Interactive Software Federation of Europe

Piracy and Counterfeiting

Video games are on the front line of cultural innovation and at the forefront of the development of the information economy. They have constantly pushed the boundaries of the online experience, have been at the heart of the smartphone and tablet revolution, and are pioneering the use of high-intensity cloud computing. Few other industries can demonstrate the same level of innovation, creativity and development of original content. The game industry now offers more, new innovative ways for consumers to experience its products online than any other content industry. It epitomises technological innovation and thrives on the development of original intellectual property. A robust and workable IP framework, together with strong enforcement, is accordingly integral to the industry's continuing success. 

The Piracy Threat

Piracy constitutes a major threat to the game industry and costs it hundreds of millions of Euros in lost sales every year. In recent years the Internet has played a vital role for the industry, being the main driver in the rapid growth and development of online games, leading to increased game development, production and jobs. The growth of online piracy, however, has been a major hindrance and discouragement to the provision and take-up of online game services, as well as being highly damaging to traditional physical goods business models. Online piracy causes widespread economic damage to European game developers, publishers, distributors and retailers. It also hurts national tax revenues and undermines the prospects for economic growth, employment and technological innovation.

It can take two to three years and tens of millions of euros to bring a major game title to market. Only a small percentage of these games achieves profitability, and the active sales cycle of a new game release is often only a few months long. The industry, therefore, incurs particular damage due to the widespread availability of devices and software designed to circumvent the technological protection measures (TPMs) that the industry uses to protect its games. This affects companies of all sizes, damaging both revenue streams and employment levels right across the industry.

To combat piracy, the game industry has tended to rely, first and foremost, on its ability to invest in the development and introduction of disruptive technologies and business models, rather than on litigation. Experiences with new business models, however, tell us that with new approaches, new IP and related enforcement challenges also emerge. These new threats may not be entirely IP infringement based, but may instead resemble acts of fraud, theft or misappropriation of services. While new business models are clearly part of the solution to piracy, and they are being aggressively pursued, they are not likely to be complete answers, in and of themselves.

Main Piracy Problems

Hosting and Linking Sites: Hosting sites store infringing files uploaded by users that are then made available for download by other users. Linking sites feature one-click links to these stored files. The wholesale use of links to further and facilitate the downloading of pirated content by millions of users worldwide has become an enormous problem for all of the content industries, including the game industry. The links are posted by users who are generally “members” of, or affiliated with, the sites concerned and are usually organised by content category and/or supported by search functionality to facilitate users finding the content they are seeking.

The linking sites have a business model consisting of deliberately and systematically making infringing game and other content available through the provision of links, and they generate profits by running ads that monetize the high volume of visitor traffic attracted to the easy access to content that they provide. The operators of both hosting and linking sites can generate substantial revenues from advertising (and from subscriptions and donations), and they generally operate anonymously and without respect for local taxation or other laws. They are also very adept at hopping from one hosting provider to another, whether in the same country or in another. Despite industry efforts to take down millions of infringing game files and links, they persist as a significant source of pirate game downloads.

BitTorrent Indexing Sites and Trackers: BitTorrent indexing sites serve a similar function to linking sites. However, rather than directing users to hosting sites, indexing sites provide users with links to torrent files, which enable them to connect with other users to share infringing game and other content. These sites (the largest and most notorious of which is, of course, The Pirate Bay), therefore, serve a primary function of enabling users to find torrents for infringing copies of game files, permitting them to find and join swarms where such copies can be downloaded from the other peers in the swarm, using a BitTorrent application.

BitTorrent trackers are servers that facilitate transfers between peers using the BitTorrent protocol. They play an indispensable role in directing the traffic of users who are attempting to participate in the P2P transfer of content via BitTorrent. Trackers facilitate and expedite the creation and growth of swarms, and thus the infringing copying and downloading of illegal copies.

Like the other content industries, the game industry suffers serious economic damage from widespread illicit P2P file-sharing. The casual infringements regularly committed by millions of users worldwide are an example of what has been rightly termed by an English High Court Judge, as “the tyranny of small decisions that have ruinous economic consequences” (Mr. Justice Kenneth Parker in BT v Secretary of State for Business Innovation and Skills [2011] EWHC 1021 (Admin)).

Circumvention Device Distribution Sites: These e-commerce websites are dedicated to the sale of devices (such as “mod chips” or “game copiers”) or software (“soft mods”) that bypass the TPMs that the industry uses in its consoles and handheld devices to protect its games. By enabling users to download and use infringing copies of games, the distribution of these devices contributes to a higher level of game piracy. Device or soft mod sites may distribute directly to the consumer, or furnish raw materials to online or physical services that install such devices, i.e. circumvention services. Nine out of ten of the most popular (by traffic ranking) e-commerce sites that offer circumvention devices for sale within the EU are hosted and operated from Spain.

Day-by-day, these circumvention devices further fuel the levels of online piracy because each one functions as a gateway to multiple future infringements and inflicts untold damage on legitimate game sales. The widespread availability of circumvention devices and services significantly contributes to the growth of online piracy, as unauthorised copies of games downloaded from the Internet can only be played on consoles modified by such devices, technologies or services.

Unauthorised Private Servers (also known as “pirate servers”, “grey shards”,  “emulators”, or “black net servers”): Among the most popular of the new online business models in the game industry are the “free-to-play” (F2P) and, particularly among MMO (Massively Multiplayer Online) games, the monthly subscription model. The cloud-based nature of F2P and subscription based games clearly insulates companies from some of the traditional strains of online piracy. Because F2P games are distributed free of charge, and because much of an MMOG’s value derives from server-based action, the harm associated with unauthorised copying and distribution of client software is diminished. However, new forms of piracy designed to exploit cloud-based content services have emerged in recent years. One particular threat involves the establishment and operation of unauthorised private servers that are used to host unauthorised game play. These servers seek to replicate the functionality of a publisher’s official server, allowing users to play an online game without connecting to that official server. When users are diverted to play on unauthorised servers, the publishers are not able to monetise their online games (through advertising, microtransactions, or monthly subscriptions), and thus face reduced opportunities to recoup their investments.

Establishing and maintaining unauthorised servers often involves multiple acts of copyright infringement as well as the circumvention of TPMs. When cloud-based games are distributed, the publisher typically incorporates into the client software TPMs that prevent the client from connecting to servers other than those operated by the publisher. Operators of unauthorised servers must therefore distribute either hacked versions of the publisher’s client software or circumvention software designed to disable the client’s TPMs that would otherwise prevent the client from connecting to the unauthorised server. Moreover, to enable online gameplay, operators of unauthorised servers must often use infringing copies of a publisher’s server software.

Game companies’ terms of service generally prohibit gameplay on unauthorised servers, and publishers generally try to add features to their official servers to make the gray ones less attractive. As the game industry migrates to cloud-based distribution models, it is unfortunately likely that the unauthorised server phenomenon will begin to supplant more traditional forms of piracy.

Unauthorised markets for digital entitlements: F2P, “freemium”, and MMO games in which the sale and attainment of digital entitlements (in-game currency, play enhancements, achievement-based rewards, supplemental game content) are central to the game experience, are frequently undermined by unauthorised secondary marketplaces that offer these entitlements for sale in exchange for real-world money. In many cases, these digital or virtual goods are themselves copyrighted artwork and images. In nearly all cases, publishers’ EULAs and terms of use prohibit the sale of such items outside of their games. The sellers in these unauthorised marketplaces often acquire these digital goods by employing phishing schemes and other fraudulent conduct to steal player accounts and to empty them of the player’s hard-earned goods. These unauthorised markets destroy the carefully-calibrated in-game economies necessary to promote a good player experience, and ultimately undermine the value of the games themselves.