Connected Games:With Growth, Comes Policy Challenges

University of California – Hastings College of Law

Michael D. GallagherChairmanEntertainment Software Association

ABA| March 2, 2015

Industry Growth – Strong Pipeline

• Industry Popularity GrowingNumber of Degree Programs

• Retention rate of more than 88%

• By comparison, the 2014 nationwide average of first- to second-year retention rates for public and private institutions conferring BA and BS degrees was 64% and 70% respectively

Industry Growth – Strong Pipeline

• 33% of Students Enrolling in Video Game Design Programs Are Women

• Video Game Programs Have Greater Gender Diversity Than Other Science and STEM Programs

• Points to Strong Future for Diverse and Welcoming Industry

Online-enabled Games Go Big

• Here, There, Everywhere…

Streaming Comes to Games

• Twitch attracts 100M visitors per month and is growing at 10-15% a month

• Sony PlayStation Now service• Forrester Research expects cloud game play to

reach 66M U.S. households by 2017

Policy Challenges

• But connected game play also implicates a variety of challenging policy issues:• Data Security• Privacy• Network access for retired games• Net Neutrality• Unclaimed Property• Virtual Currencies

Data Security: WH Proposals

Three (or four) White House Proposals:• Cybersecurity Information Sharing• Data Breach Notification• Expanded Law Enforcement Powers• White House expected to announce

“Consumer Privacy” legislation

Data Security: Info Sharing

• This legislation is intended to enable cybersecurity information sharing between private and government entities, as well as among private entities.• Authorizes private entities to disclose cyber threat

indicators to private information sharing and analysis organizations and to the Department of Homeland Security, only to be used for the purpose of protecting an information system from cyber threats.

Data Security: Breach Notice

• Sets up a national data breach notification standard • preempting most existing state law on breach

notification. • Looks generally similar to several other federal

bills that were introduced in the Senate in the last Congress, though it applies to a broader range of personal information

Data Security: Law Enf. Access

The White House has also recommended changes to federal law to aid law enforcement of cyber attacks.• Add CFAA offenses to the list of racketeering activities under

RICO.• Broaden the remedies available under 18 U.S.C. § 2512, which

criminalizes the sale of surreptitious interception devices.• Update CFAA

Privacy – Data Localization

• Requirement to store PI locally• Beginning this September, companies

collecting PI from Russian consumers will need to store that PI in Russia.

• A similar measure failed to pass in Brazil, but it could reemerge in draft regulations

• Data localization requirements complicate the ability to offer a global online service

Network Access: Abandoned Games

• Copyright office accepts exemption proposals every three years (DMCA Rulemaking)

• In 2012, ESA successfully opposed a proposed exemption for console hacking

• This time, exemptions proposed for console hacking and “abandoned games”

Network Access: Abandoned Games

• EFF has filed an exemption proposal for so-called “abandoned games” where:• Server access is necessary for “authentication” to

play the game at all; or• Server access allows for multiplayer

“matchmaking” services, and• The game or its multiplayer functionality have not

been available for six months.• Comments are due March 27

Net Neutrality

• FCC Order – reclassify under Title II• Tougher approach than FCC first considered• Likely to be tied up in litigation• ESA’s perspective:

• Low latency, high bandwidth connections are key• Keep Internet free from anti-competitive and

discriminatory practices

Unclaimed Property

• States have long required escheatment of various forms of property where rightful owner is unknown or has failed to claim

• ULC is revising its model act to address new forms of property, incl. gift cards, unused subscription fees, and virtual currencies

• ESA actively engaged in rewrite process• Seeking appropriate exclusions for in-game items,

incl. virtual currencies, and digital codes

Virtual Currencies

FinCEN and the NY Dept. of Financial Services have recently looked to regulate BitCoin. • Regulation of “Virtual Currencies” could

ensnare in-game currencies, if not properly scoped

• Generally, ESA argues that regulations should not cover “non-convertible” VC, which cannot be returned for cash.

Virtual Currencies (Cont’d)

• In October 2014, ESA filed comments with the NY Dept. of Financial Services• NY proposal contains a welcomed carve-out for

digital units used solely within online gaming platforms

• ESA requested clarification that rules would not apply to games that allow gamers to obtain digital content or to exchange “points” for member-selected goods (t-shirts, coffee mugs, etc.)

Connected Games:With Growth, Comes Policy Challenges

University of California – Hastings College of Law

Michael D. GallagherChairmanEntertainment Software Association

ABA| March 2, 2015