Sometimes you just gotta eat the losses

2012-04-25 11:13

A lot of our problems come from people being obsessively focused, somewhat irrationally, on trying to absolutely eliminate things that they regard as losses. From the DMCA’s “anti-circumvention” rules to the attempts at making SOPA/PIPA (and new attempts to make the same laws again), there is a huge amount of damage being done or attempted in the hopes of completely eradicating copyright infringement.

This is the wrong strategy. As I’ve commented before, the win condition is not to minimize unauthorized copies, but to maximize sales, and these are not the same thing. And as a number of game developers and music sellers have discovered, trying to prevent unauthorized copies can hurt sales, because people end up not buying things because using them is too annoying. I haven’t bought a DRM’d PC game in years because I got screwed by DRM on some titles a few years back. Since then, no DRM. Companies that release games without DRM are doing pretty well, by contrast.

Now consider the elaborate schemes people come up with to try to reduce “waste” or “fraud”. And consider how expensive some of them get to be as people keep adding new elaborate hoops for doctors and patients to jump through, both in direct costs and indirect costs (like treatments that would have been cheap six months ago). It’s the same problem. Your goal should not be to “minimize fraud”. It should be to “minimize costs, both direct and indirect, associated with fraud”. And when your fraud-prevention strategy is expensive and introduces a lot of indirect costs, you’re no longer minimizing costs.

This permeates all sorts of stuff people do, at every scale from personal to corporate to national. And it is crippling us in many cases. The PC game industry generally went to a “no returns on opened software” policy because, allegedly, tons of people were installing software, then returning it for a refund. SNEAKY!

But is the alternative working better? Stardock Games, the makers of Galactic Civilizations, offer 100% refunds, even on retail copies — for which they got paid only about 50% of the sticker price of the game. That’s not just foregone gains; that’s actual losses. But it’s made up for by the many more people who buy the game because they are confident they will be happy with it or get their money back. So even if you ignore the costs of the DRM software, and the support costs when the DRM software is what crashes (this was what permanently lost me; two games that used SecuROM suddenly stopped working at the same time, because the copy protection was buggy), there’s the simple fact that trying really hard to protect against unauthorized copies and fraud is costing sales.

Folks, it is time to move on and accept that there is gonna be some loss to cheaters, and errors, and so on… and instead of trying to completely eliminate it, work on minimizing its costs to you. That means talking about real comparisons, not made-up numbers like ascribing the full retail price to each unauthorized copy. And it means getting over an emotional hang-up about having total control over your world. You don’t. Stuff happens. Learn to live with it and you will be both happier and richer.

Peter Seebach




  1. Suddenly I wonder if we could convince a whole bunch of shareholders of this, and then get them to raise a fuss about fiduciary duty.

    Lory · 2012-04-26 16:03 · #