At a recent conference in Seattle, Valve co-founder Gabe Newell maintained that piracy isn’t an issue for the developer:
One thing that we have learned is that piracy is not a pricing issue. It’s a service issue. 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, 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.
The company has had some remarkable success experimenting with various sales tactics. Newell cites one example as offering a 75 percent price reduction on Valve products, which resulted in an astonishing forty fold increase in gross revenue. Switching one of their titles Team Fortress 2 to a free to play, microtransaction system increased the player base by a factor of five. While most companies with a free to play model report a conversion rate (percentage of people who pay for in-game transactions) of 2 to 3 percent, Valve has seen an unusually high rate of 20 to 30 percent.
Newell admits to being unsure as to why some of these sales tactics have worked so effectively. Nonetheless, he hopes to continue experimenting with new ideas and seeing how customers respond to them:
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. And there are clearly things that we don’t understand because a simple analysis of these statistics implies very contradictory yet reproducible results. So clearly there are things that we don’t understand, and we’re trying to develop theories for them.
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