Video Games and DRM: Carrot or Stick?

Anyone vaguely aware of video games will also be aware of the constant threat of piracy.

Far from being the elephant in the room, piracy is more like the scapegoat in the room. Games developers and publishers are rightly fed up with the amount of pirated versions of their games being produced. However, while this annoyance is fair, the amount of difference it actually makes to game sales is not so clear. Indeed even amongst game developers, the way to deal with piracy is not clear. Most favour DRM methods, but not all of them. Brad Wardell (CEO, Stardock) believes that looking at sales figures over the past ten years shows a consistent level of sales irrespective of how much piracy there is - in other words, that in general the sort of people who regularly pirate software would probably never have (and never will) pay for the game in any case, so they can't be considered a "lost sale".

If any of you have never heard of DRM, it means Digital Rights Management, or copy protection. Various solutions have been tried in the past, from the system of finding a certain word in the manual (in the days when manuals were more than a list of key kindings), to CD keys, to online activation or linking with online accounts (as we have now).

Brad Wardell believes that DRM affects paying customers far more than pirates, who will just strip out the DRM and distribute DRM-free versions of the game. The only difference DRM makes is how much effort the pirates have to go to initially to break it, but after that initial period (normally of days), the only people that are inconvenienced by DRM are those that actually bought the legitimate version of the game, who have to load CDs into drives and have them verified, log on to online accounts or worse.

Infinity Ward recently released Modern Warfare 2 with the PC version being nothing more than a direct console port. Worse than that, many of the features people expect in PC games had been deliberately stripped out. No dedicated servers, no ability to modify the game, make new content, new maps, it was all completely locked down by their IW.net. One reason given for this was the old piracy excuse - they want to avoid hacked servers therefore, no server code was released.
Even DICE, who came to the defence of PC gamers with their soon to be released Battlefield: Bad Company 2, claiming that they would support the PC community, will not be releasing their dedicated server code, so no LAN gaming, no mods and access to dedicated servers for rental will only be from their trusted suppliers. Presumably this is also a response to piracy.

The latest blow for common sense has been recently announced by Ubisoft. All their future PC games will require a constant internet connection, otherwise you will be thrown out of the game and any progress since the last checkpoint will be lost. So this means if their master servers suffer a temporary outage, you as the paying customer get thrown out of your game and lose your recent progress. This even applies to purely single-player games such as Assassin's Creed 2.
You won't be able to play their games on the move, something which seems to fly in the face of the current technology trend (such as the ipad). Forget laptop or netbook gaming when on the move or at your grandparents' house.

So, you can see that DRM basically offers a wide variety of sticks with which to beat everyone up, irrespective of whether they are pirates or paying customers. In fact, as mentioned earlier, the paying customers suffer more.
Digital distribution (such as Steam, Impulse and Direct2Drive) offer other authentication methods that aren't so intrusive, by linking the purchase to a Steam account.

So what about carrots then? Is it so much of a leap to reward paying customers by giving them access to better things and extra goodies? Some companies already do. The following already existing "carrots" are designed to address different issues (not just piracy) but all can be used to reward paying customers and to give them a better experience than the pirates.
- "Veteran" programs; registration of previous titles gives bonus content to current ones.
- Day One free DLC; additional items, maps etc. available only to primary customers (not second-hand customers)
- Additional free DLC; further bonus content throughout the life of the game.
- Patch Support; patches that are tied in with validated versions of the game.