Report Says Game Piracy Cost Companies Over $3 Billion in 1998

Despite weakened economies abroad and extraordinarily low prices for pirated games, American computer and video game publishers lost an estimated $3.2 billion worldwide in 1998 due to software piracy. "Worldwide piracy dollar losses, which don't even include losses due to online piracy, are only half the story," said Douglas Lowenstein, president of the Interactive Digital Software Association (IDSA), the interactive entertainment software industry's trade association. "Staggeringly low prices for pirated entertainment software mean that a huge number of counterfeit games are being fenced. For instance, in a country like Thailand, where 93 percent of the market is counterfeit, games are available for as little as 70 cents. When you realize that pirated games are sold for pennies on the dollar and enough are sold to equal losses of $3.2 billion then you begin to understand the immense magnitude of the problem. " The Washington-based International Intellectual Property Alliance (IIPA) has included the IDSA's filing in a report to the United States Trade Representative. The IDSA is the only entertainment software organization in the IIPA, which represents America's leading content associations on piracy issues worldwide. The IDSA's $3.2 billion figure covers the 58 countries named in the IIPA filing. The largest entertainment software losses are attributable to piracy in China, where 95 percent of the game market is pirated product ($1.42 billion); the Russian Federation, where 97 percent of the market is pirated ($2.40 billion); Mexico, where the piracy level is 85 percent ($1.70 billion); and Hong Kong, where the piracy level is 72 percent ($1.12 billion). Other markets contributing to serious entertainment software piracy are Thailand, Malaysia and Paraguay. "We remain very concerned about the mass export of pirated products from these countries destined for viable markets, such as the United States, the European Union, Brazil and Argentina," said Lowenstein. In the last year the industry has seen a marked rise of exported pirated software from Thailand, where the piracy level has jumped from 85 percent to 93 percent over the last year; Malaysia, where the piracy level is 99 percent; and Singapore, where the piracy rate has risen 5 percent to 73 percent in 1998. The IIPA report raised two themes which are especially important to the entertainment software industry: the increased presence of organized crime in piratical activities, and the failure of countries to protect intellectual property adequately as governed by international treaties. Now, the good news from IDSA: game business shows double-digit growth Piracy may be a big problem for the game industry, but on the bright side, the IDSA also said last week that sales of video and computer games jumped 35 percent in 1998 to 181 million units, the equivalent of almost two games for every household in America. Based on data compiled by the NPD Group's Interactive Entertainment Software Service, video game sales, including portable games, experienced the greatest surge, topping 1997 sales by 35 million units, a 37 percent increase. PC game sales also registered an impressive increase of 12 million units (18 percent) over last year. Interactive entertainment software sales reached a record-breaking $5.5 billion in 1998, with video game sales reaching $3.7 billion, and computer game sales reaching $1.8 billion. This 25 percent increase over 1997 sales made it the third consecutive year that that industry experienced double-digit growth. According to the NPD Group, video and PC game sales increased from $3.2 billion to $3.7 billion between 1995 and 1996, and from $3.7 billion to $4.4 billion between 1996 and 1997. Lowenstein also noted that the industry growth represents more than economic statistics on paper -- it directly affects thousands of Americans for whom it provides jobs. A report released last year by the IDSA, in conjunction with Coopers and Lybrand, showed that the industry directly employs at least 50,000 workers in the United States and 17,000 more internationally. "We expect the industry to continue to grow at double-digit rates in 1999," said Lowenstein. With more technological advances each year, the introduction of new titles and platforms, and mass-market acceptance of video and PC games, it is clear that the industry is still scoring big.