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20
Apr 09
Mon

Liveblog: Legal issues for new computer game distribution models

1:53:55pm: That’s all folks. First time I’ve liveblogged anything… difficult to concentrate, and type at the same time without missing points, but easier than I thought if the talk’s interesting (which this one was).

1:53:06pm: User-generated Content. Spore as an example. Is it a service where people can create content? Or like Photoshop, a tool which allows people to create their own IP? Does EA retain any IP rights in content created by users using EA software and using EA-provided content as a base? [We had a whole seminar on this in our Internet Business Law class a few days ago when Lauren Gelman came in] How do you value UGC? He’s mentioning WoW accounts and selling accounts. Waiting for a case to say that users can’t be prohibited from selling accounts. [I think if there’s consumer demand to do it, then the game companies should get into the action instead of resisting it – if people want to trade accounts and there’s a market for it. Don’t push it underground, but provide a marketplace! And skim a commission for doing that…]

1:47:58pm: X-box live points – allow people to use them in EA games? Conversion rate, eg, between Sims points and X-box points? Arbitrage of virtual currency. Guilain next to me is laughing, but it’s real and happening today on virtual currency exchanges.

1:46:56pm: Virtual Currency. What’s the legal analogy for virtual currency. Is it like a stored value card (eg, Starbucks gift card)? If so, then you’re a bank under federal banking regulations. Payment facilitating. [Being a bank subjects you to lots of regulation] Not exactly EA’s core competency, but now they have someone on staff who is a banking law specialist. But not quite Starbucks since you can’t buy anything tangibly… [hmm not quite accurate?] Club Med beads analogy? Swap cash for beads, and use beads within the resort only. Circumvents banking laws by providing a service – the beads don’t store value. [similar to casino chips?] EA trying to pursue the latter model, expects to be challenged about it in the future.

1:43:25pm: Nintendo and Sony don’t permit their game developers to provide EULAs! They have proprietary platforms and don’t want a third party to affect the legal relationship between them and the end user.

1:42:00pm: IP Protection. One of the benefits of streaming games means content only resides on servers. [So a persistent world like WoW can’t be replicated, since you need to access their servers to play. Licensing can be controlled and CDkeys can be verified, etc. Some people have reverse engineered their own persistent worlds, even as far back as the days of Ultima Online, but it’s not the same thing]

First sale doctrine raises some uncertainties as well with streaming content. Another issue is efficacy of EULAs. What terms are enforceable?

1:38:50pm: Revenue recognition. Cash received != revenue recognized. If you sell a boxed game, the accounting is easy. But what if a game’s revenue stream is ongoing? Accrual accounting issues – eg, for money earned but services not yet provided. EA deferred recognition of revenues across entire period because they couldn’t figure out how much of a payment EA had provided products/services for. Eg, Sims 3 will let you buy Sim points for $. You can buy digital content with points. [Same as any other microtransaction business models out there – FB points, etc] How do you recognize revenue arising from these points? Misreporting revenue may result in a securities law violation – resulting in class action law suits which are hugely expensive and SEC investigations.

1:34:07pm: Existing licenses. The new context for distributing games makes the existing licenses majorly outdated. Licensing problems can sink a game – can be hard to remove IP from a completed game. Microtransactions (eg, digital content) has copyright owners thinking how they can get their cut. So these business models are still trying to be figured out.

Bundling arrangements are being considered. Pay EA a monthly fee and you can pay any of their sports games (like a cable channel package). But how do they pay licensees like the NFL, NBA, FIFA, etc.? How do you tell how much a licensee’s content is being used?

1:30:08pm: Talent. So you record voice actors, or short video clips. Talent agreements are relatively uniform to protect lesser known talent. The union acts as the talent’s representative. Agreements normally cover
only offline play. Once the game goes online, EA needs to pay for an “interactive buyout provision”. But these were intro’ed 10 years ago before streaming became a reality. Talent budgets may exceed a million bucks. Might be prohibitively expensive to stream under current licensing agreements, so need to look at different models going forward. But unions are very cautious. Still troubled by when the VCR came out.

1:27:10pm: Soundtracks. When you want to sync it with an A/V work, normally have to seek out two copyright owners – the performance right and the rights in the musical work [although in Europe the performance right isn’t considered a copyright]. But what if you stream it? And it’s not synced staticly with an A/V work in a computer game? Do traditional music licenses even have the capacity to accommodate for usage of the music in async ways? Need to approach collecting societies (for performances) which are scattered around the world raising jurisdictional issues. Dynamic soundtracks are pretty novel in terms of accommodating for them with legal documentation. Canada’s perf rights societies are getting “pretty aggressive” in terms of scoping the rights of their constituents.

1:22:51pm: There’s existing legal regimes for audio licensing and AV works. But games are a leading industry [kind of like the porn industry, right?] due to the non-linear, interactive aspect of things. They’re different to music and movies. No easy business model to fit what EA is trying to do [compared to iTunes I guess].

1:20:57pm: Analogy to internet radio. Legal streaming service for movies – he doesn’t know of any. But what about Hulu? Move to a subscription model. Also move to SaaS in commercial software (eg tax software), but not in the entertainment industry yet. Chris is asking why stream everything instead of distributing large amounts of data which reside on a user’s computer and streaming incremental content [WoW is distributed on several disks – a high latency but very high bandwidth way of transmitting info]. Steve says that streaming makes piracy more difficult.

1:16:01pm: “There’s nothing inherently good about physical media” and they want to get rid of them. Thus a move to online distribution [Valve’s Steam platform comes immediately to my mind]. As demonstrated by the technical issues earlier – it would have been easier to play off Youtube. Move towards online gaming and multiplayer gaming. Kind of obvious to gamers, but I’m not sure you’d find many here.

1:12:38pm: EA is publishing its last game available solely in a single-player, single-play format, on physical media in June (Harry Potter).

1:10:35pm: The DVD’s back on. He’s showing the asteroid field scene. “Never tell me the odds!”

1:08:24pm: False start, brief intro by Mamei, and then we’re off.

1:07:06pm: Technical problems but now he’s showing a scene from a Star Wars V DVD.

1:01:45pm: Waiting for the presentation to start. His laptop’s wallpaper is a picture of an Audi.

Intro: Steve BenĂ©, EA’s General Counsel is here to talk about legal issues concerning distributing computer games via online streaming. Testing out a liveblogging function I made for this website some time ago.

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