What we're going to cover PRIVILEGED AND CONFIDENTIAL A few numbers… The evolution of the monetization models (and the related legal headaches) The video game industry culture, identity and freedoms Complexity: how do we deal with it (and the risks of getting it wrong) What we're going to cover

PRIVILEGED AND CONFIDENTIAL 1. A few numbers… Relevance of the digital game market worldwide

PRIVILEGED AND CONFIDENTIAL 2. The evolution of the monetization models (and the related legal headaches) We have just entered the ‘game as a service’ era, apparently. Have we not? Actually….

2. The evolution of the monetization models PRIVILEGED AND CONFIDENTIAL 2. The evolution of the monetization models Coin operated arcade machines, in the 70s ‘ game as a service?’ Monetization model: ‘pay as you play’ (microtransaction?) Legal issues: Protecting your IPRs (and avoid infringing others’ IPRs) Complying with local regulations on the operation of arcade machines in public places

2. The evolution of the monetization models PRIVILEGED AND CONFIDENTIAL 2. The evolution of the monetization models Home consoles and computers, in the 80s ‘game as a product’ Monetization model: retail purchase Legal issues: In addition to IPRs protection Content and age regulations Advertising and Marketing laws Antitrust & Competition laws

PRIVILEGED AND CONFIDENTIAL 2. The evolution of the monetization models Tech & internet development, in the beginning of 2000s ‘game as a service’ New monetization models: Subscription games (MMOs) and subscription game services (Xbox Game Pass) Microtransactions (DLC, season passes and IAPs including loot boxes) In-game advertising A combination of all of the above retail purchase Legal issues: In addition to IPRs protection and Advertising and Marketing laws Consumer protection laws Data protection laws Antitrust & Competition law

2. The evolution of the monetization models PRIVILEGED AND CONFIDENTIAL 2. The evolution of the monetization models Tech development Digital distribution Self publishing Proliferation of gaming platforms New players con pro F2P increased the level of competition within the market transparency issues?

National Authorities - enforcement actions PRIVILEGED AND CONFIDENTIAL 2. The evolution of the monetization models December 2013: CPC Network Common Position (law interpretation): (i) Games advertised as “free” should not mislead consumers about the true costs involved; (ii) Games should not contain direct exhortation to children to buy items in a game or to persuade an adult to buy items for them; (iii) Consumers should be adequately informed about the payment arrangements for purchases and should not be debited through default settings without consumers’ explicit consent; (iv) Traders should provide an email address so that consumers can contact them in case of queries or complaints. National Authorities - enforcement actions (Gameloft)

PRIVILEGED AND CONFIDENTIAL 2. The evolution of the monetization models Cryptocurrencies and Loot Boxes, 2017 New legal issues: Finance regulation (eg. ePayments and money laundering regulations) Gambling/lotteries regulations Consumers reaction: SWBII and ForzaM7 compared to Overwatch ‘Pay to win’ model?

PRIVILEGED AND CONFIDENTIAL 3. The video game industry culture, identity and freedoms “In 2009, the Federal Trade Commission (FTC) found that, as a result of this [age rating] system, “the video game industry outpaces the movie and music industries” in “(1) restricting targetmarketing of mature-rated products to children; (2) clearly and prominently disclosing rating information; and (3) restricting children’s access to mature-rated products at retail.” […] This system does much to ensure that minors cannot purchase seriously violent games on their own, and that parents who care about the matter can readily evaluate the games their children bring home. Filling the remaining modest gap in concerned-parents’ control can hardly be a compelling state interest.” Brown v. Entertainment Merchants Association, 564 U.S. at p.16 (2011) (Scalia, J.) So, culture, identity an freedoms… Freedoms: of the industry of the developers of the gamers of parents of minors

PRIVILEGED AND CONFIDENTIAL 4. Complexity: how do we deal with it (and the risks of getting it wrong) How should we deal with the fast acceleration of the complexity (technology, business and legal)? Legal review: experimenting with new tech and business models only considering the business side is dangerous Balance between good game design and effective monetization not to risk making consumers feeling extorted and/or to enable the game to recoup on the investment and turn a profit Self regulation: good self regulation rules can do keep ad hoc state regulation away Is there a representation issue within trade associations?

… what about monetization targets? PRIVILEGED AND CONFIDENTIAL … what about monetization targets? Developers know that only (approx.) 0,2% of mobile gamers account for 50% of the revenues WHALES AI: crucial role making «whale fishing» more effective.

PRIVILEGED AND CONFIDENTIAL Is “gaming disorder” a disease? Jun 2018, WHO included gaming disorder in the first released version of the next edition of the International Classification of Diseases (ICD-11). The final version of the ICD will be presented in 2019 and will go into effect on 1 January 2022.

PRIVILEGED AND CONFIDENTIAL Thank you for listening, enjoy the rest of the conference! Andrea Rizzi Partner arizzi@insightlegal.it