Written evidence submitted by the Interactive Software Federation of Europe, ISFE

RESPONSE TO THE DCMS INQUIRY: IMMERSIVE AND ADDICTIVE TECHNOLGIES

Executive Summary

1. ISFE represents the video games industry in Europe and is based in Brussels, Belgium. Our membership comprises national trade associations in 18 countries across Europe which represent in turn thousands of developers and publishers at national level. Our UK member is Ukie, the trade body for the UK’s games and interactive entertainment industry. ISFE also has as direct members the leading European and international publishers, many of which have studios with a strong European footprint, as well as important esports activities. The direct membership ensures a close link with the business and its realities which is reflected in our daily work and positions. 

2. ISFE’s purpose is to serve Europe’s video games ecosystem by ensuring the value of games are widely understood and that the immersive and engaging experiences they deliver are enjoyed by all.  ISFE aims to promote growth, skills, and innovation policies that are key to strengthening the video games sector’s contribution to Europe’s digital future.

3. ISFE welcomes the opportunity to respond to the inquiry. As the issues raised in the inquiry have an impact beyond the UK, ISFE believes that our contribution complements that submitted by Ukie.

4. The video games sector represents one of Europe’s most compelling economic success stories, relying on a strong IP framework, and is a rapidly growing segment of  the creative industries. A stable regulatory environment will help to further support the growth of this dynamic sector. In particular, it is important to maintain an aligned and harmonised approach with the EU in relevant areas to support games companies based in the UK, operating across Europe and globally. The size of Europe’s video games industry was US$18 billion in 2017 and is projected to reach US$19.5 billion by 2020[1]. In 2017, the sector registered a 18% growth rate in four European key markets: UK, Germany, Spain and France[2]. Today 50% of the European population plays videogames, which is approximately 250 million people. Growth is strongest amongst those aged 25-34 and 45-64. Around 1 in 3 of those aged 45-64 in Europe plays games and 48% of players are women, which takes us away from the typical stereotype of gamers.

The immersive media industry:

5. Video games have a proven ability to successfully drive new business models. The digital transformation with the growth of online and app-based gaming represents 64% of the industry’s total revenue.  Games app revenues represented 73% of the global app revenue in 2018[3].

6. In 2017, $2.4Bn was invested globally in AI, VR, AR, and esports.[4] VR demonstrates how innovation in the video game sector spills over into other sectors: according to PWC Global Media Outlook 2018-2022, VR will enjoy a 40% growth rate on its own in 2022, as other sectors are now adopting this technology, recruiting VR teams to enhance products and services. Similarly, video games’ virtual worlds are used in the field of AI as safe ‘test beds’ by other sectors, allowing for data to be tested before launching AI applications in the real world or to further continue research.  

7. To maintain and further strengthen Europe as a creative hub, investment in skills is necessary. Coding classes in schools need to be part of the national curriculum at an early age. While the EU Code Week and the EU Digital Education Action Plan at European level are important initiatives, digital skills and coding must be further promoted and implemented at national level. 

8. ISFE, in partnership with the European Schoolnet, runs the project “Games in Schools” which comprises a MOOC for teachers across Europe which aims to explain the educational benefits of using video games in schools and how to use these as educational and motivational resources in the class room[5]. The MOOC enjoys an unusually high engagement rate (60%) and competition rate (38%).  Part of the project is a handbook which includes lesson plans drawn from the MOOC to further support teachers. The project is also a resource for teachers in identifying those pupils and students who are interested in engaging in STEM courses, but importantly shows how an interactive experience can enhance the learning process. At national level, Ukie successfully runs the Digital Schoolhouse project.

9. Further, the video games sector believes that overcoming the gender gap is of crucial importance. According to European Commission data, only 15% in tech are women. A recent study conducted at the University of Surrey, led by Dr Anesa Hosein, shows that video games can be a vector to further encourage young women to engage in STEM courses[6]. The study concluded that girls who play video games are 3 times more likely to engage in STEM courses. The study recommends that teachers and schools identify girl gamers early as they have a natural interest in pursuing STEM degrees. The study further recommends that schools encourage participation in gaming expert talks and include gaming in STEM courses.

10. A robust communications infrastructure is necessary to ensure that Europe remains a key player in this field and in AR and AI. As streaming and cloud-gaming is expanding, 5G is expected to be the driver to ensure high-quality and immersive gaming experiences and new technologies such as AR will further take off as 5G will reduce important issues such as latency.

11. A strong IP framework that supports investment in creation underpins the success of the industry. Video games rely on copyright protection, for both software and non-software elements. As the current copyright reform in Europe is progressing, Member States need to make sure that Europe remains an attractive place to invest for developers and publishers. This is why ISFE is concerned by provisions that would put Europe at a competitive disadvantage for sectors like video game development which deal with complex works with multiple (sometimes thousands) contributors.

12. Local developers and small studios are important to maintain diversity and to underpin the local economy. ISFE supports increased budgets and specific budget lines dedicated to the video games sector in programmes such as the Creative Europe and Digital Europe programmes. Tax incentives and funding initiatives at national level benefit smaller structures.  By way of example, Germany has allocated €50 million to the video games sector for 2019[7].    

The future of esports in the UK:

13. Esports is an important and rapidly growing segment of the video games industry both in the U.K. and worldwide and has already revolutionised how consumers interact with sports, video games, and online streaming platforms. The rise of esports is an example of how the games industry has adapted to and driven evolutions in technology – from multiplayer in the home to worldwide real-time competitive play over the Internet, facilitated by the roll out of high-speed broadband and by the advent of digital streaming platforms. The strong organic growth and evolution of esports to date can be attributed to the benefits of its not being defined or constrained by reference to historic labels or inappropriate intervention. The video games industry is convinced that esports offers huge opportunities for job creation, economic growth, tourism and the development of digital skills. It is committed to growing esports in a responsible way for the benefit of all esports businesses, players and fans, and wants to work with decision makers to promote the sector, to spur economic growth and infrastructure plans and to boost the flow of talent into the sector. According to Newzoo, the global esports market will reach $1.4bn in 2020 with an audience of 380 million viewers in 2018.[8]

14. Video game publishers are one of the ‘keystone actors’ of the esports ecosystem, leading the development and ensuring that value is created and shared. Without publishers’ video games, there would be no esports at all. Publishers, therefore, are in a unique position to lead the growth of esports, recognising the value that esports brings to their games, their brands and their players, as well as the role of other stakeholders in the sector. Publishers have been very careful to develop and protect their reputations based on the franchises, brands, storylines and characters within their games. These are intrinsic and inseparable from the games and the games companies. Intellectual property rights ownership and associated control are vital to the industry in protecting these core interests. Anything that would stifle, constrain or conflict with the foregoing principles would be of great concern to video games publishers. One of the strengths of esports is the flexibility of the ecosystem, which has allowed for a lot of innovation in a short period of time and high growth rates; great care must be taken not to stifle this flexibility.

15. Even though esports is a relatively young industry, there have been increasing calls for its regulation. This could have serious consequences for the future growth of the sector. Esports is governed today by general laws that apply to every business activity, by private contracts and by various codes of conduct. Publishers care greatly about the integrity of their games and the competitions in which they are played. Self-regulation and the application of general laws have done a very satisfactory job of regulating the esports space, and there is no reason to believe that esports cannot continue to develop and implement responsible self-regulatory practices to address any issues that might arise in the future. Esports is as complex and varied as the dozens of games that are played as esports today and there is no one-size-fits-all regulation or governing body that can take that complexity into account. National and regional authorities should work with the esports sector to actively promote and encourage esports, but premature or inappropriate regulation could seriously harm the sector’s future growth and development potential.

16. While greater engagement between traditional sports and esports should be welcomed and encouraged, it must be recognised that esports differs from traditional sports in one very key respect. Publishers own the intellectual property rights in the video games played in esports, which give them the right to decide when, where and by whom the games are played and by whom they are broadcast or streamed. It must also be recognised that treating esports as ‘sports’ may lead to inappropriate regulation and other serious negative consequences.

The wider uses of “gamification” and VR/AR:

17. Innovation in the video games sector increasingly spills over to other sectors as the digital environment and its technologies are increasingly a part of society and business. The interactive element in video games drives developers and publishers to ensure a high-quality immersive experience to match the expectations of a demanding  and sophisticated player community. This is why the sector is constantly investing in innovation and new technologies which take creativity and experiences one level further.

18. Today Virtual Reality (VR) is a growth sector on its own as affordable and high performance devices are available on the market place. VR is used by other creative sectors such as the media sector to enhance their products and services. The health sector has been using VR technology for several years for therapy (fear of flying and claustrophobia), for treatment of PTSD, for pain management, and for surgical training.

19. Augmented Reality (AR) can be described as an additional digital layer added to the real world. A popular AR gaming application is Pokémon GO which successfully introduced an augmented digital layer to enhance the real-world experience. While AR is a technology mainly used as an entertainment element in video games, AR is increasingly offering opportunities to many other sectors such as the construction sector, the educational sector, the management of large industrial sites, the management of business meetings and teamwork, or medical applications.  Microsoft has successfully launched the HoloLens which uses mixed reality technology in an array of business and industry sectors. 

20. Artificial Intelligence is yet another technology in which the video games sector is innovating.  Video games’ virtual worlds are used as test beds for other sectors before launching real world applications or to pursue further research.

21. Innovation in video games is inspiring other entertainment and art sectors as it opens up opportunities to go beyond traditional entertainment and art forms. Immersive storytelling, the creative and artistic work, facial motion capture & lip synchronisation are some examples. The video games sector is constantly evolving and is interacting closely with the music, art and cinema sectors. 

Tackling digital and gaming addiction:

22. ISFE urges caution against the use of the term “addiction”. A more appropriate term would be to refer to excessive or problematic gaming. Currently the leading psychiatric and psychologic associations [9] assert that there is insufficient evidence to include excessive use of video games in an addiction or mental health disorder category as proposed by the WHO, and call for further studies. In particular,  ISFE is concerned by the lack of transparency around the process and the evidence which has led the WHO to propose the inclusion of video gaming as a mental health disorder on its list of International Classifications of Diseases (ICD), scheduled to be approved by the World Health Assembly in Spring 2019.  

23. There is a vocal opposition in the academic community on this topic[10]. Leading academic experts from renowned academic institutions and universities are openly questioning whether excessive video game play should be considered as addictive because of the very low prevalence of such a phenomenon[11]. Concerns are raised around risks of misdiagnosis, lack of analysis related to comorbidity (when a person has more than one condition), as well as the stigmatization of a large community of players around the world.

24. The industry takes its responsibility to consumers very seriously and promotes responsible gaming through various tools and measures: (i) the industry informs on the importance of taking breaks during game play of at least 5 minutes every 45-60 minutes as a rule of play; (ii) the industry is at the forefront of responsible gaming initiatives and communities across Europe: at European level with  PEGI www.pegi.eu; in Belgium:  www.jouezmalin.be, in Spain:  https://thegoodgamer.es;  in France:  www.pedagojeux.fr; in the UK:  www.askaboutgames.com; in Sweden:  www.fragaprataspela.se ; & in Poland: www.zapytajogry.pl, to mention a few.

25. The video games industry has its own system of formal self-regulation to keep children safer online: the Pan European Game Information (PEGI) system, used in 38 European territories with over 2000 members.  This self-regulatory age rating system operates under a Code of Conduct. Based on a detailed questionnaire, publishers are allocated a content age rating and content descriptors for their game.  PEGI independently reviews the game and its content to confirm that age rating is appropriate. None of the console manufacturers who are members of ISFE permit a game to be published for their consoles unless it has a PEGI age rating. In August 2018, PEGI launched an in-game purchase descriptor in addition to its already existing 7 content descriptors, to further enhance transparency[12].. Today it is also possible to obtain age ratings for digitally delivered games and apps through IARC, the International Age Rating Coalition, in which PEGI participates[13].  
26. Every platform has parental control tools installed allowing parents to ensure their children can play games safely, sensibly and responsibly. These parental controls tools perform to a very high standard and allow parents to make choices about the way their children enjoy games, including (i) preventing access to games with an age rating higher than their child’s age, (ii) limiting/disabling  spending, (iii) controlling playtime, and (iv) managing the sharing of information with other players[14].

The links between gaming and gambling:

27. ISFE members do not endorse gambling or offer gambling services. 

28. Increasingly the gambling industry is moving closer to the video games industry.  We see trends and examples that gambling operators are trying to align themselves with the video games sector, not only in terms of how their services are designed but also how these are  promoted. We are concerned that this may erroneously result in video games being looked at through the perspective of gambling laws. Specifically, we would like to point to the appropriation by gambling companies of video games style characters and graphics to attract minors into online gambling. Typical video games type graphics and characters are used in order to promote online gambling services or to gamble[15].

29. Media has recently pointed to excessive/uncontrolled spending by minors in video games in relation to the current debate about loot boxes.  To map the actual in-game spending by minors, ISFE launched during Spring 2018 a survey on four key markets in Europe.[16]  The research was conducted by Ipsos Mori in the UK, France, Germany and Spain.   It showed that 2 in 5 parents of children playing games indicate that their child spends money in-game. The vast majority (8 in 10) of those parents have an agreement of some kind with the child on such spending and only 2% of parents do not monitor their child's spending.

30. The fact that only 2% of parents do not monitor their child's spending, in combination with the data that 2 out of 5 parents indicate that their children spend money in game, show that the number of children spending money within games is small.

31. However, as a responsible industry ISFE will continue to monitor developments and to raise awareness on this topic, as well as the promotion of the various steps and tools that exist to keep children safe online and to support them to adapt a civic behaviour online (also see paragraphs 21 and 22). Our sector is already subject to, and comply with, various consumer laws and regulations in Europe designed to ensure we provide consumers with a fair and safe environment in which they can enjoy our products (for example, the Unfair Commercial Practices Directive 2005/29/EC which prohibits, amongst other things, direct exhortations to children to buy products). Our industry has always taken our responsibility to consumers, particularly children, very seriously  and continues to innovate and improve to ensure the highest level of protection for minors. The video games sector has a strong track record of global cooperation and sharing of best practices, working with fellow trade bodies globally. As we innovate in business models and technologies, consumer feedback is constantly listened to and taken into account. 
32. As a responsible industry we are concerned about illegal practices that are taking place on third party websites outside of the video game environment, such as unauthorised trading of virtual items which is prohibited by our members’ terms and conditions.
33. We are also concerned by skin gambling (or skin betting) which constitutes a subset of unauthorised trading of digital goods. The term comes from cosmetic virtual goods known as ‘skins’; however, this practice may involve other virtual items or virtual currency from games.  The virtual items are - in this context - used for the following:

•         a means to bet, where one uses virtual items from video games as virtual currency to place bets on the outcome of (i) professional sports games or (ii) games of chance on unauthorised marketplaces with the aim to win real money, or

•         as an outcome of a bet, where one uses real money to place bets on the outcome of “games of chance” on unauthorised marketplaces with the aim to win virtual/digital items.

34. Our members do not allow, facilitate, or condone the conversion of virtual currencies or other in-game virtual items into money or money equivalent or the use of them within unlicensed third-party gambling sites.  Our members take technical and/or legal measures to enforce these prohibitions. ISFE therefore welcomes the recent declaration signed by several European gambling authorities (including the UK Gambling Commission) on the blurring of lines between gaming and gambling, and in particular the call for constructive dialogue between gambling regulators and responsible game developers. The declaration specifically refers to skin gambling and we call on the authorities to further support efforts to stop such illegal activities.

Data security and infrastructure:

35. Balanced data regulations that complement the industry’s longstanding commitment to responsible data management will ensure individual privacy is protected while creating even better video game experiences.

36. The use of data, while in compliance with strict data protection and privacy policies, is essential to our industry for several reasons:

      Protect network security

      Responsible data management allows for the protection of gamers and minors through active monitoring of online chatrooms and fora

      Support developers in identifying and fixing bugs

      Dynamically adjust game difficulty to meet the evolving expectations of gamers

      Understand the players’ experience and iterate future releases

      Build and manage massive multi-player communities

      Create competitive multi-player experiences

      Create and share user-generated game content

37. A robust communications infrastructure is necessary to ensure that Europe remains a key player in video games. As streaming and cloud-gaming is expanding, 5G is expected to be the driver to ensure high-quality gaming experiences and that new technologies such as AR will further take off, as 5G will reduce important issues such as latency.

38. As regards the challenges and opportunities that relate to technologies and data regulations (such as the GDPR & ePrivacy Regulation proposal), balanced data regulations are essential for a thriving video games sector to deliver a high-quality experience and to further deliver innovation, but also to be able to ensure our role as a responsible industry towards minors in particular.

39. Any AI application will need to be compliant with the GDPR that came into force in 2018. No doubt there will be challenges when AI algorithms using machine learning will process data. Transparency requirements may conflict with other laws such as the protection of confidential business information which is crucial for a healthy and competitive business environment. Government and interested parties will need to have an ongoing dialogue on how to achieve balanced data regulations that can work with innovation.

January 2019