The Problems with Mod-Chips

[bean19]

Ozymandius (http://ozymandias.com/default.aspx), the Director of Game Platform Strategy at Microsoft, has posted an insightful blog entry (http://ozymandias.com/archive/2006/07/31/The-Problem-with-Modchips.aspx) that examines the problems that console-makers have with modchips.

To sum up, I think the reason we see a lot of industry angst around modchips is the piracy it enables, and the damage it causes to attach rate (which in turn breaks the fundamental model all consoles are built on). A lower attach rate is bad for the industry as a whole as it impacts game, hardware, and service sales for the entire industry (not just Microsoft). While I imagine there may be a few folks who really do just want to run custom applications on their console and have no intent to pirate games, we have yet to find a way to separate legitimate use from illegitimate. It’s disappointing, but there you go.
So console makers don't want us to have the ability to steal from them? Go figure. :)

[ninjadan]

You know, telephones have this same problem. You can never tell when people are going to use their free speech to talk about things they dislike, or if they're going to discuss blowing up a building.

Therefore, I propose that we crack down on telephone use since there's no real way to distinguish between the legitimate use and the illegitimate use.

[mandarin]

So console makers don't want us to have the ability to steal from them? Go figure. :)

No, "attach rate" more generally applies to the amount of software sold for a particular console. Console makers don't want you to have the ability to buy an Xbox, drop a modchip on it, and then use free homebrew software to turn it into a music/dvd/video/etc player (which should be entirely legal).

The law isn't there to enforce and support a particular business model, but that's clearly big companies view things.

[protocol_image]

You know, telephones have this same problem. You can never tell when people are going to use their free speech to talk about things they dislike, or if they're going to discuss blowing up a building.

Therefore, I propose that we crack down on telephone use since there's no real way to distinguish between the legitimate use and the illegitimate use.

That's a pretty obtuse metaphor to use. If anything, just look at the ratio of people who use mod chips for pirating games over the people who use homebrew software. If there are enough people known to exploit something, it ruins the freedoms of everyone else. I mean, you can't just walk into a store and buy a gun without a background check.

Think about the people that work 80 hour weeks, just to create these games. The more that people illegally copy them, the less it shows publishers that people are willing to pay for games. Thus, the publishers give developers less money to make new ones. So the people that are willing to stick in the industry end up working worse hours, or for less pay.

I wouldn't be surprised if ALL games become downloadable content with digital signitures (ala Valve's Steam) to best the pirates......or at least some sweet-ass ninjas.

[iamkevin]

You know, telephones have this same problem. You can never tell when people are going to use their free speech to talk about things they dislike, or if they're going to discuss blowing up a building.

Therefore, I propose that we crack down on telephone use since there's no real way to distinguish between the legitimate use and the illegitimate use.

That was a thoughtful and insightful comment; thank you for your time. It was very intelligent the way you compared video game piracy to an American's Constitutional right to freedom of speech. You should probably go ahead and take the next step and call Sony, Nintendo and Microsoft Nazis.

You would have sounded slightly less idiotic had you said "the internet has the same problem, you can never tell when people are going to download illegal pirated software, so we should crack down on internet use."

[Klade]

Developers don't just not want you able to pirate software. They also want you to buy games to replace ones you already bought but broke, and to buy their expensive addons which can be provided free from independent developers.

And of course microsoft wants you to pay for xbox live service and buy stuff from live arcade, even when there is already pc versions of the same games available and for free.

[GrinR]

I think the question is more about how to limit piracy / unauthorized use rather than how to eliminate it.

Starforce recently illustrated this, as did Sony with the PSP. At some point your efforts to resist piracy begin to impact your legitimate customers (like me) and they react.

In the PSP's instance, that means I stopped buying games for it and bought a DS instead. In the case of Starforce, I simply stopped buying any games that used it.

If the publisher/manufacturer feels that the loss of legitimate users is worth the blocking of illegitimate users... so be it. Or so the logic goes.

[thenefariousone]

Well - the alternative is that console makers charge enough to make money on each machine.

But then the industry falls apart.

We already see how conservative developers get when software costs are expensive.

And console hardware is far from cheap.

Less hardware innovation happens, as companies play it safe to keep costs low. Or they charge full price and alienate average consumers.



That's basically what the Nintendo Wii is. While the controller does clever things, it is using relatively cheap hardware to do so.

And even Nintendo does a lot to try and stop piracy.

At the end of the day, the "homebrew" crowd is a loud minority, who often make questionable decisions like wanting to "roll their own" media centre with hardware not designed for that task. The project often ends up costing more than buying a device made for such a task would.

As much as they hate to admit it - it's often the cheapness of the subsidized hardware that seduces them.

"Instead of buying a tivo that's designed to record tv shows, I'm going to:
1)to get an xbox and mod it
2)initial ???
3)install this, upgrade that
4)more ???
5)Profit!

[protocol_image]

I find it interesting how the people that loudly support mod chips have an Us and Them breakdown between the consumer and the publishers.

In regards to the whole "developers not wanting you to be able to replace a broken game" thing......I may be mistaken, but on the back page of most game manuals, it usually says that you can mail the copy of your broken game to them, and they will replace it.....usually with some sort of UPC or receipt for proof of purchase.....but still.

How's that forcing you to re-purchase your game?

[Food Nipple]

You know, telephones have this same problem. You can never tell when people are going to use their free speech to talk about things they dislike, or if they're going to discuss blowing up a building.

Therefore, I propose that we crack down on telephone use since there's no real way to distinguish between the legitimate use and the illegitimate use.

That's a terrible comparison. You have a right to free speech, you know when you buy a console that it's designed to be a closed platform. Fair use rights say that you can't be prosecuted for tampering with the console, but that doesn't mean they're going to make it easy for you to do. If you want to be able to tinker with things, buy a pc instead. I like having a cheat-free environment and software that's gone through rigirous testing and optimization, but that's me.

In case you don't watch the news, the government is listening in on phone conversations, so your analogy is broken anyways.

[thenefariousone]

Most publishers / retail stores will replace defective/scratched discs.

If you buy something and break it - then nobody owes you anything. You don't get to replace your dishes for free if you drop them on the ground and break the glasses.

Developers want you to pay for stuff because it costs time and money to make stuff. If there was no money to be made selling this stuff, nobody would be in the console business. No Microsoft, no Sony, No Nintendo.

There will always be some people trying to rip you off, so vote with your dollars.


Developers don't just not want you able to pirate software. They also want you to buy games to replace ones you already bought but broke, and to buy their expensive addons which can be provided free from independent developers.

So what if microsoft "wants" you to buy whatever. You as a consumer don't have do anything.

When one pays for Xbox live service, one is paying for QoS - basically Consistency and Predictability; just like when you pay for cable, or electricity.

You can watch tv for free, and you can generate your own power if you really want to.

QoS is the reason the majority of people pay for both of those services.

What makes the xbox live service worth paying for is the fact that not any fool can put stuff on it. On the pc, we've all seen what happens when any old fool can do whatever.

Live's a walled garden. One central authority keeping viruses off the system, making sure patches from one game don't cause trouble with other games, etc... Not 50 companies and thousands of users all trying to do the same thing.

And of course microsoft wants you to pay for xbox live service and buy stuff from live arcade, even when there is already pc versions of the same games available and for free.

[Kelegacy]

If modchips or hacks are applied, have them ruin some of the functionality of the console. If you have a modchip for the 360, you shouldn't be able to get online.

There is already a hack out for the 360...what sort of restrictions does it have? Can you still get online, earn achievements, get a gamerscore?

[Mozgus]

I wouldn't be surprised if ALL games become downloadable content with digital signitures (ala Valve's Steam) to best the pirates......or at least some sweet-ass ninjas.
Since when has Steam "bested" the pirates? To this day, it is still just as easy to download and install a pirated copy of ANY game on Steam, as it is to legally buy them on Steam. No challenge at all.

But still, if it's a good game, it should be bought. I'm just saying...digital signatures don't work.

[Dag-Sabot]

Even the most evil despicable modchip hacker needs to invest in the console itself in order to mod it, buddy whassisname ought to be 'consoled' by that. And if he's not he should write another patronising blog article to *** marketing dept.

[shnastybiznastic]

Modding an appliance it perfectly legal. It is not unreasonable, it's not immoral. The manufacturer may be built around a safety razor model, but that dosent mean that the consumer has to use the device for what the manufacturer intended (or even should). It just means that the manufacturer looses money if they don't.

To be metaphorical in a completley apt way, I needed thin razorblades for a project a few years ago. Bulk razorblades are expensive, so I just bought a 20 pack of safety razors and disassembled them. Is that wrong? Yes, I assume on some level it hurts BIC, but should I take that into consideration when buying materials for a project?

Hell, most buisinesses know the risks of the safety razor model when they choose to adopt it. Should we change the law now that customers have caught on?

At the end of the day, the "homebrew" crowd is a loud minority, who often make questionable decisions like wanting to "roll their own" media centre with hardware not designed for that task. The project often ends up costing more than buying a device made for such a task would.
So a minority, no matter how vocal, shouldn't be able to exercise the rights that the majoraty dosent? Should they have the right to make decisions that you think are questionable? What about making your own clothing? Building your own computer? Doing your own auto maintance? With the initial investment factored in, these are all more expensive than the alternative, but in many cases it's a question of satisfaction, not price. Hell, the Xbox linux people knew going in that the amount of time it would take to modify the kernel to run on an xbox would amount to a lot of money when those same skills were applied to the job market. They did it for fun, and to prove they could. Should the right to violate warranties be removed just because some people use that right to break the law?

[Metal Jesus]

Isn't "attach rate" important because the console Hardware is sold at a LOSS? They make up the lost $$$ on the hardware on the games you buy for it. If you didn't pay for the games you were playing... that wouldn't be fair, right?

Seems reasonable they wouldn't like that....

[iamkevin]

The difference is you can't make copies of the razorblades once you disassemble them and distribute them to your friends. You are still buying their product. MS doesn't "want" you to put your own software on it, but if you do that's ok, more or less, with the law, even though there is still the license you agree to when you buy the console.
What is NOT ok is software piracy, since then you are stealing software, which is of course illegal, and no amount of justification can make it not illegal. And since they have no way of determining who is doing that and who is just homebrewing stuff, they go for the safe route.
Of course, the fact that you can't run homebrew stuff on your 360 is icing on the cake for MS, since that way you have to buy their stuff, of which some of it is overpriced.
But hey, it's a business, not a charity. Deal with capitalism.

[mandarin]

Isn't "attach rate" important because the console Hardware is sold at a LOSS? They make up the lost $$$ on the hardware on the games you buy for it. If you didn't pay for the games you were playing... that wouldn't be fair, right?

Seems reasonable they wouldn't like that....

That's not what the discussion is about, though. The focus of Ozymandias' blog post is that he disagrees with homebrew software.

They do sell the hardware at a loss, sure. But if I want to buy an Xbox, mod it, and then install Linux (never to play any games on the hardware), that's within my rights as a consumer. It breaks their business model, but that's a risk they're taking. They can't fall back on the law to protect a business model. Not that they won't try--printer manufacturers have invoked the DMCA in stupid lawsuits against aftermarket ink refills. This is the same kind of thing.

[Weaverboy]

Can we skip trying "prove" our points using analogies, please? It's the weakest form of proof you can muster. And can we please avoid talk about piracy not resulting in the deprivation of property - and therefore it's okay! - either. That argument (thankfully) didn't work for Mitnick, and it doesn't work now. This is the 21st centuary. The definition of theft has effectively changed.

wrt the article, I don't buy his third point, regarding homebrew software. In fact, he seems to completely skirt the issue altogether. Razor blades are one thing (hehe) but I don't see how that relates to home brew at all. You install homebrew software because similar functionality isn't present in the system to begin with, or indeed can't even be purchased aftermarket. For one, the Xbox was a totally different beast modded; a wonderful multimedia machine. In this light, MS rolled a lot of media-playing functionality straight into the '360. Still, it's not even close to the Xbox's. He doesn't address that at all.

Also, this argument isn't really about legality according to common or statute law, either. The product is purchased under (pseudo-)contractual obligations. I see no reason why MS can't chop you off at the knees if you try and circumvent their restrictions. As always, vote with your wallet, not phoney notions of ethics and morality, as if you're some crusader.

[mandarin]

The product is purchased under (pseudo-)contractual obligations. I see no reason why MS can't chop you off at the knees if you try and circumvent their restrictions.

What obligations?

[iamkevin]

What obligations?

The EULA you agree to when you buy the console.

[Dag-Sabot]

Can we skip trying "prove" our points using analogies, please? It's the weakest form of proof you can muster.
Never!! Analogies are like the air in the tires of a forum, they keeps things bouncy and fun! Take away the analogies, well then you might get serious rim damage.

[laggerific]

Well - the alternative is that console makers charge enough to make money on each machine.

But then the industry falls apart.

We already see how conservative developers get when software costs are expensive.

And console hardware is far from cheap.

Less hardware innovation happens, as companies play it safe to keep costs low. Or they charge full price and alienate average consumers.



That's basically what the Nintendo Wii is. While the controller does clever things, it is using relatively cheap hardware to do so.

And even Nintendo does a lot to try and stop piracy.

At the end of the day, the "homebrew" crowd is a loud minority, who often make questionable decisions like wanting to "roll their own" media centre with hardware not designed for that task. The project often ends up costing more than buying a device made for such a task would.

As much as they hate to admit it - it's often the cheapness of the subsidized hardware that seduces them.

"Instead of buying a tivo that's designed to record tv shows, I'm going to:
1)to get an xbox and mod it
2)initial ???
3)install this, upgrade that
4)more ???
5)Profit!

I could see someone ripping their DVD collection to a media server using the computers they already own, and then using an XBox or something to stream that video to their TV. I'm not aware of anyone who thought the XBox could replace the tivo, but it could enhance the existence of a DVR in ones household by making media more dynamically available. Although it is becoming less necessary, as media extension devices are becoming more readily available, and probably at cheaper prices...but then again, if you're going to have an XBox anyway, might as well use it instead of adding another device to ones menagerie.

[Zeal]

Who cares. All the cool people mod and download games.

[Royal Fool]

If modchips or hacks are applied, have them ruin some of the functionality of the console. If you have a modchip for the 360, you shouldn't be able to get online.

There is already a hack out for the 360...what sort of restrictions does it have? Can you still get online, earn achievements, get a gamerscore?
The basic method is to change the firmware of the DVD drive. Yes, hackers can go online and earn achievements and gamerscore points with backup/pirated games, but Microsoft probably has ways of detecting this. I reckon they're just collecting info on what people are doing (Most pirated games, how much time spent online, etc.) before starting to ban them all. It'll happen someday, but at the moment the hackers can do anything a normal Xbox 360 owner can.

The DS has also had some stuff specifically targeted at online gaming - Action Replay DS is out, possibly allowing people to cheat in online games. And the PSP has had a strong homebrew community since the day it was launched, there's amazing things being done with it (Like a universal remote mod).

[Beelzebud]

When console makers release legal SDK's that homebrew developers can use to make cool software, there won't be as huge of mod chip scene.

You'll always have your pirates, but what about people like Xbox Media Center, or the Xbox Linux project? Give them an SDK and the mod chip community loses it's best and brightest...

[divinechaos]

Where I come from - a little country called Bolivia- we all buy pirated games and all our consoles are moded. Sometimes I think companies should do something agaisnt that, instead of targeting people that are at least buying original games.

[Paranoia]

Where I come from - a little country called Bolivia- we all buy pirated games and all our consoles are moded. Sometimes I think companies should do something agaisnt that, instead of targeting people that are at least buying original games.

That's true. Pirated software can really destroy the industry. Heck just go to south east asia countries and you'll be suprised how pirated software outnumber original software by a factor of 100:1.

[Kelegacy]

The basic method is to change the firmware of the DVD drive. Yes, hackers can go online and earn achievements and gamerscore points with backup/pirated games, but Microsoft probably has ways of detecting this. I reckon they're just collecting info on what people are doing (Most pirated games, how much time spent online, etc.) before starting to ban them all. It'll happen someday, but at the moment the hackers can do anything a normal Xbox 360 owner can.

The DS has also had some stuff specifically targeted at online gaming - Action Replay DS is out, possibly allowing people to cheat in online games. And the PSP has had a strong homebrew community since the day it was launched, there's amazing things being done with it (Like a universal remote mod).

I think the only way you can change the firmware is if you have one of the two DVD drives. Samsung and Panasonic? I can't remember, and I can't remember how you can tell which you have. Weird that someone already found a way to do this shit with a simple firmware flash. At least with an Xbox you could get a chip that allowed you to turn it on and off at your leisure, so you could get online.

I'd never solder or open one of my consoles, because if I fucked up 400 dollars worth of equipment I'd probably kill myself.

[TalkingOctopus]

I've chipped my ps1 and ps2 for a very legitimate reason: imports. Having 2 different versions of the same machine would be a stupid waste of space. I suspect not many people install modchips for this reason... Hopefully, the future will be region 3. (The 360 is not quite. The one Japanese game I want to play, Senko No Ronde Rev.X, is region locked :()

[UnderHero5]

Both my Xbox and PS2 are modded. He's right when it comes to the Xbox at least... but not because I'm pirating software. I use my Xbox almost exclusively as a media center. I stream tons of media from my small server PC to my television. I don't even remember the last time I played an actual game on my Xbox. Halo 2 maybe? (didn't even bother to beat it).

As for my PS2, I am glad to be playing import games such as Beatmania IIDX 11 Red, and Guitar Freaks V & Drummania V.

If I couldn't play imports on my PSP or DS I'd mod those too. Just ordered Band Brothers for my DS and DJ Max for my PSP earlier today.

Region free is the way to go. Don't want a lot of people modding? Don't lock the regions on our consoles. Sure a lot of people pirate games when they have a mod chip too, but I'm willing to bet a big reason for the mod chip in the first place for a lot of people is for import games.

[shnastybiznastic]

Sorry about the inflammatory post earlier, guys. I'm one of those fellas who does everything myself, and it really rips me up when I get put in the same category as software pirates for doing the digital equivalent of home improvement.

On the one hand, I can see that there's no easy way to circumvent the criminal justice system to prosecute eula violators, and since those things don't hold up in court, MS is out in the legal cold. On the other hand, I hate to see a corporation's rights become more important than my own. Especially when it makes me unable to be inquisitive. It's like some sort of anti learning policy (in a roundabout way).

[Heretic Machine]

I have the right to do whatever the fuck I want to my hardware. Don't like it? Get out of the business.

[nein89]

I was in Japan earlier this year, and on my last day there I decided "You know, I might as well pick up a game or two while I'm here." So I grabbed a few PS2 titles I'd been curious about. Got back home, looked at my options for playing them, and the most sensible proved to be swap magic. This, coincidentally, would let me play games I downloaded and burned to DVD myself if I were so inclined.

I'd kind of like to get ScummVM running on my DS; I never did finish Sam & Max, and it'd be cool to play it with the touch screen. My options for accomplishing this would, again, also allow me to just download DS and GBA roms. I recognize that this is a difficult problem for console makers to address, but that doesn't make the presently popular practices any less pathetic. This is, of course, without even touching the realm of PC games in which the version people do not pay for is generally demonstrably superior to the version which costs money.

Make SDKs reasonably available to homebrew developers, let them distribute what they make by whatever means they wish, and stop region locking games.

Even then you won't be able to make any serious progress against the crowd that downloads games as an alternative to paying, but at least the rest of us might stop laughing at you.

[protocol_image]

I have the right to do whatever the fuck I want to my hardware. Don't like it? Get out of the business.

I bet you had some MARVELOUS posts during the whole PS3 games being locked to a single unit fiasco :)

What ever came of that, anyways? ....if that's not changing the subject too much....

[Arphahat]

There are lots of reasons for modding a console, not all of which involve piracy. In my case, for example, I started investigating the potential to softmod my XBox when more and more games started giving me the "dirty disc" error. Now, I can buy the game, rip it to my console and play without ever worrying about the disc crapping out on me.

Another thing I have been doing a lot of, which is mentioned above, is using the XBox Media Center to stream video stored on my computer. It is an awesome option to be able to download a tv show that didn't record on my DVR for whatever reason, or that I just missed and still have an easy way to play it on the TV.

While it can be used for piracy, the problem becomes that you cannot secure a system in such a way as to prevent a pirate from copying and playing the game without severely inconveniencing the legitimate users of the software. The assumption that those who pirate are directly contributing to the decrease in sales is not necessarily so. If there was some sort of unbreakable copy protection in place, I seriously doubt that the pirate would go out and purchase a legitimate copy; instead, he would just go without.

[Heretic Machine]

I bet you had some MARVELOUS posts during the whole PS3 games being locked to a single unit fiasco :)

What ever came of that, anyways? ....if that's not changing the subject too much....

They nixed it, as far as I know. It might happen some time in the future, but I don't think it is being planned for something immediate. My opinon on it: I just wouldn't buy a PS3. If they did that with the 360 I just wouldn't buy 360 games anymore. It is as simple as that. I've said it before, and I'll say it again, if game developers push me too far I'll just leave the hobby all together and become a full-on retro gamer (I might as well be as it is).

[f1sh3r]

Developers don't just not want you able to pirate software. They also want you to buy games to replace ones you already bought but broke, and to buy their expensive addons which can be provided free from independent developers.

there was a time before rampant piracy that you could easily backup your software. unfortunately that's changed now, but i guess the software companies are to blame. expensive addons? do you think MS would sink money into developing them if there wasn't a demand? unfortunately the demand turns out to be "spend a bunch of money making this so someone can reverse engineer it and release it for free, well, free if you don't count the cost of the modchip they are advertising on the same site." no one is forcing you to buy any expensive addons or the system in the first place. and yes, devs want you to pay for the software they work so hard on.

And of course microsoft wants you to pay for xbox live service and buy stuff from live arcade, even when there is already pc versions of the same games available and for free.

of course they do, because it costs them money. who do you think pays for all the xbl servers? i'm fairly certain you aren't running one in your mom's basement. if you want to play free (most likely pirated through terms like abandonware) games on the pc no one is forcing you to buy them off of xbox live. last time i checked MS didn't make me download UNO for my 360, i did it willingly.

[f1sh3r]

I have the right to do whatever the fuck I want to my hardware. Don't like it? Get out of the business.

no you don't. don't like it? don't buy a 360, ps2, gamecube, etc etc. ;)

I've said it before, and I'll say it again, if game developers push me too far I'll just leave the hobby all together and become a full-on retro gamer (I might as well be as it is).

stealing roms off the net under the guise of being a "retro gamer" is what the cool kids are doing these days eh?

[bean19]

It's an interesting article to me because it is so clearly the developer's point of view written to be read by us. I believe the points he makes about not wanting players to pirate games, and not really being oppossed to homebrew programs, but not having a way to enable one without enabling the other.

However, playing games region free. . . well, he didn't go into the biggest reason that people have regions - to prevent arbitage markets by selling the same media in poorer countries. In China, where the average income/year is around $1000, people aren't spending $20 on a DVD, much less $60 on a video game. So if developers want to take advantage of this market, they have to sell their games at EXTREMELY low prices. If people could buy legitimate English or Japanese copies of the game in China for $1 or $2, then they would simply export them to the U.S. or Japan and create an arbitage market.

Since modding is possible, and since most of the poor countries that would get these games sold cheaply would get the English version instead of a localized version (due to cost and English being the international language), publishers don't usually make these sales.

This is all second hand information from a discussion with someone I'm not sourcing here, and while he is in the game industry, he isn't a buyer/producer or anything like that, so this could all be bullshit. However, I thought it was interesting and wanted to share.

[iamkevin]

I have the right to do whatever the fuck I want to my hardware. Don't like it? Get out of the business.
Disgruntled post aside, you do have the right to do whatever you want with your hardware.
However, they have the right to prevent you from doing things they don't want you to do with the hardware they make.
But the difference between the two is that you have agreed to certain terms, whether you paid attention to them or not, that give them some legal standing to fight back when you do "whatever the fuck you want" if it breaks those terms. Your only defense is "i own it" but with the terms you agreed to, you only own it in certain ways. You'll have to fight with copyright and IP law to get around that.

Don't like it? Don't buy it. MS/Sony/Nintendo/Whoever aren't making "general purpose hardware in a box," they're making targeted pieces of equipment. Even though it is in all respects just another PC, if you look at it from a "black box" perspective, it is a game console.

Just like you don't want them to bitch about you fucking with their shit, you shouldn't bitch when they fuck with the shit that they made to stop you from doing it.

[iamkevin]

It's an interesting article to me because it is so clearly the developer's point of view written to be read by us. I believe the points he makes about not wanting players to pirate games, and not really being oppossed to homebrew programs, but not having a way to enable one without enabling the other.

However, playing games region free. . . well, he didn't go into the biggest reason that people have regions - to prevent arbitage markets by selling the same media in poorer countries. In China, where the average income/year is around $1000, people aren't spending $20 on a DVD, much less $60 on a video game. So if developers want to take advantage of this market, they have to sell their games at EXTREMELY low prices. If people could buy legitimate English or Japanese copies of the game in China for $1 or $2, then they would simply export them to the U.S. or Japan and create an arbitage market.

Since modding is possible, and since most of the poor countries that would get these games sold cheaply would get the English version instead of a localized version (due to cost and English being the international language), publishers don't usually make these sales.

This is all second hand information from a discussion with someone I'm not sourcing here, and while he is in the game industry, he isn't a buyer/producer or anything like that, so this could all be bullshit. However, I thought it was interesting and wanted to share.

You are correct sir. Having regions means that publishers can control the timing of access to content.
There are some other reasons for it - take Enchant Arm / Enchanted Arms. In Japan, Microsoft paid for the publishing of the game, and the marketing of the game, etc. However, they (i guess) felt that it wasn't worth their money to localize it and publish it in the US. Ubisoft decieded that it was, and are doing the work to publish it here.
When you buy the game in Japan, MS gets X amount per game. When you buy it in North America, Ubisoft gets X amount. (ignore that MS gets another Y amount for the license). If it were region free, people in the US could import from Japan (if they knew japanese) and MS would get money when Ubisoft is the one who is supposed to get money for sales in the US since they paid for the right to publish it here, and did the work.

Some of the reasons i don't understand, but when it's something like that, it makes a bit of sense. I think if every game had a simultaneous global release done by the same publisher in all countries, games wouldn't have to be region locked, but they're not.

Some laws do exist to protect the people who make money.