Sega, others take aim at piracy of video games

July 31, 2000|By Alex Pham | Alex Pham,THE BOSTON GLOBE

Music and movies aren't the only things being pirated and distributed over the Internet these days.

Video games also are big targets.

Sega of America said last week that it has shut down 60 Web sites and 125 auctions trafficking in pirated video games played on Sega's Dreamcast console.

Software pirating has existed for as long as software has been around. What's new is the unprecedented ease brought by the Internet for pirating and distributing software, leading to a crop of new applications such as DivX, which can be used to copy movies.

On the music front, a federal judge last week ordered Napster to stop allowing Internet users to share each other's music because it violated copyright laws.

The gaming industry estimates that more than $3 billion is lost every year from piracy, a huge sum considering the industry itself pulled in just $6.9 billion in 1999 from sales of both consoles and software.

"Console makers earn a majority of their cash from licensing software," said Michael Goodman, a senior analyst with the Yankee Group. "So piracy is literally a direct attack on their revenue stream."

Sega, which is based in Japan and has operations in San Francisco, is teaming up with other console makers and software publishers to fight back. Their arsenal was considerably beefed up this year when Congress passed the Digital Millennium Copyright Act, which allowed copyright holders to go after Web sites and Internet service providers that host sales of pirated software.

In this latest broadside, Sega began issuing cease-and-desist orders to five auction sites, including Yahoo!, eBay, Lycos, Excite and, according to Charles Bellfield, Sega's spokesman. In addition, the company asked Internet service providers to shut down Web sites that sell pirated games, as well as companies that are host to virtual hard drives used by their customers for storing pirated games.

"Those companies that do not comply will face both civil and criminal prosecution by both federal and state authorities with whom we are working with," said Bellfield.

Thus far, all the companies Sega has approached have cooperM-Wated, according to Bellfield. Sega continues to issue cease-and-desist orders daily, he said. The company, which said it loses millions of dollars a year to piracy, is working with European officials and negotiating with Asian law enforcement on its crusade.

In March, Sega teamed up with game-maker Nintendo and Electronic Arts, a large game publisher, to file a lawsuit against Yahoo! to prevent pirated games from being sold on the Web site. The case, filed in U.S. District Court in California, is awaiting trial.

But game industry analysts question how successful companies will be in stamping out illicit copying of digital products. A $200 compact disc "burner," for example, can duplicate CDs.

"This is part of a bigger picture of piracy," said P.J. McNealy, analyst with the Gartner Group. "As more things become digital, they will become more portable and easier to exchange, particularly over the Internet."

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