PC Game Piracy Examined
[Page 5] PC vs. Console
In the previous section we managed to establish with a range of publicly available data that piracy is being conducted on a massive scale at the moment - up to half of all Internet traffic is composed of pirated material, there's an average global piracy rate of 38% for all software, and popular PC Games are being downloaded in their hundreds of thousands of pirated copies via torrents. No doubt by now some of you will be shaking your heads, saying that even if all this is true, who's to say that all this piracy is actually having any impact on sales. I encourage you to continue reading as we explore the various implications which the data has opened up.
In this section we look at a rather significant recent change in the gaming industry which some people have attributed to piracy: the way in which most major games developers are shifting focus towards making games designed specifically for the popular gaming consoles. On the surface, the issue seems quite straightforward - console games are selling much more than PC games, probably because of the much higher numbers of console gamers, so developers are simply following the trend, and in the process conveniently scapegoating piracy to cover their greedy motives. But is this really what's occurring?
The Move to Consoles
A noticeable change in PC gaming over the past few years has been the move away from PC exclusives. More and more games are now being developed first and foremost for the popular gaming consoles: the XBox 360, PlayStation 3 and Wii. The fundamental reason for this is a large discrepancy in sales figures - console versions of games routinely outsell the PC versions by many times the number of units. Ok, so what does this phenomenon have to do with piracy? Well as it happens, the majority of PC developers are laying at least part of the blame for their decision to move to focusing on console-based development squarely in the lap of piracy:
Cevat Yerli of Crytek, the makers of Far Cry, Crysis and Crysis Warhead has publicly stated:
We are suffering currently from the huge piracy that is encompassing Crysis. We seem to lead the charts in piracy by a large margin, a chart leading that is not desirable. I believe thatís the core problem of PC Gaming, piracy, to the degree [that PC gamers who] pirate games inherently destroy the platform. Similar games on consoles sell factors of 4-5 more. It was a big lesson for us and I believe we wonít have PC exclusives as we did with Crysis in future.
John Carmack, often called the 'father of PC gaming', and co-founder of id software, makers of the Doom and Quake series, recently stated:
It's hard to second guess exactly what the reasons are. You can say piracy. You can say user migration, but the ground truth is just that the sales numbers on the PC are not what they used to be and are not what they are on the consoles.
Cliffy B, lead creator at Epic Games, makers of the Unreal Tournament and Gears of Wars series, has been quite outspoken on this topic:
Here's the problem right now; the person who is savvy enough to want to have a good PC to upgrade their video card, is a person who is savvy enough to know bit torrent to know all the elements so they can pirate software. Therefore, high-end videogames are suffering very much on the PC. Right now, it makes sense for us to focus on Xbox 360 for a number of reasons. Not least PCs with multiple configurations and piracy.
Chris Taylor of Gas Powered Games, makers of Supreme Commander, also chimes in with his assessment:
...people are going to stop making [games] on the PC because of my earlier point, what's happened on the PC with piracy. The economics are ugly right now on the PC. You're not going to see these gigantic, epic investments of dollars on the PC when it just doesn't work. The economics have to work. You're going to see those investments made on the console side and it's going to become a more console-centric investment. And then you're going to see them ported back over to the PC and that creates a different experience on the PC.
Robert Bowling, Community Manager at Infinity Ward, the makers of games such as Call of Duty 2 and Call of Duty 4, provided a fairly blunt opinion on the issue. He made a blog post entitled 'They Wonder Why People Donít Make PC Games Any More', the title of his post along with the contents clearly linking the move away from PC game development with piracy:
On another PC related note, we pulled some disturbing numbers this past week about the amount of PC players currently playing Multiplayer (which was fantastic). What wasnít fantastic was the percentage of those numbers who were playing on stolen copies of the game on stolen / cracked CD keys of pirated copies (and that was only people playing online).... the amount of people who pirate PC games is astounding.
The people quoted above are some of the most successful and prominent PC developers of our time. Virtually every PC gamer has played one of their games, and all of them have demonstrated a high degree of dedication to PC development over the years. I doubt any of them would suddenly start abandoning PC development based only on flimsy information and false perceptions. The logic of their argument is quite sound: if the same game has the potential to sell many times more copies on a particular platform because sales are not being undermined by piracy, then quite clearly the priority of the developers and publishers should be to focus on that platform in their design, development and marketing decisions. As with any other business, games developers and publishers want to best accommodate the needs of the majority of their paying customers. Unfortunately all of these developers have received public abuse for making the above claims, the problem being that on the surface the disparity between PC and console game sales appears to have nothing to do with piracy. It seems to be a simple case of there being many times more console gamers than there are PC gamers. It's only when we take a closer look at the available data that it becomes apparent that things are not quite that simple.
Sales Data - Retail & Digital Distribution
Although they have internal access to all sales data from all channels, major games companies typically don't publicly release their sales figures. This means we have to work with what little public data is available and supplement it with some logical assumptions. Let's start with Call of Duty 4. Within the first couple of months of its release, it sold 3 million copies for the XBox 360 in North America, while only 383,000 PC copies were sold in the same region - that's already a 10:1 sales ratio in favor of the XBox 360. However as many people will quickly point out, the NPD sales data these figures are based on doesn't include digital distribution sales. That's absolutely correct. Valve Corp. who provided the primary digital distribution channel for Call of Duty 4 via the Steam client don't release sales data, but we do have a general indication of boxed retail vs. digital distribution sales from recent articles such as this one: "Gabe Newell revealed that [Valve] will soon be making more money from digital distribution of its games than traditional boxed sales". This statement tends to indicate that at best digital distribution matches retail sales for most games, and is certainly not many orders of magnitude above retail sales at the moment for games which release in both retail and digital channels.
But just to confirm this, let's check the popularity of digital downloads using other data sources, such as online poll results from a sample of PC gamers. This poll (pictured above) and this poll from the popular PC-orientated site Voodoo Extreme show that there is an undisputed preference for boxed retail versions of a game, firmly ahead of digital distribution channels by a significant margin. This makes sense when you think about it, because many people prefer to have a physical packaged copy of a game complete with discs and manual; some people have low Internet speeds and/or monthly bandwidth limits; some get low download speeds from Steam; and most importantly, the Steam versions of games can often cost as much, sometimes more, than their boxed retail equivalent. For example in Australia the Steam version of Fallout 3 costs $69.99 USD ($107.00 AUD), despite being sold for $49.99 USD in North America. Compare that with the retail boxed version in stores in Australia which depending on the exchange rate sells for the equivalent of $51 - $57 USD ($79 - $89.00 AUD). You can see that most Australians are unlikely to purchase Fallout 3 from Steam. Similarly, a year ago when Call of Duty 4 came out, Valve actually doubled its price on Steam in Australia because it undercut retail sales, making it far less attractive than the retail version. There are also other drawbacks to Steam which are covered in the Copy Protection & DRM section of this article, but the key point is that so long as digital distribution prices are roughly on par with retail sales prices, and sometimes higher, it's not going to be the preferred method for many people.
Back to our comparison of Call of Duty 4 PC and console sales. Even if we double the number of copies of COD 4 sold for PC to 766,000, ostensibly to account for the best case scenario of an equal number of additional digital distribution sales to that of retail sales, that is still nowhere near the 3 million+ copies of the exact same game sold solely on the XBox 360 in the same region during the same period; it's still a 4:1 sales ratio in favor of a single console over the PC platform. To counter claims that US NPD sales data is non-representative of global sales, because the PC is supposed to be much more popular in Europe for gaming, look at European GFK Chart Track sales data for the more recent Fallout 3 release, showing that 55% of Fallout 3 copies shipped were for the XBox 360, 28% for the PS3, and 17% for PC. In other words once again, an almost 5:1 ratio in favor of the consoles. Note that even though PC gaming may be more popular in Europe, piracy is also higher in Europe than in North America based on our examination of global piracy rates in the previous section.
In any case, what's causing such a discrepancy between PC and console sales? Are there really four or five times the number of consoles than gaming PCs in the world to account for this type of phenomenon?
PC vs. Console Install Base
Estimates of the total number of gaming consoles sold to date worldwide can be gathered from a range places including VGChartz, Wikipedia articles, NPD, as well as by those who compile their own data from various sources. Taking all these into consideration, the breakdown of 'next-gen' gaming consoles sold to date around the world is approximately:
Wii: 36 million
XBox 360: 23 million
PlayStation 3: 17 million
That's a total of around 76 million 'next-gen' consoles currently in use globally.
In the other corner, while the total number of PCs can only be approximated, Gartner Inc. places the figure at just over 1 billion PCs currently in use globally.
In both cases, it is recognized that the figures are not completely accurate, but they provide a very clear sense of the relative proportions of the install base of PCs vs. consoles - the ratio is at least 10:1 in favor of PCs. However to truly compare PCs to consoles, we need an indication of what proportion of the PCs would have sufficient graphics power to run the latest games.
Publicly available data from reports by Jon Peddie Research published in articles such as this one and this one provides us with sufficient information to deduce that sales of add-in graphics cards made by Nvidia and ATI total around 20-24 million units per quarter in 2008. Extrapolating the quarterly figure to an annual one equates to roughly 80-100 million graphics cards sold each year. This is the figure for only one year of sales, so it's a very conservative estimate of the base number of PCs with modern graphics cards. Of course some of these cards will be low-end, however since the data pertains to add-in graphics cards sold by Nvidia and ATI in the past year, not onboard graphics solutions such as Intel chipsets, then virtually all of them would be capable of some level of gaming. For example even low-end and two year-old cards can pump out over 30FPS or more in Call of Duty 4. Furthermore, since even cards released two years ago, such as the 8800GTS/GTX, can still game very effectively, it's still a low-end estimate of the total number of 'gaming' PCs in total. To add to the rough calculations above, this study claims that approximately 196 million gaming PCs were shipped between the third quarter of 2005 and the third quarter of 2008. One last piece of valuable information comes from Roy Taylor of Nvidia who recently stated that: "...there is a very large installed base of GeForce gamers. We estimate that we have over 180 million active GeForce users. That's a much bigger installed base than PS3 or Xbox 360."
In summary, looking at the data we wind up with what appear to be roughly equal proportions of machines capable of gaming in the console market vs. the PC gaming market: there are approximately 76 million or more 'next-gen' consoles currently in use around the world; and of the 1 billion PCs globally, we can state with a reasonable degree of confidence that at least 80 million, possibly as many as almost 200 million of them are capable of gaming with the latest titles. If we want to refine the figures down to which machines are capable of 'hardcore' gaming, then we can exclude the Wii from the console stats, bringing us down to 40 million consoles (XBox 360 and PS3); and even if we halve the number of PCs with add-in graphics cards to 40-100 million to account only for medium and high-end graphics cards, we still wind up with at least a 1:1 ratio in terms of the number of gaming consoles vs. the number of gaming PCs. What we can say with a high degree of certainty is that at no point does it look like gaming PCs are being outgunned in terms of sheer volume of console hardware by a 4:1, 5:1 or higher ratio as game sales ratios would suggest.
PC vs. Console Game Prices
Perhaps the sales discrepancy can be described by substantial price differences between PC and console versions of games. For example, if a console game is half the price of a PC version of that game, in theory that could lead to double the sales on console. At EBGames online we can directly compare the price of several recently-released multiplatform games (in US dollars) to see if this is true:
The console versions of each of the above games is exactly $10 (20%) more than the PC version, which is actually quite common. Console games will generally cost more than the PC equivalents. Quite clearly, the price of console games would tend to imply that they should in fact be selling fewer copies than their PC equivalents, and being pirated more often due to cost, when the exact opposite is happening in reality.
On the next page we continue the PC vs. Console discussion.