There are three things that are going to keep gamers buying games rather than pirating them. Those are community play (achievements, online play, friend lists, chat, etc), fear (in my opinion, generally inducing negative emotions in the general population is something to be avoided as much as possible) and bonus content, such as DLC and Special Editions. Special Editions, in particular, are the future of boxed games..
A 1C Shop in Moscow
Why? Let’s look at Russia. Russia was the scourge of legal games until very recently, but 1C have (almost single-handedly) managed to turn that around. They did this through two methods. Firstly, they persuaded the government to deal with high-street game piracy – where normal shops preferred to sell copied games because the unit cost was better and the packaging was nearly as good. The government cracked down on both consumers and vendors.
Secondly, they made their own games nearly the same price as the pirated versions, with much better packages and started their own chain of shops, selling legitimate versions of games from all round the world – which were all rebranded as 1C-published products. Gradually, as physical piracy died off, they raised their prices back to a more-reasonable profit-maximising level – but nowhere near the prices in the rest of the world. (As an aside, one could argue that Russia has reached a fairer price-balance than the rest of the world; we’re unable to get game prices lower because product differentiation means price competition doesn’t work between publishers.)
Special Editions therefore have a threefold appeal – they stymie piracy, give the end-user physical bonus content, normally accompanied by unique game content, and give the publisher a large premium compared to the digital version (which might be sold solely by the increasing numbers of independent developers in the future). I don’t see non-Special Editions surviving the next ten years.
MMOs sell more special editions than other genres.
What’ll happen next? I think Digital Editions from large publishers might start coming with the option to buy the physical edition at a much reduced cost. If that seems like it might encourage cost sharing, so that one friend buys the game online and gives his physical copy to another, which obviously would reduce developer profit then I think Special Editions will be turned into Collector’s Sets – no actual copy of the game, but all the accoutrements of a Special Edition.
For example, I love Cryptic Comet’s games and would buy a fan kit of theirs – especially if it included a physical board game version of their virtual board games. But I wouldn’t buy a cheaply packaged disc that was at a premium over the online price, to cover the publishers’, distributors’ and sales’ costs. I think as the market ages and gamers get more aware of the structure of the industry, they’ll start choosing to buy products online, direct-from-developer more – though the community tie-in appeal of vertically-integrated products like Steam (problematic because of its tying of content delivery to community function) may perpetuate the standard publishing model.
What doesn’t work:.
DRM: If it’s hackable, it’ll get hacked.
No Protection: Demigod got killed by a self-created DOS attack from its attempts to monitor
Always-on connections, like Cities XL tried and Ubisoft (that perennial DRM experimenter) will try soon, annoy gamers enough that hacks are always made to get around them. (And are easy to hack, as the Hamachi-play with Demigod at launch showed).
Staggered Releases: game releases have to be simultaneous worldwide, otherwise even gamers with good intentions will download full games in lieu of downloading the demo – then not buy the game.