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Community Roundup – Issue #23

Games Industry Law Summit
Community Roundup – Issue #23
By Sergei Klimov • Issue #23 • View online
It’s been a while since the previous issue was posted – which is not to say that there haven’t been things worthy of sharing. It’s just that our own little game is set to ship in a couple of months, and so instead of writing newsletters we’re busy balancing out the skills and traits that a character gets if, say, she was imprisoned for a year (–1 Health, + interest in Battle Magic, +20% Streetwise, if you wondered).
From this week onwards, however, somewhat regular newsletters are going to be a must as Alma starts the engines on the prep work for Summit 2019 – and we’ll get there in the next issue! But first, some community news.

Sean and Greg's book is out!
I know that some of you have already bought this book, but for those of you who haven’t – it’s officially out, available via Amazon (here’s links for US, UK, DE sites). Thanks to the generosity of FKKS, all of the finalists of this year’s Legal Challenge will receive a copy courtesy of the firm.
More Than Just A Game, Frankfurt Edition
You’ve probably met Gaetano Dimita at one of the earlier Summits. His university-directed event, MTJG, is set to have another edition in Frankfurt on October 19 – in partnership with Beaten Burkhardt. If you’d like to attend, feel free to reach out to another Summit guest whom you probably already know from the event: Andreas Lober.
Chinese games companies see their stock fall
If you were to buy some Tencent stock during this year’s Summit, you would be more than 20% down right now. If you were to buy some CD Projekt RED stock during this year’s Summit, you would be more than 40% up right now (they have no job openings for in-house lawyers at the moment, if you wondered, but there’s a ton of positions for animators and programmers).
The chief reason behind the falling stock price of companies such as Netease, Capcom, Nexon, etc. seems to be the news out of China – first, game approvals are put on hold; and then there’s a broader change that affects pretty much every games company that books significant profits from the region:
What’s worrying is that China’s newest directives don’t seem to be just temporary, but a part of a bigger momentum,” said Serkan Toto, founder of Tokyo-based game consultancy Kantan Games Inc. “The government seems determined to send a message to parents that they agree games are evil and usage must therefore be restricted.”
As this article in Bloomberg reflects, it would be short-sighted to take this news as bad for Tencent only. At a certain level of growth, everyone is affected by what happens in China – just to a different degree. The very same CD Projekt RED reports around 10% of its revenue as coming from "Asia + Russia”, which seems to leave a lot of potential for growth there – except that maybe now, growing your games business in China will take longer and become even less certain.
Nobody knows China (even the Chinese)
On the subject of China, there’s a great recent article that underlines the same thing that we kept hearing from all the games companies who do business there:
“as the government closes down any source of information outside its control, we can only wonder at how much it knows itself”
It’s one thing when new games are not getting approved for 6 months because of reason X, whatever that reason could be; and it’s quite another when literally nobody knows for sure.
If you consider your own games company to be in an underprivileged position, as an outsider – don’t be so hard on yourself. Some weeks ago, even Tencent‘s president Martin Lau publicly explained how Beijing’s bureaucracy hurts his company.
So at the end of the day, it’s not really about Western companies not understanding the new rules, but rather about pretty much everybody not understanding these rules.
“We don’t know China because, in ways that have generally not been acknowledged, virtually every piece of information issued from or about the country is unreliable, partial, or distorted.”
The whole article is here.
Maybe PUBG PC won't release in China at all?
Lulu Yilun Chen
Just talked with Benjamin Wu from #PacificEpoch who said his understanding is that game approvals might resume September-end, but South Korean games won't be on that list due to conflicts stemming from its standoff with China on THAAD-- meaning PUBG very likely won't make the cut
Imagine being a part of the Tencent/Bluehole business team that has to work out a way forward for PUBG PC in China…
In other news from China...
Here’s a quote that may apply to what we have with the games industry in China at the moment –
“The industry is undergoing a lot of pain right now,” said Yin. “But if dealt properly, it will be a good opportunity.”
– however, it’s from an article about the Chinese film industry. If you think that dealing with game approvals is complicated, consider having to deal with the state going after film celebrities and their suspected tax evasion in order to make a public point out of that – while you’ve got projects that depend on those specific individuals.
The full article is here.
Epic Games gets epic coverage
Some years ago, there were was a case in Russia when news sites reported “a suicide due to playing too much of [GAME]” (one of you, dear readers, should remember this case well). What they left out is that the guy was binge-drinking vodka for several days straight, which ended with him shooting himself with an illegally owned military weapon, so perhaps he could have been watching dog shows on TV all this time, with the same end result.
With power comes the responsibility, and with fame comes all sorts of crap from the tabloids. In the case of Daily Mirror (pictured above), there’s a bonus: apparently, the author of this specific piece is known for looking to frame games (“Pokemon Go is ruining my marriage”) for all sorts of problems as long as games seem to be popular enough to merit a large-font headline. Details here.
At the same time, there’s a bunch of great stories from people who have very positive first-hand experiences with Fortnite, for example this thread:
“I also get to play the game with my kids. It’s staggering how good they are at their age. Fortnite has united kids of their age, I’ve been at events where they’ve buddied up instantly with a stranger by doing an in-game dance.”
Tero Kuittinen
What’s actually happening, of course, is a creation of an amazingly rich, collaborative and experimental project by a group of 10-year olds.
Riot Games starts with damage control
Riot Games
To listen, we have to be quiet. You haven’t heard from us, because we’re focused on listening and supporting internally. In the weeks and months ahead, we’ll share the immediate and long-term actions we’re taking to enact real change for women at Riot.
In the recent weeks, Riot Games kept getting into hot water on a regular basis. From an article that was 6 months in the making and detailed their internal process as “unfair to women” to blogs of ex-employees who tried to address the issues of “rape jokes” being made by the company’s management, and to male attendees complaining about being excluded from Riot’s PAX workshop on getting into the games industry.
I’m not posting any links here because, ultimately, it all comes down to the same old truth about any creative business: sometimes, the management of games companies are not the most pleasant people to be around; and when in-house legal and HR teams are weak, or is prevented from addressing such issues (ref. Riot’s CEO shutting down their Head of Legal in front of everyone during a group meeting that addressed the problem), the whole thing is eventually going to blow up in public.
At this year’s Summit, we discussed a (very real) situation of what should the legal team undertake when one user makes a credible threat of violence towards another user, or a dev team member, on the forums. From Wargaming’s story about the gun owner who just got out of jail and wanted the dev team to do as he says, to the story of Jagex’s moderators dealing with the proposals to shoot the management, take over the company and make a better sequel, the focus has been on the line past which the in-house legal team cannot afford to just stand back and let the situation develop.
It would be good if in 2019 we could expand on the topic and talk about how the legal teams can help their companies with the prevention of some very real conflicts internally. At one of the companies where I worked, management once told an employee that he should divorce his wife – because his commute to her house is too long for him to get enough sleep. Now, in a small company this is just a stupid thing to say, but in a multi-billion company that’s a possible lawsuit. Can the in-house legal teams be counted on being there to raise red flags in such situations, or this is the domain of management exclusively? Let’s talk more about this when we meet in May 2019.
Belgium as our collective conscience?
2K Games alters NBA 2K MyTeam mode to comply with Belgian loot box laws Card packs no longer available for premium currency, though 2K "disagrees with this position"
If you’re in-house at one of the global games companies and you deal with Europe, chances are that dealing with Belgium is somewhere on your to-do list. The country may bring under 1% of the global games revenue, but its ruling on the free-to-play mechanics had a far mightier impact.
Tech companies like Facebook and Google, in general, are known to follow the strategy of “expand now, defend your position later” and may pretty much ignore the on-the-ground reality – considering the (possible but not certain) penalties to be a small price to pay, later, for the (immediate and shareholder-pleasing) progress, now. After all, being fast and having no preconceived limits is what made them successful in the first place. When Uber was under stress in Paris, they did not hire more compliance lawyers or GR specialists – they hired more defence lawyers for those drivers that got arrested.
As to the games industry, we’re not really there – because our customer base is more tangible, and we want to keep making money with the same properties for many years to come, and pretty much everywhere. Lose in Belgium – and Norway may come after you. Lose in Norway – and Germany will skin you.
At the same time, very few companies bothered to connect legal and software development in a way that would make it easy to offer different game modes to users in different regions. Valve’s vision for Steam, for a long time, has been that of “one market, one user experience” for everyone. You may be able to launch an app in Canada through Apple ahead of other territories, but for a Steam release, you are very strongly advised to run things globally – a launch should be a launch for players everywhere, from Shanghai to Lima.
All of this results in a challenge that, I think, is still not fully recognised by the global games companies: that if you want to wade in dangerous waters of (possibly exploitative) F2P mechanics, you’d better be ready to offer as many regional versions of your game as you possibly can, and tweak each according to the local rulings.
Take NBA 2019, for example – a product that’s at no.1 on Steam’s Topsellers list. As of this writing, it sports 65% negative user reviews, which is pretty exceptional (and not in a good way). It would be one thing if users simply raged about not having enough new features, but they seem to be as much – or even more – pissed off by the presence of micro-transactions in this $59.99 product. As one of the reviews spells it out –
NBA 2K19 is constantly begging you to spend VC [virtual currency]. You’re asked to spend VC on Gatorade for performance boosts, on vehicles to make progression around the plodding Neighbourhood mode quicker, on shoes, on clothes. It’s relentless, in your face the moment you turn the game on, and doesn’t leave you until the second you quit (quite literally, since GET VC is right there underneath QUIT).
The hundreds of negative comments on the game’s Steam forums indeed are focused as much on the hardware problems and lack of expected features, as on the publisher’s desire to milk users from the get-go for more cash.
“2K19 is like a free-to-play mobile game, a predatory experience where the game is always shaking you down for your lunch money (…) It is not fun to be around.”
While I disagree with the conclusion above – I would rather say, “like a bad free-to-play mobile game”, – in general it’s hard to find any love for the product. Chinese players hate it. American players hate it. Swedish players hate it. Something has got to give, and sooner than later folks will start writing formal complaints to their local consumer rights organisations.
All of this is is to say that, looking back, Belgium seems to have become our industry’s collective conscience: the region might be small, but it seems to still be able to detect certain problems with aggressive game mechanics earlier than others – and force games companies to make the consumer-friendly changes that, eventually, are bound to spread like the requirements to disclose probabilities of drops and the rules on playtime limits that are being copied off Korea’s advanced regulation.
Discord to compete with Steam, GOG, etc.
Finally, the last piece of news for today is that Discord – a communications platform that grew to over 150 million users thanks to player communities and games companies actively promoting it as the most convenient tool for chat and tech support – decided to shoot itself in the foot by announcing plans to directly compete with Steam, GOG, Humble, WePlay, Itchio and all the other digital distribution platforms (full statement is here).
There are several reasons as to why this seems like a stupid idea:
  • Discord, propelled to success by the support of developers and publishers, now wants to be “the Netflix of games” by offering free games to its $50/year Nitro subscribers; so that when CD Projekt RED will bring new users to its Discord server, these users will be offered to subscribe to Nitro, and have a ton of games to enjoy for free – as opposed to actually purchasing products in the old way.
  • Discord, currently promoted by hundreds of developers right on their Steam store pages, now defines itself as a “digital distribution store”, making such promotions no longer possible under article 2.5 of Steam’s Distribution Agreement. Whereas previously lots of products featured in-game links to Discord on par with in-game links to the official forums and social channels, right now it feels like having a GOG build that sends users to Steam, and vice versa.
  • Discord, on contrast to Steam that keeps looking for ways to allow any developer from anywhere in the world to access its audience, wants to launch a “curated store experience”. Now, becoming a direct competitor with a bunch of former platform partners is already bad enough, but making even developers vary of your platform is something of an achievement: say, you release 10 games, and promote your official Discord server – but 5 of out 10 are rejected by Discord’s curators, and so you end up bringing in users that are then offered to buy your competitor’s products while your own products remain unavailable there.
  • To add insult to injury, Discord also presented its “First on Discord” program that requires certain products to be exclusive to Discord for a period of about 3 months after launch. Both GOG and Steam teams have been for many years clear on this subject: whichever platform users are on, they should not be discriminated by being forced to purchase game X on platform A first; and game Y on platform B first.
Some users are less excited about Discord Store than others.
Some users are less excited about Discord Store than others.
The points above hurt even before we move to the logistics of the whole thing: from the current complete lack of developer tools that could allow content creators to launch and update their games on Discord to the lack of platform’s experience in dealing with multiple currencies, chargebacks, partner tax interviews and refunds…
The good news, though, is that the expected launch of this new store seems to be delayed, so maybe whoever was looking at the shot foot of the platform, was able to convince them that selling paid content is a bit more complicated than supporting free chat servers.
Summit 2019
With the news above off my chest (at least for a while) and the other news not public yet (I know that some of you, my friends, won a case in the US court last week – congrats!! – with the help of other friends, who are also a part of this community), here’s the action plan for the coming few days:
  • the dates for Summit 2019 are final
  • the special hotel rates for Summit 2019 are also final
  • we’re a few days away from sending out registration forms
The next issue of this newsletter will carry all the updated information, as well as the hotel map (and special rates so that you can compare them to what’s available elsewhere), and around the same time Alma and I will start approaching you one by one.
Have a great day – and stay safe if you’re in NC/SC this week!
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Sergei Klimov

A newsletter about games industry's legal side, written for the benefit and entertainment of the folks attending (or considering to attend) the annual Games Industry Law Summit in Vilnius.

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