In early September of 2012 on the Greek island of Lemnos, two Czech nationals were caught by Greek military police taking pictures and video of military installations.
The Greeks, perhaps justifiably, felt these actions were a serious threat to national security.
But the Czechs were simply making a video game. Their employers were Bohemia Interactive, a Czech software developer, and taking photos of the Greek military on Lemnos is not the only crazy thing they've done in the past few months.
This is a story about how Bohemia Interactive may have discovered a new way to globally finance the development and creation of consumer software.
Bohemia used to create software the same way almost all games, movies, and television shows are made. It had an idea that it took to a publisher/distributor/studio. The publisher provided the funds. Bohemia made the game. Finally the publisher sold the game, giving Bohemia a cut.
This is the system Bohemia used to release its first game, Operation Flashpoint: Cold War Crisis, in 2001. It was so technically successful that the U.S. Marines hired Bohemia to create VBS1, a virtual military simulator for training troops.
For reasons still private, though perhaps related to the money they got from the licensing of VBS1, Bohemia parted ways with its publisher Codemasters. It lost the rights to the name “Operation Flashpoint” but it released sequels under the name “ARMA,” which were met with moderate success. "ARMA II" was released in the middle of 2009.
This is where it gets weird. Three years later, in April of 2012, a fan named Dean Hall released a modification for "ARMA II" called "DayZ." The mod received near-unprecedented critical acclaim, and its popularity led to over 300,000 sales of "ARMA II" three years after its release—something unheard of for a game of its kind. At its height last year, "DayZ" had almost a million unique players.
With the unexpected influx of capital, Bohemia hired Dean Hall and is now making "ARMA III" and a standalone version of "DayZ."
Even though the game isn't finished, you can buy it and play it right now. In fact, it’s one of the best-selling titles on gaming network Steam—at the time of this writing it's the network's third most popular game, behind the pre-orders of mega-franchise games like "Bioshock" and "Resident Evil."
Releasing an “alpha” directly to consumers has never been done on this level. Sure, smaller indie game developers like Data Realms have employed similar tactics, but Bohemia is a major game developer and their software costs several tens of million dollars to produce.
Software companies used to finance the development and distribution of their products with pre-orders. But since most computer games are bought and transmitted digitally now, consumers don’t have worry about limited availability in retail stores.
Bohemia’s plan here isn’t just meant to curry favor with consumers, raise capital, and achieve higher profit margins by cutting out the financial middleman. The real genius of this play is its subversion of piracy. Yes, pirated copies of "ARMA III"'s alpha release are available on the usual websites, but this is probably because the developers chose not to implement digital rights management in their product. But as the game is continually updated, those pirated copies will be obsolete in just a few days. When access-control measures are introduced, it’ll be impractical for the pirates to keep up.
Bohemia circumvented the disadvantageous access to the cash they needed to create its software. It did this by selling/licensing a prototype of "ARMA III" directly to its customers. For a little more than $30, which is half the retail price of a finished computer game like "ARMA III," customers get access to the all versions of the game up to and including the finalized release, as well as up to four tradable licenses to use the software.
If the game succeeds like its predecessors, then those licenses may become worth more than what the customer originally paid. This makes purchasers of the alpha version of "ARMA III," in a loose but accurate sense, investors.