My lefty alter ego Tom Lee comments on my post on video game piracy:
To some extent I think Tim is right: music is a unique case. But that’s mostly because the industry that arose to distribute music was so bloated, stupid and inefficient. Having claimed nearly all of the profit from retail music sales, the record companies are the part of the music industry that’ll withering first in the face of rampant piracy. That’s shielding the actual music creators from piracy’s effects–for now, anyway. Successful but non-superstar artists found different, largely concert- and merch-based means of earning a living a while ago.But the lack of a large, parasitic & evil distribution mechanism (or at least one as evil) doesn’t mean that the videogame industry can be saved by copyright any more than the record companies can (the question of whether it should be saved strikes me as fairly irrelevant). The game companies’ business is vulnerable, too, and will ultimately have to transform itself. The wealth of DRM options available to game-makers and the console vendors’ closed systems give them a more luxurious position, but with the rise of networked consoles and the maturation of a market for pirate technologies like Alcohol 120% and console modchips, that era is coming to an end. But that’s okay. The bloated budgets of the high-profile videogame franchises is a bug, not a feature. Look at the success of the videogames Burger King has been selling–they’re short and simple, but they only cost a few bucks and the restaurant has sold 3.2 million of them. I’m sure they were envisioned as a promotional tool more than anything else, but now BK is claiming they helped their bottom line. There’s clearly room for growth in this segment of the market. The idea that every videogame has to be a (shooter|RPG|platformer|sports game|GTA clone) and cost $60 is ridiculous.
I think there are actually two conceptually distinct questions here. One is the empirical question of whether rampant piracy will undermine the traditional business model for music, video games, etc. The other is a policy question about whether that process is something we ought to be cheering on, or if we should be looking for ways to reverse the process.
I don’t have any particular opinion on the first question. I think that the market will probably evolve in unpredictable ways, and that non-traditional revenue sources like advertising and merchandising will be more important in the future. But I’m not going to make any specific predictions about what effects piracy will have on the video game market.
On the policy question, however, I’m not as sanguine as Tom about the prospect of piracy undermining the market for bloated games. Here’s the thing: nobody is forcing people to shell out $60 for a $10 million video game. If the $10 Burger King games really are as good as the $60 EA games, you would expect EA to have an awfully hard time selling their more expensive versions. But EA is a very profitable company, and they continue to succeed with ever-more-expensive games.
So it’s not clear to me who would benefit from a policy change that made it impossible to turn a profit on big-budget video games. Consumers who want to pay $60 for a lavishly produced video game would no longer have that option. Consumers who weren’t willing to pay $60 for a video game weren’t doing so anyway. And of course, the companies that were making the games would be worse off.
Of course, it matters what the alternative policy is. If it turns out that the only way to save Madden 2009 is to outlaw general purpose computers and have the FBI shoot anyone caught downloading an illicit game, then we’ll probably have to learn to live with piracy. It may be that technological advances will simply make it impossible to enforce copyright law without turning the country into a police state. But even if that outcome were shown to be inevitable, that doesn’t mean it’s something to cheer about.
Tom goes on to argue that producing a professional-quality movie will continue to get cheaper until it’s within the reach of ordinary hobbyists. I think that the problem with this vision is that in addition to a lot of technology, producing a good movie requires a lot of manpower. And much of it is quite specialized and not terribly glamorous. You need maybe one extra guy running the sound board in order to produce a professional-quality album. With movies, on the other hand, there’s a significant difference in quality between a movie made by a dozen amateurs and a movie made by a hundred professionals. There are certain categories of movies–James Bond movies, for example–that it’s very hard to imagine ever being within the reach of amateurs. It requires too many extras, too much money spent on cars to crash and blow up, too much spent on either building sets or flying people to location, etc. Not to mention, as Tom acknowledges, things like makeup, sound, and lighting require specialized skills that you’re not necessarily going to get from volunteers.
So yes, the minimum cost of movies and video games will continue to get cheaper. But for the foreseeable future, high-quality movies and video games are going to be in the range of hundreds of thousands or millions of dollars, not the hundreds or thousands that it currently costs to record a decent album. And I do think there’s a big difference between the kind of movie or video game you can produce for $100 million rather than $10 million. If we can find reasonable policies that preserve a viable market for such products, I think we should do so.