Free 2 Play and the Four Currencies

One of my most popular articles was "Piracy and the Four Currencies", which explains the economics of piracy in terms of four "psychological currencies": money-dollars ($M), time-dollars ($T), pain-in-the-butt dollars ($P) and integrity-dollars ($I). Purchases don't just cost money; they also cost different amounts of time, pain-in-the butt, and (sometimes) moral integrity.

Quick Summary

In the article, I argue that piracy, though it costs 0 $M, has a non-zero $T, $P, and $I cost, because the pirate must know where to search, risk exposure to malware, and do something illegal (which has a variable $I cost depending on one's outlook). Developers can compete with piracy by removing invasive DRM and practicing good customer service, which lowers $T and $P costs.  How much weight an individual gives to each currency varies widely.  For example, a wealthy person may value convenience over money, a busy person may value time the most, and someone with strong convictions might refuse to compromise their beliefs ("spending" $I*) for money's sake alone.

*Exactly what $I represents varies with ideology.  For example, Richard Stallman would put a large $I cost on using proprietary software, whereas I do not, and strict vegetarians might assign an $I cost to fur coats.

Free 2 Play

Now, let's apply the  four currency model to Free 2 Play games.

F2P is clearly here to stay.  It's seen big success with Angry Birds, Team Fortress 2, and given a new lease on life to MMO's that aren't World of Warcraft.  However, we've also just witnessed the spectacular implosion of F2P standard-bearer Zynga, and seen article after article about popular, critically-acclaimed F2P games that garner little revenue.

The debate is heated, so let's step back, put down our pitchforks (on both sides), and see what's going on.

Analysis

First of all, F2P competes well with piracy, because the barrier to entry couldn't be any lower.  Downloading an F2P game costs no $M, little $T, no $P, and no $I (for those who feel guilty about piracy).

Though FTP has no $M cost, it inserts $T and $P costs throughout the game to encourage players to pay $M instead.  This is the opposite of a traditional game, where there is no extra $T, $P, or $M cost once you've bought the game (invasive DRM, DLC, and bad design notwithstanding).

According to some best practices of F2P design, developers should intentionally inject inconvenience into games, which players can remove in exchange for money.  This means barriers, time sinks, and "dual-currency" systems where players can pay real money for rewards, or grind for hours instead.

In this way, traditional games are like laser printers: expensive to buy, cheap and easy to operate.  F2P games are like ink jets: cheap to buy, but expensive and sometimes a pain to operate, especially if the company has questionable business tactics.

On the one hand, F2P gives players options. Lots of people have no money but plenty of time and/or plenty of pain-in-the-butt tolerance.  Furthermore, it enables players to purchase things "a-la-carte," in case there are only certain aspects of the game they really want.  These are good things.

On the other hand, F2P adds inconveniences and compromises the "magic circle" by constantly asking the player for money.  These practices are why some designers call F2P "evil," and not just because they're luddites* who are afraid of change, as some have implied.  If anything, F2P is a return to the past as much as it is a step towards the future.  We've been here before, and it's called The Arcade.

Despite my reservations and general grumpiness, I do think F2P can drive great things - you only have to look at Team Fortress 2, League of Legends, and Triple Town to see that.  But it still deserves a critical eye.

*As an aside, the historical Luddites have been grossly misrepresented by industrialist propaganda and (incorrect) associations with religious fundamentalism.  I highly recommend the book Rebels Against the Future by Kirkpatrick Sale for an alternative viewpoint.

When (and why) F2P Fails

Let's look at some F2P games that have failed and see if the four currencies can tell us why.

The developers of Punch Quest and MonkeyDrums have suggested that their games failed because they were too nice - i.e., they embraced F2P but still hung onto the idea that they could "delight" their customers into paying more for the experience.  I feel for these teams and applaud their willingness to be so open with such a painful experience, so let's see if we can learn from it.

As I mentioned in Pay What You Want and the Four Currencies, the simple act of making something free removes the $I cost of not paying.  This is why donationware doesn't work - nobody pays because you gave them permission not to.  By making too much content easily accessible or free, customers feel no obligation to pay.  If you ask for the sale, however, there's a good chance you'll get them to pay, especially if there's a free sample.

Traditional game design has trained us to maximize the value we are giving players for their money, charge them once for it, and call it a day.  F2P requires an entirely new perspective that doesn't focus on delivering all the goodies in one big package.  It seems these developers had a hard time choosing between F2P and traditional design.  So, let's take a quick look at tradition.

The Evolving "Traditional" Model

In the past, video games were sold in retail stores as packaged goods that you bought sight-unseen. Retail is certainly on the decline, but those who use this fact to decry up-front pricing* are attacking a straw man. "Progress" doesn't happen in only one direction, and the traditional model has been evolving right along with the others.

*In fairness to Dan, he's right that charging 99 cents for all of TripleTown would be insane, and I'm largely a fan of his approach to F2P design.  That said, I can think of more than just a few indie developers who use the up-front pricing model without relying on mega-hits to succeed.

Traditioooooon!

We'll use ourselves as an example of the "neo-traditional*" model. With Defender's Quest, we relied on a lengthy, compelling, browser-based demo to drive sales. This allowed us to make good revenue without the benefit of major portals like GOG and Steam, although we were eventually able to attract their attention. We  survived by selling directly from our own site and free Flash portals like Kongregate, where we leveraged their microtransaction engine to sell an online version of the game.

*We seriously need a better name than that.

Furthermore, although the price is up-front, it's by no means "fixed." We started at $6.99 when we launched in January but made so many coupons available that anyone paying attention could nab it for $4.99.  Meanwhile, we handed out free promotional codes left and right.

We eventually raised the price to $14.99 for the gold edition launch but started with a "launch sale" of $9.99 through the first week on Steam.  And as everybody knows, Steam and GOG are fond of periodic sales with deep discounts, and we will be participating in every event they invite us to. Furthermore, we have some crazy plans of our own, so stick around for our one-year anniversary next October 30th.  Because players know that games often go on sale, they can exchange $M for $T by waiting for a price drop.

The ability to sell a game year-round, at variable prices, while keeping the majority of the revenue is a far cry from the old days of having a one-month shelf-life in a retail store and collecting a few percentage points in royalties - if you were lucky. That's the old traditional model, and I'm happy it's dying.

However, the advantage of the new traditional model is that it gets the financial exchange out of the way up front, which lets developers focus solely on game play rather than a string of tiny sales pitches. Furthermore, it avoids fracturing the game's shared cultural experience into low and high-paying tiers.  I realize that the traditional model has the potential for a smaller player base and lost income from "true fans" and whales, but I have some ideas about that and, more importantly, have no doubt that the model will continue to evolve to meet these challenges.

Finally, and I think most importantly, the traditional model and F2P have much to learn from each other. They are points on a spectrum rather than fixed binary alternatives.  The "neo-traditional" model incorporates many aspects of both, but takes it in a different direction than a typical iPhone game or console title for sale at GameStop.

Summing up F2P

F2P brings with it new opportunities, audiences, and markets, but it's not magic. Simply put, instead of front-loading the $M cost, it sprinkles alternative $P and $T costs throughout the experience as inducements to make you pay $M.

F2P pros:

• Raises the ceiling on how much a single player can spend
• Lowers the barrier to entry almost entirely
• Opens up new genres and embraces new audiences

F2P cons:

• Not a good fit for many genres (especially those focused on narrative)
• Injects financial motivations directly into the game
• Annoys players
• Can corrupt the design (c.f. Zynga)
• 
  

Closing Thoughts

Furthermore, those obsessed with growth* as the sole metric of the industry's sector-by-sector health should be slapped with a large, wet trout.  Facebook, mobile, and other once-emerging trends are obviously here to stay, but reports about the traditional industry's decline have been greatly exaggerated, especially because NPD results are grossly misleading.  And contrary to popular wisdom, the explosive growth of mobile has not doomed Nintendo's handheld market, though I can't say the same for the PSVita.

Retail sales of console games do seem to be on the decline, but the slowdown in PC sales should not be taken as an indication that PC software developers are in trouble. For example, eventually you get to the point where everyone who wants a car has one, so although it's harder to sell new ones, more cars are being driven than ever before.  Similarly, sales of new PC's have peaked because they are powerful enough, and, with a little maintenance, a decent rig can last you the better part of a decade. This is bad news for people like Dell who need to push hardware, but for those of us who just make games that run on the dang things, times couldn't be better.

Mobile platforms will eventually reach their saturation point, too, and then the pundits will start shouting that mobile is dead, and eyePhones are the Next Big Thing.

So do yourself a favor; play a great Free2Play game or two. Then play some great traditional games by friendly indie developers. Then slap a pundit with a fish.

*Second side note: the single-minded focus on "growth" is a major fallacy of modern economic thought. See Tim Jackson's Prosperity Without Growth for an alternative viewpoint. 

Watch CNBC and take a shot every time a pundit says "growth."

Pay What You Want and the Four Currencies

Cross-posted on gamasutra

Today I'd like to apply my "four currencies" model to the "pay what you want" phenomenon.  Like piracy, this is a case where the results we observe don't match what conventional wisdom says should happen, and I use my "four currencies" theory to explain the discrepancy. 

A quick summary for new readers:

In my first two articles, I explain that while piracy costs no "money-dollars" ($M), it still has "time-dollar" ($T) and "pain-in-the-butt-dollar" $P costs, ie, the time and hassle of tracking down a torrent, as well as the risk of malware, especially for non-techies.  There's also an "integrity-dollar" $I cost, ie, piracy makes some people feel guilty, and adds a small risk of legal trouble.  So, although piracy costs zero $M, it has non-zero $T, $P, and $I costs.

Raising large hurdles lowers sales

Image courtesy of haven't the slightest    

The legitimate product has no $I cost, and with a quick and friendly purchasing experience, it will also be "cheaper" than piracy in terms of $T and $P, making the customer more willing to spend $M. On the other hand, DRM and treating players like criminals raises both $T and $P, and makes players feel less guilty about piracy, lowering its $I cost.

This is a super quick and over-simplified summary. See the original articles for more details.  

The Pay-What-You-Want Paradox 

Conventional wisdom suggests that customers who are free to pay what they want for something will pay as little as possible.  This was widely repeated before RadioHead released their In Rainbows album as PWYW, and again when the first Humble Indie Bundle was announced.  In both cases, the conventional wisdom was partly right - lots of people did pay only the minimum amount.  But many paid more, and by any measure both sales were big successes.

Before we get into that though, let's look at a model where the conventional nay-saying wisdom matches reality - voluntary donations for software downloads.

Donationware Doesn't Work

image courtesy of MindfulOne

Donation-supported software rarely works.  There's a few outliers but for the most part it's a terrible way to fund a project - but why?  Let's apply the 4-currencies model.

When a developer offers a free download link on her website with an optional donation button, she is legitimately offering the game for two different minimum "prices":

The 4-currency "costs" are always relative to each individual.
This is just a theoretical "average person" example. 

The $M price of donation is as low as possible - any positive value will do, so why don't most people donate even 1 cent?  Because they can already download the product quickly ($T) and painlessly ($P) for free ($M).  Since the developer herself provides the free option, most people don't even feel guilty ($I) about it.

Pulling out a credit card, typing a number into a paypal window, etc, is too much bother ($P+$T),  especially when the developer provides a legitimate option to skip all that.

Raising NO hurdle lowers sales

Image courtesy jim.rocco

Now, what if there was a minimum price?  Let's go with 1 cent.  Let's temporarily ignore the fact that transaction fees for such small amounts would actually cost the developer money.  With a 1 cent minimum, the two "prices" now look like this:

By removing the "don't pay" option, all we have left is paying any amount, or piracy.  Piracy costs no money, but takes time, is a pain, and makes many people feel guilty. The only low $I cost option left is buying legitimately.  If the developer makes the experience quick and painless, she lowers the $P and $T costs sufficiently that many would-be pirates become customers instead*.

*Some will always pirate, because their personal valuations of the $P/$T/$I costs are different from those shown above.  These players will likely never be customers, so there's no point in worrying about them. 

Raising a tiny hurdle raises sales

Image courtesy of sombraala

Since there's no option to download both legitimately and for free, the small $P and $T cost of pay-what-you-want won't seem too bad for most people, especially if the payment page is slick, professional, and user-friendly.  Once these customers are over this initial barrier, purse strings will open, because the real obstacle was $P and $T, not $M*.

*For some people, such as those who don't have credit cards, or who live in countries not serviced by the payment processor, any amount of $M results in an insurmountable $P barrier, because there's no way for them to send the developer money.

There are some for whom money will still be an obstacle - this is the group that's paying only $0.01 or $1.  For those with a little more to spare, however, the results speak for themselves - people are more than willing to part with their $M, giving $5, $10, $100, or even $1000+.

Making it work for you

All this is simply to show how - and more importantly, why - the Pay What You Want model can work.  This doesn't mean it works in all cases.

The most successful variants of this strategy exhibit the following features:

1. Limited time
2. Product of significant value
3. Generates goodwill

The limited time is important, because it serves as a call to action - get it now while the price is incredibly low.

I have to admit that although I bought the first few Humble Bundles, I haven't bought some of the latest ones.  This is mostly because I simply don't have the time to play all those games, and I have pretty particular interests so what's on offer isn't always interesting to me.

I did, however, pay $10 for both Proun and Sleep is Death as PWYW because they caught my interest and were well worth the amount I paid.

The last point is the one I want to explore a little before signing off.  I believe people are more likely to behave cynically - that is, to pay the minimum amount, the more impersonal and detached their relationship is with the creator.  The more they see the creator as a real person with real needs, and the more they develop a personal connection with your work, the more likely they are to reward you with more than the minimum amount. This is why building a community around your game is very important, and why it's also important not to be a huge jerk, because it makes it easier for people to justify pirating your games.

The Humble Indie Bundle generated goodwill through its charity drive, by offering cross-platform versions of the games on sale, and through the sheer novelty of the promotion (which by now has worn off).

Also, anyone who tried to donate less than $1 was greeted with this picture before their order was finalized:

This likely had the effect of raising the $I cost of any transaction less than $1.

So, those are my thoughts on PWYW and the four currencies. I think the PWYW model is here to stay and can be successful in the future, but the novelty factor has now worn off.  That being said, PWYW seems like a much better option for generating revenue than an optional donation.

Part 4 : "Free-to-Play and the Four Currencies."

Piracy and the four currencies, part 2

Cross-posted on gamasutra.


My previous article, piracy and the four currencies seems to have caused a bit of a stir, so I'm going to make this a series. Welcome to part two!


For those of you just joining the conversation, go read the original article. Don't worry, it's pretty short and we'll wait right here for you.


Back already? Great.  I'm going to expand upon my original theory, and then test it out on a few new case studies to see what kind of explanatory breadth it has. 

The "four currencies"

The Point

The basic point of my article was to look at the discussion in a new way*. The old model (which so many senators and CEO's buy into), naively equates "cost" with money-dollars.  This model does a poor job of explaining human behavior, however, because humans care about more things than money- namely, they care about time, pain-in-the-butt, integrity, and a million other things.  Furthermore, the value of each of these things is different for each person - including money!  A model that acknowledges that these other, non-monetary "costs" exist is better at accounting for how and why human beings make choices.  This is what the "four currency" theory is all about. 


I chose my specific "four currencies**," not because they form an exhaustive list, but because:

• They're the main ones I think of when buying stuff
• "Four currencies" is a catchy phrase
• It gets the idea across quickly

Gauging by the intense reaction the article received, I think this theory has legs.  Since I'm just a random game developer and blogger, I'll leave the hardcore analysis and scientific testing of this theory to any grad students out there who need a thesis topic.


*The idea is still "new," but I'm not the first to posit it. This 2010 article proposes almost exactly the same idea with slightly different wording.


**Money-dollars ($M), time-dollars ($T), pain-in-the-butt dollars ($P) and integrity-dollars ($I) for those of you who didn't read the original article :)

Things I didn't cover

CC image courtesy of wilhei55

There's a few things I left out in my original analysis, which I'll touch on real quickly here.

• VALUE of the product
  All of my side-by-side comparisons assume products of equal value. This isn't always the case - for instance, a pirated game might come with viruses, buying from Steam has added value from Steam integration features, etc.  Although low quality can be considered an additional $P cost, that muddies the water somewhat.
  
  
• WHOSE cost?
  When analysing DRM "costs", I didn't really explain WHO was paying the "pain-in-the-butt" and "time" costs.  For instance, there's a high $T and $P cost to the cracker who actually breaks the DRM.  Without this, DRM is insurmountable to non-techies, so the $P cost of piracy is initially high for them.  As soon as the cracked version hits pirate sites, the $P/$T cost for everyone goes down.   I could write another whole article on just this point, so for simplicity's sake most of my examples in this article will only consider the user's "costs."
  
  
• Values are DYNAMIC
  Many people said I was assuming costs were "static," ie, unchanging.  Though I consider this a mis-reading, I'll clarify things now - each and every "four currency" value is dynamic, varying over time, between individuals, and even within an individual.
  
  
• Values are RELATIVE
  The actual number for a cost is less important than the subjective value a person assigns it.  For instance, 60 money-dollars is valued differently by the rich and the poor.  At $5/hour, that's more than a day's wages, but at $240/hour, it's 15 minutes.  And converting money-dollars to time-dollars still leaves us with relative values, because everyone values time differently.  So even the most "objective" and "quantifiable" values like $M and $T are still in the end subjectively valued, and of course $P and $I are harder still to quantify.
  
  
• Your Mileage May Vary
  In the charts I show 4-currency costs as I value them, or else I'll describe the values of the person in the example.  More than likely the weights you give to those values will differ.

What I'm Not Saying

Let's clarify what I'm specifically not saying. 


I don't think we can (or should) use the $M+$T+$P+$I formula to quantify or "put a price on" things like our time, pain-in-the-butt, and integrity, or come up with "conversion rates" between, say, $M and $I.  Even if there is some not-terrible calculation, it's use is limited because the values keep changing, and it's hard to compare values between people.  And even if you account for that, we still wind up at the original problem - considering only those values which we can reduce to numbers, which leaves out all the squishy stuff that influences human behavior.

CC image courtesy of 401k

So, when I assign numeric values to the four currencies, they're not precise.  It's more about "what moves the scales" rather than how many "pain-in-the-butt dollars" equals one "integrity dollar." 

What I Am Saying

This comic strip (source: TheOatmeal.com) about a guy trying to watch the new HBO series A Game of Thrones is a good example of what I am talking about.  I'll annotate a few of the panels showing the relative 4-currency costs of pirating vs. buying legitimately, as the character perceives them.

You can see that $I cost of piracy starts off very high. Even though he could pirate and get the show for free, he's determined to "do the right thing."  Also, he knows piracy incurs a small amount of time and hassle, so he'd much rather just spend the money, which he hopes will earn him a quick and painless buying experience.  It's not clear exactly how much he's prepared to spend, but from the looks of it money-dollar cost is less of a concern than the satisfaction he'll get from buying legitimately.

His attempts at buying are frustrated.  Additional $T and $P costs are added to the legitimate side of the scale.  The perceived cost of piracy stays the same.  He tries iTunes, Amazon, and Hulu Plus before finally going directly to HBO:

Turns out, the only way to legitimately access "A Game of Thrones" is to sign up for cable service and subscribe to HBO. This is an enormous pain-in-the-butt, it's really expensive, and if he has to schedule a visit from the cable guy, that will eat up a lot of time. $P, $M, and $T skyrocket*.  The cost of buying legitimately just went way up.  

*If he's opposed to cable on principle, the $I cost just rose, as well, which isn't reflected in the picture.

At this point, he's still averse to piracy, showing how highly he values the perceived $I cost of doing something "illegal" and "wrong."  He's still not sure what to do - but the scales are on the verge of tipping.

Hesitantly, he considers piracy, and is surprised by how quick and painless the procedure is.  $T and $P costs for piracy plummet, reflecting his new perception.  Furthermore, by this point he's been so frustrated by HBO's inferior service that the $I cost of piracy shrinks as well (he doesn't feel as bad about it). The scales tip, and his decision is clear.  Piracy it is. 

What's worth noting is that it wasn't until the very end of this process that the customer decided to pirate.  If HBO had made any effort whatsoever to making this content available in a customer-friendly way, they would have likely gotten a sale out of this person and others like him.  Instead, their inferior service drove him to piracy. 

I'm Not Justifying Piracy

At this point, I imagine DRM advocates will accuse me of trying to "justify" piracy.  I am doing nothing of the sort.  I make games for a living, and I happen to think piracy is just flat-out wrong, so the $I cost of doing so is near-infinite for me.

That doesn't mean, however, that I'm willing to fork out the money-, time- and pain-in-the-butt- dollars that movie and AAA game studios demand, though - given the choice to buy legitimately or pirate, I just refuse to do either. 


Most people aren't like me, though, and have a point where $P, $T, and $M will override $I and make them consider piracy.  The above example is one such case. 


Some of these people could be our customers.  Not all of them, sure - but some of them will most definitely buy our games if we make a service that "costs" less.  We can complain about pirates "stealing" our content and waste our efforts on burdensome hardware, software, and legal protections in a mostly futile attempt to stop them, or we can try to understand what drives their behavior and respond accordingly.


Piracy. Is. Not. Theft.


Also - Piracy is not "stealing," for the record.

Piracy is the unauthorized access and duplication of copyrighted material, such as a movie or video game.

Stealing is the unauthorized taking of some thing, such as money, horses, or sandwiches, which deprives the rightful owner of said stolen thing.

When you pirate Defender's Quest, you are violating my legal right to monopolize its distribution for a limited period* of time.  You are not, however, "stealing" it, because I still have my copies of it, and so do all the other customers who bought it. Piracy and stealing are two different things.

*Well, copyright used to be limited, at least.  It's basically forever, these days.

More Nuanced Examples


I used the 4-currency model to explain why DRM Is A Bad Thing, but some astute readers pointed out that in some cases, my model could actually justify DRM.  Let's take a look at a few of those cases.

Case #1: Steam

First, let's consider Steam.  Steam uses DRM, but instead of making people angry and driving them to pirate, it's captured an enormous and dedicated base of players.

 

The 4-currency model explains this pretty well - Steam costs only a small amount of $P and $T to set up the service - comparable to buying anything from some random website for the first time, after which every transaction has a lower $P and $T cost thereafter.  They already have your credit card info, so your wallet is already open, so to speak.  The only hurdle to overcome is the first purchase.

Steam is one of the very few cases in which the only "cost" being evaluated is $M for most players.  Steam is a service that competes magnificently well with free, as their recent success in Russia, previously written off as a haven for pirates, demonstrates.

The simple act of making someone open their wallet and pull out their credit card is a pretty big $P cost in and of itself, and Steam has removed even that from their buying process.  This is the "Steam Lock-in Effect" - once you're over the initial hump, it usually makes more sense to keep buying from Steam.

EA's competing service, Origin, whose DRM is much more onerous and restrictive, does not benefit from the "Steam Lock-in Effect."  They may already have your credit card info, but they do nothing to make the experience less painless, so the second purchase is just as much a hassle as the first.


Case #2: Consoles


The second case is that of dedicated gaming consoles. Let's roll back the clock to 2001 and the era of the PS2.  Steve is thinking of getting Final Fantasy X and has no qualms whatsoever about piracy. Let's say money's tight and he'd rather not pay $60, and that this alone is enough to drive him to piracy if all it took was downloading a torrent file. Were Final Fantasy X to be released on PC, he'd pirate it in a second (or several hours, at 2001 download speeds).

However, this isn't the case.  FFX is only on the PS2, and he'll have to do more than download it to get it running on his PS2.  He'll also need to burn a DVD from a downloaded ISO file, assuming he knows how.  Then, he'll need to hardware-mod his PS2 to run unsigned code.

This is pretty daunting for non-techie Steve, so he just shells out the 60 bucks and decides not to buy any other games that year.  Even though he doesn't feel guilty about piracy at all, just forking over the money is easier*.

*Of course, if there was a store that sold modded PS2's and pirated discs in his area, it'd be tough to get this guy to go legit.

This anti-piracy strategy is the one the RIAA, the MPAA, EA, Activision, and congress pursue - they assume none of us have scruples, and that if they make piracy hard enough they will force people to go legit.  In some cases, this model works.  It works for when customers:

• Put little value on $I
• Can't easily circumvent DRM
• Will not just quit playing games when treated poorly

First, it's ridiculous to think nobody cares about $I.  There's plenty of people who don't, but you will almost always lose them to piracy anyway, and there's no reason to drive all the honest people away, too.

Second, as time goes on technology improves, stuff downloads faster, and more $P and $T cost can be off-loaded to crackers who then make the product available for piracy.  The "good ole days" of hard-to-pirate console games are fading.

Third, as consoles move to digital distribution, the more their piracy problems start to resemble that of PC's, where piracy keeps getting easier.

Fourth, quality of service matters.  If I had the choice of selling our game on XBLA or Steam, I'd choose Steam in a heart-beat, on sales considerations alone.  And why is Steam selling so much when the PC market was supposed to be dead? Because their service is better, and customers love them for it.

Finally, even if DRM advocates win the day and invent something so strong that piracy somehow just isn't an option, the customer can always walk away. Who needs video games if they're such a pain-in-the-butt?

See You in Part 3!

That's all for today! In future articles, I'll cover some more case studies - namely MMO's, Free-to-play games, and our own title, the Indie tower-defense / RPG hybrid, Defender's Quest.

You can follow my blogging here at fortressofdoors.com, or at gamasutra. My twitter handle is @larsiusprime, and you can see how we applied this theory to how we market and sell our own game at www.defendersquest.com.

UPDATE: part 3 and part 4.

-Lars out

PS: Free Goodies

You've been a lovely audience, so here's some free goodies for y'all.

First, here's an animated gif of the comic and my analysis I put up there earlier.

Second, the "four currencies" images I've made are hereby released under a CC attribution license.

"The Four Currencies" images by Lars A. Doucet are licensed under a Creative Commons Attribution 3.0 Unported License.  Based on a work at www.fortressofdoors.com.

Piracy and the four currencies

Cross-posted on gamasutra.

Part 1 of a multi-part series. (Part 2)

The problem with most piracy debates is that the only "cost" they discuss is money-dollars.  So, the problem is framed somewhat like this:

"Buying the game from us costs money-dollars.  Pirating it costs zero money-dollars.  Therefore, most people will pirate the game if they have the choice and we must do everything we can to physically stop them."

The familiar Money-dollar ($M)

This is wrong because there are at least four currencies involved here, not just one (money-dollars).

I propose the following:

1. ($M) Money-dollars
2. ($T) Time-dollars
3. ($P) Pain-in-the-butt-dollars
4. ($I) Integrity-dollars

Whether a player buys or pirates a game depends on how much each service - not product! - "costs" in terms of these four currencies, as well as how much the player values each one.

I hate spending these

For the purpose of this article Money-dollars will be denominated in USD, Time-dollars will be denominated in hours, and Pain-in-the-butt-dollars will be denominated in SI standard units of "amount-of-aspirin-I-have-to-take-after-beating-my-head-against-the-wall-for-an-hour." Feel free to measure Integrity-dollars in Hail-Marys, or hours spent lying awake at night.

Okay, I kid, I kid.  Obviously, $P and $I are the most subjective "currencies" and it's hard to quantify them, even on an individual basis. That doesn't make them any less real, however - as I'm about to demonstrate, the $P and $I cost of a service are sometimes the most important ones.

You have a finite number to spend, and you never get any more.

So, let's start with my favorite example, Dragon Age II. On release, the game cost:

• $M 60 
• $T 5
• $P 100
• $I 0

This game was expensive, it took forever to install and deal with the invasive DRM, which was only slightly more fun than getting groped by the TSA in the comfort of your own home.  The only thing that was cheap about the game was that buying it was "the right thing to do," wasn't illegal, and it didn't make the player feel guilty.  The only way this service competed with piracy was in the $I cost.

By comparison, pirate sites were offering the game for the low, low price of :

• $M 0
• $T 0.5
• $P 5
• $I 10

It cost no money, and the only time spent was downloading the game file. There was some pain-in-the-butt, ie, the player could accidentally download malware, needed to know how to use bittorent (easy for us geeks, not so for average joe/jane), and was constantly being hassled by lurid ads and pop-ups.  Finally, there was the integrity cost that piracy is illegal, and in some sense, "morally wrong."

Spending one costs a tiny part of your soul.

What if Dragon Age II had this price instead?

• $M 60 
• $T 0.5
• $P 0.5
• $I 0

Ie, what if buying Dragon Age II was as easy as entering payment information, downloading the game, and running it? Now the game looks pretty competitive - it's actually less of a pain-in-the-butt than pirating it, and it doesn't "cost" any moral integrity or ask you to break any laws, either!

The $60 price tag will still turn those who value $M above all else to piracy, but now the game can capture all those who value $I and $P and $T more than $M, which is not a small number. 

Again, I want to underscore that the relative values of each currency vary from player to player.  People who live in low-income nations will be willing to spend more $T and $P if they can get the game for 0 $M.  The $I cost is the most subjective of the four and depends on how much stock a player puts in "doing the right thing," (so to speak) or whether they even see any moral integrity in the choice at all.  

Those who reject the notion of copyright altogether would likely value $I = 0, though even in this case, thinking of it instead as "the risk one takes of getting in trouble with the law" still raises $I to some non-zero value.

The $I cost also varies with the developer's behavior. The friendlier and more "deserving" you are in the eyes of the player, the higher the $I cost becomes for pirating the game. Conversely, a hostile attitude can easily lower the $I cost of piracy as nobody loses any sleep over pirating from an imagined "rich, greedy CEO."

Additionally, there's some strong interplay between the various currencies - a high $M cost makes the player feel entitled to a low $P cost - if I'm paying out the nose, I expect white-glove, full service VIP treatment.  If I'm treated like a criminal instead, the $I cost of piracy just plummeted.  I'll give my time and pain-in-the-butt dollars to the competition, thank you very much.

We used this theory to inform our strategy for Defender's Quest. Here's the current price of the game:

• $M 5-7
• $T 0.08
• $P 0.5
• $I 0

And here's what it's going for on your local torrent site:

• $M 0
• $T 0.08
• $P 5
• $I 10-20*

*Depending on whether pirating an "indie" game makes you feel more guilty than pirating from so-called "fat cats" like EA.

You will never be able to compete with pirate sites on price ($M) alone.  Furthermore, at best you will only be able to match their price on time cost ($T), which is merely the time it takes to find and download your game. 

The two areas you can compete on, and which do seem to make a big difference, are in pain-in-the-butt-ness and moral integrity.  If you add any DRM, even if it only has a 1% false-positive rate, you've thrown up a $P cost for those customers that far exceeds that of the pirate sites. 

Strip the DRM away and provide a friendly and easy-to-use purchasing experience, however, and you can drive the $P cost down to fractional amounts, far below what a sketchy torrent site can offer.  

Also, by virtue of being the author, you provide the lowest $I cost in town.  In the best case, you actually have a negative $I cost, which means buying the game gives the player a moral integrity credit.  The player now feels like she's doing "the right thing," she doesn't worry about breaking the law, and gets a warm fuzzy feeling knowing she's supporting the makers of games she loves.

I'll throw in one more quick note - do not underestimate the value of $T, and look for ways in which you are potentially wasting the player's time.  I got many e-mails from players telling us that one of the chief reasons for buying the game was our long demo, which also allowed them to export their save file. Many said they would not have bought the game if they had to start from scratch.  For these players, spending the 7 money-dollars was not an issue, but having to lose the 2 time-dollars they'd already sunk into the demo would have been a deal-breaker. 

This little button lowers the $T cost of playing the demo

Well, that's my theory. It's not perfect, but I think it's a lot better than what a lot of congressmen, CEO's, and so-called economists have to offer.

-Lars out

Part 1 of a multi-part series. (Part 2)