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CESA: Portable Piracy Cost Game Industry $41.5 Billion
CESA: Portable Piracy Cost Game Industry $41.5 Billion
June 7, 2010 | By Eric Caoili

June 7, 2010 | By Eric Caoili

Japan's Computer Entertainment Suppliers Association (CESA) says video game piracy for portable consoles like the Nintendo DS and PSP around the world cost the gaming industry at least ¥3.816 trillion ($41.5 billion) between 2004 and 2009. Piracy in Japan alone accounted for ¥954 billion ($10.4 billion) of that amount.

In a study conducted with Tokyo University's Baba Lab, CESA checked the download counts for the top 20 Japanese games at what it considers the top 114 piracy sites, recording those figures from 2004 to 2009.

After calculating the total for handheld piracy in Japan with that method, the groups multiplied that number by four to reach the worldwide amount, presuming that Japan makes up 25 percent of the world's software market.

CESA and Baba Lab did not take into account other popular distribution methods for pirated games like peer-to-peer sharing, so the groups admit that the actual figures for DS and PSP software piracy could be much higher than the ¥3.816 trillion amount the study found.

The firms published other details from their investigations of the piracy sites, including its finding that the U.S. has the most servers hosting piracy sites, while China has the second most. China and the U.S. alone make up 60 percent of the total amount of servers hosting piracy sites, according to a translation of CESA's report by Andriasang.

Also mentioned in the report, which is available to download (in Japanese) from CESA's site, is that the U.S. accounted for the highest number of accesses to the piracy sites it analyzed. Japan had the second highest number of access, and China had the third highest.

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Nicolas Barriga
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1 illegal download != 1 lost sale

Time and again we see these bogus claims that an illegal download is a lost sale, when all the evidence points to piracy leading to more sales in developed countries, as people try the game first and often buy it later. And in developing countries, where there usually is more piracy, most people wouldn't have bought it because of the ridiculously high prices.

Dave Endresak
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Actually, pirating an IP product is indeed stealing. I really have no idea how anyone can keep claiming it is not. This includes both the legal terms as well as simple common sense (the latter can be seen by simply asking if you have a problem with someone you do not know helping themselves to property you paid for such as your clothes, computer, or anything else, without your permission). People need to at least be honest about their actions and clearly state that their IP piracy is an act of theft, nothing more and nothing less. There's no reason to attempt to hide or distract anyone from what they are actually doing.

Also, claims that piracy increases sales have been proven false when figures are studied. The number of people who pirate an IP and later buy it is a small percentage of the overall piracy rates. Various studies vary as to specifics, of course, because it depends on what sites are studied and what control factors are used.

That being said, this report certainly is not something to take at face value because there are several problems with the assumptions made. For example, assuming that Japan accounts for 25% of total global sales of entertainment software is problematic at best. I would have to see sound, logical reasoning for such an assumption, but even if such reasoning were supplied (and it may be in the complete report), that doesn't change the fact that it is a serious limitation within the study and the actual, real world figures could be wildly different from the study results.

On a more positive note, companies such as Firaxis, Valve and Bethesda have done very well with PC-centric software releases, so claims by other companies that PC piracy is killing their business cannot be valid unless they are simply adopting poor business models, releasing inferior products, or have other problems, all of which indicate something other than piracy being the true source of their failures. In addition, you have companies such as Zynga and Nexon being very profitable with PC software, so obviously there are far more factors at work that cause failures or problems than simply piracy, particularly choice of business models.

In addition, it is critical to note that most Asian markets outside Japan such as Korea and China are dominated by PC entertainment software, not consoles, regardless of whether the consoles are portable or handheld. This has been reported repeatedly in Gamasutra and elsewhere, including by global financial analysis firms. The reason for this is because countries such as China and Korea banned Japanese consoles until very recently so the markets there developed almost entirely on PCs.

Even for Japan, the PC market is very vibrant and creative in areas such as doujin software to professional releases of products in genres such as the bishoujo, otome, and yaoi genres. In addition, I think it's worth noting that Japanese copyright law differs slightly from American law with respect to limited copying of IP by the end user for personal use. However, international treaties (Berne Convention) means that signatory countries agree to abide by their respective laws.

Finally, it's amusing to hear people complain about game prices today when the fact is that games today are far cheaper than they used to be in the past. Going back to the Atari 2600 era in the 1970s and early to mid-1980s, games were around $30 per cartridge, and there was pretty much no used game market aside from a garage sale. By the late 1980s, game prices had jumped to $50 on average to $70 for Phantasy Star (and many people bought the Sega Master System just to play the latter, the very first cartridge game that allowed saving progress due to a battery backup included in the cartridge). By the early 1990s and the 16-bit era, there were various games that started including a battery and thus carry a higher price tag, so the price was still $50 for non-battery games (even PC Engine/TurgoGrafx-16 CDROMs) or $70 or so for battery games. However, the import market also took off at this time and was profitable enough that companies were able to sell Japanese imports for $70-$100, no problem. Things have continued in this way up to the present day and the prices have remained roughly the same regardless of vastly increased development costs for various games and far more powerful technology in consoles and PC, as well as the simple economic fact of inflation.

Companies that complain about piracy are certainly focusing on the wrong thing, no question about it. So are organization who represent the industry such as CESA and ESA. Although it's understandable that they are stuck in outdated modes of thought, the important thing is for (a) such groups to look ahead, not backwards, and (b) consumers to stop making erroneous and misleading statements about the nature of their actions and the consequences on any IP owner. The last point means stop claiming that theft is not theft or that it is somehow helpful to property owners, and simply make the choice to turn away from a product that is not offered in the way that you deem fit (price point, distribution method, or whatever other complaints you may have). Still, be sure to let the owners know that they have lost you as a customer and why so that they have the choice of changing their ways in the future.

Ben Rice
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I'm pretty anti-piracy, however really think about it from a pirate's standpoint;

I've downloaded a game, played it through. Exactly what incentive is there for me to purchase the game? Do you believe individuals who knowingly download something illegally, suddenly have a change of heart most of the time?

Certainly it's not a 1 to 1 ratio. However, I think the core issue is that people who buy games are a different demographic than people who pirate games. A pirate would not have purchased the game in the first place.

Once piracy comes to the point where the buying demographic is casually downloading games (much like the music industry during Napster times), then it's an issue. I don't think we are there now.

Maurício Gomes
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All this piracy talk is funny, when they ignore where the big piracy actually exists (developing countries, where games are BOUGHT pirated, not downloaded)

Wylie Garvin
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I don't think Phantasy Star was the first cartridge game to allow saving progress on battery-backed memory. According to wikipedia (source of all-truthful information!) Phantasy Star was released in Japan in December 1987. However, the NES version of Legend of Zelda had battery-backed SRAM for saves, and it was released in North America in August 1987.

I agree that when inflation is taken into account, the cost of games has been higher in the past than it currently is today. A larger chunk of those prices went to manufacturing costs back then. Today, the lion's share of the cost of AAA titles is the production and marketing budgets, stamping out optical discs is a very small fraction of the cost.

I think that companies fighting against piracy are fighting an unwinnable, uphill battle--but its easy to see why they're doing it. AAA publishers see 10x to 20x as many pirates playing their games as they do paying customers. If they could convert even 5 or 10% of the pirates into paying customers, they would be extremely happy, even if it cost them some of their existing customers (due to annoying DRM or whatever). They also despise the 2nd-hand market, where companies like GameStop siphon new sales away from them by offering the game used for $5 less. Many gamers don't seem to care if their dollars go to pay the game's creators or just go to some unrelated company (GameStop) that can make a quick buck. They don't care, if it saves them $5. So its not surprising that the publishers are now starting to include "free" non-transferrable DLC content that 2nd-hand users would have to pay $10 for. They want to convince gamers to buy the "full" version of the game from them rather than picking up a used copy to save $5. The aggressive DRM is also mainly about piracy, but has the happy side effect of hindering second-hand sales too.

Will these schemes succeed, or will gamers ultimately find them too inconvenient (or unprincipled) and reject them? I don't know. To me its reminiscent of the music industry trying to stop file sharing (ha ha), but anyway its not hard to see why the publishers act as they do.

R Hawley
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The implication is there's $41.5 billion out in the world right now there that would be in the pockets of publishers instead of ... elsewhere. Somehow I don't see it.

Valuation and reality are very different entities. They should be grateful they still have jobs.

Maurício Gomes
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Today, I have a steam full of games that I don't even have physical time to play.

But when I was child, I had exclusively pirated games.

This pattern also applies to ALL my adult friends. (actually, all friends, all the ones that are below 16 also play exclusively pirated games).

Btw: I have a steam full of games, because retail games are ridicously expensive, I own only 3 of those, and two I bought for 25 USD. I, and my friends, and actually everyone I know, buy games in those cool steam bundles and promos, paying 60 USD for a luxury is ridiculous.

Joe McGinn
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Piracy likely causes some lost sales, but yeah these articles that assume 1 download = 1 lost sale are idiotic, and counter-productive. Everyone knows such sensationalist numbers are BS, so the whole article becomes a throwaway, which is kind of a shame.

It's like dishonest anti-drug propaganda. There are drugs that can be very very harmful, but if you lie about basic stuff and people KNOW you're lying, the kernel of truth is lost.

[User Banned]
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This user violated Gamasutra’s Comment Guidelines and has been banned.

Fiore Iantosca
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"Too many game developers and publishers are CLUELESS I'm hoping for a crash personally, and if not a crash to get rid of the cosmic fuckups now in the industry. "

Great line, and I totally agree :)

Kisai Yuki
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1 Download != 1 lost sale. For a lot of pirates, they collect stuff just to say they have it, not so much play it. Bragging rights and such.

The interesting thing about Japan (Doujin works) is that they are often sold along side commercial works, or sold at conventions and such. You never hear about these people complaining of piracy, even though their software is often uploaded to the internet the very day of release too. They know it's going to happen, they don't invest in DRM or copy protection schemes. The entire reason North America even knows the existence of such software is either from a popular fandom (Doujin works often are often various levels of fair use) or the piracy of it.

It still doesn't make it right. If it was simply easier to buy a game off steam than it was to download it from a pirate, then people would lose any justification they had for pirating it other than greed/do-not-want-to-pay. But not every game is on steam, and region locks do more harm by not allowing software(games, movies, dvd's, music, etc) to be purchased from anyone other than a pirate. (Just about everything can be "Purchased cheaper" in SEA countries.)

To use Japan as an example again, look up "Touhou Project", this is one type of IP that the fanbase has produced more doujin games (some of professional quality), art, and music than the guy who started it. See when you don't sue the fanbase, the fanbase competes with each other to produce their own (sometimes better) interpretations and remixes. Do that in North America and you get told to cease and desist.

No instead in North America we have large companies buying up all the IP rights to things, and then sitting on it, suing anyone who doesn't license it. This is why licensed games are such terrible shovelware. They aren't making the games because they have an interest in the IP, they're making the games because "fans are stupid and will buy anything."

Which leads back to the piracy problem, when a game is nothing but rubbish, why would anyone want to play it, let alone buy it? The pirates will download it, say they have it for bragging rights, but never play it.

David Brady
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That's about 7 games for every DS and PSP in the world. Seriously, I have no idea why anyone actually pays attention to these figures. They are meaningless.

Christopher Boothroyd
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Go to the cloud and leave the pirates behind!