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Video Games’ 2019: Lawsuits, Streaming, Child Safety, Dying Retail

Each December, critics and analysts put on their glasses and give the preceding year a 20/20 hindsight wrap-up. It’s important also to take a moment before getting swallowed whole by January’s news blitz to look forward at what we might expect as 2019 starts to unfold.

So, put the “Destiny” divorce, Unity’s Improbable squabble, and EA shifting gears on Star Wars aside for a few minutes. It’s time to look ahead at what the next 12 months might bring.

Intellectual Property Dance-Off
Intellectual property is already an exceedingly tricky topic, but two different ongoing stories are likely to keep the conversation going. More plaintiffs are trying to take a bite out of Epic’s “Fortnite” war chest, with lawsuits alleging copyright infringement. Now other publishers are running scared, as Microsoft has pulled two dances from “Forza Horizon 4.”

“The law on copyright and dances is pretty clear, with tons of case law and legislation backing up what many accept as legal truth,” says attorney Ryan Morrison, founding partner of Morrison Rothman. “Copyright protects only long-form dances—ballets, for example—and not a short dance move such as the one we see in Fortnite. With that said, there are very large sums of money at play here, with very powerful or well-known people behind the complaints. I believe 2019 will see very intense policy arguments about intellectual property—and specifically copyright—as the internet and gaming industry continue to exploit what would normally be considered derivative or infringing works. Judges are able to interpret what a law means and are able to overturn old decisions. Additionally, legislatures can change the entire landscape with a new law. I believe one of the two is very likely as this conversation maintains its home at the front of the entertainment industry.”

The confounding factor for many lawsuits that involve video games and other technology is the expertise of the presiding judge. Combine that with debate over whether the one or two moves featured in each “Fortnite” dance constitute choreography that is subject to copyright protection.

“Like any specialty field, software and video games (and the litigation related thereto) present their own kind of problems,” says attorney Richard Hoeg of Hoeg Law. “Special care and attention must be paid to defining terms and explaining concepts which can have varied or even contradictory meanings depending on the parties discussing them. This is especially true when dealing with a third party—like a judge or arbiter—with no knowledge of the industry and who won’t know—without help—the difference between a battle pass and a Battlefront.”

Hoeg points to the recent legal scuffle between Take-Two and the Pinkerton Consulting & Investigating agency as example. “They spend more than a few recitals describing what their game is and how it works, including a long-form description of the concept of a cut-scene,” Hoeg says. “Knowing your audience is important especially in court.”

This year could also put us on a collision course with DMCA abuse. The Digital Millennium Copyright Act provides a mechanism for content owners to request infringing material be removed from distribution channels. It’s faster than a lawsuit  We most often hear about this with regard to YouTube, and creators improperly using copyrighted music or video footage.

An ongoing fight over the Star Control intellectual property currently being waged by series creators Paul Reiche III and Fred Ford against strategy game publisher Stardock has escalated the DMCA takedown to a new level.

Reiche and Ford have been at odds with Stardock for more than a year over an intellectual property ownership dispute. Stardock acquired rights to the Star Control series in 2013, but Reiche and Ford contest the scope of those rights. Stardock released a new game in the franchise, “Star Control: Origins” in September 2018. Reiche and Ford have been struggling to fight the case in court, going so far as to start a GoFundMe campaign to raise $2 million for legal fees. Only $42,238 has been raised since the campaign went live in June 2018.

Most recently, Reiche and Ford filed a DMCA takedown request with Steam and GoG as a fast-track solution. On January 2, “Star Control: Origins” was removed from sale on those platforms (though Stardock continued to sell the game on its own website). As for January 17, sales on those platforms have resumed.

“The DMCA is an almost ridiculously overpowered law in favor of claimants and likely should be ‘nerfed,’” Hoeg explains. “Reiche and Ford are looking to revive a ‘look and feel’ standard for modern game infringement that (especially combined with the DMCA) could have a chilling effect on the industry, and in particular developers without the funds to fight a protracted legal battle.”  

The Star Control case’s twists and turns make it interesting to watch, but it’s the power of the DMCA Takedown and its use to impact a game’s viability on digital distribution platforms that could have far-reaching impact. Expect that Stardock will be adding this action to its list of legal complaints.

And then there’s Soulja Boy. Rapper DeAndre Cortez Way (aka Soulja Boy) started selling emulator consoles in early December. By the end of the month, the law caught up with Way and the SouljaGame Console and Handheld were removed from sale.

“Soulja Boy reminds the world that laws exist,” Morrison quips. “Fan games and fan movies are infringing, even if they’re free. What’s worse? Reskinning black market game consoles and pretending you made Smash Bros.”

Chances are we haven’t heard the last of Soulja Boy and the repercussions from selling pirated software.

Cloud streaming meets Twitch and Mixer
Over the past few years, a number of games have been released with features designed to enhance the experience via Twitch or Mixer streaming. “The Darwin Project” puts viewers in control of map access, airstrikes and more. “Dead Cells” allows stream watchers to make upgrade decisions or make the game more challenging. The entire “Jackbox Party Pack” franchise revolves around opening up player spots in the game to people watching from home.

This year is likely to see the evolution of that approach, especially on Microsoft-owned Mixer, which has solved the lag problem that has plagued streamer interaction for years. “The Mixer team is deeply committed to making the platform active and engaging, and we’ll continue to enable broader forms of expression so streamers and viewers can connect and interact in new ways,” director of Mixer marketing Jenn McCoy told Variety. “We believe that live streaming shouldn’t just be a one-way, static video experience.  It should feel more like hanging out with friends playing games together, rather than watching a recording of someone millions of miles away who can’t hear or engage with you.  We strive to help streamers and game developers create live streaming entertainment that is immersive and interactive, not shallow and passive.”

Things are about to get complicated, as video game consumers are going to hear the word “streaming” used in increasingly confusing ways. Sometimes, it will mean someone broadcasting gameplay on Twitch, Mixer, or another service. Other times it will refer to cloud distribution aka game streaming. With more players entering that market, including EA, Google, Microsoft, Amazon, Blade’s Shadow service, Antstream, and (reportedly) Verizon, 2019 is going to be when we see if broadband infrastructure is a barrier to delivering full game content via remote servers.

Developer Rami Ismail posits that the advent of cloud-based content delivery will marry nicely with players broadcasting content.

“I’m expecting a paradigm shift to streaming, so it’ll further emphasize live experiences, games-as-a-service, and YouTube / Twitch,” says developer Rami Ismail. “It’ll further turn games into on-demand experiences. When games can stream, everything changes, including how we surface them.”

Ismail believes that cloud-based delivery can help combat some of the growing discoverability issues developers are facing, but only for a subset of games. “It takes the wait out between finding a game and playing it, which would work well for streamers,” he says. “It’ll further empower video content creators playing multiplayer, games-as-a-service, live games, and even the occasional joke game.”

The growth of cloud-based delivery may even have an impact on how publishers tinker with their business models. As game streaming reduces the friction between the decision to play and actually booting a game, there may be incentive to reduce the price barrier, also.

“We may see some conventional console games go free-to-play, with ‘Overwatch’ and ‘GTA Online’ the two most likely to try,” says Wedbush Securities analyst Michael Pachter. According to SuperData, Grand Theft Auto V $628 million in 2018, making it the third highest earning premium PC or console game of the year. Overwatch is tenth on that list, having earned $429 million in 2018.

Keeping kids safe
Legislators are starting to catch onto the ways contemporary digital media can impact mental health. Michigan is leading the way with new legislation that has made cyber-bullying a criminal offense that can include 93 days in jail and a $500 fine.

Online harassers who engage in a pattern of abuse can find themselves in jail for five years and fined $5,000. Should cyber-bullying result in a victim’s suicide, the penalty goes up to ten years in prison and a $10,000 fine.

“Cyberbullying can cause just as much trauma as traditional bullying so it’s important that it be considered a crime,” Michigan governor Rick Snyder said. “With this bill, we are sending a message that bullying of any kind is not tolerated in Michigan.”

This is the start, in my opinion, of many more pieces of legislation coming down the pipeline as states and legislative bodies start to take cyber-bullying more serious,” Morrison says. “Anecdotally, you can see how awful trolls and children have become online behind the appearance of anonymity. This harassment takes place in schools and workplaces and then follows the victims home. Having no escape from near constant torment is no way to live, and as more stories of suicide and depression make headlines we will see much more serious action taken.”

Superdata co-founder and CEO Joost Van Dreunen suggests that protecting children will take the place of the loot box controversy in 2019. He also indicates that the trade war between the United States and China could exacerbate the issue.,

“Now that gaming has emerged as a mainstream form of entertainment, the industry can expect more scrutiny,” Van Dreunen wrote for TechCrunch. “In addition, there will be sharper focus on kids and technology in 2019. Data companies will be increasingly under the microscope. Similar to the loot box scandal that resulted in various governments speaking out, we will see an effort focused on protecting children. This means that game companies will be held to a higher standard with regards to how they handle data on minors. Against the background of a festering trade war between eastern and western economies, data ownership, in particular around children, will emerge as a political topic and strategic business challenge.”

Digital’s siege on retail continues
This year is already shaping up to be another challenging one for retail. Last year saw the collapse of Toys R Us, after a leveraged buyout left the company saddled with more debt than it could service.

The Toys R Us bankruptcy didn’t have a huge impact on the video game market, where it had lost ground to big box retailers like Target, e-commerce giant Amazon, and specialty retailer GameStop. The latter appears to be headed in the same direction as Toys R Us, as digital becomes a bigger share of video game revenue quarter-over-quarter.

Especially as games shift to service-based models, packaged goods become less relevant. GameStop has been looking for a buyer, and there are reportedly two major suitors in play. Both are private equity firms that would use GameStop assets as collateral for the debt used to make the purchase.

GameStop has been struggling to find its way, purchasing (and recently divesting itself of) Spring Mobile and loading up its retail stores with collectibles. Walk into a GameStop location today and you’ll see a significant portion of the floor space reserved for Funko Pops and merchandise tied to GameStop subsidiary ThinkGeek.

The company has been unable to find a buyer and now finds itself forced to essentially abandon the diversification strategy it initiated in 2014 by acquiring retail chain in parallel market segments,” Van Dreunen says. “Just recently GameStop sold off Spring Mobile and is likely to use the money to pay off its debts and improve the likelihood of some private equity firm or a company like Amazon to buy it.”

It’s unlikely gamers will miss having a specialty retailer with digital and Amazon taking huge bites out of the pie and players’ less than positive perception of the chain. GameStop, which usually performs well in the holiday season, fell short in 2018. The company dropped five percent during the nine-week holiday period compared to the year before.

“No one expected it to be a great year for games retail,” Van Dreunen says. “But it’s getting sadder.”

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