HOW ARE THE DEVELOPING MARKETS DIFFERENT?

Two major problems in the developing markets are software piracy and low purchasing power.

The piracy rate is as high in Russia as it is in other emerging markets. Pirates crank out cheap "jewel box" versions (both original and localized) of most newly released games with amazingly small release deltas. This avalanche of bogus product is the most natural consequence of relatively immature legislation and inefficient law enforcement. But the major underlying reason is that people are not prepared (or simply can't afford) to pay $15 and up for a game, so they willingly go out and purchase pirate jewel boxes at $3-$4 apiece. This was especially true in the period following Russia's severe economic crisis of 1998.

And yet the infrastructure is solidly in place. The legal dealer and distributor networks are well developed, both structurally and in terms of coverage, which makes it theoretically possible to move product in hundreds of thousands of copies. The problem lies in making these products affordable.

WHAT'S THE SOLUTION?

The pirates' strengths are deeply discounted prices and short time to market. Their weak points are the fact that their products are illegal (and increasingly the target of government crack-downs) and the notoriously low quality of their translations.

While localized games sell roughly ten times better than the originals, pirate localizations are invariably disappointing. This is an inevitable consequence of disassembling existing products under the gun, instead of using toolkits/source files. And as the market matures, consumers gradually become more demanding and quality-conscious. They realize the drawbacks of pirate localizations, and mostly buy these products only because there isn't much else out there.

The solution is to offer professionally localized, high-quality products packaged in jewel boxes at a competitive price. This approach does not preclude publishing limited editions in regular packaging for collectors and those with more money to spend, but most of what is produced must be as inexpensive to publish and cheap to transport as possible.

This solution requires an innovative approach on the part of both the copyright owner and the licensee. The copyright owner must recognize the need to explicitly approve the localized game's release in a jewel box version, as well as the fact that low retail prices and current market capacity assume moderate licensing fees. On the local market, close partnership between a strong distributor and a dedicated localization company is a must. This is the only way to ensure top-flight quality and strong sales, because localization outsourcing, which is commonly done with business software, is just too expensive and risky a proposition in this case.

Our point is that it is much better to maintain a reputable presence and get some revenue from the market rather than sit back helplessly and watch your intellectual property being stolen.

Last point: don't be too discouraged by the current low channel prices, as they are partially offset by high turnover. Also, bear in mind that this low pricing model is only transitional. Prices will gradually increase as the market becomes healthier and less prepared to tolerate piracy.