Newell: Stop piracy by offering superior service

By Fred Dutton Published 24 October, 2011

Valve boss speaks up on the value of customers.

The best way to combat video game piracy is by offering consumers better service than they might get from the pirates, according to Valve boss Gabe Newell.

Speaking at a tech conference in Seattle, as reported by GeekWire, Newell explained that instituting restrictive DRM was the wrong way of looking at the problem.

"One thing that we have learned is that piracy is not a pricing issue. It's a service issue," he said.

"The easiest way to stop piracy is not by putting anti-piracy technology to work. It's by giving those people a service that's better than what they're receiving from the pirates.

"For example, Russia. You say, oh, we're going to enter Russia, people say, you're doomed, they'll pirate everything in Russia. Russia now outside of Germany is our largest continental European market.

"But the point was, the people who are telling you that Russians pirate everything are the people who wait six months to localise their product into Russia," he continued.

"It doesn't take much in terms of providing a better service to make pirates a non-issue."

Elsewhere in the presentation, Newell offered up more insight on how respecting the customer can pay handsome dividends.

While discussing how to find a game's pricing sweet spot, Newell argued that new customers brought in during a price promotion acted as valuable ambassadors for the title.

Apparently, when Valve has reduced or raised a game's price without any kind of advertising, gross revenue from that title has remained constant. However, when it's run a visible money-off promotion, revenue has shot through the roof.

He cited one example where a 75 per cent off online offer had increased revenue by a factor of 40.

Not only that, but Valve saw a knock-on effect on the boxed version, which it attributes to happy customers evangelising the game.

"Promotions on the digital channel increased sales at retail at the same time, and increased sales after the sale was finished," he explained.

"Essentially, your audience, the people who bought the game, were more effective than traditional promotional tools.

"So we tried a third-party product to see if we had some artificial home-field advantage. We saw the same pricing phenomenon. 25 per cent, 50 per cent and 75 per cent very reliably generate different increases in gross revenue."

For more detail on the DRM issue, give Eurogamer's recent in-depth industry-wide piracy investigation a read.

Picture of Fred.

About Fred Dutton

Fred Dutton is Eurogamer's US news editor, based in Washington DC.

Read more articles from Fred by visiting the Fred Dutton archive page.

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Comments (43) Latest comment 6 months ago

Comments for this article are now closed, but please feel free to continue chatting on the forum!

  • oceanmotion #1 7 months ago

    Steam does offer a nice service but it's still DRM.

    Sales are great on Steam, they really nail that. Community is also very undervalued by many, another thing that Steam does well.

  • Vortextk #2 7 months ago

    Thank you for viewing people as, you know, people. Polish devs are getting that right these days too with Hard Reset and The Witcher 2.

  • Phoenisis #3 7 months ago

    But the point was, the people who are telling you that Russians pirate everything are the people who wait six months to localise their product into Russia

    This right here is key. There's absolutely nothing that will get people who're willing to pay for a game to turn to piracy as effectively as this. Nice to see there's still people in the industry who are capable of thinking about the issue of piracy rationally.

  • Kami #4 7 months ago

    It's so true. The way to stop piracy is to stop treating everyone as a potential pirate, and just offer great service. Many of us have been saying this for a while - good to know Valve spotted this.

    And sales increase revenue. WHO KNEW?! Actually, we all did.

    None of this is a surprise per se, but I suppose it is nice to hear it. There is a glimmer of hope in the industry...

  • Phoenisis #5 7 months ago

    And sales increase revenue. WHO KNEW?!

    I know right, it's almost as if treating your potential customers with respect and striving to give them best possible service is more likely to make them buy your product than treating them as thieves who exist to give you their money whenever and however it's most convenient to you. Shocking stuff.

  • Crembo #6 7 months ago

    Funny how releasing a good game also increases sales!
    Never thought about it, eh?!

  • steagz #7 7 months ago

    have you seen the amount of people on the piratebay waiting for a crack for football manager 12. theirs like 70 odd pages of comments of people showing their frustration

  • menschenfracht #8 7 months ago

    Well, there is an interesting catch in the Russian scenario.
    Russian publishers always handle their localisation in-house to reduce costs.
    So they license a game from, say, Bethesda, tell them that they will handle localisation themselves (including testing) and then live on a percent from box sales. Everyone was happy.
    Now, Steam entered the market and pretty much ruined the weak eco-system. The price of a game in Steam equals price in the traditional game shops, but no Russian publisher sees any money from the Steam sale. Users migrate to Steam in droves (Russian is language number two in Steam hardware survey since time immemorial), Russial localisator ships the game, and the buyer just isn't there. Western publisher gets some pocket money through Steam from Russian IPs, Gabe gets 33%, and Russian localisator, the only one, who has any material incentive, gets nothing. Actually, it loses money due to localisation/testing costs.

    In order to combat this, Russian publishers are beginning to ask Western ones to block certain titles in the Russian region in steam, so the only way to buy, say, Civilisation 5 in Russia is to buy a boxed release, which is connected to steam and patched throught it. But the actual CIV V store page is disable in the Steam client if you use Russian IP.
    Right now it's the only viable option left to the Russian publishers. Would be interesting to watch the situation in the next 3 years or so.

    BTW: Some infographics

  • Bennicus #9 7 months ago

    All well and good, but what if your company isn't capable of developing a really great service? Like say, instead of doing user testing early & often with real customers to get useful feedback, your development process is led by a marketing team who (going forwards) just compile a list of demands based on the latest buzzwords trending on twitter? Then all that effort trying to develop a higher quality product is a waste of time & money, and you may as well keep shovelling the same old DRM-infested crap because you'll make more money that way.

  • RevanNL #10 7 months ago

    Hellelujah! Finally someone in the industry that seems to get it. Stop piracy and second hand sales by offering superior service or products, not buy screwing over paying customers.

  • Bennicus #11 7 months ago

    @menschenfracht
    Who does the localisation for the Steam version? Surely they're getting paid something? Or it's not localised?

    If Russian customers are willing to buy non-localised versions for the convenience of steam, perhaps Russian publishers need to provide other services apart from just localisation & cardboard boxes? Or just nicer boxes :)

  • geox30 #12 7 months ago

    +1 to you sir.Well said.

  • butler` #13 7 months ago

    Take Steam out of the equation and he'd be telling a very different story indeed.

  • TurboBailey #14 7 months ago

    @RevanNL Spot on!

  • TurboBailey #15 7 months ago

    Steam is great. I just bought every single grand theft auto game for £4.99. The sales can be fab. Steam isnt perfect but it is definately a genuine alternative to piracy.
    Edited by TurboBailey at 24/10/11 @ 18:46

  • ryandsimmons #16 7 months ago

    Heh, Half Life 2 was the only PC game I pirated for over 10 years. And I only did that as I had no internet and it was the one game that was unplayable without a connection.

    So valve really aren't the people to talk about putting people off piracy.

  • shadowdogg #17 7 months ago

    @oceanmotion DRM is really cracked to hell though

  • Inmediasress #18 7 months ago

    Problem is many publishers view this as nonsense, because simply they can do whatever they want doublecross you where and when they want.
    There is no real threat to them almsot no consumer rights, it's easier to force your customers into their DRM schemes and DLC robberies because the marketing hype gets people addicted and since most of them are sheep will buy it anyway plain and simple.
    Honestly people should be protected from themselves mostly not from the publishers.
    Edited by Inmediasress at 24/10/11 @ 19:19

  • Vortextk #19 7 months ago

    @ryandsimmons

    Offline mode: https://support.steampowered.com/kb_article.php?ref=3160-AGCB-2555

    10 years without internet? You have internet now right? And half life "2" isn't even 7 years old quite yet.

  • ryandsimmons #20 7 months ago

    @Vortextk
    I meant over a 10 year period I only pirated on game. (I stopped pirating when I left school and got a job.)

    I had no internet for a 18 months period around when half life 2 came out.

  • haderach512 #21 7 months ago

    steam and gog.com made me quit piracy, be it with sales, with the absence of drm, with their communities, with special preorders, with the way they treat you as a customer. It's really a cool thing to be a legit gamer when you see what these people do, how they're trying to provide an atractive environment for gamers.

    And it's true, first treat people right, not as criminals and then wait for their response, since it's they who are buying your games. The companies need to prove us that their products are worth buying, not the other way around. The day I'll have a product for sale, I'll make sure I convince people it's worth buying, until then I am the one who needs to be convinced to take money out of my pocket.

  • kid666 #22 7 months ago

    "One thing that we have learned is that piracy is not a pricing issue. "
    Whaat? I'd probably buy ten times as much games if they were, say, around 30€ on release date.

  • MattEdWithCheese #23 7 months ago

    Good luck getting publishers to listen to you...

  • bad09 #24 7 months ago

    Rich coming from someone who runs a DRM that I've had to watch lock me out of my games when internet was down :rolleyes:

    Instituting DRM is just wrong regardless of service it's sad the industry has sunk to it really. I wouldn't say a better "service" will combat piracy that much either (while some have there reasons many pirates just do what pirates do, they always have whatever the method) but it would certainly would help sales to some extent which surely is the most important thing whatever your view on piracy. Look at Ubi, mostly bad ports, DRM worse than Steam (although they are slowly and quietly changing that) and the end result? 90% down on sales with only a short delay on piracy mostly on earlier games, others are doing OK so why not them?

    Steam DRM is better "service" sure and many will say it's converted them from pirates with it's service it's helps me accept that internet DRM but on the flip side I'm very aware it's an internet DRM, that stopped me spending quite drastically and the buy in price is very low now.

    I've said it before sometimes many in the industry think they are in a war that needs to be fought and ultimately won. I think that goal has made them lose sight of the important thing, your IP is important true, but your customers are more important as without them your IP 'ain't worth shit. Sell me just the games 'cos your selling DRMed stuff I 'ain't buying at the price you want right now or ignoring completelty regardless of quality.

    I know one day I will only really buy games from gog because "service" means everthing tied to accounts and DRM someone can (and will one day) turn off and that really depresses me. I hope their war on piracy was worth it.
    Edited by bad09 at 24/10/11 @ 19:29

  • Vortextk #25 7 months ago

    @bad09 What about offline mode? And you mean drm that will be turned off, as in like the service so you can't play the game any longer? Valve's said that steam drm would be flipped off if it was ever going to be shut down.

  • JonFE #26 7 months ago

    @ryandsimmons: I beg to differ. It wasn't unplayable; you just had to authenticate it through Steam and set it to offline mode afterwards.

    Sure, it was a pain in the arse. I used a 33.6 k modem and a pre-paid internet access card to install my boxed copy overnight, but it could be done.

  • bad09 #27 7 months ago

    @Vortextk

    We've gone over that a few times on here offline mode is twitchy, it works but not all the time under all conditions.

    As a consumer I should not be tied to an ISP for media I consume other than the intial download purchase or redownloading. I Don't have it on my music and I'm legally allowed to remove copy protection from my movies now in the UK. I should not have to worry about the net to play my games.
    Edited by bad09 at 24/10/11 @ 19:44

  • bad09 #28 7 months ago

    @Vortextk

    Oh and Vortex Valve SAY they'd flip a switch but their T&Cs do actually say different. If they'd really do it, why change 'em?

  • Vortextk #29 7 months ago

    If you get kicked off the internet so frequently it's a problem to play an online required game(note: other games don't give you ANY offline options), then steam screwing up is a symptom not the cause. Call or switch ISPs.

  • bad09 #30 7 months ago

    @Vortextk

    I have a very good connection actually, I just won't be held to ransom by publishers who think they have the right to dicate your use of media for personal use and don't buy for that reason. I don't pirate and I shouldn't have to look to crackers to secure my use of my bought product. I am however starting to walk away with the games I already got spending less on new and more on old.

  • Lamb #31 7 months ago

    Those Steam sales are awesome provided you actually get the chance to play the game. Grand Theft Auto complete collection for £5 is amazing under certain circumstances and definitely creates revenue for the publisher where there would be none.

    Really Steam is drowning out piracy in games by being a 99 cent store, new games still have to find their sweet spot in pricing and offline mode still needs tweaking.

  • funkateer #32 7 months ago

    He's kicking in an open door, but this door obviously isn't kicked in often enough.

  • wizlon #33 7 months ago

    I quit PC piracy because it was to much of a pain to mount images and crack them, then you couldn't update the game and all sorts, was just easier to buy the game legit. Plus I get most of my PC games on sale anyway.

  • ShiroBen #34 7 months ago

    "... respecting the customer ..."

    And this is the key. Show respect before you demand it. That's all game companies need to do.

    ... oh, and stop putting out rubbish. That'd help.

  • zubnut #35 7 months ago

    Hang on, cheaper prices = more games sold?
    No,no,no,NO! it can't be true can it?
    But, all these publishers and devs keep telling us that games need to be more expensive as they don't make enough money - I mean who is lying here?
    Oh wait, it's April 1st? No, its not. Trick or treat?

    Sarcasm overload, I'm going to bed |-O
    Edited by zubnut at 24/10/11 @ 23:54

  • FortysixterUK #36 7 months ago

    Tell me he didn't say that games sell better when they are cheaper.
    He didn't say that did he?
    Lets take a look

    :-

    However, when it's run a visible money-off promotion, revenue has shot through the roof.

    He cited one example where a 75 per cent off online offer had increased revenue by a factor of 40.
    :-

    Well fuck me sideways, cheaper games sell more ?

    I for one ONLY buy from Steam when theres a sale on. I assume from his comment he is surprised by that ?

    Twat.

  • menschenfracht #37 7 months ago

    @Bennicus
    There is no 'Steam version' nowadays, as I see it. Pretty much every AAA PC exclusive is tied to Steamworks (minus EA games in 2011). So, if you publish, say, Shogun 2, you'll send your localisation to SEGA to put it into the Steam release. To protect your sales you just lock it in the actual steam store, but the product ID in your box release and steam store release is the same (to avoid confusion, obviously).

    Now, I think it would be very difficult for Russian publisher to come, say, to the EA and tell that they want a piece of revenue from digital sales. I know that at least the publisher that I work in hasn't beetn able to secure such an agreement. Judging by ongoing Steam store regional lockouts, I would say that pretty much every Russian publisher is too small to actualy succeed in this kind of talks.

    So, to summarize - Steam versions are localised and have been localised for some time. Russian publishers don't see a dollar from the sales through the Steam. Steam entered the Russian market at the expense of Russian publishers. Russian publishers' revenues fell 50-60% in 2011 In 2013 there would be no-one left to localise the Western games, and Steam releases will start to suffer.
    But hey, Russian market isn't THAT big anyways.

  • Lunatic4ever #38 7 months ago

    now what is the link between "more value by offering better service" and
    "75% off" ???

    I don't get it. Promotions are not a service, they add value by decreasing the market offering's costs but its not an additional service.

    So WTF Newell?

  • jonbwfc #39 7 months ago

    All well and good, but what if your company isn't capable of developing a really great service?
    Then you go out of business, just like you would if you were selling cars. Or sofas. or Cheesecake. Are you really expecting the customer to subsidise businesses that don't do their job properly?
    Edited by jonbwfc at 25/10/11 @ 11:19

  • neeill #40 7 months ago

    Ironic

  • icematt12 #41 7 months ago

    Nice of Gabe to say that, still find Steam a bit of a pain to use at times (eg offline) but better than what some companies do.

  • Machetazo #42 7 months ago

    But the point was, the people who are telling you that Russians pirate everything are the people who wait six months to localize their product into Russia. … So that, as far as we’re concerned, is asked and answered. It doesn’t take much in terms of providing a better service to make pirates a non-issue.

    I found the source article, and Gabe's comments really interesting, and appreciated that he was able to share specific examples to back up his opinions and suggestions. I didn't, however, find Eurogamer's write-up of the discussion here enjoyable. The format used for this article was awful.
    Edited by Machetazo at 25/10/11 @ 16:03

  • HAL9000 #43 6 months ago

    @ryandsimmons: 'Heh, Half Life 2 was the only PC game I pirated for over 10 years. And I only did that as I had no internet and it was the one game that was unplayable without a connection.'

    You had no internet connection...so how could you pirate HL2? And if it was unplayable without a connection...WHAT WAS THE BLOODY POINT?
    Edited by HAL9000 at 28/11/11 @ 23:43