Legal Opinion: Will China Remain Gaming’s Black Hole?

Legend of Crouching Dragon

By on January 30, 2014 at 3:34 pm

Heard of Legend of Crouching Dragon? Made in China, it’s the uncanny valley version of Blizzard’s Hearthstone collectable card game. Just replace “version” with “exact rip off” and you’re there. Blizzard just sued its creators for 1.65 million in the Chinese courts.

This comes after we discussed Battlefield 4′s banning in my “write about China” month. It’s interesting, because I don’t remember Chinese shenanigans ever making the news so much as they are now. Previously, publishers were content to treat China as a gaming black hole, without making serious efforts to crack the market. And why bother? Games would either be censored by the State, or pirated up the yin yang.

However, times are changing. China is striding into the global economy (okay, rolling), making trade deals with America and other western nations. A decade-long ban on mainstream consoles has just been lifted. In this light, Blizzard’s lawsuit is significant as part of efforts to make the Chinese games market profitable for publishers.

The question is… will it work, or is China’s piracy problem too far gone? And is it even relevant to us in Australia?

It’ll suck the internet dry

Piracy is huge in china. So huge, in fact, that a Chinese zoo once tried to pirate a lion (people noticed when it started barking). That’s just funny. But things aren’t much better on the gaming front. We don’t have exact figures, but it’s estimated that up to 80% of software is pirated in China.

More serious, however, is the effect on what games get actually made. Games that have the highest publisher support and marketing in China are MMOs. These games address piracy by being free to download, but supported by a huge range of microtransactions. Far from the “cosmetic items only” promise that western MMOs often make, microtransactions in China are central to gameplay, and are the main source of industry profits. In one popular MMO, Perfect World, you need to spend money just to access global chat.

And why?

The reasons for this high level of piracy are many and complex. Technically, China does have decent copyright laws. They’re just not enforced. The use of the courts is discouraged at all levels of society. Fines are low anyway, making being fined for piracy just a cost of doing business. Local protectionism can make it difficult to gather evidence.

But most importantly, many of China’s people simply expect to get software for free. It’s hard to get people to pay for stuff when they see nothing wrong with doing so. Don’t get me wrong— public awareness campaigns are not an answer. Even when people know it is wrong, they still do it anyway. The “Would you download a car” advertisements only ever gave us hilarious parodies, not stop piracy.

The only way to stop piracy is a combination of enforcement and alternatives. Enforcement means taking the most blatant examples of piracy offline. Alternatives mean giving users a level of service they like, at a price that’s right.

In this model, Blizzard suing its imitators is a smart move. Although 1.65 million seems trivial for this kind of case, it has resulted in Legend of Crouching Dragon been taken off the iOS and Android app stores.  Blizzard will probably just release Hearthstone for free in China anyway, and support it with extensive microtransactions. The result is effective enforcement that’s denied the imitation profits from the western market, while giving Chinese users an alternative that fits with their expectations of how much games should cost.

So what effect does this have on Australia?

I’ve come to realise that Australia just doesn’t need strict DRM or other harsh anti-piracy protections. At a total piracy rate estimated at only 23% of all software by the most biased reporters, Australia is one of the three lowest-rated countries on the piracy ladder. The lowest is actually America, estimated at about 19% by the conservative Business Software Alliance. We have working copyright laws, and we’ve shut the major distribution networks down. Harsh DRM is not where the money lies, here, or there.

But we do need piracy to stay down — and that includes piracy in China. The reason is quite simple. In a world where some of the biggest economies have high levels of piracy, there is only one financial model for games that makes global economic sense: Always online with extensive microtransactions.

An offline Sim City could never exist in China. A Diablo 3 that didn’t milk the online auction house for all its worth could never exist in China. If nothing else, combating piracy in China is important to address the growing desire of publishers to make “piracy proof” games. With China becoming more and more relevant in the global market, the buying preferences of its gamers will be important even for the games we play. With its extensive microtransactions and a planned release in China, Hearthstone is just one of the first examples.

14 comments (Leave your own)

China’s “Great Firewall” doesn’t help things either.

 

Just make software affordable, and piracy will drop, sales will increase.
Steam sales and Mobile Apps are a testement to that.

 

Sphinx2000:
Just make software affordable, and piracy will drop, sales will increase.
Steam sales and Mobile Apps are a testement to that.

This.
The cheaper games get, the more i spend.

 

lordezekiel: This.
The cheaper games get, the more i spend.

Didn’t Gabe Newell once say that to the software market before steam brought incredibly cheap prices was something no one bothered with in Russia due to piracy and that they’ve had nothing but success ?

There’s a reason Australians pirate so much… When you try charging double people tend not to like it much.

 

When it comes to piracy and copying things, the Chinese have very little in the way of ethics. When I lived there, I had a glimpse into the way they pirate things such as movies – they’re simply readily available everywhere – more common to stream them online through their own youtube variants such as youku.

The shops were full of pirated pc and console games, and every form of software you could want. There were video shops like your Blockbuster here, full of well presented pirate movies/music etc. In fact some had such good boxes, velveted interiors etc, that it still beats the hell out of me how they could sell for 10 yuan – $1.50ish AUD.

Hell even in the big department store (aka Target) chains like the french Carreforr (however you spell that) and the korean E-Mart, I found pirated PC games and movies. Was funny how there’d be a pirated American war movie, but the dvd cover would be from Medal of Honour etc.

When i was there in 2008, most younger generation Chinese didnt have access to home computers like we do – and if they did, they were forced to study for endless hours. Video game consoles were also banned incidentally – banned from sale that is.

The usual place the CHinese would go was to these huge lan cafes – massive dark rooms where they would sit and smoke and play – populated by equal numbers of male and females – this isnt a male dominated environment by any measure.

At these lan centres they werent just gaming though – some would just online chat, some watch movies, play online dance dance revolution, lots of DOTA, WoW etc and the usual slew of god knows what they were Asian mmo’s.

But on the whole, they just dont have the same ethical approach to piracy that most western countries do. They simply can get it for free, so do so. If anything it’s Chinese pragmatism at work.

I think it’s been well known for a long time that western developers need to go in there with a free product as mentioned in this article – but it’s not an easy market to crack.

Same problem will be occuring with publishers – the Chinese are big readers, but not big book buyers – not when you can read them for free online.

 

spooler: Didn’t Gabe Newell once say that to the software market before steam brought incredibly cheap prices was something no one bothered with in Russia due to piracy and that they’ve had nothing but success ?

There’s a reason Australians pirate so much… When you try charging double people tend not to like it much.

Yeah, he said if you make it easier to buy a game than to pirate, the majority of people will buy the game.

 
James Pinnell

spooler:
There’s a reason Australians pirate so much… When you try charging double people tend not to like it much.

Didn’t you read the article? Australia has one of the lowest rates of software piracy in the world.

 

James Pinnell: Didn’t you read the article? Australia has one of the lowest rates of software piracy in the world.

I read a study last year that said we were one of the highest in the world, sadly I can’t find it for you but I refute the accuracy of the BSA paper that claims we pirate LESS than Canada. Considering how much more entertainment for value Canada gets I have my doubts. Not to mention the incredibly small pool of subjects they used 14,700 software users is a pretty dammed small sample size compared to the market.

Hell there’s 110,000,000 windows 8 users that’s like .01% of windows 8 users, not only that but the paper is full of things like “51% of the world admit they pirate”.
With 33 countries participating that means if the distribution is even around 445 Australians would have been part of this. I could get on my university forums ask “hey any of you guys ever pirated software before” and that would have as much validity in determining the Piracy rate of Australians as would the BSA study. Though it would reflect a significantly higher number because the pool of software users would be people living day to day off Raman and struggling to afford text books (I jest but we’re not exactly wealthy for the most part).

It’s about as valid as the PRC paper that stated the Chinese piracy rate was <20%. The study I read but can't seem to find was based on torrent statistics of who's torrenting from where which while it's certainly not accurate it's a hell of a lot better indication than a survey of .01%.

To summarise I am ignoring that study because the methodology is incredibly flimsy at best.

 

Yeah! Well it ain’t only China. Piracy is so common in the mid east and the ‘sub-continent’ that people think nothing of posting questions about problems with their pirated games on the official MS Windows forums (mostly Blackbox, Skidrow and other torrent downloads), of all places.

Syria is (maybe still) a big exporter to neighbouring countries of cheap as chips software of all kinds.
One example is Jordan for $1- 2 JD (not much profit in that is there! ) you can get pretty much any software. It’s right there in your face walking down the street.
( “Oh lord! help not yield unto temptation – Oh what the hell. Just this one time… I’m on holiday….” ;D )

.

 

If DVD’s/Blurays had warnings like this:

http://www.youtube.com/watch?v=ALZZx1xmAzg ;

instead of politically correct piracy nonsense, I reckon piracy rates will go way down!

 
Patrick Vuleta

spooler,

I don’t think the BSA report is necessarily extremely accurate – I did say it was “the most biased of reporters”. But neither do I think that bias will swing to underreporting.

Especially since such under-reporting would destroy their own goals. The BSA wants to get even more legislation in western countries through like the SOPA, and they’re not exactly doing themselves favourites by putting America as the most pirate-free nation in the world, are they?

Any counter claims also have their own bias. I don’t see what’s so different about claiming Australia has high piracy just because someone doesn’t like the Australia Tax. I don’t believe piracy is to blame for our inflated prices.

Maybe we don’t actually know a thing about what the real piracy rates are, but I’m willing to bet that Australia is pretty low for three reasons:

1. We have a working set of enforceable copyright laws
2. We have a culture that prides innovation and individual ownership, for the most part
3. Our per capita income is very high on average.

Those three factors are important for keeping overall piracy low. China has point one but not two or three.

As to the differences between Australia and Canada, well it’s probably just a few percent at most. To get meaningful differences you have to compare a range of different countries with different cultures, like Australia vs UAE vs Malaysia vs Egypt etc. Seen in the bigger picture, the Australian piracy rate is pretty low.

 

Patrick Vuleta: 3. Our per capita income is very high on average.

This one gets me, while it’s true we have high taxes and living cost which for most Australian’s pretty heavily mitigates out any benefit from the high wage. Compared to America where I have things like netflix and incredibly cheap movie tickets/new release movies alot of people earning less can get more entertainment than we can here. Just netflix goes a huge way to reducing piracy, I’m aware this isn’t software but meh.

Patrick Vuleta: Especially since such under-reporting would destroy their own goals. The BSA wants to get even more legislation in western countries through like the SOPA, and they’re not exactly doing themselves favourites by putting America as the most pirate-free nation in the world, are they?

America is the most pirate free nation in the world because they have absurd anti piracy laws things like, visit the pirate bay and get a free ban from the internet. Yes really the ISPs are under huge pressure from rights holders in America hence why pretty much every ISP has a life time ban for pirates system.
claiming that their piracy is the lowest goes a long way in justifying this kind of anti piracy enforcement.

Honestly reporting more accurate figures about countries like the UK/Canada/Aus/America would probably be worse for them as it would indicate the measures they’re pushing for are clearly ineffective.

Patrick Vuleta: To get meaningful differences you have to compare a range of different countries with different cultures, like Australia vs UAE vs Malaysia vs Egypt etc. Seen in the bigger picture, the Australian piracy rate is pretty low.

Sure compared to third world countries, compared to the rest of the world that isn’t suffering from a severely crippled economy not so much.

Patrick Vuleta: Any counter claims also have their own bias. I don’t see what’s so different about claiming Australia has high piracy just because someone doesn’t like the Australia Tax. I don’t believe piracy is to blame for our inflated prices.

No but those inflated prices are in part to blame for our piracy rate, alot of people will go to TPB to download a game instead of ordering it from a CD-key site or ordering a physical copy from over seas and waiting for it to get here. And it’s even worse with media for a whole load of reasons.

Once you add high price to the fact that alot of stuff is a pain in the neck to get here at all you begin to limit the number of people willing to go through the process of getting it legally and will just opt for the simplest option.

The oatmeal expresses what I want to say next better than I can.

http://theoatmeal.com/comics/game_of_thrones/img

The culture of piracy is more in companies not understanding their markets than it is anything else IMO… That and insane pricing …

 

“Fines are low anyway, making been fined for piracy”

You serious? That’s not a typo.

Please hire someone that speaks, reads and writes English to proof read this crap.

Please don’t make bullshit assertions without some credible and REFERENCED sources.

 

lustywench,

Did you want me to suggest some more articles from last week that you can go through and leave negative comments on, or are you good for now?

 
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