201: A Nation of Pirates

[Vert]

Someone has to pay for it, or it'll go away. I don't want it to go away.

The "everyone has pirated something sometime, no one is innocent" argument makes the least sense to me. As if only Jesus can call people out on piracy. It's still wrong, regardless of who's saying so.

I'm no saint, I'll say that for sure... And I agree with you completely.

 

[Andy_Panthro]

I used to live in the Middle East, and can trump any street vendor story. It was commonplace at the time to go to the local shopping mall and go to a PC games store, and find almost entirely pirated products for sale. Photocopied boxes of all the latest releases, for a low price.

Before that, you used to have to go to a Computer store and take some floppy disks with you (or buy some from them) and they would copy games or other software onto them for a minimal fee.

This also happened with videos.

Availability of legitimate software and videos was as good as zero, the only option being to import at great expense. Importing would also fall foul of customs officials, who would occasionally seize your imports if they contained too much violence, anything sexual, etc..

 

[Vert]

I'm sorry, this is sloppy economic analysis, sloppy legal analysis, and sloppy logic.

Oh boy, this is going to be a long one. But, on the other hand, I'll take it as a compliment that my article has made you so interested that you felt a lengthy reply was necessary!

First, purchasing a "pirated" game is not "illegal" - while the RIAA/MPAA have had a field day talking about "illegal filesharing" and thus managed to poison the well of accurate understanding of intellectual property law worldwide (in the service of increasing content oligopoly profits, naturally), noncommercial sharing of digital content is NOT ILLEGAL in any modern democratic society. Purchasing such content is also not "illegal" - selling content for which the seller does not have verified intellectual property rights is often covered under various criminal statutes, though is very rarely prosecuted. Simply repeating over and over that it is "illegal" to share digital content is lazy and flat-out wrong.

Except I'm not claiming that sharing digital content is illegal, nor do I do that a single time in my article. Read it again, carefully, and you'll see that I only claim that there are two illegal activities occurring: first, illegally imported hardware and software (by not buying taxes, which you'll agree with me is a violation of the law); and that people who sell pirated software are breaking the law (since, unlike your claim that noncommercial file sharing is not illegal, is a commercial activity). Ok?

That doesn't mean that I think that file sharing is legal or illegal, I don't have the necessary knowledge of copyright law to make such an analyzes and I recognize that there are arguments in favor of breaking copyright law; but that's really beside the point.

Second, while it's fun to apply the old economic models that were created to describe the creation and exchange of physical goods to non-physical (i.e. digital) goods, it's also dumb. Clearly, a different form of microeconomic optimization is at work when a producer can make unlimited copies of a "product" whose marginal cost is exactly zero. The geniuses of the economic academia are, ever so slowly, awakening to this not-surprising reality (having recently taken time off from showing us how to build a stable, healthy, durable human economic system via global derivatives trading and unregulated credit markets, of course) - the reality, however, has been there all along for anyone to see. The reason that "consumers" aren't shoveling money into the pockets of "content producers" as fast as said content producers demand is that the producers have done a piss-poor job (with few exceptions) of pricing their "product" in a way that maps intelligently to the demand curve.

Lets take this paragraph one by one, shall we? First off, 'old economic models'? Sorry to break the news, but the economics profession has the tools for analyzing production models where the fixed costs are large, but the marginal cost of producing a single good close to zero for a long time now. I mean, the textbook I used during my first year of my undergrad studies already explicitly took into account such cases and modeled them, and that was back in 2001!

Second, as can be inferred in my previous paragraph, the economics literature quite obviously has (no less) than textbook models for such cases. And they have applied these models to analyze such cases. The conclusions make for an interesting discussion, one that'll be glad to engage another time.

Thirdly, I love the double fallacy you commit in the middle. First, you implicitly accuse the economics academia of being responsible for the current credit crisis, which does have a grain of truth, yes, but very much a grain of sand in a beach. And, by doing that, you're making a implicit Ad Hominem attack, accusing the economics profession of being incompetent/stupid/incapable/evil/. Since I'm a part of the economics academia, you're also attacking me, and thus you're trying to weaken my argument by, sadly, making it personal.

Fourthly, am I to understand that you're in favor of greater price discrimination? Because that's exactly what you mean when you say you want pricing that "maps intelligently to the demand curve". Fine, so I hope you understand that that means that different countries should pay different prices too, so countries like Brazil should probably pay less than countries like US. Hope you don't mind that. That also means that things like modchips, which allow people to circumvent such restrictions, have to become illegal too.

"Consumers," despite the pejorative name attached to them as merely entities whose job is to mindlessly consume, aren't actually dumb. They understand that the actual physical (i.e. marginal, i.e. non-loaded COGS) cost of a digital product is near zero. So when they see that "product" sold for $50 or so (often with a bunch of cardboard and plastic and other crap wrapped around it to try to make it look "valuable"), they often make an informed decision: nope. Nope, I'm not paying someone $50 for something it costs them $0.25 to create. Yes, "consumers" know there is a fixed cost to making new creative content - they also know that fixed costs is (almost without exception) bloated by useless marketing, sales, executive, administrative, bureaucratic, lobbyist, and who-knows-what-else expenses - and that the actual CREATIVE force behind such "creative content" is likely to get a penny on the dollar (if he or she is fortunate).

First off, if "marketing, sales, executive, administrative, bureaucratic, lobbyist..." are useless, than why on Earth do companies spend any money on them? Why aren't there other companies, that don't have all these "useless things", making bigger profits and being more efficient, which would allow them to grow and become bigger and eventually get rid of the companies that stupidly insist on having this useless things? After all, despite what you think, there are NO legal barriers to entry into the videogame development market, anyone can do this, in any place in the world.

Lets make it even clear: all you need to make a game is a computer and a programmer. That's it. You don't need to pass an exam, you don't need to pay the government, you don't need to sign a contract, you don't need to contact the police, nada.

So, why aren't the artists doing this? They have no reason to "sell off" to the big companies, no legal obligation, nothing. Why don't they make their own companies, get filthy rich and have the big companies grind to dust? And why aren't the shareholders or owners of these companies asking, nay, demanding the management of their companies that the superfluous is rid off? After all, the objective of a company is to make a profit...

I don't need to continue, do I? Your argument simply does not make any sense.

Which brings us to #3: nobody is buying the bullshit party line that "piracy robs artists of their hard-earned money." The "artists" got robbed of their hard-earned money decades ago, when they lost control of the means of production (with all due credit to Karl) of their creativity to oligopolistic market forces that have, since then, invested heavily in political protection and custom-written laws to enforce their economic interests. The actual "artists" who actually create stuff are a rounding error in these industries - yes we all actually know that and - no - we don't believe otherwise just because some well-paid lobbyist says otherwise on Fox News. Few folks have much interest in screwing real artists - whom they actually respect and admire. However, if they know that the parasites in the system will siphon off 99 cents of every dollar they spend to buy the right to use the stuff the artists make. . . well, that's not much of a return on investment - in terms of getting real money to a real "artist" - is it?

Lets divide this into two parts, first dealing with fact that piracy does take money from the artists. And a simple way of exemplifying this is like this: lets imagine that the market is now 100% pirate. That is, no goods sold original goods. Clearly, in this situation, there is no market, thus no money is going to the artists. Now, lets take a look at a situation where there is no piracy, but ALL else is the same. Independently of the production model, its obvious that the maximum amount of money is going to go the artists, as the maximum amount of profit. I think its quite reasonable to assume that if we make the transition between models, the amount of money going to the artists increases with less piracy. Whats more, this should be independent of the production model, so you're wrong.

And before you accuse of missing the point, I'm not saying that the production model is perfect or doesn't rip off the artists or anything like that; I'm saying that ALL else equal, more piracy means less money to the artists.

Second, as I said before, the division of power and profits in these companies aren't all that obviously unfair; after all, if an artist sees other artists getting ripped off in one company, he can simply go to another one or, even better, create his own. So either the artists aren't all that valuable (as other artists can do the same job), or they make more money than you believe, or that artists are complete idiots for not taking advantage of their power.

Finally, add in the grinding poverty, income inequality, and lack of economic mobility of a country like Brazil today - and guess what? Spending $50 so a mega-corporation in some other country can earn more return on investment for its institutional shareholders just doesn't sound like the highest priority. Is this an "irrational" economic decision? Nope. Does it reflect a lack of respect for content creators? Nope - it reflects a lack of respect for parasites, middlemen, corrupt economic systems, and broken political structures. Oh, and for outdated legal systems who try desperately to treat digital goods as if they were comparable to their physical counterparts - which they aren't.

The really poor in a country like Brazil aren't consumers in any case, that is, with or without piracy, but they bear some of the costs associated with it, if you agree with me that there is an increase in violence that stems from the selling, manufacturing and smuggling of pirated goods. Agreeing with this implies that the best for those who really need it would be, at least, stopping organized crime from involving in piracy, right?

"Piracy" is indicative of many things. Above all else, it is indicative of an informed, sophisticated, and intentional decision on the part of marginalized "consumers" NOT to support systems of economic interchange that are unquestionably necrotic. In capitalism, despite the desire of oligopolies and the politicians who suckle at their ever-welcoming teats, "consumers" still get to actually DECIDE if they want to spend their money to buy stuff. Or not. And when consumers decide they don't want to spend their money, it doesn't make them criminals - or stupid - or careless - or the "victims" of insufficient police enforcement of frayed, unjust, tattered legal systems. It makes them independent, conscious, sentient economic agents who are able to weigh the available data and make intelligent decisions on behalf of themselves and those they respect.

So, please, next time you want to bemoan the causes of "rampant piracy" in this or that country - perhaps start by exploring they long-term systemic breakdowns that set the stage for these individual "consumer" decisions. Like blaming a broken vase on insufficient padding on the floor - rather than on the force we commonly call "gravity" which caused it to fall in the first place - focusing analytic effort on the end stages of a complex, intertwined system which leads there does nothing but confuse effect with cause, and rational economic choice with "bad morals."

You'll have noticed until now my civil tone. I always try to focus on making arguments, presenting facts and trying to discuss with those that disagree with me, be it in real life, be it on the internet. However, there are somethings that make me become irrational, make me furious. So please forgive the following paragraph, but such a blatant misrepresentation of my reasoning, for third time in your post, means either your an idiot, you can't read or your trying to misrepresent me to 'win the argument'. In any case:

YOU BLOODY MORON! IN MY ARTICLE, NOT ONCE, NOT A SINGLE DAMMED TIME DO I SAY THAT PEOPLE ARE CONSUMING PIRATE GOODS BECAUSE OF BAD MORALS! OR JUDGING THEM! ON THE CONTRARY, I STATE IN MY ARTICLE THAT "individual consumers who opt to purchase pirated goods largely benefit" ("the short term" that follows was added by editing on part of the escapist). IN FACT, ITS COMPLETELY OBVIOUS TO ANYONE WITH A BRAIN THAT CONSUMERS OF PIRATE GOODS HAVE MORE BENEFITS THAN COSTS, OTHERWISE THEY'D BE UTTER IDIOTS FOR DOING THAT! THE WHOLE POINT OF MY ANALYZES WAS TO SHOW THAT SOCIETY, AS A WHOLE, BEAR THE COSTS OF THESE CONSUMERS! YOU PATRONIZING SOPHIST!



Again, sorry for my outburst. But, as I said before my last paragraph, you either an idiot (which, given the sophistication of your writing, seems untrue), can't read (which might be the case and if so, then PLEASE read my article with more care and forgive my previous paragraph) or are trying to misrepresent me (in which case, I refuse to talk to you anymore). Given that, I won't use my time anymore with you, I've spent enough.

 

[Vert]

Later my wife told me that the anti-counterfeit unit were apparently making their rounds and that's why the fellow had been so anxious to pack up shop. The kicker? My wife said the person who'd tipped off the vendor was a policeman himself.

Interesting story, here in Brazil things tend to work in pretty much the same way.

I remember when I lived in Brazil (about 12 years ago now!) of a small place downtown where, as described on the article, "the vast majority of which (stores) consist of little more than a tiny cubicle with a store counter". When I made my jump from the SNES to the PS1, it was the obvious thing to do. A friend of my dad's referred us there after I played RE1 (I was less than 10 years old and playing RE1, it was awesome!), and seeing games in such quantities and so cheap (a FRACTION of what games cost on "official" stores), plus the combination of my parents being rather underpaid (we didn't live in the ghetto but weren't making enough of a fortune to feed my gaming habits at the time ) just made it the perfect choice.

I remember the transition to piracy that occurred in a similar way. It was shocking to find games for the PS1 being sold for so little, in a easy to access place and with some degree of reliability. Given the absolute bargain, it was all to easy to make yourself believe that you were doing the right thing by going pirate.

 

[Vert]

I actually agree re the "too wordy" criticism - the above post is more of a rant than a well-edited work product. Basically I see this same "story" of the poor artist being denied food for his starving children because of those "evil pirates" - the same story, it pops up all over the place. And you can just HEAR the public relations meetings behind these stories: "ok, here's the 'sad-eyed puppy' angle we want to push out to anyone unsuspecting enough to take the bait, so let's get all the PR flaks geared up so we can saturate the airwaves with 'pirates are Eeeevil' messages before we miss this quarter's earnings expectations." Maybe it's just because I've worked in a big ad agency myself (Leo Burnett - helped sell cigarettes to "young adults") and seen this kid of "campaign" from the inside - but the entire thing smells of freshly-printed astroturf.

Now I'm convinced: you're deliberately misrepresenting my WHOLE LINE of reasoning. I'll have no more to do with you, since you're clearly committed to doing such a thing, which is a shame, since you present interesting arguments and you may make some correct points.

 

[Vert]

Let's face it, games are way too expensive.

No matter what any company does, games will be pirated, but most people (I include myself and most of my friends in this category) pirate games because they can't afford them.

Lower the prices, and more people will buy games. It's that simple.

Brazil, specifically, is a different problem altogether, since games there are priced at 50$, and most people make about 6-8000$ a year, it's stupid to expect anyone to really buy original games there.

Well, I don't make enough money to buy a Ferrari (all I receive is a scholarship), but I don't go around stealing Ferraris... And yes, I know that these are different types of goods, that making an extra copy of a game does not mean someone can't play the original (unlike a Ferrari, where only one person can consume it at a time), but that's not the argument you presented, all you've said is that it's too expensive.

This happens all over the world, even America. There are place in America where vendors set up shops in malls and sell bootleg "consoles" that are just loaded up with ROM images. It just goes to show that law enforcement doesn't really care about intellectual property that much.

I think they do care, to some extent, but they may not have the resources to deal with it. That's always a big problem, as more pressing crimes may make things difficult.

 

[Vert]

To tell you the truth, if I could buy pirated games over here, I would, and that's simply because when games retail at $100 a pop, ($60 USD), they are far too expensive to buy normally. I refuse to pay twice what the US pays for the same(or in the case or GTA, a more restricted) game.
It's just plain ridiculous, if developers really want me the consumer to buy the game, then they better start offering a better service than what the internet does(Take the price down to $50 ($30 USD), and drop your DRM, and I will buy your game, or drop the price to $30.00 NZD, and I'll buy it with DRM). The only games I ever buy now are games that are on the bargin bin, and that's simply because I don't mind paying $20-$30 a pop, but anymore with DRM, is too much.

This is exactly the sort of price discrimination I was talking about earlier. Prices in a country are more expensive than in another because of: the phyisical cost of transportation (which is negligible in this case); taxes (which I suspect is the case); or because of a different demand curve in a different country.

But I feel your pain, as here in Brazil, taxes can make up no less than 45% of a game's price...

 

[Tony Montana]

Here in Brazil we have a brutal amount of Taxes (48 diferent types)... We work 6 months per year just to pay taxes. 1 litre of orange juice (100%/no-sugar/tetrapack) cost here 1,88 EUROS, in Portugal (I lived there) 0,89 EUROS, on the other hand, Brazil is the n°1 in orange production.
The minimum saraly in Portugal = 400 EUROS
The minimum saraly in Brasil = 140 EUROS

Brazil:
A PS3 console: 600 EUROS (legal store)
A PS3 game: 40 EUROS (legal store)

Unfortunately...

PIRACY IS VITAL FOR US

Sorry for my english.

 

[Vert]

I am brazilian and i live in São Paulo, i can say, that is 100% true, but lets think about. All my games are originals (Sony PS3 and Nintendo Wii) and i need to say, buying original games here in Brazil is very very expansive. I buyed my Wii in the release and i payed in the legal market (converting Real R$ to Dollar US$) US$1000 (dont kidding, one thousand dollars) just for the console and Wii Sports, most recently i buyed Animal Crossing City Folk and paid US$215 (two hundred fifteen dollars) for the game + wii speak. The problem in Brazil is the Import Taxes (in most cases the import taxes are 60%~70%) and we have to pay yet the federal taxes (+18%). So some peoples cant pay that and buy illegal games. I hope some day the brazilian politicians make some changes here and the piracy problem will desaper. Sorry for my bad english!!!

Yes, taxes are a big problem in Brazil's case. I highly suspect (but have no real evidence), that if taxes on games where smaller, not only would the amount of games being bought increase, but the increase would actually make total revenues increase too, so it'd be a potentially win-win situation for both government and consumers. But we might be wrong, I'm not familiar with studies indicating as such.

Just a note about the revisionism. The idea that last decade games were overwhelmingly legitimate is terribly, well, WRONG. There was a huge business in pirated cartridges, in pirated PC software. Hell, I remember as a kid going to legitimate stores and buying floppy disks with 6 MSX games on them. These almost certainly weren't paying any fees to their license-holders. The prevalence of CD burners just made stuff cheaper.

I'd disagree. In my experience, although not perfect, there was a large legitimate games market in Brazil, specially regarding the late 8-bit and throughout the 16-bit generation. But I have no real evidence, sadly, as I could not find any concrete data to back me up. So, unfortunately, I have to go with my impressions.

 

[antipunt]

I think Taiwan also falls into this category....

 

[Vert]

Availability of legitimate software and videos was as good as zero, the only option being to import at great expense. Importing would also fall foul of customs officials, who would occasionally seize your imports if they contained too much violence, anything sexual, etc..

Ah, official censorship, one of the best ways of creating a illegal market. I've always imagined that this would help create a massive pirate market for violent games in countries where censorship exists.

 

[Zunto]

I´m brazillian, and played videogames for about all my life, then my opnion more accurate.
Troughout the 8-16 bit era, pirated cartridges costed about 10% less than the original counterpart, so the little difference didn't pay off. Maybe it's because SEGA had an representative in Brazil at the time, called TecToy.
The arriving of 32 bit era changed about everything. Sony had no representation on Brazil, and piracy became the main form of obtaning a game. The costs of buying an original game far exceeded the possibilities of any person to expend money on entertainment. The main reason of high costs are the taxes. Any game has basically a tax over industrialized product, taxes for procteting the national industry, federal taxes, importing taxes, and so on, resulting in an increase of about 300% over the original price. It's completely insane.
This continued though the PS2 era.
I'm made part of this. Only games that I thought were master pieces were worth buying the original.
Now I have an PS3. I chose PS3 instead of the 360 for the games itself, not their prices. 360 would be the wise choice, based on piracy.
I found the solution of buying games directly from UK/Asia/Canada. If I buy PS3 games here, I'm going to pay 10x the price I pay on UK in some cases.
If our government thinks high taxes and low sales is worth it, then judges peoples that buy pirated games, what am I gonna do. I prefer very low taxes and high sales. I would definitely buy only original games for all my life with the prices were fair enough.

 

[rohit9891]

I'm from India and the situation is the same here...except that even police dont track all these stuff.People actually dont care about the effects of pirating games even though most of the indian gamers are PC gamers despite the fact that PC gaming industry is shrinking rapidly due to piracy.

There are some good games out there that developers have made free...like the full spectrum warrior or trackmania.People dont even consider try playing those games as long as they can get their hands on the latest PC games.

Besides the net speed is too low...it's too slow for even downloading videos.So nobody even cares about downloading from steam or gog,with most people not even knowing these sites offer new games at 5$ during weekends.I've been playing in PC since I was some 6 yrs old & I really dont want to see it go down because of piracy(no offense to console gamers...it's just not that popular here and there aren't many retail games available on them either).I'm not on EA's side about putting crap DRMs in games,I just wish PC gaming would be like what it was at the time of Halflife and Deus Ex.

I really hope steam,gog,stardock,... will do enough to get more gamers to buy legitimate copies of games with more good offers.

 

[Aesthetical Quietus]

To tell you the truth, if I could buy pirated games over here, I would, and that's simply because when games retail at $100 a pop, ($60 USD), they are far too expensive to buy normally. I refuse to pay twice what the US pays for the same(or in the case or GTA, a more restricted) game.
It's just plain ridiculous, if developers really want me the consumer to buy the game, then they better start offering a better service than what the internet does(Take the price down to $50 ($30 USD), and drop your DRM, and I will buy your game, or drop the price to $30.00 NZD, and I'll buy it with DRM). The only games I ever buy now are games that are on the bargin bin, and that's simply because I don't mind paying $20-$30 a pop, but anymore with DRM, is too much.

This is exactly the sort of price discrimination I was talking about earlier. Prices in a country are more expensive than in another because of: the phyisical cost of transportation (which is negligible in this case); taxes (which I suspect is the case); or because of a different demand curve in a different country.

But I feel your pain, as here in Brazil, taxes can make up no less than 45% of a game's price...

There was a reason, I've forgotten it. It basically has to do with, the price was hiked up for some reason that I can't recall, then when that reason had evaporated, because everyone was still buying games at the expensive price, they left it there to reap the profits. Something like that.
45%? Ouch..

 

[paganof]

There´s another side of this story in my opinion.

Piracy here in Brasil is also a Cultural problem. Lets take the Ferrari example, I don´t earn enough money to buy one, and as much I would love to drive a Ferrari, I have simply face the fact that I can´t have one (for now at least).

Games here in Brasil are (sadly) way to expensive for the majoroty of the gamers. But instead of accepting the fact that they can´t buy them (or at least all of them), they turn to piracy instead. And they grow up with this kind of thinking, and when they do grow up and have jobs that can support their hobby, what do they do? They still buy pirate games.

I personally know gamers, who make A LOT of money, and they still buy pirate games.

I´m pretty sure if taxes were to be reduced, and game prices were lower, it wouldn´t reduce piracy as much as we would hope. Take a look at PC games.

I don´t see in a near future anyway to change this scenario. Maybe this new generation of gamers (kids now in age 5 to 10) will be educated in a new way so piracy won´t be a option to get instant satisfaction.

 

[MalkavianGuy]

Hi, Vert.
I'm brazilian and I read your article. I must say that I was impressed, for it was the first time that I saw someone telling the world about the piracy in São Paulo.
I have a doubt. In the third page of your article you wrote "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.".
You see, I'm a law student, and I'm actually curious about what facts you could point to say that "pirate produts are sold by what can only be called organized criminal gangs".

 

[kumaiti]

As another brazilian citizen who lived through the 16 and 32 bit eras, let me add some points that you missed:

During the 8bit and 16bit eras, people were already buying pirated games for their systems. However, there was a HUGE market for game rental. You could find them everywhere and for a small fraction of the price of even a pirated game, you could rent it for one or two days.


When the change to 32 bit started to happen, this huge market was double-hit:
1. piracy, as you mentioned
2. Sony didn't officially release the PS1 there. Heck, they didn't even have offical partners like Nintendo had.

Factor #2 was critical because that made every rental place IMPORT their games, which skyrocketed the rental prices. Suddenly, instead of paying a small fraction of a pirated game to rent a licensed one, you could basically buy a game for twice the price of the rental.

That is not to mention that it also took PS1 games out of the mainstream retail.


Had Sony made an official release AND started printing the games THERE (to bypass most of the taxation), then things could be much much different now.

 

[kumaiti]

You see, I'm a law student, and I'm actually curious about what facts you could point to say that "pirate produts are sold by what can only be called organized criminal gangs".

Come on, you don't need to be a criminal investigator to walk around on Santa Efigenia for a few hours and figure out that those people are NOT simple "basement pirates" and that there is a whole organized operation behind them...

 

[MalkavianGuy]

You see, I'm a law student, and I'm actually curious about what facts you could point to say that "pirate produts are sold by what can only be called organized criminal gangs".

Come on, you don't need to be a criminal investigator to walk around on Santa Efigenia for a few hours and figure out that those people are NOT simple "basement pirates" and that there is a whole organized operation behind them...

Then I'm sure you can point me about what criminal organization we're talking about, 'cause I'm a little lost here...

 

[Vert]

Hi, Vert.
I'm brazilian and I read your article. I must say that I was impressed, for it was the first time that I saw someone telling the world about the piracy in São Paulo.
I have a doubt. In the third page of your article you wrote "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.".
You see, I'm a law student, and I'm actually curious about what facts you could point to say that "pirate produts are sold by what can only be called organized criminal gangs".

No problem! I'm having a little trouble finding news sources in English that talk about pirate goods in Brazil, but here's an good example:

http://www.ifpi.org/content/section_news/20040618.html

It basically speaks about the arrest of Law Kin Chong, a notorious chief smuggler and distributor of pirate goods, who made so much money from piracy that he (allegedly) offered a bribe of over $1.000.000 to a Brazilian member of congress! The article also speaks of his 'several popular shopping centers', which are, in fact, the 'mini-malls' I speak of in my article and where the goods are sold.

He's the most famous case and definitely is/was responsible for a massive part of the piracy market, at least in São Paulo, but most news I read regarding piracy also tends to mention other criminal gangs.

Although its difficult to directly connect Law's gang with increased violence, there can be no doubt that he's a part of organized crime and that his organization actively bribed policeman and the like, resulting in, at least, an significant increase in corruption in Brazilian institutions. And take a look at this story:

http://www.brazzil.com/2004/html/articles/jun04/p156jun04.htm

Again, in summary, the head of the congressional investigations committee on piracy, in 2004, said: "heads of organized crime, like Law Kin Chong" and "Nobody doubts that Chong is the biggest smuggler in Brazil. Clearly he is well-prepared, as was Al Capone". There may be some exaggeration on the comparison with Capone, but its still a pretty accurate description, I'd say.

So, in short, Law Kin Chong remains the best example of why I describe the organizations that sell pirate goods as organized criminal gangs.