I'm no economist, but I am a partner at an investment firm and an accountant. If you want to call me a dummy refute what I said.
Originally Posted by Soggy_Popcorn
I'm a finance/econ student, and this post makes me sad.
Pretty sure he just flipped through his econ textbook and randomly strung together key words.
Gabe on the other hand, makes me very happy! Finally a dev/publisher takes economics (and their customers) seriously!
Marginal utility on the consumer side in what I said is carrying a heavier weight to the intangible of satisfying the "want" because DRM or not the price of the game is less-affected as almost every new release is going to be 59.99-ish because the market has stabilized at this point.
Need to go pick up pizza, brb to finish editing this.
edit- Pizza in hand.
The game theory bit was about how a company needs to acknowledge that the number of times the game is pirated is not equal to lost sales to the extent that intrusive DRM was causing a barrier to consumption to a percentage of these non-participants. If a game is sold for 399.99 USD and requires verification on 17 networks and only allows for one install per license ever you will only sell a handful of games and the 99,999,999 times it's pirated is irrelevant. On the other end you have a game that is free, but the company requests you donate a penny if you like it. This company has FOC of 25,000,000.00 a year and spent 45,000,000.00 developing that IP specifically. 0 piracy and the company is out of business because they can't recoup the costs. Valve has a metric, (look at this thread and count the number of guys that love steam, accept steam and hate all DRM), that accounts for the pirates of convenience and the pirates generally. Specifically targeting the available market and the price that will get the maximum number of buyers within the relevant range to Valve and the game developers.
A factor of 40 increase in sales is irrelevant if the margin that is left requires sales of BEU is 500 million.
The intangible assumption in their modeling, and Valve's unique ability to measure it, that being as unobtrusive in verifying that you are offering proper support to a product and excluding non-participants is a stronger profit driver, than is locking down a game with 12 flavors of Securom or dropping its price to an astronomical BEU is what matters.
Where am I confused?Edited by dave12 - 10/24/11 at 6:44pm