Paulista Avenue could easily be the heart of São Paulo, the biggest city of Brazil. It’s the street where you’ll find the headquarters of some of Brazil’s – and the world’s – biggest corporations.

For a recent arrival, it’s a curious scene. Take the subway and leave at the Trianon-Masp station. If you take a look around, you should spot the small police outpost nearby and, with a little more searching, the Paulista Center Mall. There you’ll find that pretty much every single store is devoted entirely to selling pirated merchandise, mainly bootleg software and games. It’s a pirated goods heaven, and it shows just how permissible piracy has become in Brazilian society.

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Although data isn’t easy to come by, the Brazilian Association for the Development of Electronic Games (Abragames) estimated in 2004 that no less than 94 percent of the country’s games market consisted of pirated merchandise. Similarly, Brazilian internet portal UOL reported in 2006 that the so called ‘grey market’ of illegally imported products made up 80 percent of Brazil’s games market and 94 percent of its console market. These numbers lead to a simple conclusion: If you play videogames in Brazil, you’re more than likely committing a crime.

Shopping with pirates
So what’s the experience of buying a pirated game in Brazil? To answer this question, let’s take a trip to Santa Ifigenia Street, near the old business center of São Paulo. Starting from the nearby church of São Bento and continuing as you walk down the street, you’re surrounded by a ridiculous farce.

A dozen vendors fill the street, displaying small posters with crude photocopies of game covers and incessantly asking passersby if they’re looking for PC or PlayStation 2 games. The farce comes into play every time a police patrol, the only cars allowed on this portion of the road, drives past. You won’t necessarily hear a shout, but before the police arrive, every vendor rushes to pack up his product and head off to other parts, returning quickly after the danger has passed. This ritual repeats itself almost every day, without any noticeable difference.

It’s clear enough on Santa Ifigenia street that vendors are engaging in illegal activities, but take a detour to a nearby mini-mall and the signs of game piracy and legitimate commerce blend together. Stores here won’t sell the blatant pirated games you can find on Santa Ifigenia, but it’s not hard to figure out that at least some of these games are ‘grey market’ imports, not the least by the fact that these stores are often unwilling to give out an official receipt after a purchase.

However, if you’re really interested in buying a game, your best bet is to enter one of the many “pseudo-malls” around São Paulo and take a look at what the games stores offer there. These shops, the vast majority of which consist of little more than a tiny cubicle with a store counter, don’t display pirated games directly. Instead, they offer customers a cheap pocket binder containing the same crude photocopies the street vendors use or, occasionally, just a list of games.

The reason is simple: The game discs themselves aren’t kept in the store, in case of a police raid. So after you opt to purchase a game, the seller will tell an associate to bring you a copy. It doesn’t take much time, and your CD or DVD will probably come packaged in a small plastic black bag, with another photocopy of the cover jammed inside.

The asking price is ridiculously small – usually around R$10 to R$15 (or $5 to $7.50) – but after a little negotiation, you can easily end up paying half that. You won’t, of course, receive a receipt; instead you might be giving a business card with the name of the game you purchased written on the back, with the promise that you’ll be able to exchange the game in that store if it proves to be faulty.

Although there is a large sensation of seediness associated with these transactions, the fact that you can expect the store to be there for the next week makes the experience not too unlike that of buying a game legally. After all, new releases are very quick to arrive, if the game doesn’t work you can exchange it and you can even find copies of Konami’s Winning Eleven series fully translated into Portuguese. What more could a consumer want?

A haven for piracy
What’s truly disturbing, however, is what comes later, when you mention to other people that you’ve bought a pirated game. Instead of scolding or reprimanding you for committing a blatantly illegal act, most people won’t even bat an eyelash. If you’re talking to another gamer, they may even laud you for your decision.

And, indeed, why wouldn’t they? There now exists a whole generation of gamers – the 32-bit generation – that probably bought the vast majority, if not the entirety, of their game merchandise illegally. This piracy isn’t restricted to games, either, although the bootleg games market is probably the most extensive and blatant. To claim that Brazil is a nation of pirates isn’t all that far from the truth.

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Brazil wasn’t always a haven for piracy. After all, up until the mid-’90s, the games market in Brazil was overwhelmingly legal; companies would officially launch and provide support for consoles, such as Tectoy (Sega) and Gradiente (Nintendo). The piracy epidemic only came about with the combination of exceptionally high taxes (EGM Brazil estimated in their March 2005 edition that at least 45 percent of the price of a PC game consisted of taxes), the low income of most Brazilians, the lack of an effective government anti-piracy program and, ironically, the very factor that helped make games more mass-market: the change of media from cartridges to CDs, making it much easier to copy games.

For many years now, Brazilian society has seen piracy not just as commonplace, but as the default way of buying a game. This has had a profound impact on society in general and those who play games in particular.

On a more positive note, blatant piracy has made gaming much more prevalent in Brazil than it would be otherwise, simply because of cheaper prices. In 2006, around 24 percent of lower middle-class households – families with a combined income of around R$24,000 (or $12,000) a year – had a videogame console. And although piracy for society as a whole is obviously bad, individual consumers who opt to purchase pirated goods largely benefit in the short term.

But the negative consequences of piracy are tremendous. Pirate products are often smuggled and sold by what can only be called organized criminal gangs, with obvious implications. Equally obvious is that government loses out on a potential revenue source, as do legitimate retailers, importers, manufacturers and, of course, the game developers themselves.

Less obvious is the wasted potential a market such as Brazil has. Mexico, a country very similar to Brazil in this aspect, is now the fifth most important Xbox 360 market in the world. Likewise, the game development scene in Brazil is equally stunted; only in 2008 did a big name developer (Ubisoft) establish a development studio in São Paulo. So far, they’re the only one.

Another, more subtle consequence lies in the Brazilian public’s perception of games. There is a taint of illegality to gamer culture that is hard to dispel when so few gamers buy legal games. And, excepting the aforementioned Winning Eleven series, translations into Portuguese are incredibly rare, and buying merchandise without official support means that if your Xbox 360 goes into “red ring of death” mode, you’re on your own.

Pirates in the making
What can we say will happen in other countries where piracy is becoming more prevalent? If big markets, such as the U.S. and Japan, become more afflicted by piracy, you can reasonably expect the industry will shrink and that hardcore gamers will probably be the most affected. After all, the people who are more inclined to pirate games are younger, more tech oriented and, above all, spend more of their time and income on games. Losing these players wouldn’t be a death blow to the industry, but you could expect publishers and developers to compensate by trending toward casual games and MMOGs (one of the few types of PC games that is still hard to pirate).

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If Brazil’s example teaches us anything, it’s that the games industry is more vulnerable to piracy than it may be willing to admit. After all, games in Brazil went from a legitimate marketplace to an underground economy in less than half a decade. It demonstrates that if the conditions are just right, it’s not all that hard for piracy to become the norm.

Is this the inevitable future? I hope not. But the current economic crisis will make the lure of piracy stronger than ever. You can be certain that both gamers and the unscrupulous will act upon this temptation, creating a more extensive pirate infrastructure in the process and laying the seeds for a difficult future for the games industry.

Pedro Franco is finishing his master’s thesis in economics and has played videogames since the age of 6. He hopes that Shogo: Mobile Armor Division will one day get a sequel.

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