The fastest-selling video game of all time centers on a foot soldier conducting covert operations behind enemy lines. Perhaps not surprisingly, a gaming population two-thirds the size of New York City has followed suit by illegally downloading the title on the Internet.

At least 5.2 million copies of Activision Blizzard's (ATVI) Call of Duty: Black Ops were illegally downloaded between its Nov. 9 release and the end of 2010. That's about 100,000 copies a day, according to TorrentFreak, a blog about file-sharing platform BitTorrent, which has more than 160 million users globally. All told, more than 19 million people illegally downloaded five of the top-selling games of 2010, which also include Electronic Arts' (ERTS) Battlefield Bad Company 2: Vietnam, and Mass Effect 2, Take-Two Interactive's (TTWO) Mafia II and Activision Blizzard's Starcraft II.

"The trend is toward increased levels of piracy, and thus increased costs to the publishers, due to the growth of broadband access to the Internet, particularly in countries where there is no legal and enforcement deterrence against online piracy and little appreciation of, and respect for, intellectual property," says Ric Hirsch, senior vice president for intellectual property enforcement at the Washington D.C.-based trade group Entertainment Software Association (ESA). "Online downloading activity continues to be a problem as more households gain broadband access to the Internet, particularly overseas."

U.S. Game Developers Hit Especially Hard

How much illegal downloads cost video-game publishers is anyone's guess because of the challenges of reliably measuring pirated downloads, especially from overseas. As far back as 2007, the ESA pegged piracy costs to publishers at $3 billion a year, and that number included only illegally produced game disks and not illegal downloads.

Today, the ESA pegs piracy costs to publishers at "several billion dollars" a year. While much of the piracy is from overseas, most of the costs are borne domestically because the most popular titles are largely made and distributed by U.S. publishers such as Activision Blizzard and Electronic Arts. Activision declined a request for comment from DailyFinance.

Still, the ESA's estimate may be overstated because it's impossible to measure how many of the thieves would have purchased the game otherwise, says Wedbush Morgan analyst Michael Pachter. "I would bet that three-quarters of the illegal downloads were by people who would never have purchased the game anyway," says Pachter. "The total cost is probably $300 million to $500 million annually, but I can't say it's much more."

Regardless, game pirates appear to be one step ahead of publishers when it comes to outsmarting safeguards against online theft. Many publishers now avoid distributing personal-computer versions of their games and stick with either disks or downloads solely through consoles such as Microsoft's (MSFT) Xbox or Sony's (SNE) PlayStation.

That means antipiracy efforts aren't likely to keep up with the growth rate in global broadband access. Such efforts include so-called technological protection measures (TPMs) that publishers are embedding to better disable titles that are illegally acquired, as well as stricter laws against illegally downloading titles through Craigslist and other online marketplace sites.

A Reminder of the Hidden Risks

All told, the likely rise in piracy puts a further damper on a video-game industry hampered last year by falling sales, as many cash-strapped gamers opted for either used games or free titles online. U.S. game software sales through the first 11 months of 2010 fell 5% from a year earlier to $7 billion, according to research firm NPD Group.

With the Activision Blizzard release of Call of Duty, though, the industry showed signs of life heading into the holiday season as software sales in November alone rose 4% to $1.46 billion. Call of Duty had grossed more than $1 billion in sales by late December.

"These numbers should serve as a reminder of the hidden risks associated with digital sales, especially as the piracy on the top-pirated PC title -- typically downloaded -- was almost 200% greater than that of any console game (largely sold as packaged media) despite the vastly smaller installed base," wrote Janney Capital Markets analyst Tony Wible in a Jan. 3 note to clients. "We believe higher levels of piracy should encourage more support of packaged media."

"I'm not sure that there is much to be done to stop tech-savvy thieves who have their minds set on stealing intellectual property," adds Pachter. "The only real solution is cloud-gaming, where no consumer possesses a copy of the game. That's the direction the industry will ultimately take."


Increase your money and finance knowledge from home

Economics 101

Intro to economics. But fun.

View Course »

How much house can I afford

Home buying 101, evaluating one of your most important financial decisions.

View Course »

Add a Comment

*0 / 3000 Character Maximum

17 Comments

Filter by:
dal

I look for free online game sights like Jagex's Runescape for gaming, I am not going to go out and have to buy another electronic device just to play the occasional game. I know folks who have all the latest devices and games and no life, games are fun but so is life..... live it!

January 07 2011 at 5:27 AM Report abuse rate up rate down Reply
RPMWWE

Software piracy is so lucrative because of the ridiculous amounts of money the software companies charge for it. Lower the price and sell more copies like the pirates do!

January 07 2011 at 2:05 AM Report abuse +3 rate up rate down Reply
R.M.R.Jr.

like the hackers getting into my bank, and all the other hacking going on cant stop them . they are good . the Wourld got to end Amen, Peace on Earth

January 07 2011 at 12:52 AM Report abuse +1 rate up rate down Reply
R.M.R.Jr.

Hopfully the Wourld will have a day to talk 2 higher power Dec.21, 2012 .So we can start over, as this stuff going on in the Wourld is getting out of control. There really is no way out of r problems, no matter how hard we think and do. Amen Peace on Earth

January 07 2011 at 12:44 AM Report abuse +1 rate up rate down Reply
1 reply to R.M.R.Jr.'s comment
dal

not trying to be a grammar nazi but it is spelled "world".

January 07 2011 at 5:17 AM Report abuse rate up rate down Reply
miterball

I don't feel for these companies, as the prices they charge are a crime. The patent system in America is designed to rip off the consumer and protect the rich companies from any real competition.

January 06 2011 at 10:22 PM Report abuse +1 rate up rate down Reply
Steven

Well when gaming goes to the clouds I'll go to my old computer and my old games because I refuse to deal with companys like steam and valve where the downloads are forever and your system is slowed down so much there is no fun left and if the game doesn't work or it really sucks good luck getting a refund. Its like you are paying for something bad someone else did but then that what usually happens in a policed enviroment you become overlawed and that justifies the overcost. By the way I have never pirated or bought pirated goods but if you have I hope they catch you and make you use steam for life.

January 06 2011 at 10:13 PM Report abuse +2 rate up rate down Reply
runyoudown2

maybe this will make the big gaming companies realize that thet are overcharging for their product,and people are sick of it!!!!

January 06 2011 at 10:01 PM Report abuse +5 rate up rate down Reply
linus922

Talk about a victimless crime.

January 06 2011 at 9:48 PM Report abuse +6 rate up rate down Reply
nsheats

I hope they pirate 100% and put them all out of business. Then maybe our children will join the real world and realize that, gee if you kill someone in real life they dont just get born again upon reboot.

January 06 2011 at 9:01 PM Report abuse +2 rate up rate down Reply
2 replies to nsheats's comment
runyoudown2

nsheats:that's a parents job!!! a parent is supposed to teach their children
fact from fiction,and right from wrong!!!

January 06 2011 at 10:05 PM Report abuse +7 rate up rate down Reply
Steven

Do your job as a parent and quit blaming others cause you lack the ability to teach them reality from fiction.

January 06 2011 at 10:16 PM Report abuse +4 rate up rate down Reply
tammy1126

Well one suggestion to slow or stop the piracy would be to realize the world has changed!
While wages are going down - for those lucky enough to have a job - and unemployment is still at all time highs, companies need to grasp the fact they can't charge 1994 prices anymore because people do not have 1994 incomes anymore.
Gone are the days of being able to slap $60.00 down for a video game, $400.00 for a sporting event, $50.00 for a night at the movies. We still want the products, we just cannot afford them anymore!

January 06 2011 at 8:31 PM Report abuse +10 rate up rate down Reply
1 reply to tammy1126's comment
Steven

Finally some truth in advertizing or is it advertising?

January 06 2011 at 10:18 PM Report abuse +2 rate up rate down Reply