"OMG! teh pirates stoled my gaem!!!1!"
DRM tends to suck. Whether it's the inability to transfer Kindle books (or the fact they costs the same) or the registration hassles with PC software, I think users have a dim view of it. I'm with you there. That's not my point.
On the producer side, complaints about piracy are rampant. "We lost $3 gajillion in sales last quarter due to pirates!" I hate those kinds of complaints. There might be a billion copies of your product out there, and if one does the math that comes out to $3 gajillion, but there's no way those people would have spent that much money on your product if they hadn't found a way to pirate it.
But there is an opportunity cost involved. If pirates couldn't get their warez for free, they'd wind up buying some of those products. They'd spend less on beer, pizza, and auto parts. Minors would spend less on ... what do kids do with spare cash these days? iPods and iTunes? Big Macs and funny t-shirts?
I think piracy has killed off single-player PC games. What remains is the big boys -- The Sims, perhaps. Games that require online registration get hacked, but I think the low price point of Steam titles reduces it. Diablo, although often played single-player, is still played online; that's how you get to compare your epeen to the next guy's.
What's gone are middle-market titles. Everyone and their brother bought Doom 3, but who buys those other shooters? Not the mass-market; just the diehards. The guys more likely to have a bittorrent running in the background 24/7.
That means that successful titles are online (with all the expense that brings), or so popular that they reach out beyond those comfortable with bittorrents, which again means expensive. Niche titles fight for a living and are pirated like crazy. Consoles are grossly expensive to develop for, too.
Are games getting less innovative? Yes. The market sucks. A game designer, a programmer, and an artist can't save up some spare cash and develop a game in their spare time, throw it out on the PC, and profit from it. There's not enough of a market willing to pay for something they could steal instead. Buyers save their money for the console and online titles that they have to pay for. Have a cool idea? You need to convince someone to give you $15M to develop it. Otherwise, you're SOL. Or, just building it in your spare time.
Pros aren't often hobbyists on the side. Once you've done a few years of the crazy game dev rat race, 100-hour weeks and all, you think: screw that noise. I'm working 9-5 and then going home to spend time with my family and friends.
My point is that if it were possible to make money as an indie, more people would do it.
And it is possible, just ... grossly constrained. Next time, I explore revenue possibilities.
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