EU Commission Ordered Research Could Not Prove Negative Effect Of Piracy On Videogame Sales

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In 2013, the European Commissioned submitted a request to investigate the effect of piracy on the sales of digital products such as movies, ebooks, music and videogames. In 2015 the research document had been submitted but has until now not been used as evidence for new legislation as the study couldn’t not prove a meaningful correlation.

Julia Reda, a European Parliament member (appropriately from the German Pirate Party) got hold of the 300+ page document and wrote a blog post about it: https://juliareda.eu/2017/09/secret-copyright-infringement-study/. Two days later, the European Commission made the PDF publicly available here: https://publications.europa.eu/en/publication-detail/-/publication/59ea4ec1-a19b-11e7-b92d-01aa75ed71a1

Allow us to show you some excerpts of the document, particularly those that are about the topic most close to our hearts: Videogames.

The study also analysed consumers’ “willingness to pay” for illegally accessed creative content in order to assess whether piracy might be related to price levels. To optimize the recollection of the respondent, it was asked for the last illegal online transaction. Consumers may be willing to pay more or less for other transactions so the results should be interpreted with caution. Overall, the analysis indicates that for films and TV-series current prices are higher than 80 per cent of the illegal downloaders and streamers are willing to pay. For books, music and games prices are at a level broadly corresponding to the willingness to pay of illegal downloaders and streamers. This suggests that a decrease in the price level would not change piracy rates for books, music and games but that prices can have an effect on displacement rates for films and TV-series.

According to this statement, it’s found that consumers are already largely willing to pay the asking price of videogames, so lowering the price would not affect the number of people that are willing to get these products via illegal means.

Author’s input: I’m mostly OK with the current asking price for videogames. I’m willing to pay the full amount for games that I’ve been anticipating for a long time and the ones I’m less excited about can just be picked up for a lower price later on.

For books, the availability of e-books is rapidly expanding but e-book sales are still marginal and total sales exhibit a negative trend in most countries. In the games industry the greatest proportion of revenues is generated by physical console games but online games will overtake this segment in a matter of a few years if current trends continue.

It would be interesting to see the rest of the study make a clear difference between digital content and physical discs. People who want to own a physical product will never buy a pirated version as they just want to have the legitimate item in their collection. Digital content on the other hand is becoming a larger percentage of the total revenue made by selling videogames and there is not that much that seperates the pirated content from the original one.

Author’s input: Since the last console generation, the largest percentage of my collection is digital content. It’s easier to get the games on release date, the content is readily available on your console and there are often tempting deals to be made in eShop discounts… I don’t even have a disc drive anymore on my gaming laptop

For games, the estimated effect of illegal online transactions on sales is positive – implying that illegal consumption leads to increased legal consumption. This positive effect of illegal downloads and streams on the sales of games may be explained by the industry being successful in converting illegal users to paying users. Tactics used by the industry include, for example, offering gameplay with extra bonuses or extra levels if consumers pay.

A very interesting conclusion here: They state that for videogames, piracy may even have a positive effect on sales. Meaning people are experiencing the pirated version of the game first and then purchasing it. Part of this may be due to developers enticing their audience to get the real thing via bonus content, but we’ve also seen some games “punish” or “shame” pirates for getting the illegal version (impossible difficulty, making the antagonist look silly or breaking the game or the savefile halfway through)

Author’s input:I could also see the popularity of a game having something to do with it. A really great game could benefit from the additional word of mouth, even if those mouths spout a lot of “ARRRs!”

Despite broken figures, comparing 2013 with 2009 shows generally increasing sales from computer games with the exception of Spain and the United Kingdom where sales have stabilized at slightly below 2009 levels. As with the other types of content, the sales of games on physical carriers has declined. The few figures on online gaming revenues suggest that they are rapidly increasing.

For games the market for physical carriers, whether for PC or consoles, is in decline in most countries, although the games market in Poland is rapidly expanding.

Statement that the Videogames business is growing + further evidence that the percentage of digital purchases is increasing.

Author’s input: while the revenue for the gaming business is increasing, the amount of money that ends up in retailers’ hands is decreasing. I would hate to see the business turn into online only as I still like having my favourite games as physical copies + I like going to a store and browsing through their deals in person.

Fukugawa (2011) did not find a negative effect of downloading on games sales, and noted that although approximately 40% of surveyed users know how to download and play pirated videogames for free, most of them do not actually download pirated versions. Fukugawa (2011) also applies ownership of game playing devices as a control variable for interest in games.

According to this part, almost half of the videogame-playing populace knows how to obtain illegal copies, most of them choose not to.

Author’s opinion: I assume the percentage to be much higher than 40% if we would be talking about PC gamers only. But for consoles, it’s not as easy as it used to be over a decade ago.

According to quarterly sales figures of Activision, sales are evenly distributed over the four seasons for all channels and platforms. However for other companies half of PC and console games sales are realized in the last quarter of the year.This seasonal peak appears to depend on marketing strategies, i.e. the timing of the introduction of blockbusters. For this reason physical sales and streaming (legal and illegal) in the last 6 and 3 months are multiplied by 2.5 and 5 respectively, while sales of games through other channels are multiplied by 2 and 4 respectively.

No big surprises here: most of the high-profile games are released around the holiday period so parents and grandparent can buy them for their children and grandchildren.

The combination of similar piracy rates for music and higher piracy rates in this study compared to previous studies indicates that the use of illegal channels may have matured for music but is still increasing for audio-visual, books and games. For films/TV-series these percentage of illegal online users are 31 and 35 per cent for illegal downloads and streams respectively, for books and games these percentages are between 14 and 18 per cent for illegal downloads, streams and gamers playing on a chipped console.

Statistics gathered from polled users conclude that the piracy rate for videogames is between 14 and 18%. Though one should wonder what they mean with “illegal streams”.

Author’s note: I expected even bigger numbers here for some reason, but again I think the console business might mitigate the numbers as I believe the highest piracy rate would be on the PC. There’s also the fact that people were asked these questions and people tend to lie when they fear there might be repercussions.

For games, positive effects of illegal downloads, streams and games played on chipped consoles on sales can be concluded…

… For games the reason for the positive effects may be that players may get hooked to a game and access a game legally to play the game with all bonuses, at higher levels or whatever makes playing the game legally more interesting…

…The overall conclusion is that for games, illegal online transactions induce more legal transactions…

…Games: out of every 100 online copyright infringements, 24 induce an extra legal transaction.

Having access to multiplayer content is a likely factor for “pirates” to consider getting the legal version of a game after sampling the pirated version. But there is also a possibility that said games don’t have a free demo and some users wanted to test the game before spending money on it.

Author’s note: Another, yet very rare explanation: It could be that people get a pirated copy of a game that isn’t accesible in their region or not translated and they get that online. They still purchase the actual game for their collection even though it’s not compatible with their console (Region Locked games). An example that comes to mind is a fan translate of Final Fantasy V that allowed people to play it in English way before Square released the games for western audiences.

Games – willingness to pay by characteristics

Gender: the willingness to pay does not differ between males and females

Age: 47% of the 15 year olds are not willing to pay more than the lowest price category, as to 28 percent of the rest of the age categories. In the highest price category, 13% of 15 year olds is willing to pay more than the highest price category, as to 30% of the rest of the age categories. 50% of the 60 year olds is not willing to pay more than the lowest price category, as to 29% of the rest of ages. In the highest price category only 19% of 60 year olds are willing to pay more, as opposed to 29% of the rest of the age categories.

Author’s note: I wonder where they found all these 60 year old gamers.

Education: 61% of the highly educated respondents is not willing to pay more than the lowest price category, as to 31% of the lower educated respondents. 12% of the highly educated respondents is willing to pay more than the highest price category, as to 28% of the lower educated respondents.

Country differences: The French are the least willing to pay for games, compared to other countries (64% of males and 52% of females is not willing to pay more than the lowest price range). In Sweden, the males are most willing to pay for games, compared to other countries, and in the UK the females are most willing to pay for games compared to other countries (only 5% is not willing to pay more than the lowest price category, and 62% of females is willing to pay more than the highest price category).

For games the average willingness to pay is equal to € 8.40. 32% of respondents is not willing to pay more than the lowest price range, and almost equal share, 27% is willing to pay more than the highest price range for games. The average price of one month of gaming is generally less than the average willingness to pay, and hence the price should not be an issue for most illegal downloaders…

…Overall, the price is one factor that helps explain the piracy of films and TVseries, but the price does not help explain the piracy of music, e-books and games.

If you read the above, it means that the average amount we have to spend to be able to game an entire month* is lower than what we’d be willing to pay.

*This doesn’t mean online game subscriptions, just the cost it would take to keep you gaming all through the month – in the article they stated 1 to 4 games are needed for this

CONCLUSION:

While the study analysed old publications and polled users for new info in 2014, the results were not enough to indicate if piracy has a negative effect on the sales of videogames.

This doesn’t mean there isn’t any negative effect at all (as there are without a doubt certain game companies that are more affected than other) but that the research done here failed to substantiate any meaningful data that could be used during the creation of future EU legislation.

What are your opinions on the topic? Let us know on Twitter or in the comments!

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Robby Bisschop
Belgian, male, born in 1987
I love videogames (mostly RPGs), anime, movies and Magic The Gathering.
About the author

Robby Bisschop

Belgian, male, born in 1987 I love videogames (mostly RPGs), anime, movies and Magic The Gathering.