"are more dangerous than piracy." There's no way to accurately calculate losses to piracy, so how is DRM effective?
Having a digital copy pirated "does not equate to money being taken out of my pocket," says Refenes. He doubts companies have really investigated these 'losses' and just given knee jerk reactions.
When it comes to the digital playground it's near impossible to calculate loss as there's nothing physical to measure it against. Digital products are "negligible or zero cost".
"I think I can safely say that Super Meat Boy has been pirated at least 200,000 times. We are closing in on 2 million sales and assuming a 10% piracy to sales ratio does not seem unreasonable. As a forward thinking developer who exists in the present, I realize and accept that a pirated copy of a digital game does not equate to money being taken out of my pocket. Team Meat shows no loss in our year end totals due to piracy and neither should any other developer," he .
"For the sake of argument, some of those people that did pirate Super Meat Boy could have bought the game if piracy didn’t exist but there is no actual way to calculate that lost revenue. It is impossible to know with certainty the intentions of people," he continued. "With the SimCity fiasco and several companies trying to find new ways to combat piracy and stating piracy has negatively affected their bottom line I wonder if they’ve taken the time to accurately try to determine what their losses are due to piracy."
Any figures on 'loss due to piracy' are wild guesses at best, asserts Tommy Refenes.
"In the digital world, you don’t have a set inventory. Your game is infinitely replicable at a negligible or zero cost (the cost bandwidth off your own site or nothing if you’re on a portal like Steam, eShop, etc). Digital inventory has no value. Your company isn’t worth an infinite amount because you have infinite copies of your game."
"As such, calculating worth and loss based on infinite inventory is impossible. If you have infinite stock, and someone steals one unit from that stock, you still have infinite stock. If you have infinite stock and someone steals 1 trillion units from that stock , you still have infinite stock. There is no loss of stock when you have an infinite amount."
"Because of this, in the digital world, there is no loss when someone steals a game because it isn’t one less copy you can sell, it is potentially one less sale but that is irrelevant. Everyone in the world with an internet connection and a form of online payment is a potential buyer for your game but that doesn’t mean everyone in the world will buy your game."
It's a false assumption that each case of piracy is a 'lost sale': "Loss due to piracy is an implied loss because it is not a calculable loss. You cannot, with any accuracy, state that because your game was pirated 300 times you lost 300 sales. You cannot prove even one lost sale because there is no evidence to state that any one person who pirated your game would have bought your game if piracy did not exist."
Now he comes to the core of the matter at hand; does DRM actually help combat piracy?
"Companies try to combat piracy of their software with DRM but if loss due to pirated software is not calculable to an accurate amount does the implementation of DRM provide a return on investment? It is impossible to say yes to this statement," concludes Refenes. Ubisoft would disagree, saying their Uplay platform 'has worked'.
"Look at it as numbers spent in a set budget. You spend $X on research for your new DRM method that will prevent people from stealing your game. That $X is a line item in accounting that can be quantified. Can you then say “This $X we put into research for our DRM gained us back $Y in sales”?"
"There is no way to calculate this because it is not possible to quantify the intentions of a person. Also, there’s no way of accurately determining which customers would have stolen the game had there not been DRM."
Additional common-sense logic: "To add to that, the reality of our current software age is the internet is more efficient at breaking things than companies are at creating them. A company will spend massive amounts of money on DRM and the internet will break it in a matter of days in most cases."
"When the DRM is broken is it worth the money spent to implement it?"
"Did the week of unbroken DRM for your game gain you any sales from potential pirates due to the inability to pirate at launch? Again, there is no way of telling and as such cannot be used as an accurate justification for spending money."
Tommy Refenes smelt SimCity's DRM a mile off and proposes a far larger problem than piracy has occurred. "EA and Maxis are currently facing a bigger problem than piracy: A growing number of their customers no longer trust them and this has and will cost them money," he said. Refenes had SimCity day one and suffered through its launch week.
"After the frustrations with SimCity I asked Origin for a refund and received one. This was money they had and then lost a few days later. Applying our earlier conversation about calculable loss, there is a loss that is quantifiable, that will show up in accounting spreadsheets and does take away from profit."
"That loss is the return, and it is much more dangerous than someone stealing your game."
Check out theby Team Meat's Tommy Refenes entitled 'Apathy and refunds are more dangerous than Piracy.'