Level Up: Video games guide - Level 3 - User-generated content

Level Up: A guide to the video games industry

Level 3 - User-generated content

As we approach the end of Q1 2022, it's clear from the media that the video games industry shows no sign of slowing down. Record revenues are being reported by the big players, with Japanese publisher Bandai Namco reporting a 15.5% year-over-year increase in revenue to USD $5.4bn. Similarly, Rovio, the developers behind the Angry Birds franchise, have reported a 7% year-on-year increase in revenue to EUR €286.2mn. If the trend continues, we can expect to see continued growth being reported by developers and publishers in the coming months which will open more opportunities for stakeholders looking to invest in or enter the video games industry.

With the above in mind, we wanted to create an all-in-one guide for those that currently operate in or are considering entering the video games industry with the purpose of providing an overview of the life cycle of a video game – from the early stages of development, past the grind of regulatory compliance, through to the final stages of monetising the product. The result is "Level Up: A Guide to the Video Games Industry".

In Levels 1 and 2 of the Guide, we discussed the importance of early-stage development, including game content created by both developers and artificial intelligence (AI). Importantly, we reviewed the intellectual property rights and the common pitfalls that key stakeholders should be aware of during the development stages.

In Level 3 of the Guide, we continue our analysis of game content but in the context of User Generated Content (UGC) and its increased use by developers. In particular, we examine the legal issues in the UK concerning ownership of UGC and the practical implications for stakeholders looking to monetise such content.

Level Three

One trend we are witnessing in the video gaming industry is the increasing amount of gameplay-related content being developed and created by players and fans. User-Generated Content (UGC) raises a number of legal and practical issues that key stakeholders in the gaming industry will need to consider.

What is UGC?

In short, UGC includes any form of content (e.g., images, text, audio, videos) that is uploaded by users onto social media platforms (e.g., Facebook, Reddit), media platforms (e.g., YouTube), blog or educational platforms (e.g., Wikipedia), streaming platforms (e.g., Twitch) and even in open source software.

In the context of video games, UGC broadly falls into three categories:

Machinima: gameplay from existing games being used to create animated content (e.g; cinematics);
MODs: custom modifications to in-game mechanics and the design of existing games by modifying the software;
Game Creation Systems: platforms or software provided by gaming studios that enable users to develop and create completely new gameplay content.

Historically, stakeholders would often take enforcement action against those individuals that made unauthorised changes to the game’s software or re-published or distributed gameplay content without the rights holder’s consent on grounds of IP infringement. Fast forward to the present and times have changed. Developers and publishers are now often encouraging users to create and publish UGC to help build a game’s brand awareness by using the user’s social media connections to reach new viewers and potential customers. This enables developers to connect with and gain a better understanding of new target audiences without having to spend money pursuing traditional advertising and marketing tactics. Moreover, certain games have adopted UGC-based strategies as part of their digital content and have become some of the biggest gaming brands in the world as a result (e.g., Minecraft, Roblox).

What are the legal issues?

Games that adopt UGC-based strategies in their gameplay are inherently at risk of claims being brought by third parties for IP infringement. In early 2020, Nintendo threatened legal action against Sony unless it removed certain UGC from Dreams, a system that enables players to create new games.¹ Specifically, Nintendo requested that Sony remove any UGC that was modelled by users after/upon its beloved character Super Mario. Sony responded by promptly removing the offending UGC and leaving a notice explaining that the content had been removed on the grounds that it contained copyrighted material. This removal led to a larger purge of Nintendo-themed creations made by users on the Dream platform.

In another recent example, Twitch informed streamers across its platform that it had deleted content violating music copyright laws after receiving a wave of DMCA “takedown requests” earlier in the year.²From a US and EU law perspective, the US Digital Millennium Copyright Act (DMCA) as well as the EU Copyright Directive control how copyrighted material is used online and contain provisions to protect companies that act as an online platform from third- party IP infringement claims if they take appropriate action in response to a take-down notice and remove the infringing material.

To mitigate the risks of third-party IP infringement claims, companies that work with UGC are making serious investments into how they moderate and control UGC in connection with their games and/or platforms. This includes setting up specialist moderation teams in-house but also contracting with third-party consultants to provide moderation services and ensure that the gaming and digital community are not creating UGC that risks third-party IP infringement. For instance, Twitch’s ‘Soundtrack by Twitch’ tool is part of Twitch’s response to its music copyright problem. The tool curates music that’s safe to stream worldwide.

Another method to reduce the risk of third-party IP infringement is to restrict the user’s freedom of design. For instance, games developer Mythical Games, has created a UGC-based game which allows players to create their own characters and the virtual world they interact with using the game creation system. However, Mythical Games ensures that it is the creator of all in-game assets that a user can interact with and prevents users from importing, sculpting or designing their own assets. Accordingly, users can only create out of the assets delivered by the developer, which vastly reduces the risk of third-party IP infringement; however, it also runs the risk of disenfranchising players that expect to have greater creative freedom within the game.