As long as video game piracy has existed, gamers and the industry have debated whether the practice really hurts the sale of legitimate games. In 2010, the Business Software Alliance estimated that generalized software piracy costs the world $51 billion and a half million jobs annually. Even most people who doubt each illegal download equals a lost sale will admit that illegal downloads have a negative effect on overall game sales.
So it is more than a little surprising that a comprehensive study of the effects of piracy by the European Commission has found that “illegal consumption [of games] leads to more legal consumption.” To be more precise, the study estimates that for every 100 games illegally downloaded, players actually obtain 24 Lake games (including free games) than they would in a world where piracy didn’t exist.
The 306-page report “Estimating Displacement Rates of Copyrighted Content in the EU” (PDF) makes a number of caveats to this headline number, not least a 45 percent margin of error making the results less than statistically significant (i.e. indistinguishable). from noise). That said, the same study found that piracy has the more expected negative effects on movie and book sales (and a neutral effect on music), pinning games as one area where piracy really seems to work differently.
“This positive effect of illegal downloads and streams on game sales can be explained by the industry’s ability to convert illegal users into paying users,” the study authors write. Increased game sales may be due to piracy as “players” [get] addicted and then [pay] to play the game with extra bonuses or on extra levels,” they continue. When it comes to games, “only free games are more likely to be supplanted by online copyright violations than not”, that is, people who pirate games seem to use them as a replacement for other free game options, more than for games they would otherwise buy.
How do they know?
The core of the study’s findings comes from surveys of 30,000 consumers in six EU countries (UK, Germany, France, Spain, Poland and Sweden). So it largely relies on self-reported data on game purchases and use of illegal download sites. But the study isn’t naive enough to simply ask “how many games do you piracy” and “would you buy more games if piracy wasn’t an option” and be done with it.
Rather, the study authors make an effort to use a number of research strategies and statistical models to mitigate the effects of erroneous and misremembered answers, as well as the “endogeneity problem” in the correlation (i.e., people who like games have more likely to play both illegal and legitimate games).
For example, the survey asks respondents about their general moral attitude towards piracy and their familiarity with piracy terms, both of which are highly correlated with reported piracy rates. As the study authors put it, “If people know piracy terms but don’t report piracy, it could indicate untruthful responses.”
Respondents were also asked specific questions about their willingness to pay different prices for their latest illegal download to try to turn hypothetical counterfactuals about a piracy-free world into specific questions about an actual game. Finally, econometric models were used to estimate the effects of piracy based on piracy-correlated factors such as the availability of high-speed internet and the frequency with which people use the internet to read news or do homework.
While it may be really impossible to know what a piracy-free world would be like, this is one of the more exhaustive and rigorous efforts we’ve seen to actually find out if and how much piracy is crowding out legitimate game sales. The counterintuitive finding that sales are likely to increase as piracy increases should be taken with a grain of salt, but cannot be dismissed outright.