Video-game pirates on the loose

The black market for games has hit $3.2 billion annually, and it's growing, too.

Electronic Arts, the world's largest independent video and computer game maker, and Sony Computer Entertainment America, manufacturer of the PlayStation game console, recently filed suit against an Internet "ring" that they allege was distributing pirated copies of Electronic Arts games for the PlayStation.

Last week in Los Angeles, authorities confiscated over 1 million unlicensed Pokemon toys. A few weeks earlier, U.S. Customs officials in Elizabeth, N.J., confiscated $250,000 worth of illicit Pokemon plush dolls, figurines, key chains, clocks and other items.

The video game business is bigger and healthier than ever, and so is video game piracy. According to Interactive Digital Software Association (IDSA) estimates - the IDSA represents video and computer game makers - game pirates sold approximately $3.2 billion in packaged goods in 1998. Considering that worldwide sales of legitimate games is estimated at $16 billion, sales of pirated games may cost the industry as much as 20 percent of its sales.

"We figure that we lost approximately $400 million last year," said Pat Becker, Electronic Arts' director of corporate communication. "Publishers with hot titles tend to be the ones that get targeted. Bad games don't get copied much in the marketplace."

Sports-games hottest
Electronic Arts' sports line has solid followings both in the United States, where its "John Madden NFL" series always breaks into the best-seller lists, and internationally, with "FIFA Soccer." According to Becker, the defendants in this case include some former Electronic Arts employees who downloaded games on to the Internet illegally.

"These are titles that were acquired by people who formerly worked at Electronic Arts and uploaded to this counterfeit ring called Paradigm," Becker said. "The big challenge with the Internet is that it is hard to track people down."

"In this particular case, there were a number of illegal copies that were seized as part of the raid: 'Dungeon Keeper,' 'FIFA: Road to World Cup 98,' 'Madden NFL 98,' 'NBA Live 98,' 'Need For Speed 2,' Need For Speed: High Stakes,' 'NHL 98,' 'Nuclear Strike,' Sid Meier's Gettysburg' and 'War Hammer: Dark Omen.'"

The term game piracy used to refer to companies that manufactured and marketed unauthorized copies of games, usually in Asia and South America. With the growth of the Internet, this definition has changed. Rather than manufacturing cartridges and software, pirates can now distribute it online.

"Piracy in all of its forms represents the biggest threat to the continued growth of this industry," said Douglas Lowenstein, the president of the Interactive Digital Software Association. "The $3.2 billion figure is just for packaged goods. It doesn't include the Internet, which I would estimate represents hundreds of millions of dollars. There are no hard figures for piracy on the Internet."

CD-R copies
Software piracy also exists on a much smaller level. According to Lowenstein, many consumers burn their own pirated games using common CD-R drives. While the standard PlayStation will not read ordinary CD-ROM, consumers can purchase "MOD" chips that enable PlayStations to read standard PC CD-ROM and Japanese PlayStation games.

In fact, one of the reasons Nintendo decided to use cartridge ROM instead of the far less expensive CD-ROM with the Nintendo 64 is that cartridges are harder to duplicate. While this decision has hurt their business, it has cut back on the level of piracy.

"Our definition of 'piracy' consists of counterfeit software - something that purports to be an authentic cartridge but is not," said Nintendo general counsel Rick Flamm. "There is a lot of counterfeit Gameboy software, and there is a little bit of counterfeit N64 software. We estimate that Nintendo lost approximately $725 million to piracy in 1998, and that does not include Internet piracy."

Nintendo and Electronic Arts are not the only companies taking piracy seriously. The IDSA has launched an aggressive attack on counterfeit games and the unauthorized distribution of intellectual property. When MSNBC ran a positive story about MAME (multiple arcade machine editor), an unlicensed emulator that allows people to play arcade games on their computers, an IDSA official contacted the author to discuss the story.

Conducting own probes
On a larger note, the IDSA has worked vigorously to encourage confiscation of counterfeit products and the prosecution of software pirates. "We do a number of things. We do our own investigations. We have people on our staff who surf the Internet investigating sites that we suspect of counterfeit activity on a daily basis," said Lowenstein.

"We also get leads from our members that we investigate on their behalf."

"We are also working with the Justice Department. You may see cases of a legal nature coming out of the Justice Department and cases of a civil nature coming from the industry."

In fact, the case that Sony Computer Entertainment America and Electronic Arts are pursuing broke off of a civil action in which the IDSA is involved.