Revenues Fall

Among almost all major publishers, revenues have fallen.  This comes on the heels of several publishers doing some major cost-cutting (e.g. THQ) and encountering lower sales of hardware (e.g Sony's PS3 and PSP).

Overall, sales from video game hardware and software have fallen for the eighth straight month down to US $548.4 million.

Businessweek

Tencent Buys Stake in Epic Games

The Chinese gaming juggernaut Tencent, which reportedly has more than 700 million users in mainland China, has purchased a minority stake in Epic Games, the makers of "Gears of War" and the mobile game "Infinity Blade."  Last year, Tencent acquired Los Angeles based Riot Games, the makers of "League of Legends."  Tencent's actions are evidently part of a new strategy to develop games across multiple platforms.

Epic Stake

I'm a Clone, You're a Clone, Clones Everywhere!

Pillsbury's Virtual World's Team has recently commented on a federal court decision finding in favor of the owner of "Tetris" against Xio Interactive, Inc., the maker of a similar falling block game called "Mino".  In its post, the team advocates a dual pronged strategy of intellectual property protection through both patent and copyright law.

Game Cloning Can be Stopped!

Intellectual property protection and enforcement is of paramount importance especially with the growth of Apple's app store distribution platform.  Although the distribution platform allows developers of "indie" games to better connect with the consumer, it also allows for hundreds of game clones from various territories like China to flood the market. 

Mario Kart Wii Clone from China

App Clone Uploaded from Vietnam

Unfortunately, many of these small developers are completely unaware of how to remedy the existence of a game clone on the market.  Further, with each passing day there is the greater likelihood that a consumer will accidentally purchase the clone causing widespread consumer confusion.

At least during the initial screening of an application, Apple should have stronger safeguards in place.

The Republic of Korea's Proposed Ban on Virtual Goods

According to the Korea Times, next month the Korean Republic's Ministry of Culture, Sports and Tourism ("MCST") hopes to ban the trade of ALL in game virtual items.  According to Kim Kap-Soo, the head of MCST's content policy division, "the main purpose of the games is for entertainment and should be used for academic and other good purposes."

The proposed law would prohibit users from using automated bot programs to collect items.  Violators of the new law would face a fine of up to 50 million won (about US$43,000, or £27,600) and a 5-year prison term.

The Korea Times

Also, this proposed ban comes on the heels of Blizzard's launch of its real money auction house in Diablo III.  At least in the US, users have spent upwards of $3,000 (US) on in game items to make them competitive on the inferno difficulty, the highest difficulty setting in the game.  With each sale Blizzard takes a small cut as shown below:

For Equipment (weapons, armor, accessories, and other unique items)

Transaction Fee (Real-Money Auction House): $1.00 USD per item / $1.00 AUD per item

Transfer Fee (when sending proceeds to PayPal or other authorized payment-service provider): 15% of amount being transferred
                    

For Commodities (gems, materials, dyes, pages, recipes, and other non-unique items)

Transaction Fee (Real-Money Auction House): 15% of final sale price
Transfer Fee (when sending proceeds to PayPal or other authorized payment-service provider): 15% of amount being transferred

Diablo III Transaction Fees

Although the ban has a good aim in the sense that it tries to discourage automated bot programs, which are always illegal, it will destroy the whole point of loot in dungeon crawling games.  Moreover, users will no longer be compelled to invest their time and money in such games.

The proposed law would threaten MMORPGs and other games that are free-to-play which depend on the value of their in-game items for their very existence.  No doubt large players in the industry will fight tooth and nail to prevent the passage of this ban.

Invasion of Diablo III....by the Korean Government

Korea's Fair Trade Commission ("FTC") has raided Blizzard's Seoul offices amidst allegations that Blizzard is refusing to offer customers refunds for Diablo III.  Because the game was hotly anticipated in the region the Diablo III servers became overloaded.  As a result, users demanded refunds and eventually complained to the FTC.

The FTC is reviewing whether Diablo III's EULA is "unfair" in that it does not allow for a refund if users experience problems with the game.

Below is an excerpt from the comparable EULA available from Blizzard's Americas and Oceania Diablo III site:

Service and Terms of Use.

The Terms of Use agreement governs all aspects of game play. If you do not agree with the Terms of Use, then (a) you may not register for an Account to play the Game; and (b) you may call 1-800-592-5499 within thirty (30) days after the original purchase and request a full refund of the purchase price. Once you accept the License Agreement and the Terms of Use, you will no longer be eligible for a refund. 

Investigation

Additional Info

Diablo III US EULA

Local Partners Required!

China has strict limitations for foreign developers.  For MMORPGS, the government requires a local partner to handle the distribution of the game.  Just recently in March of 2012, Blizzard and NetEase renewed their deal for NetEase to publish World of Warcraft in mainland China for an additional three years.  Blizzard's relationship with NetEase has spurred NetEase to be a major player as an online gaming company.

Renewal with NetEase

Starcraft II, Licensed and Official E-Sports Event

Finally, it looks like the issue surrounding broadcasting rights of Starcraft II tournaments will be at an end.  KeSPA, the ruling competitive sports gaming body, OGN, and GOMtv have officially received licenses from Blizzard to broadcast Starcraft II tournaments and will work in conjunction with each other in uniting players and leagues.

KeSPA, OGN, and GOMtv

Hello all!

Sorry for the delay, but I will now resume making weekly posts.  Check back in every week!

-Brian

The Growth Rate of Virtual Goods Slows

Virtual Goods

Virtual Goods in a Broken Marriage

In China, a judge has ruled that the virtual assets shared between a recently divorced couple shall remain with the former husband. Before marriage the man and woman had two separate accounts and merged them with only the husband's name listed. While together, they accumulated quite a large number of virtual goods under the merged account.

What implications does this case have? Although to most nowadays the notion that virtual assets could be valuable is surprising, the rising market and growth of virtual goods cannot be denied. For example, the rising use of facebook credits. Perhaps lawyers in family law would be wise to advise couples of the effect of community property laws on virual assets.

You Can't Take It With You

Japan: No Rent Policy

In Japan, you cannot rent video games or systems.  Of course, there are stores that notoriously allow you to rent CDs and make copies but that's a different story.  Japanese law goes so far as to even prosecute stores that implement quick buy back policies for games offering consumer 80-90% of the purchase price back after a week or so of use.

While renting systems in the U.S. has apparently gone the way of the dinosaurs, there is a healthy appetite for game rentals considering the rising prices of games and the increasing number of sub-par content.  How does this differing dynamic in Japan affect consumer habits there?  Does it make the Japanese consumer that much more of a discerning consumer before taking the plunge?   Does this sort of policy advance the market for games or impede it?

Japanese Stores, Buyback

Korea cable channels MBC Game and OnGameNet Broadcast Starcraft Tournaments Without Permission

Blizzard allowed the two channels to broadcast Korea e-Sports Players Association (KeSPA) tournaments until August, but the channels have continued to broadcast tournaments into the fall season.

The channels argue that they should be able to broadcast Starcraft tournaments because the games used in the professional tournaments are in the public domain while Blizzard argues that its intellectual property is being violated.  The channels argue that to require them to obtain the appropriate permission to broadcast the tournaments would equate to requiring soccer players to pay to use Adidas balls.

In terms of protecting its intellectual property Blizzard seems to have a firm foundation.  Each successive broadcast displays a multitude of Starcraft copyrighted material.  The channels' argument equating Starcraft as a mere tool in comparison to people kicking around a soccer ball with the Adidas trademark seems misplaced.   Although the sports comparison is interesting, there is usually no IP issue when a channel broadcasts a soccer game using an Adidas soccer ball, unless the broadcasters were to say malign the Adidas trademark.

Starcraft Tournament Broadcast

China Prohibits "Vulgar" Online Game Ads

The Chinese government has prohibited online gaming companies from promoting their products through the use of "vulgar" online game ads.  The order came through after several Chinese gaming companies used scantily clad models to promote products. 

However, what goes against China's moral fiber and is deemed vulgar seems ultimately vague and hard to decipher.  It will be interesting to see how the government enforces this law and if it will provide clarity in the future.

Prohibition of Vulgar Ads

Lenovo's New System

As the fourth largest personal computer maker in the world, Lenovo has plans to roll out its own entertainment console, the Ebox, and stake its claim in millions of Chinese households.  The Ebox operates on a motion control system akin to Microsoft Xbox 360's "Kinect" and Sony PS3's "Move."  Lenovo plans to release the system in China at the end of 2010.

In its efforts to diversify business, the company touts its ability to better understand the Chinese consumer by packing the console (which looks strikingly similar to Nintendo's Wii console) with 30 games rather than the usual standard of having the console exist separately from game software and without any pre-packaged add-ons.  Whether Lenovo's gutsy foray into the industry with its own system will be a success will depend on its ability to withstand China's difficult regulations and rampant piracy.

The Ebox

First!