Shaping digital horizons for video games

Chris Hewish at Xsolla outlines the impact of regulatory frameworks on the video game industry

 

For years, tech giants and the platforms they operate have grown to become intrinsic parts of the daily lives for billions of people around the world. It’s hard to imagine our lives without these digital walled gardens and the near-infinite variety of content placed within them by businesses of all sizes.

 

These platforms have created entirely new industries and improved the lives of millions of business owners across the entire globe. Yet as these platforms have gained arguably utility status within our lives, their business practices and attitudes have increasingly come under scrutiny. 

 

Over the years, an increasingly vocal and large number of consumers and business owners have raised concerns over how these platforms operate. Whether it be questions around exorbitant fees or arbitrarily enforced guidelines, there is a growing consensus amongst those that depend on these platforms for content and commerce that the tech giant operators are engaging in unfair business practices and monopolistic behaviour.

 

In what many would consider a form of validation, these concerns have gained the attention of governments and courts in recent years, which have resulted in rulings and legislation that are only beginning to affect change; bringing cracks to these digital walled gardens we call platforms. 

 

Just this year, the UK’s Digital Markets, Competition, and Consumers Bill (DMCC) and the European Union’s Digital Markets Act (DMA) have begun taking centre stage in this growing dispute between the consumers and creators who supply these platforms and the tech giants that operate them.  The DMCC and the DMA are two major developments that address some of these issues and create a more open ecosystem that more fairly benefits everyone. 

 

As one of the most dynamic and rapidly growing sectors in the UK’s digital economy, the video game industry is a microcosm of the broader digital marketplace. With guidelines set out by the DMA and the DMCC having just been finalised for UK businesses, everyone must understand the nuances so they can take steps to remain compliant and benefit from the redefined digital landscape.

 

Understanding the differences

Both bills aim to address the challenges posed by tech giants. Known as the “gatekeepers,” companies including Apple, Google, Alphabet, Amazon, Microsoft, ByteDance, and Meta wield significant influence over digital markets and their consumers. While the bills share the goals of fostering fair competition, safeguarding consumer rights, and promoting innovation, the differences between them vary significantly. 

 

The Digital Markets Act has a rule-based approach, while the Digital Markets, Competition, and Consumers Bill is evidence-based. For the latter, this means that the DMCC will consider the current players who have established market dominance and are in a position of strategic significance.

 

The DMCC also works with the Competition and Markets Authority (CMA), providing them with tools to address barriers to competition in digital markets via the Digital Markets Unit (DMU). Whereas the DMA has strict principles that gatekeepers are asked to comply with, these are in an easy-to-follow list of “do’s” and “don’ts.”

 

Some of the “don’ts” include preventing consumers from linking up to businesses outside their platforms and treating services and products offered by the gatekeeper more favourably in ranking than similar services or products provided by third parties on the gatekeeper’s platform. 

 

The “do’s” include allowing third parties to inter-operate with the gatekeeper’s services and allowing business users to promote their offer and conclude contracts with their customers outside the gatekeeper’s platform. 

 

Opportunities for smaller players

Video game developers, publishers, and consumers will benefit from the digital market ecosystem if both regulatory frameworks are implemented. While the DMCC isn’t expected to be final until Autumn, the DMA is already setting the path for a brighter digital future. 

 

With the DMA’s provisions, video game companies can host their apps on their websites, offering consumers direct access to their products or services without a middleman. For consumers, this means they’re no longer bound by the restrictions of app stores and can now explore a diverse marketplace, finding games that suit their preferences and budgets.

 

Meanwhile, video game developers and publishers are freed from the commission fee that tech giants imposed on them, meaning they can retain a greater share of their earnings.

 

Another game-changer is the ability to build relationships directly with consumers and engage with them. Before the DMA, core app stores forbid the inclusion of third-party app stores. This meant that game companies didn’t have the opportunity to establish web shops within platforms like Apple’s app store or Google’s Play store.

 

With the DMA’s rules, they can now do this. Now, when users browse through the app stores looking for games, they see offerings from major developers and can look at titles available exclusively through third-party app stores. 

 

There is also belief that the ability for game businesses to retain a higher portion of their sales will result in the creation of more jobs, as the ability to engage payment options outside of those offered by the platforms will put as much as 20% more profit into the hands of developers and publishers.

 

This could be thousands or millions of dollars, much of which would allow these companies to retain and even hire more employees. All without causing any reduction in the ability of the tech giants to cover all costs related to operating their platforms. This is a true “win-win” situation for a games industry rocked by mass layoffs and studio closures over the past year. 

 

Rocky regulatory terrain 

While the DMA and the recently passed DMCC have benefits, remaining compliant is crucial. By being informed about regulatory developments, businesses—large and small—can assess the impact of both frameworks on their operations and adjust their conduct accordingly. 

 

But what steps do they need to take? 

• Stay informed. Game developers and publishers should closely monitor the developments of both legislations to remain aware of how they can adhere to compliance. 
• Review the guidelines. It’s important to examine the guidelines, policies, and agreements to ensure compliance with both regulatory frameworks. This may involve evaluating data handling practices, contractual agreements with digital platforms, and consumer protection measures.
• Keep engaged with regulatory authorities. Large and small businesses should maintain an open dialogue with relevant regulatory authorities to stay on top of compliance and understand how it affects operations. Participating in consultations and providing feedback on proposed regulations can help shape the regulatory landscape and ensure that industry concerns aren’t overlooked.
  

By taking these measures, game developers and publishers can mitigate compliance risks and demonstrate their commitment to transparency, fair competition, and consumer protection, all of which are important DMA and DMCC objectives. 

 

The road ahead

Both laws will usher in a new era of regulatory oversight and opportunity, and they will have profound implications for businesses everywhere. Video game developers and publishers must understand the provisions set out by the DMA and take steps to get a firm grasp of the DMCC, which will help them navigate these new changes.

 

With these and other regulations appearing on the horizon, a new day is dawning for the games industry: a day where creators are beginning to gain control over their businesses and connect directly with their customers.

 

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Chris Hewish is Chief Strategy Officer at Xsolla

 

Main image courtesy of iStockPhoto.com and Ivan Pantic