What is Code Stripping?

Code stripping: the practice of removing or ‘stripping’ a game or software activation code from a physical, boxed product – entering it into a database and selling it as a digital code.  The physical product is then discarded.

Ever wonder why some digital codes that you see for sale are considerably cheaper than Steam?  Its not out of the goodness of the cheap retailers heart.  It is not because Steam is a rip off.  Its grey market versus legitimate.

Grey market games are those bought and sold through unofficial channels.  It is not a new concept.  Back when the X360 ceased region locking games – this whole sub market developed – and grey market retailers made fortunes.  Buying product from underdeveloped economies, shipping and selling them to consumers in other parts of the world.

In the world of PC digital – this has taken an alarming step forward.  Code stripping.

Basically code stripping involves wholesalers and retailers buying in pallet loads of cheap boxed PC product from underdeveloped gaming markets, employing cheap/unskilled labour to physically open the box, take out the code and pass to data entry, who will record the code in a database.  These codes are then sold online as digital activation codes.

Logically, the packaging and the disc then make their way into landfill as they are now useless.  And the sellers of both the boxed product and the codes make millions.  The end consumer is (usually) totally unaware that this process has occurred.

Code stripping is a blight on the industry – an extreme case of greed versus environment in our take, make, waste society.

So who is responsible for this?  Is it an ignorant consumer? A greedy retailer/wholesaler?  In part.  Ironically the main cause of the problem are those affected by it:  The Publisher.

The publisher needs to sell X amount of games at full price to be able to justify the expense of bringing the game to market.  The more copies that are sold at full price, the quicker break even point is reached and the more money can be made and then invested in the brand – including future iterations.  For most games, full price sales have a very limited life span – with the exception of super AAA – such as GTA and (almost) anything that Nintendo releases.   The bulk of full price sales happen in the first 4 weeks of launch.  Sometimes the first week.

For a discounted version of the full game to be available at release, the fewer full priced games sold, the longer it will take to break even.  No rocket science there.

However what you may not know is that the execs at the top of the tree will only be looking at top level numbers and decisions may be made to cut future, unannounced content – ie future iterations of the game, DLC, expansion packs, online functionality, etc.  This depends on the management team and the figures – and whether they adopt a ‘minimise losses’ strategy.  Development is halted, brand teams are cut and development studios closed (in the most extreme cases.)

In this instance, both the Publisher and the Consumer have missed out.  Not to mention the poor souls who have lost their jobs.

So why on earth would a publisher do this?

In my time in the industry, there are two sets of publishers.  Those that are sales driven and those that are marketing driven.

Both rely on and measure games sales.  The marketing driven publishers are different in that they will build and nurture their brands (particularly their own IP) at the expense of cheap unit sales out the door.  Rockstar and Bethesda are examples that come to mind.

Sales driven publishers tend to focus on shipping as many units as possible.  Period.  Their sales execs will usually be rewarded by volume of sales, rather than by ASP (average sell price) or margin.  In this sort of organization, you will find that the export manager who sells to the underdeveloped markets is very influential – and will be rewarded with praise and dollars for selling so many units and “expanding our reach”.  There will also be little care of the consequence of what happens to the product after it leaves the warehouse as the champagne corks fly. You don’t need to look far on discount sites at a products launch to see the heavily discounted titles and the publishers that they belong to.

The solution to Code Stripping?

  1. Education – for both the consumer and the publisher.
  2. Create a 1 tier pricing system – globally
  3. Develop pay to play games only
  4. Eliminate physical product from the underdeveloped markets
  5. Region encode – thus a game that originates from Russia (for example) can not be played anywhere outside of Russia, or features (such as online play) are limited outside of Russia.

There are some publishers now that have introduced region encoded SKU’s for their products – whilst some remain comfortably oblivious.

 

 

*At Savemi, we refuse to stock any product that is code stripped.  We only sell authorized digital codes from the publishers.