The Muskrat Ramble

This post was originally written as feedback to a Christopher Park, developer of the game AI War (http://www.arcengames.com/aiwar_features.php)  based on a post in his blog (http://christophermpark.blogspot.com/2009/07/thoughts-on-piracy-and-drm.html). In his blog post, Chris laments the existence of piracy and explains why he believes there’s no ideal solution, particularly for the independent developer. As such he covers many of the bases explored in previous discussions among game developers that have come to similar conclusions.

The mistake all these discussions make is equating digital products to physical products. They are not equivalent. Physical objects cost money to duplicate – materials, equipment, labor. They also cost money to get to market. Digital objects cost nothing to duplicate and when sold online, cost nearly nothing to distribute. If you steal a physical object, you’ve robbed the duplicator and distributor of costs they’ve already incurred. If you steal a digital object, these costs never existed.

What about the cost of creation? The value of the design? The reality is, the labor cost of designing a product is a sunk cost, whether digital or physical and almost never factored into the sale price. The price of a good is mostly set by the cost of production, distribution, marketing and consumer demand (what the market will bear). What this means is 3 of the 4 factor (all but demand) are severely minimised in the case of a digital product. Or more simply, digital products are basically priced at what the market will bear whereas there are hard lower limits to pricing on physical objects before the seller incurs a loss on the item itself.

They key to solving digital piracy is understanding where the REAL value lies in your “product”. Why does Apple make a ton of money on ITunes when all the songs they sell are freely available on the net (and they’ve removed DRM from the versions you buy as well!)

The answer is that people aren’t paying $.99 for the song. They’re paying for convenience: ease of finding music they like through the store, ease of getting it onto devices they want to play it on, knowledge that they won’t “lose” their music if their HD crashes or CD gets scratched, etc. The song itself is worthless because you can get it for free a hundred different ways. But Apple makes money off of the song by focusing on the value surrounding it.

How do we do this for games? Steam is a good solution – I buy almost all my games on steam because it makes life very easy for me. No media to deal with, easy install on every computer i own, if I want to share with a friend I give them my steam account (only one of us can play at a time, but that’s fine — it’s just like lending a book).

MMOs offer a different, but equally good value model. I don’t pay for the game – I can hack and slash in similar ways in games I already own. I pay for access to a populous and well-connected multiuser environment. I don’t see the subscription price as fee for content or fee for the game. I see it more like membership to a fitness club. I have weights at home, but the environment of the gym is far more conducive to a good workout.

So what is the value associated with a Real Time Strategy game like AI War? I’d argue that the core game is valueless. There are plenty of games with similar mechanics available for free on the Internet. The true value that AI War brings to the table, and it’s point of differentiation is in the AI. An additional opportunity for creating value is in the way in which co-operative multiplayer matchmaking could be handled.

AI War is currently sold as a $20 game with no DRM – just a license key that lifts restrictions on the free trial. Its main selling points are that the AI is uniquely challenging and that the game has been designed from the ground-up as a co-operative game. There are 10 levels of AI difficulty, with the first “challenging” AI at level 7. Nobody has yet beaten level 10.

Given this, here’s how I’d apply the principles discussed above to sell AI War:

AIs up to level 5 are free. You can play the full game with friends in an unlimited context with these AIs. Level 6+7 AIs are also included, but play as the current free trial does.

AIs from 6-10 cost $4.99 each (6 and 7 are bundled together for $4.99). There could be a couple of AIs for each level, each with a distinct playstyle/personality and these could come with new units as well.

Each purchased AI also would give the player access to a leaderboard that tracks player stats/wins against the AI. It also comes with a matchmaking service that lets players find others online for co-op play. The matchmaking service should track player stats, including whether the player drops out and doesn’t resume, or inversely, whether they’re willing to drop into games that are already started.

There’s a cash reward for beating a level 10 AI. This goes up with the number of people that purchase the AI (e.g. $1 of each purchase goes to the reward pool). The pool keeps filling up w/purchase money until the AI gets beaten, then it’s given to the winner and starts filling again.

This essentially defeats the torrents — the whole game is “free”. It’s highly unlikely people will be torrenting the AIs – and even if they do, without an account on the leaderboard you’d lose the benefit of the matchmaking (which I think would be very useful).

The average player that gets hooked will almost immediately buy the level 6/7 pack. At $5, it’s almost impossible to resist. This will get them REALLY hooked, because they’ll soon beat level 7 and then will be looking for a challenge.

I also think a lot of players will be enticed to buy the level 10 AI… just for a crack at winning the prize pool (seed it with $100-$1000 to start).

I’d be really interested to see if a pricing model like this ended up netting you much better sales. My gut says it will.