Digital Disaster

Videogames, along with other new media markets, have officially arrived - at least in the eyes of the British government, that most ponderous and slow-moving of beasts. Many years after the majority of British adults started using the Internet and playing games, the government has finally seen fit to introduce legislation to accommodate it, in the form of the Digital Economy Bill - a bill which should represent a new high water mark in terms of the government's engagement with the thriving interactive entertainment business.

It is a shame, then, that the bill is an almost unmitigated disaster from the first word to the last - legislating not for the industry of the future, but instead making a slightly pathetic attempt to protect the industries of the past. While infuriating digital entrepreneurs and privacy advocates, it also makes a mockery of its own name by providing practically nothing to actually help the development of our digital economy.

The arguments for and against the bill on the basis of privacy, civil rights and legal due process have been made by many other writers, and will undoubtedly rage for months to come. What is more relevant is to consider its direct implications for the videogames business.

Only one of the bill's major thrusts is directly focused on videogames, and involves the decision to shift the rating of all videogames to the Video Standards Council, which is expected to adopt the PEGI rating system once the bill passes. This is a reasonable compromise position to have reached - PEGI has been redesigned to resemble the existing BBFC system, and the new legal framework for the rating system will be clearer. That's a positive, but frankly minor, step for the boxed games business.

The remainder of the bill addresses the media industries more generally, and it's here that we run into major difficulties.

Aside from some slightly vague promises regarding future mobile broadband services (which were always going to have to come about anyway, and it's disappointing that we're still at the "vague promises from parliament" stage rather than the "concrete timeline from commercial operators" stage), much of the rest of the bill focuses on the enforcement of copyright online.

Two key measures are outlined. The first is, in essence, the framework which will allow for the controversial "three strikes" rule, under which someone who is accused of piracy on three occasions can be disconnected, or have other penalties imposed upon them. Internet service providers are expected to cooperate with both policing and enforcing this aspect of the bill. Other measures such as demanding that the entertainment business' enforcers be able to examine the contents of users' private files in online storage are also outlined.

The second is a sweeping power which would give future Secretaries of State the ability to modify the Copyright, Designs and Patents Act 1988, upon which the bulk of the UK's copyright regime rests. In theory, this would be used to respond quickly to changes in the technology used for file-sharing, although critics would point - with some justification - to how the UK government has, in a host of unrelated situations, wilfully abused the powers it granted to itself for the sole purpose of fighting terrorism, and ask how powers granted to fight piracy might also be abused.

From the point of view of the games business, however, it is not the privacy or civil liberties implications that matter. It's not even the question of proportionate response or legal due process - while we may feel uncomfortable with those matters on a personal level (I certainly do), from the point of view of the industry, the question is simple. Do these measures harm us or help us?

There's a knee-jerk response, expressed succinctly in ELSPA's brief statement on the bill, which says that anything which fights piracy is a Good Thing. Yet that's exactly the kind of dogma which the games industry has slowly been getting good at questioning. In recent years, moves by legal firms such as Davenport Lyons and ACS Law to send out thousands of threatening letters to accused filesharers, using language little short of extortion and evidence which would struggle in a court of law, have been reviled by many in the industry. "We're not in the business of suing consumers" was the message that came through fairly clearly from many publishers.

Why not? The reasons are simple. Firstly, it's a PR disaster to threaten families because their teenager has downloaded a game, and an even worse PR disaster to threaten people who haven't downloaded anything, as has happened in many of those cases. The damage done to the reputation and perception of a company, and of the industry as a whole, by those kind of cases is vastly more costly than the possible loss through an alleged act of piracy, and there is no evidence of any significant deterrent effect on filesharing from such cases.

Secondly, by issuing such threats you risk knocking valid consumers out of the market entirely. The innocent accused are a clear-cut case, but the reality is that many pirates are consumers too - often buying some games and pirating others which they consider less attractive or worthwhile. In fact, studies in the music business (which sadly have not been replicated in games, as far as I can discover) have shown that people who illicitly download music are actually also the biggest spenders in the industry, buying far more albums, concert tickets and merchandise, on average, than non-downloaders. No industry with its eye on top-line growth and bottom-line profits should be comfortable with cutting off its own nose to spite its face by removing those people and their money from the ecosystem entirely. Make piracy harder, certainly. Incentivise legitimate purchase, yes. Even ban their consoles, as Microsoft has done - but cut off their connections? Sue them? Think hard before coming down in favour of such measures.

However, in this bill, the question of making the industry look like the bad guys, or of damaging the industry's own consumer base, is the least of our concerns. It's the other powers that are the real worry - the concept of effectively creating a powerful Piracy Tsar, whose remit to alter the legal framework surrounding online services will be far greater than that which the government presently possesses.

That's a problem because it means that any online service will, effectively, be building its foundations on quicksand. If you deal with customers online - allowing them to communicate, storing their data, connecting them to one another, distributing files to them, or any one of a host of things which normal online services do - you'll suddenly be in a position where you can be drafted into action as the unwilling policeman of the government's Piracy Tsar with little notice and no comeback.

Google and Facebook know this, and have joined the voices campaigning vigorously against the bill. Smaller entrepreneurs are even more worried. For them, this bill risks making investors wary (a small online business could be wiped out by suddenly being burdened with these kind of demands from government), and will actively work against the introduction of disruptive technologies, by building a legal climate which discourages companies from using data and online services in creative ways.

For the games industry, this spells trouble. It's lazy to think about this business as being one which sells games in boxes to people in shops, and therefore to uncritically welcome draconian measures which prevent those games from being pirated. Increasingly, this is an industry which sells services to consumers, sells advertising to the media sector, deals in micro-transactions for free-to-play games and distributes its wares online through a variety of storefronts and business models. In fact, this is an industry which is doing exactly what the music industry failed to do for years - finding the new business models which defeat the pirates, or even better, leverage the pirates' activities for our own aims, all without running crying to the government for legal protection from technological progress.

The Digital Economy Bill, in its present form, will hamper that development. Ironically, it will slow down the development of the true digital economy, damaging consumer confidence in the industry at the same time as threatening new business models with a legal burden designed not to protect them, but to shore up the crumbling, archaic business models of record labels and movie studios - and, sadly, some games publishers - who are determined that if they can't make the Internet go away, at least they can lock it down so tightly that it cannot thrive. In the interest of protecting dinosaurs, the government is willing to stifle innovation. With EA this week predicting that over half of its revenues next year will come from online ventures, it's terribly sad to see the industry apparently willing to applaud a bill which sells their future to protect their past.

Of course, it may never come to pass. Britain's present government is no stranger to deeply controversial legislation, having attempted to introduce a variety of anti-terror laws and powers which proved deeply divisive, so the furore over the Digital Economy bill is just another day at the office for this parliament. However, arriving so close to a tight election, it may well become an embarrassing political millstone for its proponents if, as seems likely, they cannot strike a deal to get it passed swiftly. If this happens, the bill may be buried as the election approaches - which would be greeted with unhappy grumbling from some corners of the industry, but a huge sigh of relief from anyone with half an eye on the next ten years of this business' growth.