Computer Games and the Evolution of Digital Rights
Computer games are all games that are played using a computer to display the board, generate events, and provide other players to play with or, generally, for any other game relevant aspect. The entertainment industry is a wide term to encompass any business generating profit from their activities related to the entertainment sector.
The MITS Altair 8800, released in 1975, is often considered to be the first true personal computer (Wolf 2008). Its operating system was created by two guys from a young company (then still called “Micro-Soft”) who offered it as a product to MITS before they had actually written it. These young men (Bill Gates and Paul Allen) soon went on to also sell IBM an operating system (MS-DOS, written in 8086 assembly) for their x86-based computers. While this does not mark the first time that hardware and software became two separate products, it is arguably the most famous one as the renamed company, Microsoft, went on to become a giant of the industry. While there are many fascinating aspects to the time and these companies, the fact that MS-DOS already used hidden and undocumented features to disrupt competitors’ products (e.g., later MS software products would not work correctly unless the computer was running on MS-DOS – as opposed to their competitors’ version of DOS – as its operating system) is the most relevant here.
Ever since then, the industry has kept changing its business models (Ojala and Tyrvainen 2011) and how to protect them. Computer games are a good product family to illustrate and discuss this. They are by many considered an essential part of the software and entertainment industry (Hildmann and Hildmann 2012), but one that is historically understudied (Saarikoski and Suominen 2009). There is no comprehensive analysis of the history of video and computer games from a business point of view (Royer 2011), yet. For a general account, we refer to, e.g., Purcaru et al. (2014) or Dillon (2016).
Computer Games Driving the Hardware Industry
Wolf (2008) and others say that it was the computer games that (financially) drove the evolution from computers the size of warehouses to the PC; from the 1975 MITS Altair 8800 to whatever model and type is considered state of the art at the time the reader is reading this. Whether computer games alone deserve the credit for this transformation, which is at the heart of the communication and information revolution of the last decades, is arguable; whether computer games have become (and been for 40 years now) a best-selling product is not a question at all. In the entertainment industry, they have long since replaced traditional board and card games in overall profit (Bohannon (2008) estimated gaming to be a $11 billion industry globally in 2008; in 2016 this is the economic impact of the gaming industry to the US GDP alone (Anderton 2017)) with the global industry exceeding $90 billion (https://tinyurl.com/ya7tfobf (venturebeat.com)).
The next paragraphs will sketch the century-long development from Charles Babbage’s Analytical Engine early in the nineteenth century (Spencer 1975) to the video game culture of today (Kushner 2011; Williams 2017).
From the Arcade to the Living Room (The Rise of Atari)
This pervasive euphoria for computer games was not always the case. For example, the 1958 game Tennis for Two did not receive wide public attention or marketing (Nyitray 2011). Until 1972 commercial computer games came only in the form of arcade games, sold by companies like Midway, Bally, and Atari (Mazor and Salmon 2009). While Magnavox found itself selling its analog home TV game Pong in respectable numbers, they decided to shift their business paradigm from selling the consoles to selling the games (i.e., introducing different ROM cartridges that would all run on the same console). As far as home consoles are concerned, Ralph Baer’s television-based Brown Box (1966–1967) and Magnavox Odyssey, released in 1972 (the year of Pong) (Montfort and Bogost 2009), are considered landmark hardware when it comes to lineage and impact on design (Nyitray 2011). Three years later, in 1975, Atari started building arcade games for the private use (Wolf 2008), i.e., home versions. These consoles included Pong, but as they were basically stand-alone units, built on a game-by-game basis, production took a long time and was very costly. In October 1977 Atari released the VCS (Video Computer System) 2600, which could be fed with cartridges of individual games. This product did well and ultimately became the most successful of the early game consoles (Royer 2011). However, financially speaking, it did not do well enough in its initial years. The 1978 arcade game Space Invaders (by Tomohiro Nishikado), which was licensed by Atari for the home market, partly rescued them from the losses of 1977–1978 (Montfort and Bogost 2009). Historical reviews such as Glenday (2009) rank the game as the top arcade game ever, and its arcade version famously caused coin shortages in some countries. The game’s 1980 VCS release is considered to have multiplied Atari’s console sales.
Digital Rights (The Fall of Atari)
What became Atari’s final mistake was that they did not protect their developmental investment into the consoles. At the time a shift in the business model happened, in the sense that the profit did not come from the sales of the consoles themselves anymore but from the subsequent sale of individual games. Unfortunately (for Atari), the only protection against some guys in a garage starting to write their own games was the fact that Atari did not offer a programming manual or the console blueprints to just anyone.
According to (Levy 2010), Atari “regarded the workings of its VCS machine as a secret guarded somewhat more closely than the formula for Coca-Cola.” So when Activision was formed in 1980 (Royer 2011) by some of Atari’s best coders gone rogue, it marked the eventual end of Atari’s unprecedented success (and the console industry as a whole), simply because the soon increasing number of game-producing companies did not have to pay any royalties for the use of the consoles on which their games were being played. As O’Donnell (2009) states, “[a]ny company capable of determining how the 2600 worked and willing to pay for the cost of producing cartridges could then market their games, which set a low bar for quality.” This raid on the profit of the console-producing companies (bearing the full financial burden and risk of providing the platform for the games) combined with the sudden flood of mediocre games (which both disappointed the consumer as well as caused the dumping of prices) let to the collapse of the industry in 1983 (Royer 2011). The age of Atari lasted a mere 6 years, but it turned a generation of kids into computer game players, computer (game) programmers (Aspray 2004) and, eventually, computer scientists. The credit for doing this does – of course – not go to Atari alone; the company is mentioned as one (admittedly very dominant and rather famous) example of what today is a global multibillion dollar industry.
Copyright Protection and IPR (From Nintendo to Today)
It took another 2 years and another company to bring about a change in the market. Nintendo’s introduction of the Nintendo Entertainment System (NES) (A number of NES games are emulated and playable online at http://www.virtualnes.com) in the winter of 1985 became a turning point in the history of the industry (O’Donnell 2009) and even has implications for the Digital Millennium Copyright Act (DMCA) of 1998. The system required an authorization chip, the 10NES, to be present in the cartridge. Atari tried unsuccessfully to reverse engineer the chip and even went as far as to physically disassemble the chip (to no avail). The introduction of this chip is considered the moment when the industry changed from protecting its hardware to protecting copyright. Since the chip was required to be in the cartridge in order for the game to work in the console, preventing the chip from being copied meant to control the games that could legally be sold for a console. It is noteworthy that the design of the 10NES chip was integral to this, as the similar approach taken by SEGA failed. Accolade, who had reverse engineered the SEGA system to be able to circumvent it and publish games for the Genesis III, ended up winning a court case against SEGA (O’Donnell 2009).
Instead of a special chip such as the 10NES, SEGA relied on the string SEGA being found at a specific position in the memory of the game cartridge. Writing this string to correct location in memory required the knowledge of what to write where but did not require a specific (and protected) chip.
In addition, when the string was present on a game cartridge, SEGA had its game console display the text “Produced by or under license from SEGA Enterprise LTD” before starting the game. This, however, meant that anyone using the game including the string without permission (i.e., payment of royalties to SEGA) effectively infringed on SEGA’s trademark.
Finally, as the string in memory was originally written by SEGA, copying it could be considered a breach of the copyright of SEGA’s code.
While the initial ruling was in favor of SEGA, Accolade successfully appealed and subsequently won the case, with one of the arguments being that the string in memory was tiny in comparison to the amount of code written for the actual game and that the copyright breach was therefore negligible. In addition, the clever use of SEGA’s trademark as a copy protection mechanism was ruled to constitute a violation of certain legal restrictions placed on the use of trademarks. Since then, the industry (computer games and the computer industry in general) has continuously changed to ensure the protection of the companies’ investment into intellectual property (mainly the software).
Summary and Conclusion
According to Ojala and Tyrvainen (2011) over the last decade, the software industry has taken the shape of a $200 billion software division within a $500 billion service industry. Even the latest offline digital rights management (DRM) tools, such as Denuvo (https://www.denuvo.com/), fail to adequately protect against piracy. One famous example of this is the case of Resident Evil 7 in 2017 which was cracked within 5 days (https://tinyurl.com/yaaluusm (www.dsogaming.com)). Additionally offline DRM systems can have impacts on the performance of a game (http://www.sega.com/denuvo) and even block paying customers. This leads to two approaches by the industry: either a complete move away from DRM as done by CD Projekt Red’s gaming platform Good-Old-Games (https://www.gog.com) or the move to a cloud-based DRM as done by Valve’s platform Steam or others. Tommy Refenes (Super Meat Boy developer) states “the fight against piracy equates to spending time and money combating a loss that cannot be quantified” and “[d]evelopers should focus on their paying customers and stop wasting time and money on non-paying customers.” While cloud-based online DRM systems made it harder to make illegal copies of software (and, as Ojala and Tyrvainen (2011) point out, specifically games), they can also lead to a loss of reputation and customers. While Steam managed to introduce a semi-online DRM (allowing for up to 4 weeks in offline mode) and still be considered a positive influence for PC gaming by providing additional services (https://tinyurl.com/ycp4c9be (www.cinemablend.com)), others have failed here. For instance, Ubisoft’s original always-on DRM leads to some backlash from the customers especially when the servers for the DRM are not reachable (https://tinyurl.com/y97alctv (kotaku.com)). In this case it leads to a switch in the company policies removing the always-on demand for single-player games (https://tinyurl.com/yb8w795f (www.rockpapershotgun.com)).
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