Interactive gaming and the law - Part 1: Game On

With the launch of the BBC's Ceefax service in 1974, UK TV audiences were treated to their first taste of interactive TV. Although the service was somewhat rudimentary by design, it quickly won over a respectable number of users and - more importantly - highlighted the fact that the traditional passive TV viewer could, and would, interact with their TV if the content was right.

In the intervening years, the technology has improved dramatically and, at a time when much of the industrialised world is on the cusp of a convergent, digital communications 'revolution' (which makes two-way TV communication easier), interactive TV has never been more important to broadcasters.

There are even those that believe a competent iTV strategy is critical to their future success and that the content best suited to iTV - and as such a driver of significant revenues - is TV-based, interactive games. Market research company, Datamonitor, predicts that iTV-based gaming will be a major contributor to the growth of global, online gaming - a market, the company believes, that will be worth approximately E24 billion by 2005.

Additionally, recent figures from interactive TV games developer, Two Way TV, appear to bear out Datamonitor's predictions and vindicate those broadcasters that are taking iTV so seriously. Since 1997 approximately 15 million games have been played via the company's service; if each of these games cost approximately 80 cents each, the commercial potential of the market begins to become apparent.

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It is no wonder, therefore, that broadcasters are scrabbling to deploy iTV to cash in on the gaming market and to secure their position in an uncertain digital future. In Part One, we will consider some of the main terms that are commonly included in a games licence and how these can be used to make the most of an iTV games asset. Agreements for the distribution of games services are likely to contain similar terms. The following are the principal considerations that should be born in mind during an agreement's negotiation.

Rights

The carrier of a game needs to be certain that it has licensed those rights that it needs to achieve its proposed distribution of that game. Equally, the games developer or publisher needs to be sure that it has the right to licence that game for the agreed uses. While this may sound relatively straightforward, the number of different styles of
games - with their associate rights - means the considerations should be different in each case.

Arcade style game - In a typical arcade style game, a bundle of copyrights will exist including copyright in the characters, background graphics, script and music and these constitute the copyright in the 'game'. The licence should make clear that any collection society re-use fees in connection with any music rights, will remain the responsibility of the games provider.

The agreement should express whether these rights are being licensed exclusively or non-exclusively and should specify the extent to which the carrier may distribute the game; this will usually be as part of a games channel service offered via that carrier's network.

The rights in the game will be subject to the usual indemnities in favour of the carrier in the event that the game infringes the right of any third party, or use of the game contravenes any law; although this may be of limited benefit to the carrier where the breach constitutes a criminal offence.

Enhanced television game - Interactive versions of existing television programmes will comprise all the rights of the non-interactive television programme, as well as those additional rights comprising the interactive feature. The parties will need to agree an enhanced format that suits the software and mediumware used. These additional rights will typically be rights in the graphics used on screen and any copyright in text used.

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The interactive application would usually be provided by the production company behind the original programme, and the carrier will expect the production company to stand by the integrity of this application in the same way as any other content supplied by it. The interactive version of a game show is likely to make use of what is often referred to as the game's 'format'.

The creator of the format in that game will be required to consent to the format's exploitation and the carrier should ask the production company to undertake that this consent has been given. A question that commonly arises is: 'to what extent can the creator of the original format claim a monopoly in that format'? To answer this, it is important to appreciate what is meant by the phrase 'format right'.

In the context of a television programme, the term 'format right' is often used to describe a programme's look, feel and defining characteristics. The 'format' of a television programme is not a right granted or protected by any law. Copyright may exist in certain constituent parts of the programme or in the programme itself, but the 'format' of a programme can only be protected by contractual agreement; (remedies for alleged copying may exist, however, if 'passing-off' can be established although this is often difficult to prove).

Terms

Games services agreements will typically be for a fixed term; however, it may be in both parties' interests for the licence term to be short with an option for renewal. Although both parties would wish for as much certainty as possible, distributing a game that is not successful is not in the interests of either party.

It is not only a wasted opportunity but also tarnishes the image of a particular games site in the mind of a demanding gaming audience. On the other hand, the carrier may wish to provide for a situation in which the game is surprisingly successful and negotiate a right to extend the contract on the same commercial terms at the end of the agreement period.

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Revenue

In an uncertain advertising market, payments made by users whether via a premium rate phone call, a credit card payment or by debits to the subscriber's television bill will be the main source of revenue. Typically, the revenue would be shared between the parties according to an agreed percentage.

This shared amount will usually be net of VAT and any costs of providing the premium rate calls, or of operating a credit card account. The parties may agree that further costs should be deducted before the revenue is shared. The games provider will normally decide the prize level although the carrier may wish to specify a minimum. The issue of responsibility for prize fulfilment should also be agreed.

Right to suspend

Many games that are currently offered are technically illegal and it is easy to appreciate the advantages of sailing as close to the legal wind as possible, (in Part Two, we will look into how far games providers can go). Although the game should be subject to the carrier's acceptance testing, the carrier should also insist on the right to suspend the game in the event that it has reasonable cause to believe that the game is contrary to any law.

Similarly, the games provider should insist that the game is re-instated in the event that the game is, in fact, legal or negotiate a right to supply a replacement. In most arrangements, suspension is likely to be injurious to both parties and the games provider may also legitimately argue for a pro-rated refund of any flat-fee paid in respect of that period of suspension. A right to suspend, however, may not be enough to avoid the bringing of criminal charges in respect of an illegal game if the Crown Prosecution Service or a private prosecutor was so minded.

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Information collection

Games preferences, times of use, typical betting levels and patterns of behaviour all provide valuable information for games providers. This allows them to target games services effectively, design games that appeal to very particular audiences and maximise advertising impact and revenues.

Significantly, the requirement to separate advertisements and content does not apply to games offered as part of a graphics-based, walled garden service, which presents a valuable opportunity to elicit consumer preference information from users of the games. (In Part Three, we will compare the ITC's regulation of games services in an interactive 'walled garden' environment with its regulation of games services in an 'enhanced TV' environment).

The games licence should set out how user data will be shared between the parties and for what purposes it may be used. Information collection and use will be subject to any requirements of applicable Data Protection legislation.

Contractual Flexibility

The fast changing iTV games market demands agreements that are flexible and that can absorb the fickle demands of gamers. To be enforceable, any contract has to be sufficiently certain in setting out the rights and obligations of the parties and so the degree of 'flexibility' must be agreed and clearly expressed. For example, an agreement may be drafted so that:
• A games provider is entitled to alter or replace the game in certain circumstances
• The marketing spend required from either party is linked to revenue earned from the game
• The carrier of the service has the first option to distribute any further versions of the game
• There is flexibility in how the parties promote the game; and
• The carrier has flexibility in the location of the game in any interactive menu.

In summary

The details of any agreement for the licensing of games content will depend on the negotiating strengths of the parties, which will inevitably be determined by a variety of factors - not least the extent of the distributor's proposed distribution and the perceived demand for the game.

The speed at which the games market changes means that, more than ever, agreements need to be concluded quickly and with the minimum of fuss. A revenue sharing arrangement serves to align the interests of the parties and should mean that many issues resolve themselves.

Those issues that remain need to be dealt with in a fair, commercial and clinical way. The games providers and carriers that can take first advantage of a new trend, technological change or legal reform are likely to be the ones who will reap the substantial prizes that are at stake.

For more information visit: www.wiggin.co.uk

Click here to read part two

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