paid customers. In no way is this a loss, it shows that the limited resource is in demand. It will now be up to the pirates if they want to buy into the game to play it online or if they will move elsewhere.
KB
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software authoritarians are like loathsome missionaries
Re your attempt to be a devil's advocate, you can't quantfy how many of the 100k "potential buyers" (aka thieves) would ever buy the game. I can quantify how many of them haven't and if they "move on" (to steal some other "free"/stolen game) then Stardock suffered the vagaries of the demands of freeloading thieves rather than paying thieves, which equates to theft of that large magnitude anyway. So what is already certain is that their product's value has been dilluted by rampant theft, whether they want to come right out and call it that (I will).
Why should a company leave it up to thieves to determine if/when they'll pay to play? People who rob banks don't get to dictate interest rates. It's fundamentally authoritarian to demand others change business models to accomodate criminals, to give away their property on someone else's terms.
I don't begrudge anyone the right to determine how they license, monetize, or run their operations. It's their choice if they want to give it away, like Linux, to build mass interest and adoption. It should also be their choice if they want to charge exhorbitant prices and protect their properties with DRM and thereby restrict their base to a smaller group of people who are comfortable with the contractual terms the product is offered. Live and let live.
It's authoritarian to dictate (or suggest) terms contrary to what others have already chosen for themselves. I find it as unseemly as when Jehovah's Witnesses or Mormons come to the door without knowing anyone at the house and informing them that this is their golden opportunity for salvation, joy, and everything else. You don't know better than anyone else what's right or wrong for them. Who the hell are you to make important decisions for other citizens?
Appealing to realities of the market (such as the rampant, viral nature of piracy that reduces the value of assets and makes it much more difficult to gain any ROI) only proves that pirates are dictating what a company like Stardock does rather than Stardock having any control and freedom to do what they want with their product. Stardock may accede to such pressures (in the same way p*ssy shipping companies pay Somali pirates ransom), but that shows they're no longer free to operate as *they* choose -- they're only hostages to thieves. The end result is the only "freedom" is enjoyed by the thieves, the leechers, those who are a drain on businesses and society. Everyone else is a hostage.
I love freedom, so I hate you authoritarians. Stop knocking on everyone's door like a freaking know-it-all, burning-bosom Mormon missionary, and stop trying to get everyone to conform to your worldview. The world will be a lot better off for it because you're probably no less screwed-up than anyone else.
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Re: software authoritarians are like loathsome missionaries
Then when you tell him that he is clearly to blame for the fire and to go away, and then slam the door in his face-- he'll be feeling exactly as we feel when someone like you comes here and tells us "I have a right to do it this way!"
Yes, you do. We're just pointing out how bad an idea it is. Stay inside and burn for all I care.
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Re: software authoritarians are like loathsome missionaries
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Turns out the servers may not have been hammered as claimed
Further the issues where around some of the automatic pings and check the app does when checking for updates and friends. Based on the link above it seems to me that the StarDock exec is not necessarily in alignment with his underlings.
The high ratio of free:pay sounds about right when you don't include DRM or if you offer your product for free with optional pay if you want. The idea behind "free" it to get your content (game, music, whatever) more recognition and wider market/mind share.
It sounds to me like the StarDock CEO is just whining that he isn't seeing more conversions from those 120-150k gamers. What he really should be whining about is not coming up with a business model that would capture some dollars from those pirates. They would not pay for the game, but maybe they would pay a nominal monthly fee to get on the service, or maybe they would pay for DLC or some other service or value add.
Granted there are some people that will pirate regardless and NEVER pay a dime, but out of that group of users that pirate there is a certain percentage that would be willing to pay. The trick is knowing what they would pay for (is the game too expensive? is there more value we need to be providing?) and if producing that offering is worth it over the life of the product. All of this can be determined through the correct market research and planning.
In this case it seems like Stardock just said they would go DRM free to get a headline and some more interest in their products but haven't thought about ways to exploit the extra 120-150k people using their product.
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Re: Turns out the servers may not have been hammered as claimed
It seems to me, that he genuinely cares about his customers, and simply want them to enjoy his game. It seems to me that he, and his company, is pretty much what we all think a developper should be.
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Re: Turns out the servers may not have been hammered as claimed
Uh, that's exactly what the exec said was the case: the pirate copies couldn't download the updates or get onto the servers, but they were choking the authentication servers so that the *legitimate* clients were also having trouble with those activities. As someone else pointed out, Stardock *did* have mechanisms in place to protect the scarce resource (i.e. their server farm) from pirated copies, but the initial version of the check was too far in to do its job properly. Once they changed the setup so the legitimate clients could bypass the bottleneck created by the pirated copies, all was good.
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An MMO client really *is* nothing more than a graphics display engine and some networking code. Anyone who has tried to do differently has paid the price and failed. All the significant bits of the application are, and *must* be, on the server.
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genuinely unclear on how it all works
1) 100k attempts on a server system. Street date broken by GameStop well before authentication servers are up and ready. Is there any correlation at all?
2) Are those 100k attempts all from different IPs or whatever, or can at least some be repeated attempts from the same place? If so, then the numbers are a bit disingenuous. If not, then that's a whole lot of people interested in playing this game (if not so interested in paying for it).
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uhm...
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Re: uhm...
It was published by Stardock though.
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Stardock? I'll buy it!
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Free server access,.charge for the game.
Like Guildwars has no monthly fee.
I quit paying for monthly subscription fees, years ago.
And will never pay for it again.
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As such, I was not saying they have to follow some business model to make it work. I believe that the model they have will work out and turn a profit despite the problems they encountered by not having any DRM on the game itself initially. They fixed the server scaling problem such that they won't get DDos'd by their own game now or in the future, but if the servers are kicking duplicate serials and such then pirates are going to have a rough time enjoying the rest of the game.
There are surely those who will pirate and never buy a game, I don't question that. The problem is they will never buy it one way or another as they know someone will eventually crack whatever DRM is on the game so they can play it without paying anyway. The folks I'm talking about as potential sales are the ones that think pirating is just a way to demo the game. Now they see they can't enjoy the full game, they may buy the game if they see the potential fun in the multiplayer aspect.
And yes, in 15 years I've been involved with most of the various business models and after fighting hackers etc, I came to the simple conclusion which my bosses all hate: DRM doesn't work. Serial numbers, kicking duplicates off of servers etc, that works because there is not enough data in the wild to get a good sampling in order to hack the generation scheme quickly. You get at least 6 months on the serial number system and of course building a replacement server takes a while also.
SO..... What I was suggesting is not to ignore piracy, just to assume it will happen because no matter what your efforts, even 10 very intelligent programmers are going to be out-hacked by the thousands of hackers out looking to see how your code works and/or break it because they are just curious and/or bored.
Ignoring the single player piracy, the portion which can be controlled is the online component where very little is in hacker hands. Eventually they can work around things but that's after the initial desire to play the first version of the game has worn out. If you use your resources in expansions and slight modifications (fairly cheap compared to initial dev time) which can't be immediately duplicated on gray shards/servers, getting a legal following is much more viable than fighting hackers.
This is very obviously my opinion, but using that 15 years you dissed, I kinda say that I've watched this over time and all DRM has been a joke. 20 years ago I used to crack drm (lite at the time), I had no money but my folks bought me a computer, I had lots of time and not much else to do. Today I'd be in jail for some of the things I did, young, intelligent, and curious. If you think 15 year olds no longer exist with those abilities and no concept of law, you are a fool.
There is "no" business model which works in software on PC's without assuming piracy happens on the non-internet side of things. Go to pirate bay and look for whatever game you want, you will find a set of torrents for it. Don't download them, probably infected but they are working games usually. (I use VMWare to test various things such as this, those torrents work to play the game though. A good portion are virus/trojan infected though.)
I'm writing an epic post here but facts are facts. DRM doesn't work, pisses folks off and the only thing that can be sold is the added content. Even for pirates, they want online game play, they want patches because it fixes xyz bug, or they want new content/ballance changes, those things only come from the original content provider and only a couple days/weeks later from hackers. Those things only come from the original provider and hacked versions come in much later. So, I stand by the comment that with 100k illegal copies they will likely get a fair amount of legal purchases to enjoy the online side of things out of those 100k illegal copies.
KB
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Whether DRM was there or not, whether is was cracked or not, the game would still make Version checks on start-up. These amount to pings to the server and server responses. Way before the user can even approach the multiplayer button on the screen to have their serial checked. 120,000 repeated call and responses to a their (Non sharded) Mbit servers with a couple of server host already running on each is equivalent to DOS attacking a Mac Lisa with Pixars Renderfarm. Pure ownage
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Stardock's own answer to the piracy issue
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