EAs Eyes wide shut

Here at the Edinburgh International Games Festival the panel discussion on virtual currency that I chaired has caused a bit of a storm thanks to Jeff (lawnmower man) Brown, VP of Corporate Communications for Electronic Arts.

During the discussion Greg Lastowka and Linda MacKellar (of MacKellars law firmand Slam Games) both stressed that games companies need to take some stance on item trading both in their EULA and through actions i.e. if a company bans item trades in word they must follow up in deed by warning and possibly banning players that transgress the contract. Greg made the point that sleeping on rights and allowing the other party i.e. the players, to assume that they are not being enforced, could invoke some interesting common law concepts should the games company want to invoke the rights later. Whereas Linda, who also runs a development company, made the point that game companies can’t simply tack a EULA on at the end of a development process but have to think of their intended legal position through the design process.

Jeff stated that EAs position is quite clear – they are aware of item sales in games like Sims Online currently do absolutely nothing about, nor do they intend to do anything about it in the future.

In front on an increasingly stunned audience Jeff went on to comment on the whole business of making money out of virtual items – stating that if a kid had a choice between spending time creating something in an online world or going out and mowing the lawn for a few bucks, then obviously they should go mow lawns.

Sitting next to Jeff was Jamie Hale of Gaming Open Market and while I looked for somewhere to take cover Jamie and Jeff ‘discussed’ whether virtual item / currency sales (the basis of GOMs business) was the complete waste of time that Jeff seemed to be suggesting it was.

After the panel several audience member came up to me and asked: Did that EA guy really say that this virtual world stuff is a waste of people time – can you say that about your player base? I think Jeff’s point was that doing it for money was waste of time but that certainly was not the impression that many people seemed to take away.

Comments

[Matthias]

1.

Why do you have a problem with "that EA guy" stating the obvious? Yes, online games are a waste of time. Just like board games, chatrooms, playgrounds, pool billard, and all the other pastimes out there.

I have two kids, and given the choice, one of them would prefer online gaming and the other would prefer making money with mowing lawns. What's the big deal? Does everybody have to be the same?

[Tore Vesterby]

2.

Now that's a grade A scoop there. I find it interesting though that his view of the gamer is a kid playing the Sims. Where do the adult gamers come into this?

On a surface level it seems that Mr. Brown does not really know a lot about gamers these days, or that he choses to ignore experiments that show how money can be made in these worlds, e.g. Playmoney.

I suppose you can say that your playerbase are wasting their time. Especially if you don't really know what type of people make up your playerbase. It appears that little kids and geeky teenage boys being the target audience for large publishers like EA, which to me seems that there's even more reason to worry about publishers buying up developers for making games in-house. Let's hope a few indy-developers can break through to them, or that Mr. Brown's views are not representative for EA in general.

[neven]

3.

VP Corporate Communications? Oh boy. Either EA hasn't been tracking ebay, playerauctions and others, or this guy is a complete idiot.

It's not a question of whether this is a waste of time or not, but realizing the economic implications of virtual item trading. This "niche market" already acounts for millions of dollars of revenue and some people actually make a living of it. The more popular MMORPGs get and the more people join in, the less EA will be able to state that this is a waste of time.

Do any of the games have people employed as "central bankers" or anybody that keeps an eye on "currency" value and "money supply". (Quoted, because, obviously, virtual money is a waste of time and worthless).

P.S. Does anybody have a video of the discussion ;) ?

[Edward Castronova]

4.

Neven> do any of the games have people employed as "central bankers" or anybody that keeps an eye on "currency" value and "money supply".

No, not really. Actually, in many games, its the item traders who have the massive supplies necessary to regulate currency values.

I am surprised that the EA exec was defensive and, it sounds like, heated about it. Seems like he needs to have this item trading be unimportant, despite the figures. I've seen that reaction from plenty of people, but always those who are most frightened of the uncontrollable social change that this all implies. Corporate VP types. Well, I guess the guy is a corporate VP, so even if he is from a game company, that might explain it.

[Tobold]

5.

I think what blinds companies when regarding virtual property sales is that they can't imagine that there are buyers. If you assume that the game you created is near-perfect and lots of fun, you have troubles imagining somebody going and buying something that he could achieve by playing. Who would buy a saved game of Civilization III with a big high-score?

Only if you admit that achieving certain goals in a MMORPG is a tedious treadmill, and certain goals can't be reached at all on a casual gamers playing schedule, does the market in virtual property make sense. It is obvious why a kid (or the often reported third world workers) would prefer selling virtual items to many of the other, less pleasant alternatives he has to make money. But the market exists not because there are sellers, but because there are buyers. And in the coverage of the virtual items market the buyers have received far too little consideration up to now.

[Alice]

6.

FWIW, it wasn't heated - but rather hilarious. From my perspective, while he came across as fairly laconic/arrogant (hey, he's EA ;)), his main point was this: if EA accept responsibility for the sales either in or out of game (either by taking a cut, or by monitoring the system or even providing the system), then they're obliged to create and police the rulesystem that ensues, and therefore the (probably astronomical) legal counsel and bills that would result - all for a fairly small playerbase (a few hundred thousand) as compared to say, Madden's millions.

He was, in sum and in essence, saying 'look - we made a great game, if people want to game the system and cheat by purchasing weapons they haven't earned, and if during that process they get ripped off, why is that EA's responsibility?'. I agree with him.

I found the lawyers far more distasteful: seeing them circling, eyeballing the opportunity for litigation.. it was a scarier future there than EA pretending virtual asset sales don't happen.

[Jamie Hale]

7.

[My first response was lost in an internet cafe accident :P - I'll have to re-type when I get home.]

I just wish he had have stuck around to chat afterwards. Or showed up for the rehearsal. Or even showed any indication that he was remotely interested in anything being discussed by the panel on which he agreed to speak.

Is it just me, or are persistent worlds the runt of the gaming industry?

I mean there are only 2-3 million subscribers in *all* MMOGs in North America. By comparison, The Sims (not online) and expansions have sold 13-20 million (?) copies. Why *should* EA care?

(Devil's advocate of course...)

J

[Will Leverett]

8.

Wish I was a fly on that wall - sounds like it was a good little roundtable. There wouldn't be a transcript of the event, would there?

I'd be interested to see where the discussion goes about the consequences of failing to enforce the EULA. There are some companies that choose to promote virtual item trading, and a number of companies that choose to police it. Alternatively there are those like EA who have lots of reasons to not keep an eye on virtual items trading (too many to list here), but I do not know if that makes it ok. But I am curious to see what would happen to someone like EA if they simply acted obvlivious to the whole thing.

Wouldn't it be allowable to simply say they will enforce the EULA as they see fit?

[Keith Quinn]

9.

When comparing mowing lawns versus eBaying virtual items, it's my observation that the latter can pull in larger amounts of cash. Coupling that with the concept of one making that cash while playing a game, why would any kid choose mowing lawns over virtual sales?

[Dave Rickey]

10.

The Sims and expansions retail at $20-30, of which EA gets about $10. That's not chicken feed, figure they've grossed around $200M on the franchise, and it's a perfect product for them that lends itself well to cranking out predictable followups

Now figure that UO has had in the neighborhood of 7 years (6 years and 9 months) at roughly 200K population, paying $10/month, all of which went to EA. (6 x 12) + 9 = 81, 81 x 200,000 x $10 = $162,000,000 (note that this doesn't try to count any revenues from box sales). So UO, not the biggest online game by a long shot, has generated nearly as much revenue for EA as the best-selling single-player game in the history of the industry. Dollar-wise, they don't have grounds to blow off the MMO market as unimportant.

So why the ostrich act? Well, EA may be genuinely oblivious, they don't exactly have the best track record when it comes to understanding MMO's. But in general, industry exec's are hoping the other shoe drops on someone else. Once a few more cases have been litigated (again, hopefully on someone else's dime), and they have some case law to stand on, they'll be ready to step up, but for now they are collectively sticking their fingers in their ears and sayin "NANANANANA, I CAN'T HEAR YOU."

There are a few exceptions, Linden Labs' leadership being one. But no exec ever advanced his career by saying "We've got a big problem coming in a few years, and I have no idea what we can do about it."

--Dave

[Dave Rickey]

11.

The Sims and expansions retail at $20-30, of which EA gets about $10. That's not chicken feed, figure they've grossed around $200M on the franchise, and it's a perfect product for them that lends itself well to cranking out predictable followups.

Now figure that UO has had in the neighborhood of 7 years (6 years and 9 months) at roughly 200K population, paying $10/month, all of which went to EA. (6 x 12) + 9 = 81, 81 x 200,000 x $10 = $162,000,000 (note that this doesn't try to count any revenues from box sales). So UO, not the biggest online game by a long shot, has generated nearly as much revenue for EA as the best-selling single-player game in the history of the industry. Dollar-wise, they don't have grounds to blow off the MMO market as unimportant.

So why the ostrich act? Well, EA may be genuinely oblivious, they don't exactly have the best track record when it comes to understanding MMO's. But in general, industry exec's are hoping the other shoe drops on someone else. Once a few more cases have been litigated (again, hopefully on someone else's dime), and they have some case law to stand on, they'll be ready to step up, but for now they are collectively sticking their fingers in their ears and sayin "NANANANANA, I CAN'T HEAR YOU."

There are a few exceptions, Linden Labs' leadership being one. But no exec ever advanced his career by saying "We've got a big problem coming in a few years, and I have no idea what we can do about it."

--Dave

[Linda MacKellar]

12.

I'd just like to point out that I am not a vulture circling for litigation (see comments by Alice). I am a contract lawyer and commercial director of a games company. I loathe litigation, and grey areas of law. Yes, I know you guys hate it when we see things are unclear, but that's the way it is and my job is to help games companies manage their liability.

I believe that games companies have to make decisions from as informed a view point as possible. The EULA/Rules of Play/Terms of Use is a way in which companies can manage their liability and when I talk about enforcing it, I don't mean we all rush out to court and serve writs. The games company enforces its rules in the same way as an ISP would. Some say this is too much work. Well, if it is too much trouble for the games company, then perhaps the games company is the wrong "person" to run the game.

MMOGs are a service not a product, they have the capacity to be truly mass market. However they will only become so, if games companies listen to their customers and deliver a good gaming experience to everyone.

But they need to do that is such a way that they minimise their liability - there is no point in providing all the fun and taking risks they could avoid.

You know what - I know I should have said more at the session to get my point across but we were running out of time and I also didn't want to be rude to Mr EA (ironically I didn't want to come across as an arrogant lawyer but seem to have managed it anyway).

If there's a next time - the gloves will come off and you'll have to drag the microphone off me.

[greglas]

13.

Yeah, I'm also kind of perplexed by Alice's reaction that we lawyers came off as evil. I tried very hard to speak quickly to the legal issues I thought the audience would find interesting. And EA has lots of laywers, you know -- Steve Schnur (EA) on the panel before ours was talking about licensing and musical mechanical copyright royalties as if the audience were *all* lawyers.

I'm probably personally responsible for the "shark" reaction, though, because I said I'd be really interested in seeing some court opinions come out on the issues of virtual property. As I stressed when I said that, though, that's an expression of *my* interest as a legal scholar, and I said that game designers should not be so eager to provide me with interesting reading material.

All in all, it *was* more humorous than serious, though. The very first thing Jeff said was that it was a considered policy of EA that they were completely ignoring (not approving and not condoning) all the activities and issues raised by virtual property markets because they had decided the legal problems were too murky and financially speaking, virtual property would be small potatoes to EA.

Very honest thing to say in some ways, but obviously not completely true in other ways and not something they're bound to stick with -- but that was his story and he stuck to it.

And ta to Aleks Krotoski, btw, for putting the panel together. It (and the festival generally) were very informative.

[Raph]

14.

Dave, don't forget that even though the development costs for an EA single-player game are now at or exceeding the costs for a triple-A MMOG, the ongoing profit margin is much much better on a single player title since there are few ongoing costs outside of marketing (if you do ongoing marketing). UO's gross is comparable, but to get its net you need to divide in half or something.

Still not chicken feed, I agree. ;)

[ren]

15.

A couple of points:

First - If EAs long term strategy is not to make any money of item trading other than in the indirect sense (that one can argue that it is inevitable component of some of the games that they are creating in virtue of the structure of those games and EAs in action) then one can certainly see the logic of their position.

Though I think that one argument against their absolutism is best summed up by analogy – they are setting down a bunch of really delicious sweets (candy for the North Americans out there) in a room and telling everyone that they are only allowed to use them as game counters, they then turn their back and when some people start eating the sweets, getting sick because they ate to much and getting into fights over the best ones - EA claim that this has got absolutely nothing to do with them.

While the legal position might be on their side I think that many people would think that they had some moral responsibility. You could take this argument all the way back and say that companies should not even create MMOs, but I would go for a more pragmatic position and suggest that MMOs in development now perhaps should start to put in greater degrees of transaction tracking etc. Though I can see the CS cost and profitably argument on the horizon.

Second - Although it was misinterpreted by some of the audience, one the points Jeff’s was making was that he believes selling items and currency is ‘not a serious commercial opportunity’ – it took this to mean both for EA as a part of their business model and for gamers.

I just don’t get this. Just looking at the money to be made - selling items manifestly is a serious opportunity (I’m putting not to one side the many arguments against item trading, and simply looking at the case for the practice of it practice of it being ‘serious’ or not). OK not on the level of business of EA (but what is?) but certainly for individuals.

Now I’m not knocking mowing lawns (just so long as you are wearing sun protection and are careful with the rapidly spinning blades – just how many lawn mower accidents are there each year I wonder, more serious injuries than MMO trading I would bet). What’s more item trading can be both a real business e.g. GOM, IGE, mysupersales, Juilan etc., and for those starting out in business a very real introduction to the world of commerce and trading.

I seen no reason why MBA students could not learn a lot from trying to open a business in Second Life, many of the lesions that they would learn would be highly applicable to commerce.

[Tobold]

16.

I see a big difference of virtual property in creative games like Second Life, and in games where virtual property is not created but found. If a player actively designs or codes a virtual item, one can well assume that he has some intellectual property rights. But if he just received a virtual item as reward for slaying a virtual monster, there was no intellectual creation from the player involved.

See it that way: The olympics are currently running. What if in a month you can find olympic medals being traded on EBay? Does that imply some legal liability on the part of the IOC? The IOC might well assume the same stance as EA: The medals are rewards that are not supposed to be tradeable. If some people are doing it anyway, that is not their responsability.

[Aleks]

17.

Thank you immensely to everyone who contributed to the panel, and to Ren for working so hard on it. I'm very pleased to see the TN reaction and in response to the call for transcripts, I have received word that there is a video of the session available. If anyone is interested, please do let me know.

It was a rousing and very informative discussion, and I was pleased that the EIGF directors were keen to include such a panel. To be honest, I thought Jeff did a great job acting as a very vocal and cynical foil, which perhaps brought many of the uninformed attendees a different perspective on the situation.

It certainly inspired conversation!

Thanks again to all involved, including those from afar.

[Ian]

18.

Can you post a link?

Ian
[email protected]
www.alphavillegazette.com (TSO News Blog)

[Bruce Boston]

19.

Tobold: "The IOC might well assume the same stance as EA"

Maybe, but I think this would depend on if the IOC relinquishes ownership of those items or not. In the case of most gaming companies, they maintain a claim of ownership.

I'm not sure what legal liability the owner of property has when that property is used to facilitate a crime, (I guess it would depend on the crime) but in the case of a gun left outside on your front lawn, the liability can be quite high, but I'm also guessing that there are plenty of examples where the liability can be quite low.

-bruce

[Richard Bartle]

20.

Tobold>What if in a month you can find olympic medals being traded on EBay?

What if, in a month, you find world records being offered on eBay?

Richard

[TBT]

21.

I've never seen any kids earn 6 digit incomes mowing lawns, but I have seen them do it in virtual sales.. Best part is they never broke a sweat and didn't have to deal with allergies too. Jeff seriously needs to get a clue..

[ren]

22.

I just thought I would link to some of the coverage of the session: Guardian. Black Belt Jones, with photos: All of us in action, Greg at the podium, and Dr C on VT.

Though The Second Life Herald take the prize with: Jeff Brown Spouts off again! You gamers are wasting your time.

[Estariel]

23.

Maybe this Jeff was the kind of guy who was out mowing lawns for money, when the rest of the kids were having fun playing games?

He worked real hard and is now VP with a big corp.

While the rest of us are still.....

...having fun playing games?

[Urizenus Sklar]

24.

Thanks for posting those photos Ren. Is it me, or is "The EA guy" sniffing his middle finger in that pic?

A student reporter at the Michigan Daily asked Brown about this topic too. Here is my favorite exchange:

Wolverine: You wrote, "Simoleans which, like Monopoly money, have no real world value." Are you aware of the Online Exchange Banks and eBay trade? It would seem as if Simoleans have a very real value, complete with its own fluctuating exchange rate.

Jeff Brown: No doubt, even Monopoly money has some value to enthusiasts. However the limited amount of trading in Simoleans on eBay is the exception that proves the rule: outside of the game, Simoleans have insignificant value."

Here's the link to the full interview: http://www.alphavilleherald.com/archives/000181.html

The whole interview seemed like an exercise in "head in sand" liability minimization. No money no sex no nothing happens in the game.

[Ian]

25.

whoa, is it just me, or professor Castronova, look a lot like Peter/Urizenus

[Squirrel]

26.

Yeah he does look a lot like Uri. That is spooky.

[Edward Castronova]

27.

The cat's out of the bag: I am Ludlow's double, to maintain appearances when he has to go into hiding.