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