Gabe Newell: Piracy is an issue of service, not price

When Valve's Gabe Newell isn't overseeing the creation of GlaDOS sequels, Team Fortress 2 hats, or everything else but Half Life: Episode 3, he can usually be found imparting his business wisdom to anyone who will listen. And yes, there are a lot of people who will listen; people like attendees at a recent conference in Seattle in which Newell perked ears with his idea that beating video game piracy is matter of offering better service, not cheaper games.

“One thing that we have learned is that piracy is not a pricing issue. It’s a service issue,” explained Newell during his time on stage at the Washington Technology Industry Association's (WTIA) Tech NW conference. “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.”

For example, Newell noted that Valve was warned against the Russian market due to its massive pirate community. In actuality, Steam offered easier access to games, more options, and higher quality downloads than its underground competitors, thereby turning Russia into the studio's most lucrative continental European market outside of Germany.

Added Newell: “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.”

Moving from piracy to price elasticity, Newell also discussed how selling through Steam has allowed it to try a number of different pricing experiments - some of which worked, some of which did not, and all of which have helped the company inch closer to industry domination.

“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... It’s just an exciting time but also a very troubling time.”

You can read the full transcript from Newell's TechNW appearance at GeekWire.

Oct 25, 2011

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  • R-ape - October 25, 2011 6:28 p.m.

  • ObliqueZombie - October 25, 2011 5:07 p.m.

    Hmm... he makes a point. I'd WANT to buy a game if it was made my a respectable developer with added customer service and additions. The better they treat me, or the more personal they are, I'll buy from them with no quarrels. That said, I buy all my games anyhow. It just feels better to play the game, and makes me want to beat it--sometimes more than once--and get the achievements, granted if there are any.
  • shawksta - October 25, 2011 2:28 p.m.

    Touche Gabe, you make a strong point, and what your gonna do MIGHT effect it, but not really, people will still do it to get it for Free. Why are we argueing, its just gonna delay Episode 3 for another 10 years.
  • Defguru7777 - October 25, 2011 2:15 p.m.

    Cool story bro. Now where's Episode 3?
  • D0CCON - October 25, 2011 1:38 p.m.

    I never pirated games before using Steam, so my input isn't very useful, but afterwards I never even had the desire to. Why pirtae KOTOR when it's on sale for $2.50? Or Borderlands GOTY when it's only $7.50? Or every GTA when they all add up to $12.50? Not to mention the service is painless to use.
  • Fox_Mulder - October 25, 2011 1:05 p.m.

    I was actually very desperate for a game that released recently and so I pirated it off the net. It was because I was too poor to afford it. I'd be playing it right now too if I had a DVD-R that could hold 8.6 GB.
  • ninjaemperor - October 25, 2011 12:46 p.m.

    I completely agree with him, ever since I got steam, there's just so much less of a need to pirate, its way easier to deal with a simple download, for like, 5 bucks usually, than have to go through all the patching and cracking sh*t that takes forever.
  • Net_Bastard - October 25, 2011 12:44 p.m.

    Here's the problem when it comes to arguing for or against piracy: Not everyone does it for the same reason. Some people do it due to poverty. Some people do it to make a statement against the publisher (Anything from Activision, EA, Ubisoft, or THQ). Some people do it because they feel like the company is charging up the ass for their product and shouldn't get away with it (Adobe products). Some people do it because they want to try it out before buying when there is no demo or the demo is too short. Some people do it because they're bored and pirating a game is the equivalent of playing a free Flash game to them and they were never intending to buy it. I used to pirate games because I was a poor middle schooler and I thought that the devs could get by without me. I only stopped because I got 2 notices from my ISP, and then I found Steam. Not only do my video games have more of a value to them now, now I don't have to worry about the features the game would have blocked off due to it being an unofficial copy.
  • FoxdenRacing - October 25, 2011 12:28 p.m.

    Gabe's one of those guys I'd love to sit and have a conversation with. I'd love to compare notes, and possibly butt heads, as I do believe pricing is a sticking point...but now he's making me wonder. Pricing may not affect piracy much [he has the data, I don't]...I personally know a few people that use it as an after-the-act justification, but then turn their noses up at the product when it gets a massive price cut. Granted, that evidence is anecdotal and not hard statistics. Either way, I believe price most certainly does affect whether or not any given customer spends money with them or with their competition. All forms of competition...not just other game studios, but also used games, movies, music, books, theme parks, expansion packs for already-owned games, anything that could be construed as entertainment all vies for the same portion of our budget. The one that leaves us feeling least ripped off is the one that gets the sale. Personally, I do feel that $60 is arbitrary and has nothing to do with the income = unit price * unit sales curve, and some of Gabe's statements about the sales data he has say the same thing. Could it be that the shady, scammy, gouge-fest snake-oil 'Free to Play' games are only a trend because gaming proper is too expensive (and in some cases, that today's demos suck)? It's a known truth that the especially gullible will balk at a $15 music CD, but will happily buy the same 15 tracks at $1.50 each. Something to think about...
  • jackthemenace - October 25, 2011 12:26 p.m.

    I only understood 1/10th of the article, but that picture should be the new Logo of the The Hoal Inturwebz.
  • angelusdlion - October 25, 2011 12:10 p.m.

    Bull, it is a pricing issue. As long as people CAN get it for free, they will.
  • CH3BURASHKA - October 25, 2011 1:58 p.m.

    Apparently, you don't have a steady source of income. With money comes the ability to purchase, and when you have the choice, various other factors come into play other than price: availability, ease of purchase, even developer amicability - if you like the developer, you'll use your cash to support them. It is a pricing issue, but much, much less so than availability. It only seems like price is such a big issue because publishers do all they can to kill availability.
  • angelusdlion - October 26, 2011 12:05 p.m.

    Did I ever say I pirated stuff? I was just making a observation. Apparently you like to jump to conclusions. Pirates say "information wants to be free" but what they mean is "we want free stuff."
  • SomeOddGuy - October 25, 2011 1:59 p.m.

    I'm not certain if pricing is really an issue all the time, considering the fact there's the statement that the ones that do pirate are the ones that would never have paid for it to begin with, like Net_Bastard stated at the end of his first paragraph. I mean, come on... Pirating the Humble Indie Bundle?...
  • Dman3981 - October 25, 2011 12:09 p.m.

    Doesn't anyone feel though that this is negatively effecting the economy though?
  • ZhugeLiang - October 25, 2011 noon

    I take issue with a consumer's idea of "fighting back" being the theft of the good that they don't want to buy. It gives this sort of stealing an undeserved justification and false sense of legitimacy. A consumer's power is in his wallet, not in what he steals.
  • Boonehams - October 25, 2011 11:57 a.m.

    Gotta give Gabe for shedding light on a reason that many neglect, but overall, it's a mixture of service and pricing. Anti-pirating measures with DRM that hinders gameplay, and console/retailer-specific content that's on the game disc but is locked out because you don't shop at [STORE NAME] don't deter pirates, it just makes them feel justified for what they do. Meanwhile, pricing games at $60 when the games can be beaten in a weekend (while offering little to no replay value) aren't helping the industry. Let's not kid ourselves: Pirates will always exist. But with excellent service, ease of use and fair pricing, most pirates will have little reason to keep doing what they do.
  • Mezolitik - October 25, 2011 11:51 a.m.

    He does make a point; EA's anti-piracy software worked so well, I stopped buying their games. The company actively punishes gamers, PC in particular, for legally acquiring software, with its data-farming and one-use, one-owner mentality. The best thing about Steam - and this is probably how they 'get you' - is that, to be part of the community, and get PC achievements, etc. you have to buy from Steam. It becomes almost a neccessity, in the end. E.g. I want Arkham City, but I'm gonna wait for it to come out on Steam, even if that means missing out on one of the 100,000 pre-order bonuses on offer. Why? I like launching games from the same icon on the W7 taskbar. P.s. Arnold Schwarzenegger was the only person who could lift a minigun on the Terminator 2 set. Gabe is a phony! P.p.s I love Steam.
  • larkan - October 25, 2011 11:51 a.m.

    While I agree with the service aspect he speaks of, I do think we need a combination of both pricing and service changes. If major companies were to get rid of piracy software (Ubisoft I'm looking at you), and drop the prices by 15-20%, they would see a lot more sales. Most people, like me, will wait for that $60 price tag to drop down to $40 or even $20, or wait for the Steam Xmas sale.
  • DarthSohn - October 25, 2011 11:50 a.m.

    He's right. That's why things like netflix do well. Make it easy to get things legally and reasonable priced, people will go for it everytime. Downloading games, applying cracks, dealing with patching and all that stuff is made into a non-issue with the ease and affordability of steam games. Gabe, you're smart enough to see the things that executives who are paid far too much should know if they didn't have their heads up their asses.

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