Introduction

On 10 November, the European Parliament (“EP”) adopted a pivotal resolution on esports and video games (“Resolution”), which represents a formal first step to address the importance of these sectors. Though most of the statistics indicate that Europe seems to be chasing other economies in this respect, the EP has recognised the growing impact and importance of this ecosystem as a digital and intellectual property (“IP”) asset in the European economy.

The Resolution seeks to identify the main priorities in this domain and encourage follow-ups to tackle the challenges identified. One very interesting feature of this Resolution is that it maps out the interconnection between several areas, such as consumer law, IP and the fight against illegal content, instead of analysing the topic in a compartmentalised fashion, therefore offering a more holistic overview of the challenges faced. This approach may be extremely useful in accelerating the definition of a European strategy for video games and esports, since both sectors significantly impact other industries, such as media and entertainment.

Among the many recommendations put forth in the Resolution, all utterly relevant, some deserve a closer look.

(i)             Mapping of European ecosystem regarding video games and esports and the creation of a European Video Game Observatory

This major recommendation seeks to ensure the promotion of an integrated and harmonised European approach to the sector. In fact, as underlined in the Resolution, greater investments in these industries, as well as the development of a coherent, long-term strategy in the European video game sector depend on the handling and assimilation of the right data.

As recognised by the EP, most of the video games and esports markets are composed of non-EU actors. In the case of video games, Europe is still lagging far behind, with U.S.A. and Japan owning most of the market. In fact, in the list of the top 10 video game publishers worldwide, only one (Ubisoft) is European, coming in 9^th place. Regarding esports, however, this first step forward – i.e. the Resolution – may represent a chance of taking the upper hand, allowing Europe to compete with the global market.

The need for a coherent legal framework, identified nearly ten years ago by OMPI (1), highlighted as well by the European Video Games Society on 12 July 2022 (2), was also pinpointed in this document. However, it is debatable whether a common ground with regards to IP can be found. In this sense, while the EP recognises that video games represent an asset, has also noted the lack of harmonised legal concepts and framework, which very much compromises the achievement of a coordinated approach.

Regardless of open or closed catalogues of types of works on copyright, most legal systems around the world do not expressly include video games as protected works, although they also do not exclude them as such. This circumstance, along with the fact that, as described by the Court of Justice of the European Union (CJEU), video games constitute a complex matter comprising not only a computer program but also graphic and sound elements, which, although encrypted in computer language, have a unique creative value which cannot be reduced to that encryption(3), is part of the reason why determining a copyright legal framework applicable to video games is so difficult. There seems to be no doubt as to whether video games are protected works, as the CJEU has already stated, but rather as to the specific regime applicable (i.e. whether they should be considered audiovisual work, software or a combination of both).

This context led to too many years of grey areas, which proliferated as video games became increasingly complex and were greatly intensified with the emergence of esports. Since no industry can thrive relying on uncertainty, to which the absence of an adequate legal framework contributed fairly, private actors, namely publishers, rolled up their sleeves and created a somewhat international legal standard for the development of video games and esports. The truth is that, for better or worse, this system does seem to work, albeit at a cost for developers and creatives in the field, which are usually the weakest party in the equation.

However, intense regulation could cause these non-EU actors to simply avoid the European market. In other words, if regulation in the EU begins to restrict the rights of publishers, studios or any other relevant actors already established for years, this may drive them even further away from the EU, which is the opposite of that intended. This delicate balance between innovation 

and regulation is not, however, new – like in many other areas in recent years, it has become a recurrent dilemma in the pursuit of harmonised European legal frameworks.

Perhaps influenced by this, the Resolution does not openly propose a revision of copyright law to clearly and undoubtedly outline a regime for video games. Yet, it is possible that a middle ground may be found with the creation of a European Video Game Observatory, as proposed by the Resolution, with the purpose of supporting decision-makers and stakeholders and providing them with harmonised data, assessments and recommendations with a view to developing the sector. Notwithstanding, there is only so much that can be done without clarifying the nature of video games in reference to the applicable legal framework. More specifically, it is not clear how the cross-border enforcement of IP rights of game developers and artists can be adequately protected and how fair remuneration can be ensured, as advocated by the Resolution, if no such framework exists.

Finally, another interesting recommendation is the creation of a “European Video Game” label to flag video games created in Europe and give them better visibility, and which could provide further information and help in the creation of a map of this ecosystem.

(ii)             Study on issues linked to in-game monetisation, such as luck-based game elements and pay-to-win systems

It is important to keep in mind that, in abstract, in-game monetisation is not problematic per se. Also, not all pay-to-win aspects are considered a form of exploiting the vulnerabilities of users. Pay-to-win are aspects of the game that allow users to buy, using real currency, items or abilities in the game which give advantages to the buyer and help increase his or her chances to win while playing. If a specific mechanism can be summarised as a mere online purchase, and assuming that all legally mandatory information is provided to the consumer, there seems to be no additional challenges or queries regarding this topic.

Nevertheless, some of these pay-to-win elements include loot boxes, which are consumable virtual items that provide (at least an apparent) randomised access to relevant rewards (usually other virtual items) in the game, or access to special game events that may also offer these advantages, which the user would not be able to gain in any other way while playing.

The Resolution states that the use of these elements may influence the classification of the game as a game of chance or luck-based game, meaning that it may be subject to additional obligations in certain jurisdictions, if so considered, and seeks to encourage measures of transparency, including the provision of additional information to users, namely regarding win probabilities and randomness.

Much has been said and done on business-to-consumer commercial practices, for instance with Directive (EU) 2019/2161. The Committee on Internal Market and Consumer Protection also requested a study from the Policy Department for Economic, Scientific and Quality of Life Policies, which was concluded in July 2020, on loot boxes in online games and their effect on consumers (4), which provided a useful overview of the topic. Lastly, and perhaps more importantly, on 29 December 2021 the European Commission adopted a Commission Notice on the interpretation and application of the Unfair Commercial Practices Directive (5) (“UCPD”).

Still the Resolution continues to ask for greater transparency around some pay-to-win mechanisms that are often used in video games, reminding that, as stated in the 2020 study mentioned above, European Union policies do not specifically address loot boxes.

This problem seems, however, to have been partially solved with the adoption of the Commission Notice mentioned above, which states that the UCPD applies to gaming to the extent relevant. Moreover, it states that the presence of paid random content (including loot boxes, card packs, and prize wheels) should be clearly disclosed to the consumer, including in explanations of the probabilities of receiving a random item. In this sense, it is clear that the sale of loot boxes in games must comply with the information obligations under the Consumer Rights Directive and the UCPD concerning the price and main characteristics of the product.

Additionally, further assessments are to be carried out in each member state, since gambling (which is ultimately the real question – namely, to which extent can loot boxes be considered a disguised form of gambling) is a matter of national competence. In this regard, some member states, through their national authorities, such as Belgium and the Netherlands, have already banned such mechanisms after concluding that, according to local laws, they were to be considered online gambling.

However, the problems with loot boxes are not just linked to gambling but also to their design, an element which still needs to be properly addressed. In fact, the above-mentioned 2020 study on loot boxes concluded that many of their design techniques appear to take advantage of behavioural effects. A few examples include baiting offers or time-limited free play experiences, 

the use of virtual currencies, the selling of bundles, intermittent or unpredictable reinforcement/rewards, near-miss experiences and social components (i.e. rankings).

Ultimately, it seems to be inconclusive whether such techniques may be framed as dark patterns (as defined in the recent Digital Services Act), if they are intended to exploit its online interfaces in such a way as to deceive or manipulate recipients of the service or to distort or impair their ability to make free and informed decisions when using the platform, and whether this problem may be solved through the Regulation, since gaming itself may not be included in the scope of information society services, unless we are specifically referring to online gaming.

(iii)             Recognition of the need to protect esports players from issues typically arising in the field of sports and encouragement of a draft European charter to promote European values in esports

One of the elements that makes esports unique is the fact that, even though it may be included in the broad concept of sport (albeit of a digital nature and taking place in a virtual environment), competitions and games are owned (including IP rights) by private actors, instead of entities with a public interest, such as federations. As such, it seems only natural that, following the approach of ‘what is illegal offline should be illegal online’, the already familiar motto adopted by the EU Commission for regulation purposes, the issues most often identified in traditional sports should also be tackled in the digital environment. These issues may include match fixing and illegal performance enhancing strategies (such as doping) to protect the integrity of competitions and players themselves.

Accordingly, the Resolution underlines the importance of drafting a charter to promote European values in esports competitions, in partnership with publishers, team organisations, clubs and tournament organisers. The creation of tools such as guiding industry principles on esports and national codes of conduct in this matter is also encouraged.

Other relevant recommendations include the study of the possibility of creating coherent and comprehensive guidelines regarding the status of professional esports players and the adoption of a responsible approach to esports, namely by promoting a healthy lifestyle among esports players, considering the studied negative impacts that long hours of gaming may have on players.

(iv)           Encouragement of greater support and investment in the sector, including in R&D and training, to maximise game creation opportunities

Finally, since the European video game industry is mainly composed of small and medium-sized enterprises, measures and incentives at both the national and EU level are of the upmost importance.

The European Union has recognised the significance of Cultural and Creative Industries (“CCIs”), having issued several strategies, policies and funding applicable to these industries in recent years (5). With this is mind, the Resolution suggests the need to view the video games sector as a CCI and to advance with the full implementation of all EU legislation relating to CCIs, so that adequate funding can be provided to this sector.

In this sense, initiatives such as Creative Europe (6), managed by the Executive Agency for Education, Audiovisual and Culture, and Horizon Europe (7) are expected to play a key role in the development and advancement of this industry, though no concrete consequences can be reported just yet, given the initial stage of these initiatives.

Conclusions

Considering the importance of esports and video games for the cultural and creative industries, we should expect more attention from European stakeholders and thus more legislative and regulatory initiatives, as well as appropriate funding programmes. Be as it may, and though it is still difficult to predict the extent of its future outcomes, this Resolution is an important step towards a European strategy for the video games’ ecosystem, much overlooked until very recently.

Though the approach itself is not new – we have seen this strong will to regulate in other technology-related areas – we are likely to see, in the near future, relevant practical effects of this Resolution. In reality, video games and esports have always been somewhat left on the sidelines, creating many doubts as to whether general regulation should apply to them, and to what extent.

However, with the formal acknowledgement of the importance of this industry, we may finally see some of these doubts cleared, hoping that the guidelines, studies or even regulation deemed necessary in the Resolution will see daylight in the coming years.