Broadband gets push from video game industry lobbyists

Video game lobbyists are pushing for government policies that encourage affordable, accessible and faster high-speed Internet service as the agendas for the new Congress and the Obama administration come into focus.

Michael Gallagher, the head of the industry's main trade group and former assistant secretary of Commerce under President George W. Bush, believes broadband is the "connective tissue" that his member companies need to survive in a turbulent economy.

Opportunities to play games online and download games and game-related content from a range of legitimate download services help drive demand for broadband, the Entertainment Software Association said in a briefing paper sent to President Obama's transition team.

"We're the only form of entertainment online that's interactive -- movies and music are linear," Gallagher said. "We're very pleased with the president's strong embracing of broadband deployment as a high value goal for our country."

The more than $6 billion in broadband funds in Obama's economic stimulus package was a good start, he added. Gallagher's group also supports efforts to free up wireless spectrum as gaming moves from PCs and plasma screens to handheld devices.

"The administration and Congress have a huge amount to contribute to make sure that resources are available and make sure that rules of the road encourage investment and give companies and customers access to it at reasonable prices and terms," he said.

To help spread ESA's message, Gallagher recently hired Jennifer Manner, a Democrat and former executive at Skyterra Communications, to lead his lobbying team.

In 2007, ESA brought on former Motion Picture Association of America executive Rich Taylor, and last year it wooed Recording Industry Association of America lawyer Kenneth Doroshow. Both are Democrats.

According to disclosure forms, ESA spent $980,000 per quarter last year on lobbying-related activities. Those efforts focused on a range of issues from media violence and parental control technologies to industry ratings and video game sale regulation.

Lobbyists also spent considerable time advocating for increased intellectual property protection and were handed a win when Bush signed a bill in October to toughen civil and criminal laws against counterfeiting and piracy and created an IP enforcement coordinator within the White House.

Gallagher said the IP czar position, which has yet to be filled by Obama, is an important job because the individual will be tasked with marshaling and coordinating enforcement resources across a number of agencies.

"We are hopeful that position gets filled as soon as possible," he said. "Every week that goes by and they're not there, we're losing momentum."

The ESA chief also stressed the importance of an annual report by the Office of the U.S. Trade Representative that highlights countries that are the worst intellectual property offenders, noting that Western Europe is of particular concern.

ESA's study estimated about 6.4 million illegal downloads of 13 game titles were made available through two popular services in December alone. Countries with the most unauthorized downloads were Italy, Spain, France, Germany and Poland.

While the USTR report is valuable, Gallagher added, the process needs more teeth.

Senate Finance Chairman Max Baucus and Sen. Orrin Hatch, R-Utah, introduced legislation last Congress that would have required trade officials to create an action plan for the worst offenders with harsh consequences for countries that do not comply.

Trade is also important for the group.

"The attitude toward trade is very hostile -- not just in Congress but across the country," Gallagher said. "You see different initiatives and rhetoric that trends toward closing down borders."

Tariffs of up to 30 percent translate into higher prices for software, consoles and peripherals, according to ESA documents. The industry supports a revitalized Doha round in the WTO, increased access to emerging markets like Brazil, China, India, and Russia, and new trade deals.

On the state level, ESA is waging multiple wars. One is against what it believes are harmful taxation proposals aimed at digital goods, including music and videogame downloads. Gallagher argues the legislative trend is "bad policy and a bad idea that inhibits growth" and would eliminate jobs in his industry.

His industry also routinely faces First Amendment threats from state legislatures and challenges them in court. Last month, a San Francisco appeals court ruled a state law banning sales of violent video games to children is unconstitutional.

Despite the recession, international tariffs and domestic threats, the gaming industry will not be begging for a government bailout anytime soon.

Gallagher's sector had a record-breaking 2008, with top-line revenue growing to $22 billion. An average of eight video games was sold every second last year and holiday season sales were strong when many other sectors were lukewarm or poor.

An estimated 38 million consoles are in U.S. homes today, which means the industry has reached the 30 percent penetration point, Gallagher said. "That's where big things happen," he said. "This is a strong point in the curve."