There is no doubt that piracy is utterly killing the flight sim addon economy. When the last addon company finally shuts up shop, it won't be the recession you'll blame, although that is one contributory factor. It will be the vast droves of casual freeloaders who, in very large numbers, download torrents worth (pun intended) of aircraft and scenery, sometimes justifying doing so with ever more creative excuses.
A successful addon eight years ago could confidently expect 3000-5000 sales or more. In the last year, equivalent software of like quality is lucky to sell 1000. In many cases, rather good addons which appeal to a niche portion of an already niche market can make as little as 300 sales. Any addon seller that tells you otherwise is telling fibs. Clearly, for some niche developers this makes hundreds of hours of devoted development time nothing more than a virtually unpaid hobby. The average addon for FSX is the equivalent of a short shopping trip to pay for essential supplies for two people for one day. That is hardly expensive. In real terms, most addons are cheaper than they ever were. There are exceptions to this, but in the main it is true.
One customer of ours thought it was ok to "try before buying" one of our products and felt that, having eventually purchased (probably because he wanted official support), it was perfectly ok to let me know that finally he'd been "honest". He also excused himself with the cliche that he'd "recommended" our product to others, and therefore was doing us a "service". He didn't of course indicate whether these others actually pirated our product as well, but my guess is that they all did.
Anyone who questions or criticises relatively bland activation methods would do well to absorb the alarming statistics that the opening post in this thread succinctly explains. But there are two levels of activation. One is, to a determined freeloader, relatively easy to overcome. The other, requiring a double layered security procedure, is what puts people off buying at all, and quite understandably they object to having to run through hoops because of other people's behaviour. The double layer activation system closes many piracy loopholes, but I would guess has a significant negative impact on sales.
Developers are therefore struggling to overcome a problem for which there is really virtually no solution - but zero tolerance to any kind of piracy is a start. In cases where there is a dispute after a genuine purchase, buyers can generally speaking unilaterally rescind their credit card payment as a last resort even where the seller refuses to refund, but in practice I don't think refunds are a problem where there are convincing reasons for offering one, even where it is not stated as official policy.
In nearly a decade of activity, we have only had to refund about six customers on the basis that they couldn't make our products work. I think any decent developer refunds rather than face a protracted fight. Therefore, with certain well known exceptions (developers who treat their customers with contempt) which are evident from a few minutes research, the often claimed reason for piracy: that the developer did not offer a demo, is not a valid excuse. In addition, usually within just hours of release, nearly all new addons are commented on by a large number of public forum posts. There is now plenty of information to inform a buying decision.
There are other factors having an impact on the dismal current climate for FS addons (and do not believe anyone who claims otherwise). One significant factor is that customers are becoming more and more demanding. This means that development time for the average addon is now twice as long as it was say five years ago. A professional and respected developer now needs a substantial number of sales just to recoup investment after up to two years with little or no income. At exactly the time when MS has pulled the plug on FSX for the time being, and in despite of the behaviour of bankers and governments causing an unprecedented recession, there are now a very large number of payware houses popping up to climb on a non-existent bandwagon. Some of them are producing somewhat mixed quality addons and they are all competing for an ever diminishing slice of a shrinking cake.
This has a squeezing effect on the better products, which are now often lumped together in a confusing and chaotic market that is subject to the growing trend of website reviews, often sloppily written, which are no longer reliable in some cases, because there is a growing commercial link between so-called independent websites and products, and in this atmosphere it is difficult to establish whether editorial independence is upheld. There are noble and notable exceptions to this, and Avsim is one of them, having a review board whose job it is to moderate reviews to establish fairness and balance. That commendable system is rarely the case with other websites.
Things are further complicated by the exponential growth of affiliate sellers or re-sellers. Some of them do a good job, claim a fair commission and work hard. Others, frankly, are merely climbing on a perceived gravy train, do almost no work for their commission and in some cases do not even host the product but merely act as a weblink from a threadbare page advertising the addon. In many cases the bandwidth, file hosting and other costs are entirely born by the original developer who nevertheless pays a hefty commission.
This often results in some affiliate sellers making a fair amount of cash in return for little work, with the combined marketing of a large number of products, while the individual developers make very little. An affiliate re-seller having a total product count of fifty to a hundred titles has very little interest in each individual item. What matters to him is the total number of sales. Similarly, re-sellers often have no particular interest in quality, only in quantity. As with all things, there are noble exceptions.
Further pressure is applied to developers who see affiliate sellers attempting to drop prices to compete, creating a domino effect and accusations from some that the developer is "ripping off" its own customers through trying to maintain a reasonable price for its work. The current discounts on offer are in my view a reflection of a misplaced desperation on the part of some sellers to remain competitive. It won't work, since there is a baseline price below which no developer can survive. Despite complaints that payware is becoming too expensive, in fact the vast majority of established developers have held prices well below the accumulated inflation rate and in our case current products, which now involve at least twice the work compared to previous one, are in fact cheaper in real terms than they ever were.
The ever growing number of here-today, gone-tomorrow flight sim websites further fragments an already fragile framework. Established websites are of course entitled to an income, but some of the recent additions are poorly run, charge for membership but without any value offered in return, and are constantly demanding freebies from developers on the basis of offering a review which either never appears, or eventually turns up after a long delay as a few hurriedly written, mispelled lines with basic grammatical errors, and mistakes as to the content of the package, or critiques which are clearly errors as a result of not even reading the package documents.
The solution to this growing unreliability is of course the forums, which nowadays have far more power than any website review. However that in turn imposes a great responsibility on posters not to post gratuitously biased or agenda-based criticism - something that is not always adhered to.
Thus, it is getting ever more difficult to create, market and sustain even a good product at precisely the time when economic conditions are already at their worst.
It is for this reason that piracy has reached a state where, combined with other factors, it is killing off the whole flightsim business by slow but sustained strangulation. One day, sim enthusiasts will wake up and find that there are no addons left to buy. It won't happen tommorow, or next month, but unless something significant occurs, the pirates will win, because the fact is there is no way to stop them. The only recourse the sim community has is to name and shame and to use social means to condemn them, publicly, privately and through any other means. That might sound a rather pathetic answer, but there is no other answer.
The now growing solution of requiring permanent online connection even to just RUN a piece of software (see Rise of Flight) is an absurd and silly attempt to address the piracy problem and is entirely counter-productive. But it is not surprising to see this happening. I fear though, that measures like this will simply turn off the honest customer even more.
The only thing that will promote the survival of a shrinking industry, apart from getting rid of the worst of piracy, is for developers to make all efforts to deliver a sound and reliable good quality package, to treat their customers with respect (and support forums alone do not always achieve this - what is needed is a fast and reliable e-mail response). But equally customers have it in their hands to behave honestly, to be measured, balanced and fair in their criticisms, and not to relentlessly expect miracles from products which are built upon an already flawed core software requiring a great deal of time and energy to blend with.
These are, by the way, personal views.
Rob Young