Games makers get ready for combat

The DTI has accused the computer games industry of being part of 'rip-off Britain'. Now Lara Croft and co are fighting back
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It sounds like a great idea for a computer game. You run a multimedia publishing empire that suddenly finds proposed changes to the law mean you face having to fight off cheap imports and pirate copies or end up losing your business.

That scenario could be just a few years away, and it is not a vision of the future being welcomed by the Britsoft games community, which still struggles to report regular profits. As the sector musters its forces to combat the threat, it finds that the target of its protests is the very Labour government that likes to be seen promoting the development of digital Britain.

It took the industry a while to spot that when Stephen Byers, the former Secretary of State for Trade and Industry, spoke about changing the European trademark laws to relax the rules stating that brand owners can prevent imported goods being sold in the European Union, he was talking about computer games. Byers has been replaced by Patricia Hewitt, previously the DTI minister for Small Business and E-commerce, in the post-election Cabinet.

Among a long list of products covered by the DTI's most recent international price comparison, which looked at the prices of 133 items across Europe and the United States, eight computer games were included. They were more expensive in Europe than the US. Byers came to the conclusion that only by removing trademark restrictions could competition be increased.

"We want the European Commission to change the Trade Mark Directive so traders can import cheaper branded goods from any country. Allowing brands to dictate which retailers can sell their products and where they can import them from is unacceptable," Byers said at the launch of the price survey.

The election put the project on the back burner, but a DTI spokeswoman confirms that the campaign to change European trademark rules is still on the agenda and will be resumed soon.

The consequences of Byers's message are still sinking in at the offices of the European Leisure Software Publishers Association (Elspa). Part of the reason for the delayed reaction is that the DTI failed to warn the group, which represents the UK games industry, about the initiative.

Roger Bennett, the director-general of Elspa, says: "It just happened. Stephen Byers stood on the steps of the DTI and said, 'The consumer is king.' We were not consulted and not told in advance." He is suspicious of the motives behind the Byers initiative and believes the games industry has wrongly fallen under the umbrella of the growing number of product categories used to back up claims of a "rip-off Britain".

"Where do they get it from? Is this government intent on turning the UK into one huge shopping mall? This will cause a further undermining of the market," Bennett says. He paints a bleak picture of the future if the rules are changed, predicting that the damage to the Britsoft community could be catastrophic. In the face of falling profits, investment will drop, some publishers will disappear and there will be job cuts in the industry.

On top of the threat of cheap products flooding in from Asia and particularly Eastern Europe, Bennett claims that the lifting of the sales barriers will allow easier passage for pirate games to come in from places such as Russia and Estonia. "Product is being ripped off, but it looks exactly the same as an original, and how are we going to restrict it?"

Already publishers are starting to think about how they could counter any changes by reducing their exposure to non-EU imports. John Pirie, executive vice-president of distribution for Europe at Infogrames, says its policy of offering cheaper pricing to poorer countries outside the EU could change. "If you are working with a partner, then with these changes there is nothing to stop them grey-importing into the UK, and sponsorship and subsidy comes back to kick you in the teeth."

As part of his defence, Pirie calls on the DTI to recognise the costs of developing a game and the need to recoup some of that outlay through the retail price. "Tens of millions are invested in games, and it can cost the same as a film," he says. "The costs are large and you have got to get some return, but we don't make as much profits as people think we do."

Richard Barclay, marketing director at UbiSoft, says recent losses among publishers, which included a £96m pre-tax loss at Eidos for its financial year to 31 March, are evidence that the industry is not ripping off consumers. "Many video games companies have posted horrendous losses and it can take a considerable amount of money to develop a game ­ and then only a few will be successful. It is a very difficult business to be in at the moment," he says.

Despite the games industry's pleas for protection, there are supporters for the DTI's plan to introduce changes that should result in cheaper prices for consumers. Phil Evans, senior policy adviser at the Consumers' Association, dismisses claims from the games industry that opening up the market for more imports will threaten their existence and start a piracy tidal wave.

"This is a business problem and it should be down to the efficiency of the publishers, not down to their ability to gouge the UK consumers, who pay more than anyone else. Piracy happens irrespective of what ever trademark exists," he says.

Evans calls on the games industry to provide more evidence of the potential damage that changes in legislation would cause, instead of damning the proposals out of hand. "Computer games have always been an area of concern because they do set different prices and because some of the games are engineered not to work outside the US or Europe," he says.

Evans adds that using a country such as Turkey as an example of where lower price points could be used to undermine UK brands is questionable in an EU that includes Greece and Portugal, where lower game prices could also be justified.

He warns that the supporters of trademark change recognise that it will take a long time to get the initiative made law and are digging in for a prolonged contest. "We are in it for the long haul."

Simon Chapman, partner at Lochners Technology Solicitors, says the process of getting the changes made into binding laws faces several hurdles. "The alternative to a precedent being set by the European Court of Justice would be for the European Parliament to amend the Trade Mark Directive, which would in turn require domestic legislation adopting the amendments," he says.

In the meantime, the British games industry faces further uncertainty. The next step for the DTI will have to be speaking to the games industry if it plans to give the sector a fair chance to defend its position. "Rather than being flanked by retailers, come and talk to the manufacturers. Come and talk to me before you make a decision on my behalf," Pirie demands.