Discussions about DRM usually focus on digital music or movies. The game market is often neglected in these discussions, despite its rising market size and the increasing relevance of DRM for the game industry.

In the USA 2001, the market volume of the game industry (9,4 billion Dollars) exceeded for the first time the turnover of the movie industry (8,1 billion Dollars) (Wirtz 2003, p. 493). The production and marketing costs of high quality games such as “Lord Of The Rings – The Two Towers” by market leader Electronic Arts was above 25 million Dollars (Jensen 2003, p. 49). Successful games like Myst have realized revenues of 125 million Dollars (Wirtz 2003, p. 493). It is estimated that the turnover of the PC and video game market worldwide is about 18,8 billion Euros (VUD 2005).

Rising importance of DRM in the game market
Piracy and the emergence of new DRM-based business models are a big issue in the game industry as well. National entertainment software associations worldwide like the British ELSPA ( or the German VUD ( are complaining about massive sales losses due to illegal circulation of game copies. For example, it is estimated that in Germany about 11 million blank CDs/DVDs have been illegally used to burn copies of games between January and June 2004 (GfK 2004).

Therefore, the most important role of DRM in the traditional gaming market has been pure copy protection for CDs and DVDs. But other roles of DRM are gaining more and more importance. Similar to the digital music and movie market, DRM systems are now more frequently deployed to enable new online distribution (streaming, full-download) or revenue models (subscription services, pay per game/time).

In addition, new roles that are rather unique to the game market are gaining significance. Examples are the management of the game play and persistent online usage control. The management of game play relates to the control of a played game itself. For example, in multiplayer online role games, the developer is in charge to supervise a virtual world. Among other things, a developer prevents cheating among role players or controls the trade of virtual assets. Virtual assets, such as valuable weapons or virtual money, have often been traded on eBay without the permission of the game developer. Therefore, DRM can be implemented in virtual assets to control or restrict such trading.

Online usage control encompasses the management of access to and further usage of retail games via the Internet. Retail games are sold in CD or DVD boxes, which are usually played in offline modus on PCs. Traditional access control mechanisms of retail games are focused on a closed system environment: When the copy protection of a game has been cracked or a license number is shared, it can be easily disseminated to other systems beyond the developer’s control. However, the Internet has enabled new control mechanisms, which have the potential to manage the access and further use of a game persistently. They can be considered as DRM technology, because they give a content distributor a sophisticated means to manage game users’ rights persistently. Persistent usage control mechanisms have a special potential on the game market, because for game players there exist incentives to uphold an online relationship with the game developer. Unlike music or movies, games themselves are highly adaptable and can be enriched with additional features like new game levels, maps or weapons. There is a high demand for such features for an enhanced and continuous game play.

Online usage control systems force the purchaser of a retail game to validate it via the developer’s online platform. If a developer assumes an illegal use, he may disable an account instantly. Game access activation can be required only once during game installation or repeatedly over a given period. The latter gives the game provider an ongoing control system to identify illegal licenses. Although a user might have successfully registered an unlicensed copy of a game at the initial activation process, he cannot be sure if this illegal license will not be detected the next time. As a result, to crack a game only once will not be sufficient any more. This is especially efficient against the casual user, who often receives cracked games or licenses from friends.

Case Study: Half-Life 2
The first game developer to use DRM as an online usage control system for retail games is Valve. Valve uses its online platform "Steam" as a Digital Rights Management system to verify legitimate access keys and to keep control of the further usage of its games. Steam is also deployed to administer customer billing, to provide updates and to allow the users to backup games on CD-Rs or DVD-Rs. Valve introduced Steam as a DRM system with the release of Half-Life 2 in October 2004. Half-Life 2 is a so-called first-person shooter game, in which the user basically takes a first-person perspective in a three-dimensional space to battle against enemies. It also provides the option to play it in a multi-player mode. Half-Life 2 is a long-awaited sequel to Half-Life in the game community. Its production time was several years.

To install Half-Life 2, Valve requires in addition to an online activation the creation of a personalized online account via Steam. If Steam detects any identical licenses, it will cancel all accounts that have used these licenses. Steam even disables the account of the user that originally obtained the license legally. Valve claims to have cancelled more than 50.000 (allegedly) illegal accounts so far.

Beyond the pure authorization of legally obtained games, Valve’s Steam also has the potential to intensively control the user. For example, Steam has been abused to postpone the point in time when users were able to start playing Half-Life 2. After the official release of Half-Live 2 in November 2004, purchasers were not able to install and play their games for almost one week. Valve had been in a contractual licensing dispute with its distributor Vivendi, which did not allow Valve to unlock Half-Life 2 during this legal issue. In this case, the purchasers of Half-Life 2 were locked in a licensing battle between two corporations (Grimmelmann 2003).

The relevance of usage control systems will gain significance, when they are used to enforce changes to an End User License Agreement (EULA). For example, Valve reserves the right to change fees or billing methods at any time. Therefore they force users to agree to review the EULA periodically for any amendments:

"Valve reserves the right to change (…) fees or billing methods at any time and Valve will provide notice of any such change in at least thirty (30) days advance. All changes will be posted as amendments to this Agreement or in the Rules of Use and you are responsible for reviewing the billing section of Steam to obtain timely notice of such changes."

"Your non-cancellation of your Account thirty (30) days after posting of the changes on Steam means that you accept such changes“ (Steam 2005, section 4b).

In other words, Valve basically allows its customers to use their game only as long as Valve wants them to have it. Valve claims the right to demand additional fees at any time without notifying its customers personally. When a user connects to Steam to receive additional features or necessary patches, which are normally provided for free, he cannot be sure if he will not be billed. With Steam, any changes in the EULA will affect the game user instantly. Regardless of whether Valve has the legal right or not to disable accounts, Valve can simply do it. And if one considers going to court, it is especially difficult for non-US citizens to sue this US-based company for any unfair practice. With Steam in combination with its EULA, Valve can be described as judge, jury and executioner.

In another section of the EULA, Valve claims the right to download via Steam additional software or updates on users’ computers without noticing them:

"Steam and your Subscription(s) require (…) the automatic download of software, other content and updates thereto onto your computer. (…) You understand that Steam may automatically update, pre-load, create new versions or otherwise enhance the Steam Software and accordingly, the system requirements to use the Steam Software may change over time" (Steam 2005, section 2b).

Users of Half-Life 2 have to agree that Valve is going to download software beyond the users’ control, when they connect to Steam. This can be convenient to keep the game up-to-date automatically. But the consumers do not have the choice whether they are going to allow it or not. This lack of control is especially critical, because Valve does not guarantee that the downloads will be virus-free or secure (Steam 2005, section 9b).

Even though playing the game does not require a connection to Steam after the initial activation process, the default setting of Half-Life 2 automatically establishes an online connection to Half-Life 2. Many game players are not aware of the possibility to play this game in offline mode and changing the default settings is rather complicated. The documentation about this function is limited.

How do the consumers react?
However, Valve’s online usage control system and its restrictive EULA did not result in low sales of the game. Quite the opposite can be observed: Between November 2004 and January 2005 Half-Life 2 has been sold more than 1.7 million times. Currently it is still one of the best sold games worldwide.

Looking at different game forums on Half-Life 2, the online activation via Steam and the continuous binding to this online platform is by far the most discussed topic. But although there are mostly massive complaints about Valve’s rigid usage control system, most of the players would not forgo buying the game. In contrast, there are hardly any extensive discussions on how DRM systems might enforce amendments to the End User License Agreement. Therefore it can be assumed that most users of Half-Life 2 are not aware of the content of the EULA. Often users of games or other software products do not read EULAs. EULAs are considered too long and incomprehensible. Above that, Valve’s EULA is only available in English, which is a hurdle for many non-English speakers. It can be assumed that most users are not aware of how amendments in the EULA can be enforced by Steam. Game players have so far no experience with this kind of extensive user control.

This case is also about transparency. Recently the Federation of German Consumer Organisations (VZBV) sent a cease and desist order to Valve and its distributor Vivendi, complaining about their insufficient DRM information policy. The term „Internet connection“ as a requirement is merely listed in the “other” category on retail boxes. The need for online activation is not clearly indicated. Because the EULA is only available in English and cannot be read before the purchase it raises the question, whether it is at all legally valid. However, Steam is still in use and controls 1,7 million customer accounts at its will with its DRM.

Bottom line
DRM-based usage control systems can be abused to violate consumer rights. It is alarming to see how little consumers have reacted to this practice and that it has not negatively affected sales of the game. This could pose an incentive for other developers on the game market to use online usage control system to restrict consumers' rights. DRMs developments on the game market, therefore, have to be closely watched in the future.


About the author: Danny Vogeley is an intern at Berlecon Research. He has been analysing several digital markets like Internet broadcasting, mobile music and M-Business strategies of media companies. Currently, he works in the field "digital consumer". He is a member of the INDICARE project team.

Status: first posted 10/03/05; licensed under Creative Commons