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Has piracy EVER resulted in a developer getting shut down? That is, has piracy ever been so detrimental that it brought about the downfall of a game studio? If I were to release a game, should I be extremely wary of pirates and plan accordingly, or is it safe to assume that it won't damage me or my studio whatsoever?

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A very succinct and interesting question. I would like to see if anyone has any real world examples! –  Blue Apr 30 '13 at 9:10
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I don't think this question can be answered, as it is only speculation how many of the pirated copies are actually lost sales. I am certain there are developers that could have survived with the extra sales but it is impossible to proof really. –  Archy Apr 30 '13 at 10:23
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@Archy Well as you can see you can give real life examples which involve not direct sales being affected but actual services which answers his question "Has piracy ever resulted in a developer getting shut down?". The answer is yes. –  Blue Apr 30 '13 at 10:27
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Removed the lengthy PR-bomb from the question. It was irrelevant to the question being asked. –  Trevor Powell Apr 30 '13 at 12:50
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My bad. I thought my question wouldn't make sense without an intro, but I guess I overthought things and added more than I should have. –  de_stroyd Apr 30 '13 at 17:49

11 Answers 11

up vote 85 down vote accepted
+50

After a little running around the internet I found an interesting article that shows a good example of how pirating can affect a game directly and shutdown a project.

iOS Game, Battle Dungeon, Forced To Shut Down Due To Piracy

In this article, Hunted Cow, the developers behind the iOS game Battle Dungeon ended up shutting down their servers. The reason they gave as quoted:

“Unfortunately we have taken Battle Dungeon down for the forseeable future. This was due to high levels of server load created by large numbers of pirated copies of the game. The high load revealed technical issues which we don’t feel we can fix to the level that our paying customers deserve.”

I found this interesting because it shows that the piracy directly affected the performance of the servers rather than the revenue the developers were receiving to continue with development. Essentially (for those just wanting to skim the article) the pirated copy of the game hit the torrents of the web and multiplied the number of active players on their servers so drastically it reduced performance to a non playable standard. This resulted in them shutting down the project on December 3rd 2012.

Since then they have upgraded their server hardware and rereleased the app on the iTunes Store on April 8th 2013. However the piracy is what caused them to make these changes, costing money to company, down time of more than 4 months for the paying players and a reworking of their website which would have taken up valuable resources from their planned work.

Piracy may not affect companies directly from losing money from the initial sale, but as with Hunted Cow it can really set you back and potentially enough to shut you down. Hunted Cow were able to readjust and solve the problem after it happened, potentially with user based access to servers being validated for paying customers - however that is my own assumption.

It is something that you can prepare for in many different ways (DRM, payment authentication, server load access restrictions) and still be affected in ways you won't predict. Do your best to estimate what can happen to your services with extra pirated copies (extra load on servers, potential player griefing etc) and account for it as best you can within your budget so it doesn't affect your fair paying customers.

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Why was their game even allowing pirated copies to authenticate? –  Vaughan Hilts Apr 30 '13 at 12:57
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And yet they admit that piracy only exposed the flaws. Had they sold all of those copies, they would have had the same problems and would have had to apply the same solution. –  Hackworth Apr 30 '13 at 13:07
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@Hackworth But they would have had the money to actually try and alleviate the problem had they all payed. However it's hard to say exactly what would have happened. –  Rangoric Apr 30 '13 at 13:16
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Also, had they sold all these copies, they would have seen a gradual influx of new users while checking the sale stats, instead of just getting broadsided out of nowhere. –  TheTerribleSwiftTomato Apr 30 '13 at 13:18
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A minor point of skepticism here: in certain jurisdictions, poor server infrastructure that cannot handle the load of sold products opens a publisher up to criminal prosecution. ( Blizzard's South Korean offices were raided by the SK "FTC" due to server instability at launch. ) So a little proactive spin might also be an explanation. –  horatio Apr 30 '13 at 15:54

I've never heard of this happening as a loss of sales. There are situations where a company has had a direct loss of money that can be attributed to piracy.

Project Zomboid faced issues with this a few years ago when their updater was cracked. The updater was hacked to allow pirates to download the latest release of the game from Project Zomboid. Since Project Zomboid was using Amazon Cloud services to distribute their updates, the additional downloads were costing them money. This resulted in them taking the game down for a while.

This example, including the example in Blue's answer both show situations where, if the conditions were right, it could have caused the game company to go under.

These examples show that when a company offers a service as part of their business (online servers, or even direct download updates), this service can be taken advantage of and cost the company more money than it generates.

These examples show that it's possible to lose money directly as a result of piracy. This means it is possible to go out of business as a direct result of piracy, but as with both examples, the companies can take measures to avoid the continued "unauthorized expenses".

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+1 Exactly my sentiment! It may not actually be the loss of the sale that directly brings down a company. These "lost sales" are hard to track but the implication and affect on hardware is very easy to analyse. –  Blue Apr 30 '13 at 14:14
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worked in support for a game company about a decade ago. We got inundated with support requests from people buying pirated versions of our products on eBay who couldn't activate those copies because the fake license keys they got would bounce on our license servers. In addition to that we got a pretty stable percentage of support requests from people with no known registration (each licensed copy was registered to a specific key and email). We got a pretty good feel for the number of pirated copies out there that way. It was roughly 30%. –  jwenting May 1 '13 at 5:33
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[ctd] we didn't shut down because of that, but it seriously affected out revenue, slowing down releases, hurting profits, eliminating expansion plans. Nobody lost their jobs, but there was no money to hire people either. And I do know people who did lose their jobs in other companies due to piracy, their employers simply giving up on the market and shutting down departments to focus on areas where piracy is less of a problem, business software and custom software. –  jwenting May 1 '13 at 5:36

A case where it didn't take down the studio, but it must likely hurt sales and cost money:

Demigod by Stardock was pirated before launch and had a massive server load - 18,000 validated users and 140,000 concurrent users. This prevented everyone from playing:

"Our stress tests had counted on having maybe 50,000 people playing at once at peak and that wouldn’t be reached for a few weeks by which time we would have slowly seen things becoming problematic... So during the day today, people couldn’t even log on, and in some cases, the Demigod forums, which use one of the affected databases for some piddly thing were even down," he wrote. "Even getting the game running was a pain today because a simple HTTP call to see what the latest version would get hung leaving people looking at a black screen. Stuff of nightmares."

The game took a huge hit in reviews - it was a multiplayer game where the multiplayer didn't seem to work.

As I remember, Stardock had to call people in over the weekend ($ for overtime), they had to spin up the servers sooner ($$ and time), and they had to sink more man hours in patching (probably would have happened anyway, but maybe not on "no one goes home tonight" urgency).

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Interesting item that I did not know about Demigod. I apparently purchased it late enough after release to miss this entirely. That being said, I think it still could have been successful if it weren't for its limited hero pool causing duplicate heros in a single match. –  SpartanDonut Apr 30 '13 at 14:15
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I'm somewhat shocked about these--it's like the games are being written by a pile of monkeys. How could you possibly write a game with a server component that didn't tie the ability to log onto the server to paying? I can't even... wtf? Who are these companies hiring? –  Bill K May 1 '13 at 5:35
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@BillK easy. The login would require credentials. Due to privacy regulations in many countries you can't store personal data, so they only store a license key. The pirates all register with the same license key, just as if a single person had installed it on multiple computers at home (you do NOT want to prevent that). The only flaw I see is that they didn't detect multiple simultaneous logins by the same license and log out all but the last of them. And another scenario: each login attempt generates traffic. Enough simultaneous attempts can shut down the network even without anyone playing. –  jwenting May 1 '13 at 5:41
    
If you read the Correction: pirated users couldn't update or play multiplayer, but the pirated games would still send requests to server/services (ie. check for updates etc.) –  Holger May 1 '13 at 13:13

It's actually saved companies before! Leisure Suit Larry was not a very popular game before it was passed around on pirated floppy disks. I remember Al Lowe saying that they sold more strategy guides than copies of the game.

There were no plans on a second game until the piracy eruption(pun intended).

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hehe "eruption" –  Blue May 1 '13 at 7:16
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I remember the creator of Minecraft being quite harsh on the idea that piracy causes lost sales/profits. torrentfreak.com/… –  deed02392 May 1 '13 at 8:22

I would be quite wary of such reports, if there are any. Unless you have been or have worked for such an unfortunate developer and know the reason first hand, there is always the possibility that piracy is being used as a scapegoat, or a convenient quarter- to half-truth.

After all, "Our game is SO awesome that it was crushed by its own success and because people are scumbags." sounds a lot better to future customers and/or investors than the myriad reasons for why companies usually fail - all kinds of mismanagement, poor quality or desirability of the product, insufficient marketing, wrong time and place for the product, etc. etc.

See FUD for examples of that strategy.

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My thoughts exactly. It makes an excellent scapegoat because, often times, it is hard to disprove, particularly for offline games. –  MikeS Apr 30 '13 at 14:45
    
As a scapegoat, it loses its power when the person on the other side of the debate says "Then why didn't you have better piracy protection?" Pay the manhours to build the protection or deal with lost revenue and increased server load. –  TecBrat Apr 30 '13 at 15:05
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@TecBrat nice, but flawed argument. If you're suffering from 50% piracy losses and increasing piracy protection would eat up more than 50% of your remaining revenue in order to reduce that loss to 30% (and antagonise 20% of your paying customers into abandoning you because of the increased hassle), you're fighting a losing battle. Which is exactly what many companies have been doing, ending up cutting their losses and shutting down titles and departments that were suffering too much to focus on something else. –  jwenting May 1 '13 at 5:43
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This isn't an answer, ironically it's just FUD. No sources, only speculation. –  Matsemann May 1 '13 at 9:46
    
@Matsemann What do you want a source for? Google "Top 10 reasons why companies fail". –  Hackworth May 3 '13 at 12:11

I can think of one off of the top of my head where DRM and piracy caused a game to have poor(er) sales, and the company ultimate went defunct which may or may not have been directly related to the sales of the game.

Titan's Quest made by Iron Lore Entertainment had DRM where pirated copies were extremely glitchy and crashed a lot, and the pirates spread horrible word of mouth about it around and this affected the sales

I'm not sure if it was directly linked to them going defunct, but I'm sure it didn't help the situation.

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So they used copy-protection to make the game appear buggy and glitchy in the pirated version, and then complained that people got the impression that the uncracked version might be buggy and glitchy too? It seems like their own copy protection hit them much harder than the actual piracy. –  Philipp May 1 '13 at 10:12
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Well to be fair Titan's Quest was actually kind of a crappy game anyway. One of the founders of Iron Lore (Brian something) works as a teacher at my school (Northeastern University) and convinced me to try it. Needless to say it was not really fun, while I am sure it got a lot of negative press from bugs in pirated versions, the game wasn't really up to par (gameplay wise, graphics were actually pretty awesome) for it to have been a success. You should also note that this company was founded on a super tight budget and had all their eggs in that one Titan Quest shaped basket. –  Benjamin Danger Johnson May 1 '13 at 17:28

I should clarify that a developer's job is not lost. Reason: It is not one game that is being pirated, there are loads of it, the piracy of games might increase the word of mouth for those games provided they become popular say GTA series and more. So if a game becomes popular because of piracy and if they achieve the cult status, the requirement of a new version for the same with more graphics, detailing and programming will come as a public demand. Hence a developer job is not lost, but increased.

If we look at the other way where the popularity too fails, the company making that game will either shut in worst case scenario or will make a new version, but in any case, the developer will have his most precious intellectual property and will invest in a new venture or product. So in this case also, his job is not lost.

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I can't find the article right now but a while ago I read one about how the developers of one of the Spyro games spent 1/5 of the budget and development time on an experemental DRM system.

They calculated that this system slowed hackers down by only 6 days and increased revenue by almost 30%.

Though these are not studio closing numbers it does give you an idea of the effect piracy can have on a game. You should most definitely consider the impact it will have on you and plan accordingly.

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Were you talking about Keeping the Pirates At Bay? According to that article, it was 2 months before a successful crack came out, but they did not attempt to estimate how many sales would have been lost to piracy otherwise. They only observed that 30-50% of a game's total sales are made in the first 2 months. –  Nathan Reed Apr 30 '13 at 18:10
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Great link @NathanReed –  Blue May 3 '13 at 8:17
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To elaborate it was not a 5th of the budget but a 50th. They spent just under 2% of total developer man hours on the developing the protection. The planning and resources that went into it meant extra production and testing tasks were needed but otherwise it wasn't a fifth of the costs. –  Blue May 3 '13 at 8:45

This is impossible to prove because "loss of sales" is a complete fiction. It compares the actual world and events that have happened to an imaginary parallel universe in which all the users who copied the program were forced to pay for the program (whether or not they still wanted to use that program if they had to pay, and whether or not some of them could afford it).

If a game dev fails, whereas others are surviving, this is probably caused by differences between that game dev and others, since everyone is affected by piracy, but not everyone shuts down.

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"Unable to be proven" is not the same as "complete fiction". –  Attackfarm Apr 30 '13 at 23:26
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Who said it was the same? X because Y doesn't mean X = Y. The loss of sales doctrine is based on comparing reality to an imaginary universe where everyone pays for stuff that can be copied. –  Anon May 1 '13 at 3:24
    
Oh this argument reminds me of Richard Stallman. BTW I consider him as one of the best men in the world. I am a programmer and a fan of Free Software/Open source. –  H M May 1 '13 at 4:05
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you can actually measure it pretty reliably under certain conditions. If you have an older product, with known sales numbers, and release something else appealing to the same audience, then see your sales of that product drop to 50% of the prior, yet see the number of blogs, forum posts, and support requests be the same or higher, you can pretty much assume that that 50% drop is due to piracy. –  jwenting May 1 '13 at 5:47
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The argument might remind you of Stallman, yet I do not agree with a lot of what Stallman thinks. (I think he's a communist twit, for the most part.) But facts are facts. Even though Stallman and I disagree, we both have to rationally recognize that some argument is based on a fictional reality. If you develop software, before you bank the first investment dollar or write the first line of code, you have to plan that there will be piracy. You don't plan for the imaginary universe with no piracy and then cry. –  Anon May 2 '13 at 6:01

It's not mentioned yet, but some people cite the very piracy friendly CD format of the Dreamcast discs (you just had to burn the iso's, no modding just a bootloader) as one of the major factors in the system's failure. It didn't result in the total collapse of Sega, but we'll never see any hardware from them again.

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Do you have any sources to back this up? –  de_stroyd Apr 30 '13 at 18:25
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It isn't because most Dreamcast games absolutely sucked or anything. This was Sega blaming piracy when the problem was in their own walls. Much like K-Mart blamed self-serve checkouts for their huge losses when everyone know it was Wal-Mart. –  Captain Skyhawk Apr 30 '13 at 20:49
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-1 Please provide sources for your claims –  Byte56 Apr 30 '13 at 23:08

It can be good and bad. The good is it helps to popularize the software (I'm talking in general). Microsoft is the best example. They actually 'allowed' piracy, now 95% of the computers in the world has their software and now, we can't live without them.

Another theory is, don't worry much. If the user is using pirated version, he'll never pay for a non-pirated one, if pirated is not available. I mean, why he is using pirated, because he don't want to pay. So there is not much about lost sales, it may actually increase sales by the popularity and the 'good' people who want to buy. Give an option to register/buy. But the developer will feel bad when they see their software cracked.

Movies is a different game. Pirated will directly attribute to lost sales.

Edit: For those who are looking for source, here is a quote from M$. Just what I was saying about Microsoft. Most of their business strategies are opponent crushing ones.

Bill Gates famously said: "As long as they're going to steal it, we want them to steal ours. They'll get sort of addicted, and then we'll somehow figure out how to collect sometime in the next decade."

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Microsoft allowed piracy? If I remember my computer history, Gates was very against piracy from the beginning. –  Byte56 Apr 30 '13 at 14:46
    
He never said. But that is what happened. He had the means, but never did, cause that was 'low' priority. That is another way to crush opponents. –  Mathew Joy Apr 30 '13 at 14:49
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Have a source for that? Long before Windows, Gates wrote An open letter to hobbyists, in which he is fairly critical of pirates. –  Byte56 Apr 30 '13 at 14:56
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@Byte56 what he may mean by allowing it is that people have speculated that they don't enforce piracy in third-world countries that much, because when they eventually have money they are accustomed to MS software and MS will thus earn money. I don't have any sources, just trying to point out what he may mean. –  Matsemann Apr 30 '13 at 15:00
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@Mathew as the other answers have shown, it's not just the 'lost sales' that hurt a company, but for instance server load. –  Matsemann Apr 30 '13 at 15:01

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