lacktheknack said:
Bostur said:
It's not black and white. This is an over simplification of something far more complex then junior level economic lessons.
Once a project idea has been conceived, it's all expenses from this point on until release.
Costs of production:
*A producer, first of all, has to hire teams of people (Animators/writers/Artists/Designers/Programmers etc) to develop the game. These teams (can be more then one studio mind you) require up front investment in order to support themselves outside of work (living expenses), and to invest in resources necessary for the project (new staff, new tech etc.). This up front investment is purely an estimate.
*Advertisement, venues for demos, deals with retail outlets/online services etc. all require a team of professional business men who also have bills/expenses to be paid.
*Deadlines are made in order to minimize costs, though costs may surpass estimate prior to deadlines and sometimes deadlines need to be moved (which normally costs proportionally more then the initial estimate due to serious amounts of reshuffling required and PR control).
*Even after release, post-launch support will be a drain (DLC, Balancers etc.)
(TAKE NOTE: THAT PRICE TAG YOU SEE WHEN YOU BUY A GAME? THATS NOT IT'S TRUE VALUE, THAT INCLUDES THE COSTS ON RETAIL COMPANIES/SERVICES. I DON'T KNOW THE FIGURES BUT I'D SAY THE TRUE VALUE OF THE GAME WOULD BE BETWEEN 20-30 DOLLARS INDIVIDUALLY AND EVEN LESS ON MASS (10-15 Dollars per unit)
Income:
*Some people may not realise this, but the developers get paid by the Retail outlets before an official customer sale is ever made. The retailers, on mass, buy a certain number of units for initial release, particularly pre-order copies and enough copies to fill the shelves, with extras in the store rooms if possible.
*Based on the successes post release of the game, more bulk purchases are made (or not). Note: It's at this point where second hand sales start to weigh in. The more returns made means smaller quantities of the game are bought from the Producers (Though still enough to satisfy those who want new games). So the more people flog off their recently completed games (or maybe they didn't like it) the fewer new units purchased by retail (This is where Producers and Devs can lose out since the Retailers feel they don't need to spend as much, regardless of demand).
*DLC is the biggest boon for the devs. More often then not they are vastly cheaper to make, with smaller teams, smaller budgets and the favoured platform for DLC is digital download (retail don't earn much if anything out of this, as Retail DLC is getting rarer and rarer outside of Ultimate editions, which again, depend on success rates). The price of these items are so random too. For some DLC you almost feel like your playing a new game, for others it's just aesthetic changes or frivolous gimmicks and the price tag can be the same between the 2...
*Beyond Newer editions of the same game (compilations and such) there is little else after initial release and DLC to make more money on. If they haven't covered costs of production at this point the future will be tight and job losses are almost certain (but very low in the chain).
How Piracy affects this:
*There are 3 types of pirate: The truly less fortunate (who want what they legitimately can't have), the ignorant (who either aren't aware they are committing a crime or try to justify themselves/alleviate the guilt) and the goon (who seek to profit)
*They all have the same impact, so exploring the differences between each is irrelevant.
*For every copy pirated the chances of an extra sale being made drops. Saying that "I wasn't going to buy it anyway" is not a universal opinion for piracy, the number that holds true to could be a fraction of the overall quantity pirated or it could be the majority, yet there is no empirical way of measuring that and is a hollow point. A more reliable measure is probability... I'm no math whizz either so I can't give a decent example. But it's more reasonable to discuss chances, considering the initial cost of production is an estimated investment.
*Safe to say, Piracy does one thing, it negates both New sales and Second hand sales, which at this point only affects Retail outlets. However this forces retail outlets to invest less in new sales and rely more on their 2nd hand sales (where they earn the full whack on the price tag). Retail then drastically reduce the quantities of new units being brought into the store. What's more, even if they run out of new copies and some customer comes in looking for a new copy, they just find another store in the chain that has a new copy and ships it to the store that doesn't, reducing the need for a the Retail chain from buying more new units from the Producers.
The Producers lose out because of the Retails (understandable) desire to make their own profit by not investing in more new units.
In regards to Digital Sales, piracy has a similar affect, though because there is no exchange of physical copies, the potential amount lost is less significant. But Digital Distribution is not cheap on the Producers by any means. There continued presence on Services like steam likely requires frequent maintenance charges, let alone the amount deducted from the cost of the sale itself.
(DLC follows a similar course as shown above, but it's different in that it's also dependant on the sales that make it back to the producers)
What does this all mean?
When all is done and dusted, the things that you must note are thus:
*How much did the retail earn on New sales over costs of supply (based on number of units sold to customers)
*How much did retail earn on 2nd hand sales, over new sales AND cost of supply (since 2nd hand sales acts more like profiteering from recycling the costs involved in 2nd hand sales are significantly lower, even when deals are taken into account)
*How much did the producers earn OVER their costs (based on number of new units purchased by Retail outlets and through Digital distributors, over there costs of production)
*What is the estimated number of pirated copies are there in circulation. (based on a bevy of resources that are far from reliable sadly, usually favouring the anonymity of the Pirates). What is the probability of even a portion of those pirated copies were only done out of convenience rather then necessity (that term really shouldn't apply here, as Games are a Luxury, not a necessity). That number is the (more reliable, but still flimsy) number of lost sales.
Based on figures acquired from sales over losses (i.e total numbers of units purchased by Retailers/digital distributers... who may or may not have suffered under piracy, against number of units produced but never purchased [only applies to retailers] and over all costs of production), the Producers then have to make decisions.
*If it was successful, future projects may get a larger estimated budget with more wiggle room OR investment in other projects elsewhere on top of planned future projects. However they will look at the estimated copies pirated and see a loss and will make expenses in order to hopefully reduce it for the next project. This will, sadly, take priority over the devs budget, meaning Studios may have to make cut backs (which can affect the product) or even shrink in size (which both affects the product and team morale).
*If it did poorly ,heads roll, policies change, contracts break etc etc. But such drastic changes only happen in a commercial and critical flop, which would be hard to blame piracy for.
What you must see, in order to have a fair view on the subject at least, is that ultimately, good or bad, the commercial impact of a product affects those lower down in the chain (the labourers and grunts of the industry) more visibly then the higher up and through them the product excels or diminishes (depending on the perseverance of the teams). This affects the product you receive at home, and also your outlook on the industry as a result.
Everything in the chain of Production, distribution and to purchase (and I mean EVERYTHING) affects the other elements in the chain. Those furthest down will feel it much sooner then those up top, and we the gamers get the result.
Final Note:
There ARE consequences to piracy. But a reliable figure can't be attained by the obvious difficulty of tracking piracy, but it doesn't change the fact that piracy consumes but does not invest. Heck, even the illusion of something more imposing is enough to trigger the problems we face now. I'm definitely not going to say the Producers or the Retailers are innocent in this, but I can't accept it as a simple good choice/bad choice either. Piracy is wrong and has no benefits short of self gratification. But Greed and stubbornness on the part of wealthy Producers and Retailers are just as much to blame.
EDIT: Just to clarify, I have no noteworthy qualification in economics or game development or retail. This information is all piecemeal knowledge and I have no doubt I missed massive chunks of important information. But the point I tried to emphasise is simply that it's not straight forward. Those brief, tip of the tongue, analogies are misleading and very often completely unrelatable to topics of piracy at best. There is no good or evil, though morality and common sense play a part.