Gabe Newell of video game company was recently interviewed on a WTIA TechNW panel and dropped some gems on the audience with regards to pricing, service and piracy.
One thing that we have learned is that piracy is not a pricing issue. It’s a service issue. The easiest way to stop piracy is not by putting antipiracy technology to work. It’s by giving those people a service that’s better than what they’re receiving from the pirates.
This is in line with the argument that convenience is key. If it’s easier to illegally stream a TV show than it is to legally purchase it, then customers will illegally stream. Whether you price it at $1 or $5 won’t matter quite as much comparatively. And “easier” doesn’t mean cheaper. Easier can refer to the lack of availability (HBO shows aren’t for sale on iTunes), the purchasing process being too complicated (iTunes and Amazon have done a great job streamlining), the release window being uncooperative, etc.
On the state of the industry:
We don’t understand what’s going on. All we know is we’re going to keep running these experiments to try and understand better what it is that our customers are telling us. And there are clearly things that we don’t understand because a simple analysis of these statistics implies very contradictory yet reproducible results. So clearly there are things that we don’t understand, and we’re trying to develop theories for them. It’s just an exciting time but also a very troubling time.
Interviewer Ed Fries closed out the conversation with some great insight that is often missed by those focused on complaining about the changes in our market place, and holding on to the past.
This is probably the biggest change that’s affected the gaming business over the last few years. It’s not just that we have digital distribution to our customers. It’s that we have this incredible two-way connection that we’ve never had before with our customers. We’ve gone from a situation where we dream up a game, we spend three years making it, we put it in a box, we put it out in stores, we hope it sells, to a situation that’s incredibly more fluid and dynamic, where we’re constantly modifying the game with the participation of the customers themselves.