TechNotes - Top 10 issues for Gaming and Esports

Gaming and esports

 

Newzoo, June 2019

There are now more than 2.5 billion gamers across the world. Combined, they will spend $152.1 billion on games in 2019, representing an increase of +9.6% year on year.

 

1. Regulation of loot boxes:  Including loot boxes in video games and apps is coming under increasing scrutiny from regulators and legislators worldwide. Belgium and the Netherlands have already taken steps to ban loot boxes, similar legislation has been put before the US Senate, and the UK DCMS Committee is currently conducting an inquiry into “immersive and addictive technologies”. We have suggested some modifications to current business methods here to keep ahead of the regulatory curve.

2. Clones: Copyright will automatically subsist in software code and graphics, but it will be challenging to protect underlying ideas, concepts or formats, which is not much help if someone reskins your game. However, computer software can also be protected using patents in Europe if it provides a technical contribution to the art or solves a technical problem. For example, Konami obtained a European patent for an aspect of a football game which uses a pass indicator to balance the technical requirements of displaying a zoomed in view of a player whilst proving an overview of what was going on in other parts of the pitch off-screen.

3. Children: Games played by or targeted at children are in the regulatory spotlight following high-profile reports in the press of minors spending large amounts of money on in-game purchases. In the UK, the Competition and Markets Authority, the Advertising Standards Authority and the Gambling Commission have each taken steps to investigate the practices surrounding apps targeted at children, eliciting a flurry of self-regulation in the industry as a result (for example, both Google and Apple have recently tightened their app store policies to restrict third-party advertising and analytics in apps targeted at or designed for children). As this area will likely continue to attract elevated regulatory scrutiny, companies and developers should be prepared to take the initiative before legislators step in.

4. Copyright Directive: The new EU Directive on Copyright in the Digital Single Market has completed the European legislative procedure and Member States have until June 2021 to implement it into national legislation. One area of relevance to video games companies is the bolstering of authors’ rights, as the Copyright Directive provides a mechanism for authors to be entitled to “appropriate and proportional remuneration” when they licence or transfer their copyright works as well as additional remuneration if the payment originally agreed turns out to be disproportionately low compared to subsequent revenue derived from exploitation of the copyright work. This has implications where highly profitable video games are based on licensed material. We have provided further insights into the Copyright Directive here and here.

5. Competition: On 05 April 2019, the European Commission charged Valve and five video game publishers with breaching competition law by implementing “geo-blocking” restrictions on video games which prevented consumers from purchasing video games cross-border from other Member States. The Commission alleges that Valve and the five game publishers agreed to prevent consumers from purchasing and activating in their home territory PC video games acquired at a discount in low-cost Eastern European jurisdictions, therefore segmenting the EU Single Market. This investigation coincides with the implementation of the Geo-blocking Regulation, which aims to prevent the conditional provision of goods or services based on nationality or place of residence. The scope of the Regulation is due to be reviewed by the Commission by 23 March 2020.

6. Data Protection: On 02 July 2019, the UK Information Commissioner appeared before the UK DCMS Committee and stated that whilst the video games industry has “some maturation to do in understanding what their obligations are in data protection law”, her office would work with industry as it looks to implement an Age Appropriate Design Code (a code of practice for online services that are likely to be accessed by children). Therefore it is crucial to both be on top of your obligations under data protection law but also to understand that the ICO is in “listening mode” with regard to planned regulation which could significantly affect the video games industry.

7. Games as a Service: One of the major themes of E3 2019 was the rise of the “GaaS” model that is being championed by Google, Xbox, EA and Ubisoft amongst others, which allows gamers to subscribe to an evolving library of games. GaaS (whether delivered in conjunction with cloud streaming or through the more common approach of storefront downloads) provides for recurring monetisation rather than relying on one-off purchases. However, the GaaS model will certainly cause unrest amongst players on the issues of game “ownership”, the ability to archive games, and the value and longevity of purchasable in-game content. Companies will need to present clear information to players on who “owns” the content they are subscribing to.

8. Professional gamers: As esports prize pools continue to grow, so does the professional training and regimented scheduling required by competitive esports players, which is often overseen and managed by their esports team. Therefore, esports teams need to be increasingly alive to whether their players are contractors or employees given the circumstances of their relationship, and what kinds of duties they owe their players in terms of mental and physical wellbeing.

9. Protecting your brand in esports: Consider applying for trade marks to protect your esports team name, logos and even gamertags. Not only can this help you in preventing imitators from operating, but registered trade marks can be valuable IP rights capable of being licensed or sold onwards for merchandising, endorsements or broadcasting rights.

10. Taxes on streaming: Where professional (or otherwise) players are providing live streams on a paid basis, local sales tax may be due on the revenue generated dependent on the person watching the stream. Whether the streamer or the platform will be liable for this local sales tax depends on the jurisdiction and so, in some instances, the platform being streamed on will take care of these obligations but they may not be required to do so in all territories. Personal income tax is also likely to be due on revenue generated by professional players, regardless of whether the revenue is generated via advertisements, revenue or even sponsorship via Patreon, GoFundMe or similar services.

This article was authored by Kireth Kalirai, Bryn Reynolds, Laurence Lai, Michael Yu, Craig Gilchrist and Viktorija Kasper.

This document (and any information accessed through links in this document) is provided for information purposes only and does not constitute legal advice. Professional legal advice should be obtained before taking or refraining from any action as a result of the contents of this document.