Wednesday, November 07, 2012

The Data Blitz Raid (scytherage's take)

My wife has given her thoughts and has provided a lot of the 'facts' about this story. I only caught wind of it today and I thought originally this was just some minor thing with NBA2K13 being the only game at issue. Upon reading more and finding out over 2 million worth of games were seized, wow, I realized this was pretty serious stuff. I also saw other posts on Pinoyxbox and other blogs about how bad it was, with the store being closed and essentially putting a halt to their business operations for a day or two....Looks like Datablitz was subjected to public humiliation in this incident. Note that not all people are gamers so to people not familiar with the games business it just makes them lose a bit of face to have police coming in, and word going around about selling pirated games for a store with a large ORIGINAL signboard at their stores.

I've read most of the stories and know some of the facts. In the end I'd rather side with Data Blitz on this.

They're not perfect, sure. But imagine a world without them. Just visit SM's Toy Kingdom and fathom paying 3,000 pesos for your games. That's a world I'd rather not live in.

Games are a luxury, they aren't a necessity. Perhaps that explains their high prices. But the question is always, how high should their prices be? That's a complex problem.

From what I know, the market here locally for games is rather small. We're not going to turn into Singapore, Hong Kong or Japan anytime soon. People have to have a lot of disposable income to get into the gaming hobby. So having games be affordable is crucial for it to grow.

I'm sure there will be those that would side with X-play because it's entirely possible they do have some rights to selling that game exclusively. But if they are going to make an issue of this, I don't think they should have approached it they way they did. The tactic they used just does not win them faith with the very people they want to sell their product to.

At the root of this problem are a lot of other issues, parallel importing, grey markets...honestly I'm no law expert so I'm not going to get into arguing on this side of the fence. What I simply understand is this: relatively speaking, Datablitz offers very good prices. Compare it to play-asia, compare it to shopping in Hong Kong or other Asian countries....the prices they offer is relatively fair. I guess my wife brought up a very good point about 'how exactly do they do it? do they evade taxes?'

We don't know that. It's not like Data Blitz is publicly traded or anything. That's their business. I'm to assume that they do; if you're in business in major malls like that, with hundreds of games and a lot of customers, know what, if i was in that kind of business it would be a very stupid idea not to pay the right taxes.

It is entirely possible that they don't---but we don't know the facts and it isn't fair to think that 'because their games are cheap, they must be doing something corrupt/evil/whatever'.

The other thing is the idea of the 'exclusive distributor'; i have a hard time understanding this. Who made them exclusive? Is there some kind of court legal document that would say this? Completely out of my scope here, again i dont know any law stuff. But other stores are doing the same thing that Data Blitz is doing. If this whole exclusive distributor thing is such a big deal then how come other people are getting away with it? It seems the law in our country only applies to those who can pay enough to the cop who is going to catch the crooks. If the cops aren't paid, they won't do anything. That probably explains why pirated games/movies/etc can be sold in major malls even with the PNP just blindly passing by the stores. It's a strange, weird society we live in here in the Philippines. I think this whole Data Blitz raid underscores a deeper societal/cultural problem that needs to be addressed.

My simple view is that X-play probably paid an INCREDIBLE amount of money for exclusive rights to games like NBA2K13. When they eventually got the game and started selling them, they found out that the demand here....isn't really that great. They were probably expecting to sell hundreds of thousands of copies. But the truth is, game consoles, well, buying LEGIT games for game consoles is a middle class thing here in the Philippines. The middle class is about 1% of the population, and not all of that 1% buys original games. It's a really tough sell to market video games here.

So I can imagine these guys at X-play were stuck with thousands of unsold NBA2K13 copies. So what do they do? They start looking for someone to blame. They see Data Blitz, a successful business....and realize they can make back what they lost with their huge investment in ONE LOUSY GAME by suing the pants off them. I suppose their objective, really, is to get a settlement of some kind.

This probably has nothing to do with 'principle' or exclusive distributorship rights or anything like that. It's more likely about recouping that big investment.

If anything, the mistake of X-play is they probably overestimated the demand for NBA2K13. Yeah, you'll hear your buds talk about that game, if you're a middle class Pinoy with other middle class kids. But video gaming is NOT a "masa" hobby. Not everyone can afford it, even the pirated variety. It's still a big luxury here. And with people scrambling to make ends meet, buying a video game is likely the last thing on the majority's minds.

If they had factored in a bit of research before buying a billion copies of NBA2K13, then maybe they wouldn't be stuck in this conundrum. Market research is very important. It sucks to sit down and think and crunch numbers, but if you don't do it, you will end up like X-play here. One thing I've learned about starting a business (note: i dont have one but ive seen enough to know some things...), some people have great dreams but they dont have good plans, some people have great ideas but they dont have a good structure/foundation behind their ideals, and that's what usually kills great business ideas. X-play is likely going to be a classic example of this. But they are going the 'smart' route by going for the lawsuit.

Well, that is, if they win.....another thing is going the legal route can be expensive....

Other conspiracy theories ive heard --- the GMA connection, well that is troubling. If big media like GMA start seeing console games as a potential profit source, and if console games get handled like how X-play is handling it, we're going to see some dark times in console gaming here in the Philippines. Say hello to the 3,000 peso PS3 game. I really hope that does not happen.

But then again, if it does, I'm sure the market will respond in kind. By pirating even more games. Great job X-play, you just set us back 20 years in convincing people to support original titles. *sigh* *facepalm*....

Tuesday, November 06, 2012

Datablitz gets raided for selling 'unauthroized' games.

Datablitz, the biggest gaming software retail chain in the Philippines, has just been accused of selling a ‘unauthorized’ game of NBA 2k13.  (Source)   Not because it was downloaded illegally and burnt to a cheap CD but because Datablitz did not buy some(?) of  their copies from the official and exclusive Philippine distributor of the game, XPLAY games.  Based on the article posted, PNP-CIDG (Philippine National Police -  Criminal Investigation and Detection Group) raided stores and the warehouse of Datablitz.  The complaint was filed because the games being sold apparently did not have the XPLAY sticker like the one shown in the image below.  Those in the Philippines might be wondering why the PNP-CIDG and not the OMB (Optical Media Board) well this is not about piracy but trade and business.

The truth is Datablitz is the errant party here --- if we are going to base it according to the law.  They probably got some copies from the gray market --- for what reason...who knows?   I don't claim to know the reason why Datablitz have other copies.  It could be anything from the 'golden and superior' R1 copies for NBA2K13 or simply because the gray market copies are cheaper and would increase their profit margins.

But its hard for me to fault Datablitz entirely.  It's difficult for me not to side with Datablitz because for the longest time they have been the only ones promoting original gaming.   But if you are a little familiar with retail and distributorships, you know how this story goes...

We can all cry foul about this and most Filipino gamers already have.  But for XPLAY to gain exclusive rights or even distributorship of the game, they must have dumped a truckload of money to 2KGames.  They must have TONS of NBA 2K13 games in their warehouse and the shelf life of that game(as if any game that has a yearly installation) is quickly nearing its end.  In a few months the game will be irrelevant as the next NBA 2K game will be released.  XPLAY must know that the Philippine gaming market is not big enough to profit from and they need ALL the retailers to work with them if they want to gain anything.

What XPLAY is doing is protecting their investment.  And they have the papers to prove it.  Papers that the law will recognize.  And what that Datablitz have --- unofficial gray channels.  I’m quite surprised this has happened since Datablitz is the the official distributor of EA games in the Philippines.  They should have known that it was possible to get into trouble by not getting from the official distributor.  And Datablitz is so big…they are extremely visible unlike those smaller stores in Greenhills.  Yes, its sad that the store that advocates buying original software is getting caught for something that may be a technicality.

I’m not siding with anyone here but just stating the sobering reality of Philippine trade laws and our small game industry.


Update: X-Play has released an official statement regarding this. (Source)  I'll quote some parts and then comment:
"This is not a knee-jerk reaction from X-Play. In fact, meetings were heldwith Datablitz President, Winston Lim and his team to become X-Play'sprimary partner for NBA 2K13. Datablitz key executives Sandra Lu and OrphaOambas even participated in X-Play's distributor conferences and got all themarketing and distribution plans of the company.
Datablitz's decision to acquire and distribute NBA 2K13 through unauthorizedmeans despite these efforts, leaves X-Play no other option but to reportthis to the proper authorities, in which CIDG and the Regional Trial Courttook immediate action on."
As of this time, I haven't read an official statement from Datablitz regarding the issue.  But X-Play does state the reason for the raid --- Datablitz bought NBA2K13 through unofficial channels.  I don't know if Datablitz ever carried NBA2K13 from X-Play but considering they are the BIGGEST gaming software retail chain the country, them not buying would reduce the overall sales of X-Play.  I'm not sure if this would inadvertently affect retailers in the event X-Play raised their price due to the reduction in sales volume.  It might be likely that the cost of the game being sold to retailers (not consumers) would be higher and leave some retailers will little to no margin.  They are 'stuck' because they followed exclusive distributorship rule which is not just something that happens in the Philippines.  Datablitz got their game from the gray market, probably because the gray market offered a higher profit margin for them.

I'm not sympathetic to either party but now I understand what was the cause of the raid from one point of view.  This is NOT about gaming anymore it's about trade and business.

We may have our grievances with X-Play --- perhaps the SRP set for their games our expensive and naturally, gamers will gravitate to those who sell at a better price.  But at the end of the day, this is business and there's a lot more going on than meets the eye.

Update:  Finally Datablitz has released their statement. (Source)  I'll quote some parts and comment:

"were only asked to participate in meetings and/or to join XPlay's so-called "marketing programs" (which are really nothing more than just glamorized parlor game events). DataBlitz participated in the meetings and "marketing programs" out of courtesy to XPlay and no such thing as "primary partnership", whatsoever was ever discussed, offered, nor penned on paper, whatsoever."
"XPlay has never indicated in any form of writing or communications whatsoever to DataBlitz that they are the exclusive distributor of the game."
"If there suddenly are now parties out there who see the vibrancy of the gaming industry as a way to profit immensely by using sham claims of being the only party that possesses "authorized" stocks (whatever that means) in order to shove overpriced games down the throats of the gaming public, this kind of modus is just against the core principles of DataBlitz and something we just cannot and will not go along with."
"At the end of the day, we have the welfare of our customers at heart, not the twisted desires of these opportunists."
Ok that was long...and 'emotionally charged'.  Basically Datablitz was saying two things: 1) there was no written and signed partnership between Datablitz and X-Play for NBA2K13 retail.  2) They are contesting X-Play's claim that they are the exclusive local distributor of the game.  The rest of the statement was just how DataBlitz claims to be a champion for the local gaming industry scene here in the Philippines.

So given this, the ball is now in the court of X-Play.  Do they really have documents to prove they have exclusive distributor rights in the Philippines?  Hey, there are exclusive distributors in other countries so we do know this kind of agreement between the publisher and the distributor does exist.  It also appears its a classic 'usapan' vs 'pirmahan'.  Those in business would do well to know that several repeatedly signed sheets of paper hold a stronger value over 'friendship', flattery, 'smiles' and 'camaraderie' between companies.

My husband asks me why I am not entirely on the side of DataBlitz.  Well...I want to stay neutral here.  But I understand where DataBlitz is coming from.  The allegation that they are selling something illegally acquired stands to destroy all the years they spent marketing themselves as selling original and authentic software.

How about the government?  Well I would like the question the extent of their investigative practices... Do they know the all the facts or they just went in there and seized / arrested indiscriminately?   If X-Play can prove without a doubt that they have exclusive distributorship rights to NBA2K13, then no doubt the government will side with them.  Why?  It's simple --- X-Play pays taxes (hopefully).  This is opposed to buying from the gray market which is normally a foreign based distributor whose sales don't contribute anything to the government.  Sure they 'probably' both pay some importation tax, but one of them pays more to the Philippine government 

Yes...I'm cynical which is a far cry from what I was before.  But I have sobered up a bit. I don't know the good or bad guy here.  Frankly, I don't think there is such a delineation anymore --- everything is just 'shades of gray' (not 50! LOL).  So there, I prefer cynical neutrality and just wait to see how this business thing plays out.

Update:  Here are more details regarding the so-called raid of pirated software (Source)

The Philippine National Police - Criminal Investigation and Detection Group (CIDG) has seized P2.7 million worth of smuggled computer games in simultaneous raids held in various parts of Metro Manila.
Members of the Anti-Transnational and Cyber Crime Division seized 1,060 pieces of video game discs worth P2.65 million in raids held in 11 stores and one warehouse last Monday.
CIDG chief Police Director Samuel Pagdilao, Jr. said the smuggled items were confiscated in operations held at SM Megamall in Ortigas; Robinsons Magnolia in Quezon City; Elife @ Eton in Edsa; Park Square in Ayala Center; Rockwell Information Center; Greenbelt Expo Exchange, all in Makati; Market! Market! in Taguig; Robinsons Ermita in Manila; Trinoma in Edsa, SM Annex in SM City North Edsa; and the Datablitz warehouse in Pasay. 
Authorities also arrested 32 individuals during the raids. Eleven of the arrested individuals were charged after the CIDG determined the suspects’ involvement in the illegal activities. 
Senior Supt. Gilbert Sosa, head of the CIDG Anti-Transnational and Cyber Crime Division, said the 11 were charged for violating Section 168 or unfair competition in relation to Sec. 179 of the Intellectual Property Rights Law. 
The violation is punishable by a jail term that lasts from two to five years or fines ranging from P50,000 to P200,000. 
Charged were Glen Tena, Arvin Lamanilao, Christopher Decierdo, Frederick Japsay, Billie Jay Cuadra, Christian Dadula, Nico Villegas, Elvis Martin, Clint Fructuoso, John Badeo and Shannon Rosales.
The raid stemmed from the complaint of Jose Enrico Demetrio Dingle, head of security of IPVG, which owns X-Play Online Games, Inc. The company is the exclusive distributor of Blizzard Entertainment games and NBA 2K13 products. 
Sosa said Datablitz Inc. is not authorized to distribute and sell the computer games contained in the discs. He said the discs were also smuggled into the country from Hongkong and Singapore.

Ooooh...messy messy messy.  So there's even an allegation that the gray market copies were smuggled from Hong Kong and Singapore?  Ok...time to find those Customs tax receipts...  There is NO DEFINITIVE gaming market in the Philippines (at least on the console) so if you're selling games, you have no choice but to import them.  Importing is not a crime just as long as you pay the correct tax.  And smuggling --- geeze...that only happens if they didn't go and pay the correct tax or don't have papers to prove they paid the correct tax.  Customs officials SHOULD issue receipts for taxes paid.  Judging the value of game and its quantity, I wouldn't be surprised if the importation tax alone would be a HUGE amount.

And why in the world are they arresting those people?  Are they management (who actually handle purchasing) or the just manning the stores?

And there's more ...(Source)
Other gaming titles were also reportedly seized by the police, but Gonzales was not able to identify which specific titles they were.

Contrary to earlier reports by some news outlets, the pieces of software seized from DataBlitz were neither counterfeit nor pirated, but were just sold without proper authorization from the local distributor, according to the CIDG official. 

Gonzales said DataBlitz would be charged with violation of Section 168 of Republic Act 8293, or the law on unfair competition. 
Good grief...'unfair competition' law.  Messy messy messy indeed...  And what were the other titles that were confiscated eh and how that does that relate to the original complaint from X-Play?  Did they get Diablo 3 or WoW: Mist of Pandora too?  Or something else...?!?  And if 'unfair competition' law doesn't stick, it'll boil down to importation taxes.