Tuesday, July 20, 2010

Big money selling free computer games

Video game producers have been accused of many things, from greediness to promoting Satanism, so it was a surprise yesterday when software development company Valve released a new, professionally-made game free of charge. That's right, Alien Swarm (a top-down, cooperative shooting game) is available to play for the click of a button. To really shock and amaze, Valve also released the full source code for others to emulate or modify.

Open source isn't new, but it's been a rarity in the computer game industry. Most publishers take strict precautions against online game sharing (a.k.a. piracy, which cost the software industry $51 billion last year). Every game distributed freely online is taken as a lost sale, so blocking private distribution becomes a necessary evil.
As an example of the "closed source" path, game developer Ubisoft requires a unique CD key, online account registration, and a constant internet connection in order to play their recent titles, Assassin's Creed II and Splinter Cell: Conviction. These costly measures were implemented after the first Assassin's Creed title was leaked and distributed before the official release, causing Ubisoft to take serious losses.

With other companies paying to protect intellectual property, why would Valve be giving theirs away for free? The best explanation for this corporate altruism: keeping customers on your side matters. As explained on the Valve forums:

The decision to release the game for free was made most likely to promote the Steam Platform and as a show of good faith to the community. While the immediate monetary profit is not seen, these sorts of unique business maneuvers have usually profited Valve more in the long run and pushed them to the top of the PC gaming industry.

The public response has obviously been positive (not many will complain about getting free stuff). Compare that to Ubisoft, which has suffered a boycott of Assassin's Creed II because of their invasive anti-piracy measures. It's unclear how much an online protest can impact eventual sales, but it certainly can't help.

Many factors have contributed to Valve's success; their estimated market share for digital-distribution of computer games is 70%. Solid public relations have helped them beat out their competitors. Valve's game platform, Steam, offers 1,100 games for sale and has 25 million active members. It's no Facebook, but with a large customer base and active discussion forums, Steam's social media presence is substantial.

A cynic might say that with those numbers, Valve can easily afford to give away one game. And they'd be right. Regardless of the motive, it's an interesting move for the cutthroat video game industry. Former giants such as Midway (makers of Mortal Kombat and other arcade classics) have fallen into bankruptcy. Only time will tell if Valve's investment in releasing Alien Swarm pays off, or they follow the unlucky path of other technology headliners.

Unfashionably Economic

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