THANK YOU, PAT AND GOOD MORNING EVERYONE.
THIS IS CERTAINLY A WEEK OF GREAT EXCITEMENT AND CELEBRATION FOR THE INTERACTIVE ENTERTAINMENT INDUSTRY.
AND THAT'S ESPECIALLY TRUE FOR THOSE OF US WHO HAVE BEEN INVOLVED IN THIS BUSINESS NOW FOR OVER A DECADE.
FOR ONE THING, THIS SHOW, FOCUSED ON OUR SPECIFIC FORM OF FUN, SERVES, I THINK, TO VALIDATE INTERACTIVE ENTERTAINMENT AS A PERMANENT FORM OF CONSUMER RECREATION.
THE DAYS WHEN THIS BUSINESS COULD BE DISMISSED AS JUST A PASSING FAD ARE, FORTUNATELY, LONG GONE . . . .
AND THE FUTURE OF THIS BUSINESS WOULD APPEAR TO BE VERY BRIGHT INDEED.
BUT LIKE ANY RELATIVELY NEW AND GROWING INDUSTRY, WE DO FACE SOME CHALLENGES. AND I'D LIKE TO TALK ABOUT A FEW OF THEM TODAY.
INCIDENTALLY, LAST WEEK THE WALL STREET JOURNAL SAID THAT SOME PEOPLE IN THIS INDUSTRY THINK THAT I'M EITHER A "VISIONARY . . . . OR AN IDIOT."
I'M NOT REALLY SURE WHO THESE PEOPLE ARE . . . . OR WHICH SIDE OF THE FENCE THEY'RE ON . . . . BUT JUST SO THERE ISN'T ANY CONFUSION, I'VE DECIDED THIS MORNING TO WEAR MY "VISIONARY" HAT!
I SUSPECT THAT THERE MAY BE SOME IN THE AUDIENCE WHO THINK THAT THE CHALLENGES OUR INDUSTRY FACES ARE DISTINCTLY NINTENDO'S.
AFTER ALL, ISN'T NINTENDO THE COMPANY THAT IS STILL POURING SIGNIFICANT RESOURCES AND CREATIVITY INTO 16-BIT VIDEO GAMES . . .
WHEN THE INDUSTRY SEEMS INTENT ON MOVING ONWARD?
WELL, YES, WE ARE AND WE INTEND TO KEEP ON DOING SO.
WE CERTAINLY DON'T HAVE ANY PLANS TO ABANDON THIS HUGE INSTALLED BASE, AS LONG AS WE CAN CONTINUE TO CREATE ENTERTAINING GAMES.
AND ISN'T NINTENDO THE COMPANY LAUNCHING VIRTUAL BOY -- AN ENTIRELY NEW TYPE OF VIDEO GAMING?
ONE WHERE THE INTERFACE IS A PAIR OF GOGGLES INSTEAD OF A TV SCREEN . . . WHERE THE GRAPHICS ARE TRULY 3-D BUT STILL MONOCHROMATIC?
WELL, YES, WE ARE . . . AND WE'RE CONFIDENT THAT GAME PLAYERS WILL LOVE NOT ONLY THE NEW ENTERTAINMENT EXPERIENCE OFFERED BY VIRTUAL BOY . . . .
BUT THAT THEY'LL ESPECIALLY LIKE THE SUGGESTED RETAIL PRICE OF $179.95 FOR THIS 32-BIT EXPERIENCE . . . WITH A GAME PACKED IN.
NO QUESTION ABOUT IT, NINTENDO HAS ITS OWN CHALLENGES - AND I'M CONFIDENT THAT WE'LL MEET THEM.
BUT THE CHALLENGES I'D LIKE TO TALK ABOUT THIS MORNING ARE NOT UNIQUE TO NINTENDO. THEY HAPPEN TO BE CHALLENGES WHICH IMPACT EVERY INTERACTIVE ENTERTAINMENT COMPANY.
CERTAINLY ONE OF THE BIGGEST CHALLENGES WHICH WE ALL FACE IS HOW TO CONTINUALLY ENTERTAIN AND EXCITE OUR CORE CONSUMER.
AND OF COURSE, IN OUR CASE, THAT'S THE AVID VIDEO GAME PLAYER . . . YOUNG AND OLD ALIKE.
LET ME EXPLAIN HOW NINTENDO HAS JUST THIS PAST WEEK RESPONDED TO THAT CHALLENGE.
IT SEEMS TO ME, AS A VETERAN OF NEARLY 15 YEARS IN THIS INDUSTRY, THAT THE PEAKS AND VALLEYS IN THE VIDEO GAME BUSINESS OVER ANY GIVEN PERIOD OF TIME, MIRROR VERY CLOSELY THE RELATIVE ENTERTAINMENT VALUE OF OUR GAMES.
I SUPPOSE YOU COULD EVEN BUILD A BUSINESS MODEL TO PROVE THIS. I'D CALL IT THE "GAME PLAYER BOREDOM INDEX."
PUT ANOTHER WAY, EVERY TIME SOMEONE CREATES A VIDEO GAME MASTERPIECE, THEY RAISE THE ENTERTAINMENT BAR FOR EVERYONE IN THE INDUSTRY.
LET'S FACE IT. GAME PLAYERS ALWAYS RECOGNIZE QUALITY AND THEY ENTHUSIASTICALLY FLOCK TO IT.
WITNESS THE 7.5 MILLION DONKEY KONG COUNTRY CARTRIDGES WE'VE SOLD WORLDWIDE SINCE LAST NOVEMBER.
LIKEWISE, ONCE WE GIVE CONSUMERS A DONKEY KONG COUNTRY, THEY EXPECT THAT EVERYTHING ELSE OUT THERE ON STORE SHELVES . . . . AND TO COME, WILL BE JUST AS GOOD, IF NOT BETTER, IN TERMS OF ENTERTAINMENT VALUE.
IT'S THIS NEVER ENDING QUEST FOR BETTER GAMES THAT'S REALLY BEHIND OUR DECISION TO MOVE THE INTRODUCTION OF NINTENDO ULTRA-64 IN NORTH AMERICA AND EUROPE TO NEXT APRIL.
ONCE WE INTRODUCED DONKEY KONG COUNTRY, I'M AFRAID THAT WE REDEFINED THE GOLD STANDARD FOR 16-BIT GAMES AND AT THE SAME TIME, WE NECESSARILY SET A MUCH HIGHER QUALITY STANDARD FOR OUR 64-BIT PLATFORM.
I CAN TELL YOU THAT SILICON GRAPHICS AND NINTENDO HAVE CREATED AN EXTRAORDINARILY POWERFUL NEW HARDWARE PLATFORM IN NINTENDO ULTRA-64, ONE CAPABLE OF PRESENTING SEAMLESS, REAL TIME 3D GRAPHICS.
THE SGI-NINTENDO ENGINEERING TEAM HAS DONE ITS JOB. THE NINTENDO ULTRA-64 CHIP SET - THE HARDWARE - IS ESSENTIALLY COMPLETED.
BUT, OVER THE PAST TWO YEARS, SGI'S GRAPHICS TECHNOLOGY HAS ALSO ENABLED NINTENDO TO RAISE THE ENTERTAINMENT BAR ON 16-BIT GAME PLAY.
OUR NEW KILLER INSTINCT AND DONKEY KONG COUNTRY 2 GAMES, BOTH FOR THE SUPER NES, WHICH ARE DEBUTING HERE AT E³ AND WHICH WILL REACH GAME PLAYERS THIS SUMMER AND FALL, SIMPLY RAISE THAT QUALITY BAR EVEN HIGHER . . .
BEYOND DONKEY KONG COUNTRY AND CERTAINLY, IN MY MIND, TO A LEVEL EQUAL TO ANY OF THE 32-BIT SOFTWARE BEING EXHIBITED HERE AT E³.
WHAT THIS MEANS IS THAT THE QUALITY OF VIDEO GAMES NOW UNDER DEVELOPMENT FOR NINTENDO ULTRA-64 SIMPLY MUST BE THAT MUCH BETTER.
NOT JUST A LITTLE BIT, BUT A LOT! AND NINTENDO IS GOING TO TAKE THE ADDITIONAL TIME NECESSARY TO ACHIEVE THAT LEVEL OF QUALITY. PERIOD. THERE'S NO QUESTION ABOUT IT.
IN EFFECT, WE'VE CHANGED THE RULES AGAIN ON OURSELVES AND FOR OUR THIRD PARTY PUBLISHERS.
YOU'LL SEE COMPLETED NINTENDO ULTRA-64 GAMES THIS NOVEMBER IN TOKYO AT THE SHOSHINKAI TRADE SHOW, WHEN WE OFFICIALLY UNVEIL THE NEW PRODUCT, AND, OF COURSE, IN LAS VEGAS NEXT JANUARY AT THE CONSUMER ELECTRONICS SHOW.
IN REACHING THIS DECISION, AND IN MEETING THIS PARTICULAR CHALLENGE, WE HAVE, I BELIEVE, REMAINED FAITHFUL TO THE PEOPLE WHO PURCHASE OUR GAMES AND EXPECT TO BE ENTERTAINED BY THEM.
BUT EVERY COMPANY MUST WRESTLE INDIVIDUALLY WITH THESE QUESTIONS OF QUALITY AND TIMING.
MY PURPOSE HERE THIS MORNING IS TO MOVE BEYOND THOSE KINDS OF INTERNAL DECISIONS TO A FAR MORE DANGEROUS CHALLENGE THAT CONFRONTS ALL OF US.
ONE WHICH APPLIES NOT ONLY TO NINTENDO . . . BUT TO NINTENDO, TO SEGA AND TO SONY . . . . AND INDEED, TO ALL ENTERTAINMENT SOFTWARE PUBLISHERS, REGARDLESS OF HARDWARE PLATFORM.
THE CHALLENGE THAT I WANT TO ADDRESS THIS MORNING AFFECTS EVERY PERSON WHOSE LIVELIHOOD IS DEPENDENT ON THE CREATION, MANUFACTURE AND DISTRIBUTION OF INTERACTIVE ENTERTAINMENT.
AND AS I INTRODUCE THIS CHALLENGE, I MUST ADMIT THAT AT FIRST GLANCE, IT APPEARS RATHER BENIGN.
THIS INNOCENT LOOKING THING IS KNOWN AS THE VIDEO GAME COPIER. A MACHINE TO MAKE COUNTERFEIT SOFTWARE.
THE ONE DISPLAYED HERE IS MARKETED UNDER THE NAME "SUPER WILD CARD."
AND THAT NAME IS APPROPRIATE, BECAUSE IN LOOKING INTO THE FUTURE OF INTERACTIVE ENTERTAINMENT, THAT'S PRECISELY WHAT IT REPRESENTS.
THE "SUPER WILD CARD" AND PRODUCTS LIKE IT IMMEDIATELY EXPAND THE ALREADY DAUNTING PROBLEM OF SOFTWARE COUNTERFEITING INTO THE BORDERLESS REACHES OF CYBERSPACE.
AND THERE, THE PROSPECTS FOR PROTECTING OUR BUSINESSES . . . FOR PROTECTING OUR EMPLOYEES . . . FOR PROTECTING THE PRODUCTS OF OUR IMAGINATION . . . ARE DOWNRIGHT CHILLING.
BUT BEFORE WE MOVE INTO THAT FUTURE, LET ME START BY TALKING ABOUT WHAT EXISTS TODAY.
OVER THE LAST FEW MONTHS, WE'VE ALL BEEN BOMBARDED WITH NUMBERS THAT TRY TO PUT THE COUNTERFEITING STORY INTO CONTEXT.
THE BUSINESS SOFTWARE ALLIANCE RECENTLY ESTIMATED THE WORLDWIDE LOSS FROM PIRATED BUSINESS SOFTWARE AT OVER FIFTEEN BILLION DOLLARS.
COUNTERFEITERS ARE NOW PUTTING A DOZEN ALBUMS WORTH OF POPULAR MUSIC ON A SINGLE AUDIO CD . . . AND SELLING IT FOR A COUPLE OF DOLLARS.
WE KNOW THAT BOOTLEG COPIES OF DISNEY'S LION KING VIDEO WERE WIDELY AVAILABLE THROUGHOUT ASIA LONG BEFORE THE LEGITIMATE PRODUCT EVER HIT STORE SHELVES HERE IN THIS COUNTRY.
BUT I WANT TO CONCENTRATE SOLELY ON THE IMPACT OF COUNTERFEITING TO OUR INTERACTIVE ENTERTAINMENT INDUSTRY.
WE CONSERVATIVELY ESTIMATE THAT THE LOSS FROM COUNTERFEIT ENTERTAINMENT SOFTWARE . . . WHETHER FOR PLAY ON HOME VIDEO GAME SYSTEMS OR ON PERSONAL COMPUTERS . . . . IS AT LEAST $5 BILLION PER YEAR.
LET ME FOCUS A LITTLE MORE NARROWLY. IN THE LAST FULLY REPORTED FISCAL YEAR, NINTENDO REALIZED SALES OF $4.7 BILLION, ALL ATTRIBUTABLE TO SALES OF HOME VIDEO GAME PRODUCTS.
OUR NEAREST COMPETITOR, SEGA, HAD SALES OF $3.4 BILLION, OF WHICH $2.9 BILLION WERE DIRECTLY ATTRIBUTABLE TO HOME VIDEO GAME SALES.
I THINK IT'S FAIR TO SAY THAT ALONG WITH A NUMBER OF INDEPENDENT THIRD PARTY PUBLISHERS, NINTENDO AND SEGA PRETTY MUCH DEFINE THE CURRENT VIDEO GAME INDUSTRY.
BUT THIS ASSESSMENT IGNORES A THIRD MAJOR PLAYER -- THE COUNTERFEITER.
WORLDWIDE REVENUE LOSSES TO NINTENDO AND ITS THIRD PARTY PUBLISHERS LAST YEAR ALONE FROM ALL PIRATED ACTIVITY CAME TO APPROXIMATELY $2.5 BILLION. I SUSPECT THAT SEGA HAD COMPARABLE LOSSES.
WHILE IT IS COMMON TO LOOK AT WORLDWIDE MARKET SHARES LIKE THIS . . . NINTENDO AND SEGA PRODUCTS SHARING THE PIE . . . IN FACT, THERE IS A MORE ACCURATE WAY TO REPRESENT THE CURRENT STATE OF AFFAIRS.
IN THE REAL WORLD, THERE IS A THIRD MAJOR PLAYER . . . THE COUNTERFEITER . . . AND HIS PIECE OF THE ACTION IS THE MOST PROFITABLE, BECAUSE HE SELLS THE PRODUCTS OF NINTENDO AND SEGA, AND OTHERS, WITHOUT BEARING A NICKEL OF OUR DEVELOPMENT, DISTRIBUTION AND MARKETING COSTS.
THERE'S ALWAYS A TEMPTATION TO IGNORE THE DANGER OF COUNTERFEITING . . . TO CONSIDER IT AS JUST A COST OF DOING BUSINESS, AND TO WRITE OFF ANTI-PIRACY PROGRAMS AS A LEGAL EXPENSE. SOMETHING FOR OUR LAWYERS TO FOCUS ON.
INDEED, WHY AM I EVEN UP HERE TALKING ABOUT IT THIS MORNING, WHEN I COULD PROBABLY WAX ELOQUENT ON THE SOCIAL BENEFITS OF PLAYING VIDEO GAMES - OR BUYING NINTENDO PRODUCTS!
WELL, BECAUSE I HAPPEN TO THINK IT'S ABSOLUTELY ESSENTIAL THAT WE TALK ABOUT IT.
THIS IS SOMETHING THAT REQUIRES HEIGHTENED AWARENESS ON THE PART OF ALL OF US WHO PLAY A ROLE IN WHAT WE HOPE WILL CONTINUE TO BE A GROWING BUSINESS.
IF WE IGNORE THIS PROBLEM OR FAIL TO KEEP IT IN PROPER PERSPECTIVE, WE DO SO AT AN EVER-INCREASING RISK.
BECAUSE, LADIES AND GENTLEMEN, THE BAD GUYS HAPPEN TO BE GETTING MUCH BETTER AT THEIR WORK - MAKE NO MISTAKE ABOUT IT.
LET ME SHOW YOU WHAT I MEAN. AT THE LEFT IS A COPY OF THE LEGITIMATE NINTENDO CARTRIDGE FOR ONE OF ACCLAIM'S MEGA-HITS, MORTAL KOMBAT 2.
AT THE RIGHT IS AN ALL-BUT-IDENTICAL COUNTERFEIT VERSION. IN MANY CASES, THE GAME PLAYS EQUALLY WELL ON THE PIRATED CARTRIDGE.
IN FACT, WHAT FIRST ALERTED US TO COUNTERFEIT VERSIONS OF DONKEY KONG COUNTRY . . . HERE SHOWN ON THE RIGHT . . . WERE COMPLAINTS FROM GAME PLAYERS IN SOME PARTS OF THE WORLD THAT THEY COULDN'T SAVE THEIR PROGRESS WHEN THEY TURNED THE GAME OFF.
THE COUNTERFEITERS, TO FURTHER INCREASE THEIR PROFIT MARGINS, HAD SIMPLY ELIMINATED OUR BATTERY BACKUP.
THE IMPACT OF THIS COUNTERFEITING PROBLEM IS SIMPLY OVERWHELMING . . . . AND IT SHOWS EVERY SIGN OF GETTING WORSE . . . MUCH WORSE.
WE ESTIMATE THE POTENTIAL SIZE OF THE WORLDWIDE MARKET FOR LEGITIMATE INTERACTIVE ENTERTAINMENT PRODUCTS . . . AT SOMETHING BETWEEN TWO AND THREE TIMES CURRENT LEVELS.
THINK ABOUT THAT FOR A MINUTE.
WE AREN'T JUST TALKING HERE ABOUT A SERIOUS CHALLENGE TO THE INTERACTIVE ENTERTAINMENT BUSINESS.
WE ARE ALSO LOOKING AT A TREMENDOUS OPPORTUNITY FOR THIS INDUSTRY.
JUST IMAGINE WHAT IT WOULD BE LIKE IF WE COULD MARKET LEGITIMATE ENTERTAINMENT SOFTWARE IN PLACES LIKE CHINA, SOUTHEAST ASIA, INDIA, THE MIDDLE EAST, RUSSIA AND EASTERN EUROPE - FREE OF COUNTERFEITERS WHO, IN EFFECT, NOW POLLUTE AND DESTROY THESE POTENTIAL MARKETS.
CONSIDER THIS. THE SOFTWARE PUBLISHERS ASSOCIATION RECENTLY COMPILED A LIST OF NATIONS WITH THE MOST EGREGIOUS COUNTERFEIT MARKETS. HERE ARE THE FOUR WORST OFFENDERS.
IN FACT, IN CHINA, COUNTERFEITING HAS ACTUALLY BECOME A GROWTH INDUSTRY.
COMBINED, THESE FOUR NATIONS ARE HOME TO MORE THAN 2.3 BILLION HUMAN BEINGS, OR 44% OF THE WORLD'S POPULATION.
AND MANY OF THE PEOPLE IN THESE COUNTRIES CAN NOW OR SOON WILL BE ABLE TO AFFORD OUR ENTERTAINMENT PRODUCTS.
IF YOU BELIEVE THAT THE INTERACTIVE ENTERTAINMENT INDUSTRY IS HEALTHY NOW, THINK WHAT IT COULD BE LIKE IF IT EXISTED AS WELL INSIDE THE BORDERS OF JUST THESE FOUR ADDITIONAL NATIONS.
AND THAT, IT SEEMS TO ME, SHOULD BE OUR GOAL. TO EXPAND OUR LEGITIMATE BUSINESSES INTO THESE NEW MARKETS.
BUT THE IMPACT OF COUNTERFEITING IS MORE THAN JUST THE CORPORATE BOTTOM LINE.
RIGHT NOW, THE CLEAR MAJORITY OF ALL SOFTWARE IS CREATED HERE IN THE UNITED STATES.
AND THE GROWTH OF COUNTERFEIT SOFTWARE UNDENIABLY THREATENS THE JOBS OF HUNDREDS OF THOUSANDS OF AMERICANS WHO DIRECTLY CREATE AND MARKET SOFTWARE -- INCLUDING A NUMBER OF PEOPLE IN THIS ROOM.
AND THE IMPACT OF COUNTERFEIT SOFTWARE UNDENIABLY TRANSCENDS EVEN THE INTERACTIVE ENTERTAINMENT INDUSTRY.
LET ME JUST TAKE A MOMENT TO LET YOU PONDER TWO UNRELATED EXAMPLES OF SOFTWARE PIRACY.
IN GREAT BRITAIN, YOU CAN LEGITIMATELY PURCHASE A COMPACT DISK THAT CONTAINS THE PHONE NUMBER OF EVERY SOUL IN THE UNITED KINGDOM.
IF YOU KNOW A PERSON'S NAME, YOU CAN FIND OUT THAT PERSON'S PHONE NUMBER AND ADDRESS.
WELL, THAT PROGRAM HAS BEEN COUNTERFEITED, AND A SECURITY CODE WITHIN IT HAS BEEN BREECHED. AS A RESULT, IT IS NOW POSSIBLE FOR ILLEGAL PURCHASERS TO CRISS CROSS, OR CREATE REVERSE DIRECTORIES.
IN OTHER WORDS, AN OBSCENE CALLER WITH THAT COMPACT DISK MAY NOW PICK A NUMBER AT RANDOM AND KNOW EXACTLY WITH WHOM HE IS SPEAKING.
OF COURSE, FOR STALKERS AND CRANK CALLERS, THIS IS A DREAM COME TRUE. FOR EVERYONE ELSE, IT'S A NIGHTMARE WAITING TO HAPPEN.
OR CONSIDER A RAID FOR ILLEGAL SOFTWARE RECENTLY CONDUCTED BY SPANISH POLICE ON THE ISLAND OF MAJORCA.
NOW, IT IS COMMONLY ACCEPTED THAT ONE OF THE DANGERS OF PIRATED SOFTWARE IS THE ABILITY OF A HACKER TO PLANT BUGS OR CONTAMINATE THE PROGRAM.
THAT RAID ON MAJORCA WAS CONDUCTED IN THE CONTROL TOWER OF THE ISLAND'S AIRPORT. THE COUNTERFEIT SOFTWARE WAS BEING USED TO MANAGE AIR TRAFFIC CONTROL -- TO PROPERLY SPACE PLANES ON TAKEOFF, APPROACH AND LANDING!
WELL, HOW DO WE DEAL WITH THIS PROBLEM?
AT NINTENDO, WE'VE BEEN TRYING TO ANSWER THAT QUESTION NOW FOR OVER A DECADE. AND THAT EXPERIENCE HAS TAUGHT US A FEW THINGS.
AS WE SEE IT, EFFECTIVE DETERRENCE IN ANY COUNTRY REQUIRES AT LEAST THREE THINGS.
FIRST, THERE MUST BE LAWS WHICH FULLY PROTECT THE CREATORS OF INTELLECTUAL PROPERTY.
SECOND, THE WILL AND ABILITY TO ENFORCE THOSE LAWS MUST EXIST. THAT MEANS BOTH STRINGENT CUSTOMS WORK AND CONSTANT, DILIGENT LAW ENFORCEMENT.
I MUST TELL YOU THAT WE AT NINTENDO REGARD THE WORK OF THE U.S. TRADE REPRESENTATIVE'S OFFICE, UNDER THE LEADERSHIP OF AMBASSADOR MICKEY KANTOR, AS THE SINGLE MOST EFFECTIVE MEANS, RIGHT NOW, OF RIDDING THIS PLANET OF COUNTERFEITERS.
BUT THE PROTECTION OF INTELLECTUAL PROPERTY AROUND THE WORLD SHOULDN'T BE THE RESPONSIBILITY OF THE U.S. GOVERNMENT ALONE.
ALL GOVERNMENTS NEED TO RECOGNIZE THAT THERE CAN BE NO SAFE HAVEN FOR PIRATES, WHETHER THEY BOARD SHIPS AS IN THE OLD DAYS OR MANUFACTURE FAKE PRODUCTS IN VIOLATION OF SOMEBODY ELSE'S INTELLECTUAL PROPERTY RIGHTS.
AND IT DOESN'T STOP WITH JUST GOVERNMENTS. UNLESS INDUSTRY IS WILLING TO BE A FULL AND ACTIVE PARTICIPANT -- AND I MEAN TIME AND MONEY FROM EVERY VIABLE COMPANY WITHIN AN INDUSTRY -- ENFORCEMENT WILL FAIL.
IN THE CASE OF THE INTERACTIVE ENTERTAINMENT INDUSTRY, IT MEANS THAT RELYING ON NINTENDO AND SEGA ALONE TO FIGHT THE VIDEO GAME COUNTERFEITING PROBLEM, JUST DOESN'T CUT IT.
EVERY COMPANY HERE - BIG AND SMALL - MUST DO ITS SHARE -- IN ONE WAY OR THE OTHER.
FINALLY, DETERRENT NUMBER THREE WOULD SEEM TO BE THE EASIEST -- SIMPLE UNDERSTANDING. BUT IN SOME WAYS, IT'S THE MOST DIFFICULT.
I SUSPECT THAT SOME GOVERNMENTS MAY ACTUALLY SEE SHORT TERM ECONOMIC GAIN IN COUNTERFEITING AND EITHER CONDONE OR ACTUALLY SUPPORT IT.
WHAT THEY FAIL TO REALIZE IS THAT IN THE LONG RUN, THEY ARE SEVERELY HAMPERING THE BIRTH OF A NATIVE INFORMATION AND ENTERTAINMENT SOFTWARE INDUSTRY WITHIN THEIR BORDERS.
HERE AGAIN IS THE "SUPER WILD CARD." LET ME TELL YOU A LITTLE BIT MORE ABOUT THIS THING.
IT'S AN ACCESSORY BEING MANUFACTURED RIGHT NOW IN TAIWAN AND HONG KONG, WHICH IS READILY AVAILABLE AROUND THE WORLD.
IT ATTACHES TO A SUPER NES OR SEGA GENESIS, AND IN NON-TECHNICAL TERMS, SUCKS THE COMPUTER CODE RIGHT OFF THE SILICON AND DEPOSITS IT DIRECTLY ONTO A FLOPPY DISK.
THE COST IS NOT CHEAP -- TWO HUNDRED TO FIVE HUNDRED DOLLARS -- BUT OBVIOUSLY THAT'S NOT A BIG OBSTACLE.
CURRENTLY, SALES OF THESE DEVICES IN HONG KONG ALONE ARE RUNNING AT FULLY 40% OF THE UNIT VOLUMES OF 16-BIT GAME CONSOLES.
AND THE REASON IS SIMPLE. THAT INVESTMENT MAKES POSSIBLE THE PERFECT COPYING OF ANY AVAILABLE VIDEO GAME CARTRIDGE IN THE WORLD FOR THE MINIMAL COST OF A FLOPPY DISK.
IN FACT, "WHILE-YOU-WAIT" PARLORS UTILIZING THESE COPIERS HAVE SPRUNG UP THROUGHOUT HONG KONG, WHERE A CONSUMER CAN WALK INTO A SHOP, POINT AT SIX OR EIGHT OF HIS FAVORITE NEW VIDEO GAME TITLES, AND WALK OUT CARRYING FLOPPY DISCS CONTAINING MAYBE FOUR OR FIVE HUNDRED DOLLARS WORTH OF HIT GAMES FOR JUST A COUPLE DOLLARS.
AND THE IMPACT? WELL, CONSIDER THIS. IN HONG KONG, A MARKET WITH AN INSTALLED BASE OF OVER A HALF MILLION 16-BIT HARDWARE SYSTEMS, SEGA RECENTLY REPORTED THAT SALES FOR ITS LEAD RELEASE OF LAST YEAR, SONIC AND KNUCKLES, TOTALED 200 COPIES. THAT'S RIGHT, TWO HUNDRED!
AND IF YOU THINK HONG KONG IS A LONG WAY AWAY, TAKE A LOOK AT THIS.
HERE'S AN ADVERTISEMENT IN A CURRENT ISSUE OF A WELL-RESPECTED U.S. MAGAZINE, OFFERING . . . AND I QUOTE . . . "ADD-ON VIDEO GAME SYSTEMS THAT HOOK UP EASILY TO EXISTING SYSTEMS."
THE PAYOFF . . . AGAIN ACCORDING TO THE AD . . . "PARENTS AND PLAYERS REJOICE! PAY 60 CENTS A GAME, NOT $60." REJOICE INDEED!
WHAT THIS DEVICE REPRESENTS IS THE EXPLOSION OF VIDEO GAME COUNTERFEITING INTO THE LIMITLESS, BORDERLESS, AND ALL-BUT-LAWLESS REACHES OF CYBERSPACE.
IN THAT SENSE, WE IN THE VIDEO GAME BUSINESS NOW FACE ALL OF THE DANGERS WHICH HAVE CONFRONTED PC SOFTWARE DEVELOPERS FOR SOME TIME.
BECAUSE WHETHER WE LIKE IT OR NOT, OUR SOFTWARE IS POSTED ON NETWORK BULLETIN BOARDS AS SOON AS IT COMES TO MARKET.
BUT IN A SENSE OUR TASK IS EVEN MORE DIFFICULT.
BECAUSE INSTEAD OF ENFORCING MORALITY AMONG ADULTS PERHAPS INTERESTED IN A SINGLE SPREAD SHEET PROGRAM, WE'RE FACED WITH EXPLAINING ETHICS AND INTELLECTUAL PROPERTY RIGHTS TO A WORLD FULL OF TEENAGERS RAVENOUS FOR OUR FORM OF ENTERTAINMENT.
MAKE NO MISTAKE. CYBERSPACE IS DIFFERENT.
FIRST, THIS IS A WORLD WHERE EVERY USER IS A POTENTIAL ILLEGAL DISTRIBUTOR.
AND THAT DISTRIBUTOR IS EXTREMELY DIFFICULT TO DETECT -- OR EVEN IDENTIFY.
WHAT'S MORE, IF HE IS SUSPECTED, ESCAPE IS SIMPLE.
UNLIKE THE TYPICAL VIDEO GAME COUNTERFEITER, WORKING WITH MILLIONS OF CARTRIDGES OVER TENS OF THOUSANDS OF SQUARE FEET OF MANUFACTURING SPACE, THE CYBERSPACE PIRATE CAN DESTROY MATERIAL EVIDENCE IN A MATTER OF KEYSTROKES.
FOR THOSE WHO BELIEVE CYBERSPACE HOLDS THE GREATEST PROMISE FOR INDIVIDUAL WRITERS, ARTISTS, OR EVEN BUSINESSPEOPLE, LET ME SUGGEST THAT IN THE NEAR TERM THOSE WHO MAY BENEFIT MOST ARE THE LAWYERS AND THE CROOKS.
AND AS A LAWYER BY TRAINING, YES, I DO DISTINGUISH BETWEEN THE TWO.
WHAT IS YET TO BE BALANCED IN CYBERSPACE IS THE RIGHT TO FREEDOM OF SPEECH, ON ONE HAND, AND THE RIGHT TO PRIVACY, ON THE OTHER.
AND IT IS HERE . . . IN THE MATTER OF UNDERSTANDING, THAT THE GREATEST CHALLENGE LIES.
BECAUSE, UNFORTUNATELY, FOR MANY ON THE INTERNET, IT WOULD APPEAR THAT THE RIGHT OF PRIVACY IS INTERPRETED DIFFERENTLY DEPENDING UPON WHOSE PRIVACY IS BEING PROTECTED.
ON THE PART OF THE INDIVIDUAL, PRIVACY IS SEEN AS AN ABSOLUTE RIGHT.
BUT TO SOME, CORPORATE PRIVACY, IN THE FORM OF PROTECTED INTELLECTUAL PROPERTY, DOESN'T SEEM TO EXIST AT ALL.
IN THE WORDS OF THE PRESIDENTIAL GROUP EXPLORING THE INFORMATION INFRASTRUCTURE, "THERE SEEMS TO BE AN ATTITUDE BY SOME ON THE INTERNET THAT YOU CHECK YOUR COPYRIGHTS AT THE DOOR WHEN YOU ENTER THAT DOMAIN."
MARYBETH PETERS, THE REGISTRAR OF COPYRIGHTS, RECENTLY CALLED THE INTERNET THE BIGGEST COPYING MACHINE IN THE WORLD.
AND AUTHOR WILLIAM GIBSON, WHO COINED THE TERM CYBERSPACE IN THE EARLY 80'S, ALSO ESTABLISHED THE NOW FAMILIAR DRAMATIC CONFLICT PITTING SO-CALLED HEROES IN THE FORM OF COMPUTER HACKERS AGAINST VILLAINS CAST AS EVIL MULTI-NATIONAL CORPORATIONS.
UNFORTUNATELY, SOME IN THE MEDIA HAVE ACCEPTED THIS NONSENSE. THEY TOO SOMETIMES CELEBRATE THE HACKER-HERO.
AND THIS, IN TURN, HAS ACTED TO HELP AUTHENTICE THE ABSURD RATIONALIZATION THAT . . . AND I QUOTE . . . "INFORMATION WANTS TO BE FREE."
THIS, OF COURSE, HAS ALL THE INHERENT LOGIC OF THE AUTO THIEF WHO EXPLAINS TO POLICE THAT THE MINIVAN IN YOUR GARAGE JUST WANTED TO BE FREE.
AND WHAT'S MORE, THIS ABSOLUTE FREEDOM OF INFORMATION, AS DEMANDED BY SOME, ITSELF THREATENS THE INFORMATION INFRASTRUCTURE.
MOST WOULD AGREE WITH CLINTON ADMINISTRATION OFFICIAL SALLY KATZEN WHO WARNS THAT "PEOPLE WILL NOT USE THE INFORMATION INFRASTRUCTURE UNLESS THEY HAVE CONFIDENCE THAT THEIR INFORMATION IS GOING WHERE THEY WANT IT TO, WHEN THEY WANT IT TO, AND NOWHERE ELSE."
IN OTHER WORDS, PROTECTION OF PERSONAL PRIVACY IS ESSENTIAL.
BUT THE SAME PROTECTION SHOULD HOLD TRUE FOR CORPORATIONS. YOU CAN'T SUPPORT ONE AND NOT THE OTHER.
TO FREELY DISSEMINATE PROPRIETARY INFORMATION OWNED BY CORPORATIONS . . . THEIR LEGALLY PROTECTED INTELLECTUAL PROPERTY . . . IS TO STRIP IT OF COMMERCIAL VALUE . . . AND IN TURN TO DESTROY THE PROMISE OF THE INFORMATION INFRASTRUCTURE.
WITHOUT THE PROFITS OF THOSE ORIGINAL DONKEY KONG ARCADE MACHINES, BACK IN THE EARLY 1980'S, THERE WOULD HAVE BEEN NO REVOLUTIONARY DONKEY KONG COUNTRY FOR THE WORLD'S VIDEO GAME PLAYERS IN 1994.
THAT GAME ALONE REQUIRED AN INVESTMENT OF MANY MILLIONS OF DOLLARS IN TIME AND TECHNOLOGY, A FIGURE FEW HACKERS CAN AFFORD.
WHEN COUNTERFEITERS USE CYBERSPACE TO FREELY DISTRIBUTE SOMEBODY ELSE'S SOFTWARE, THE FUTURE TRULY IS UNDERMINED.
BECAUSE WHEN WORTHY CONTENT IS ROBBED OF ITS COMMERCIAL VALUE, THE PEOPLE WHO CREATE IT FIND SOMETHING ELSE TO DO FOR A LIVING. THE CONTENT JUST NEVER EXISTS.
THUS, THE LEGAL PROTECTION OF INFORMATION IS NOT A THREAT TO CYBERSPACE . . . . BUT RATHER, ITS GREATEST ASSET.
TO HELP PROTECT THAT ASSET, A COMMITTEE OF THE PRESIDENTIAL TASK FORCE ON THE INFORMATION INFRASTRUCTURE IS CURRENTLY FINALIZING A SERIES OF PROPOSALS, INCLUDING CHANGES TO EXISTING U.S. COPYRIGHT LAW.
THESE CHANGES WILL PROVIDE ADDITIONAL PROTECTION TO INTELLECTUAL PROPERTY IN CYBERSPACE. THEY DESERVE OUR INDUSTRY'S WHOLEHEARTED SUPPORT.
NOW, NOT EVERYONE MAY SHARE MY VIEWS ON PROTECTING INFORMATION -- ESPECIALLY SOME ON THE INTERNET.
SO THIS MORNING, AS I BEGAN SPEAKING, A COPY OF MY REMARKS WERE ENTERED INTO THE NINTENDO CORPORATE BULLETIN BOARD ON AMERICA-ON-LINE.
YOU ALSO FIND IT AT OUR WEB SITE ON THE INTERNET.
I LOOK FORWARD TO HEARING FROM THOSE WHO MAY DISAGREE WITH ME.
IN CONCLUSION, LET ME REPEAT THAT THE GLOBAL PROTECTION OF INTELLECTUAL PROPERTY IS ABSOLUTELY ESSENTIAL TO FULLY EXPAND THE POTENTIAL OF READILY EXCHANGED INFORMATION AND ENTERTAINMENT.
IT IS VITAL IN ORDER TO NURTURE THE DEVELOPMENT OF LEGITIMATE AND VALUABLE NATIONAL SOFTWARE MARKETS IN NATIONS LIKE CHINA, WHERE COUNTERFEIT GOODS RIGHT NOW SMOTHER ALL OPPORTUNITY.
AND IT ALSO IS VITAL IN THIS COUNTRY. TODAY IN THE U.S., THOUSANDS OF SMALL COMPANIES ARE STRUGGLING FOR SUCCESS IN THE EMERGING FIELD OF MULTIMEDIA.
THE POTENTIAL OF WHAT THEY CAN PRODUCE IS ENORMOUS -- THE ABILITY TO MAKE OUR LIVES MORE PRODUCTIVE AND MORE FUN.
AND TO DO THAT IN A WAY THAT NO ONE HAS THOUGHT OF BEFORE.
BUT SHOULD ANY OF THOSE ENTREPRENEURS STRIKE IT RICH, AND CREATE A BREAKTHROUGH PRODUCT THAT FINDS AN ENTHUSIASTIC AUDIENCE, IT STILL MUST FACE THE THREAT OF COUNTERFEIT.
LONG BEFORE THAT PRODUCT EVER REACHES THE MASS MARKET, IT'S VALUE MAY WELL HAVE BEEN STRIPPED CLEAN BY PEOPLE WHO HAD NO PART IN ITS CREATION -- WHO SIMPLY STOLE IT. AND THAT VISIONARY COMPANY WILL DISAPPEAR.
THINK ABOUT A WORLD WITHOUT COUNTERFEITERS. THINK ABOUT THE MARKETS SUCH A WORLD WOULD OPEN UP FOR THOSE OF US IN THE INTERACTIVE ENTERTAINMENT INDUSTRY.
AND THINK ABOUT THE ENTERTAINMENT PRODUCTS SUCH A WORLD WOULD FOSTER - NOT JUST THE PRODUCTS CREATED BY MULTI-NATIONAL CORPORATIONS, BUT ONES CREATED BY INDIVIDUALS AND NEW COMPANIES NOT YET EVEN BORN.
I THINK SUCH A WORLD IS NOT ONLY WORTH THINKING AND TALKING ABOUT, IT'S A WORLD THAT ALL OF US IN THIS ROOM CAN HELP CREATE.
SURE, IT'S A BIG CHALLENGE. AND YES, IT DWARFS THE CHALLENGES TYPICALLY IDENTIFIED BY CORPORATE EXECUTIVES WHO NATURALLY TEND TO FOCUS ON THEIR OWN COMPANY'S SUCCESS.
BUT IT HAPPENS TO BE THE BIGGEST CHALLENGE - AND OPPORTUNITY - FACING THE INTERACTIVE ENTERTAINMENT INDUSTRY RIGHT NOW.
I URGE EACH OF YOU TO JOIN NINTENDO AND SEGA AND THE OTHER COMPANIES IN THIS INDUSTRY WHO ARE FIGHTING INTERNATIONAL COUNTERFEITING.
ALL OF US HERE AT E³ NEED TO CONTINUE TO SPEAK OUT AGAINST THIS SERIOUS PROBLEM.
WE NEED TO EDUCATE EVERYONE WHO ARE ENTERTAINED BY OUR PRODUCTS, ABOUT THE NEED FOR PROTECTION OF INTELLECTUAL PROPERTY.
IF WE DO THIS, WE'LL EVENTUALLY WIN THE COUNTERFEITING BATTLE - NOT ONLY FOR OUR EMPLOYEES AND SHAREHOLDERS, BUT FOR THE SAKE OF EVERY PERSON AROUND THE WORLD WHO ENJOYS INTERACTIVE ENTERTAINMENT.
THANK YOU.