'Cause We Are Living in an Immaterial World...

A friend's plight, and the fallout from Zynga's abolishment of Street Racer, set me on the path to thinking about how we deal with digital assets in a world that hasn't yet realised that they are the digital representation of a physical asset and so is valuable.

Let's look at how this is effecting Joe Blogs on the street first.  Mr Blogs has been having some financial trouble as of late and is unable to pay back his debts - as a result he has to declare bankruptcy.  Normally when you declare bankruptcy, your non-essential assets are sold off in order to pay back your creditors, however in my example Joe Blogs has very few physical assets to be sold off.  He has his laptop, which he uses for work and so has to keep, but he spent most of his previous leisure time playing MMORPGs, listening to music, reading ebooks and social networking.  As a result of this, Joe has very few physical assets but has thousands of pounds worth of digital assets.

Currently, these digital assets are ignored - they are not seen as being worth anything.  The reality, however, couldn't be further from the truth.  Joe has a World of Warcraft account, with four characters that would be worth circa £700 each on ebay; he has around £5,000 worth of music, ebooks and movies on his laptop; his Steam account has £500 worth of games downloaded to it, and he owns seven valuable domain names that are worth about £100 each.  The collective value of his digital assets is around £9000, which far outstrips the value of the rest of his physical property combined.  At time of writing, there is no way for the accountants, or Joe, to access these funds.  Joe can't sell on his mp3s or ebooks as they only work with his iTunes account; he can't sell his World of Warcraft account as selling it is against Blizzard's EULA and though he personally can sell on his domain names, the accountant cannot do this for him.

Joe does not own his own property beyond using it for its single intended usage.  This seems simply nonsensical in a world that is increasingly digital.  Why is it that if I buy a CD in a shop I reserve the right to sell this on once I am done with it to whoever I wish, but I cannot do the same with the eight mp3s that make up my "Fame Monster" album?  Why are the terms of use so restricted just because we remove the physical element?  Why is it suddenly apparently worthless to anyone but me?  The fact of the matter is that it isn't.  My CD is still worth what someone will pay for it, but it's made impossible for me to sell it on.  Joe's £9000 worth of digital assets?  Effectively worthless.

Now let's look at how this effects businesses.  Zynga, creator of social games on sites like Facebook, has come under fire after announcing they were abolishing one of their games, Street Racing.  The reason this has caused so much consternation is that Street Racing, like many of Zynga's games, employs the use of microtransactions to allow players to customize and upgrade their vehicles.  For those who don't know, a microtransaction, in this situation, means the player pays a small amount of real money for access to digital content within the game.  Zynga have faced a lot of criticism for people who have sunk a lot of their hard earned cash into the game - abolishing the game effectively means Zynga is taking their money and running without consequence.  It's tantamount to you buying a diary in real life, using it for a little while, then having WHSmith come into your house and take it away without explanation, your notes and dates still in it.  Of course, in the real world, businesses would never get away with taking away something that a consumer had already paid for and taken into their possession, but for some reason when we move these transactions into the digital realm it becomes common practice and seen as bizarrely ethical.

There was another example of this back in 2009, when the initial Kindle ebook reader launched.  Amazon released a number of George Orwell's books that later had to be withdrawn for legal reasons.  However, the books were not just withdrawn from the store, as you would imagine, but removed from the libraries of consumers who had already bought and paid for it.  The owners of these books were not made aware this was happening and were understandably upset that Amazon felt it had the right to delete things from their Kindle libraries, that they had previously perceived to a personal and private piece of property.  They were sure, as had come before, that once you buy a copy of a book, the store no longer own the rights to that copy.  Not so, said Amazon.

The world is clearly in transition, between being focused on what's real and can be held in one's hand and the increasingly immaterial world we inhabit in our daily lives.  I personally spend probably as much time on social networks as I do actually speaking to people face to face - does that mean those interactions are worthless because they were not physical?  No, and my property isn't worthless just because it's not physical.  We are locked in a power struggle over our own personal assets.  Companies want to retain the rights to their intellectual property to prevent people stealing it, and consumers want to retain the rights to their digital property to prevent companies stealing it back.

At the moment I cannot see any simple solution.  In times to come will we be able to sell these digital assets back to companies at a reduced rate in the way that one can trade in a game for cash at a store?  Will we be able to auction them off them on eBay?  Will we see digital repo men invading our networks and stripping our hard drives of all that is valuable?  Will they come for our MMO characters if we fall behind on our subscription?

It seems impossible to predict how the power balance is going to shift, but with the rise in social networking many of these apparent injustices in DRM are not going unnoticed and are hurting their brand as much as the company feels they may be protecting it.  Perhaps that is where the battle will be fought, and the war ultimately won - power to the people.

Chancellor Vows Support for UK Games Industry: Too Little Too Late?

Alistair Darling's delivery of the budget for the coming year was greeted with a triumphant cheer from the UK's games industry today. Few could believe it when Mr Darling announced that he was introducing long awaited and hard lobbied tax breaks for the industry, and not only that, but that he was also going to do this in line with TIGA's previously announced tax relief plan.

To this effect, developers that create profitable games will now be able to use the relief to pay less tax on profits, while unsuccessful games will be awarded a cash tax credit to reduce losses. This should free up cash to spend on other projects or creating jobs for the increasing numbers of stellar graduates that British and overseas Universities are producing year on year.

Scottish developers are delighted and are basking in the warm glow of victory. Colin Anderson, Managing Director at Denki, said, "Games Tax Relief will stimulate much needed investment and innovation in one of the UK's leading knowledge based industries. The leadership TIGA has demonstrated throughout this debate has played a decisive role in getting Games Tax Relief on the political agenda and in to today's Budget."

And Colin MacDonald, Studio Manager at Scottish industry giant Realtime Worlds said, “The UK video games industry is one of the most creative and innovative in the world. This decision will mean we can continue to invest in UK talent and prevent brain drain to our overseas competitors. This is a great day for Scottish and UK-wide developers. It is also a major achievement by TIGA.”

The news of the tax breaks, and the form they are taking, was welcomed by TIGA. CEO Richard Wilson said "The Government's decision to introduce Games Tax Relief in today's Budget is an inspired decision. It is good for the UK games industry, good for consumers of British video games and good for the wider UK economy.

TIGA's research indicates that over 5 years Games Tax Relief would create or save 3,550 graduate level jobs; increase and safeguard £457 million in new development expenditure and ‘saved' development expenditure that would be lost without the relief; and generate £415 million in tax receipts for the Treasury, comfortably exceeding the cost of Games Tax Relief. Games Tax Relief would also encourage game developers to adopt new online, more sustainable business models and sell directly to the consumer."

For Scotland's games industry this is big news, as two major titles, Crackdown 2 and APB, are expected to emerge by quarter 3 of 2010. Provided these games are profitable, their developers, Ruffian Games and Realtime Worlds respectively, could stand to reap the rewards and this should have a knock on effect on a large scale with other local companies and Scotland's Universities.

Potentially this also will bring a sigh of relief to those companies whose commercial successes have, so far, been few and far between as they will be bolstered by the incoming cash tax credit, and overall this might lead to fewer British games companies going bust. Again, this stands to encourage ongoing employment and give these companies more breathing room to grow.

However, this may come as too little too late. With a general election expected to be called within the next six weeks, the Conservatives, currently tipped to win an upcoming election, have vowed they will enact an "emergency budget" within 50 days of coming to power, obliterating many of the more controversial and surprising of Darling's moves. As the Conservatives have not, at any point, indicated support for UK games industry tax breaks, we can't be sure that this would remain as part of a Conservative budget.

Though this shouldn't quell your enthusiasm or celebrations and in all actuality there's no real indication that the tax breaks would be at risk of removal under a Conservative government, we must bear in mind that much of what was in today's budget will have been included on the basis that it will encourage votes for the Labour government.

Let's not count our lemmings before they're out the door...

Keeping Them in the Nest

So if you listen to the papers, it would seem that last week it was announced that Scotland's games industry would be getting a multi-million pound investment - to the delightful tune of £2.5m.  Really what most of us here in Dundee hear when there's talk of tax breaks or cash injections from the Scottish government, ostensibly for Scotland, is "for Dundee".  Being at the epicentre of everything games in Scotland, and in some ways the UK, does have its perks.

However, perhaps that is not strictly the case.  This money is to go towards a prototyping centre at the University of Abertay Dundee - hoping to assist local companies in creating and developing new gaming content and methods as well as encourage hands on learning for Dundee's many games oriented students.  This is, of course, no bad thing.  We are better educating our own workforce and local companies are being given the chance to develop new content in state of the art surroundings.  However, there is one downside and it comes in the form of three words:

No tax breaks.

We have been hoping and praying that Alistair Darling's pre-budget report would include some mention of the tax breaks the industry has been begging for, but to no avail.  Currently it is estimated that the games industry contributes circa £1bn every year to the UK's GDP, of which £420m ends up directly in the Exchequer's coffers.  Despite this, the Chancellor has deemed that the industry should not receive tax breaks, allegedly because it does not contribute enough to the advancement of the UK's cultural values in the same way that the film industry does (which currently receives £104m in tax relief from the UK government annually - a figure UK trade body TIGA said is much in excess of what the games industry would need.)

So what does this have to do with the £2.5m figure mentioned earlier?  What does it have to do with our students?  Though the UK does not offer tax breaks or incentives to developing studios, countries like Canada currently offer generous awards which are drawing companies, and subsequently talent, into the country in droves.  Their industries continue to grow and flourish and will as long as these rewards remain.  The main issue for the UK is, therefore, that our excellent Universities are training up our talent, nurturing them and then, once they have the degree and mortar board, that talent is being sucked out of the country.  Our studios simply cannot compete with the incentives tax relieved companies in other countries can offer.

This, however, is looking at things in a cold and harsh light, but you would imagine that this is the view that the government would take - why would we want to spend money training a workforce if we're not going to see a return on that investment?

Those with softer hearts might see it as essentially like bringing up a child, spending hundreds of thousands of pounds getting them ready for the world only to see them leave, set up home with someone else and take all of our "investment" in time and money with them.  Like a child though, we will see them from time to time; we will hear from them and we will receive some of the benefit of our investment a few times a year.  This is not totally unlike our workforce, who leave the nest with all their knowledge and experience, take it elsewhere and use it to develop new content there - we will see a return on our investment in that this advancement might effect what we ourselves are able to produce or we may be able to build on the idea, but we certainly won't receive the direct benefit that our "child" did.

It comes down to whether you can look at things with the view of an egoist or a utilitarian - should we share the wealth, share the talent and our know-how safe in the knowledge that, somehow and in some small way, it will come back to us?  Or should we not be looking to keep all that for ourselves and leading the charge development wise?

As much as I'm sure some people would like to take the warm and fuzzy approach to this, the truth is we, as an industry, cannot afford to keep hemorrhaging talent in the way we are presently or we will bleed out and die, or at the very least remain crippled.  We definitely cannot afford to keep pouring money into students if we can't keep them in our workforce afterwards.  I'm not suggesting we stop diverting cash to education - far from it as the UK only gives 5.3% of its total GDP back to education (Canada gives 5.2%.  We've got you beat there, suckers!)  What I am suggesting is that if we do want to better educate and prepare those in higher education to become part of our workforce then maybe, just maybe, we should actually be finding ways to ensure they do become part of it.

From Little Acorns Mighty Oaks Do Grow

On 11 December, GfK-ChartTrack released new data indicating that the Nintendo DS was the biggest selling games console in the UK ever.  Weighing in at 10.05 million lifetime sales against its predecessor the PS2's 10.02 million, this seems all the more impressive when you take into account that the PS2 was released over nine years ago and the DS has been on the market for a meagre five.

It is now estimated that one in six people in the UK own a DS, some of them owning more than one.  This is a remarkable figure even taking that into account and even more so if we cast our glance back to 2004 when the DS arrived on the scene.

The DS' arrival was not heralded to great fanfare by the gaming community.  It was hailed as clunky - cheap looking, plastic and ugly.  Its use of dual viewing screens and a stylus, by then seen as the outmoded peripheral of yore for PDAs only, was subject to huge criticism.  It's safe to say that no one imagined that five years later it would be dominating the console market, but it has, and this is due in no small part to its user friendly hardware.  Those of us brought up on a diet of games find this concept difficult to understand, but most non-gamers are immediately turned off of consoles and handhelds because of the controls.  A traditional controller set up, particularly in handhelds, is not intuitive or welcoming which causes a barrier when a company looks to attract new customers - a revelation we have recently heard repeated at E3 with the introduction of Project Natal.

The DS made gaming simple by breaking it into three simple steps: pick up the stylus, touch the screen with it, play.  No learning fiddly controls - no bumpers, no triggers, no joypads, no analog sticks and most importantly no confusing and frightening button combinations.  You have one peripheral and one input device, the screen, and that's it.  This painted a much more approachable picture to the casual and non- gamers and, most importantly, young children who make up a large part of Nintendo's target market with the DS.  The cheap and plastic look that was mocked by the gaming community to begin with seemed playful and fun to others.

It wasn't just the hardware that proved attractive - Nintendo came out with a slew of different titles that seemed to bridge every gap and fill every niché market imaginable.  These titles challenged everything we knew about handheld gaming, with titles such as Brain Training and Cooking Mama designed to educate as well as entertain.  The DS could be use as an e-book reader and a study aid as well as play fun and interesting gaming titles such as the Professor Layton series and The Sims.  This opened the device up to a market that its competitors just couldn't access by becoming an acceptable and often encouraged part of people's every day lives.

This device broke apart the very definition of "game" and as such our characterization of what a "gamer" is.  Hardcore gamers, who grew up on a regimen of Quake and Wolfenstein may scoff, scowl and mock, spitting venom at the casual gamers who dare liken themselves to what they perceive a gamer to be without realising times have changed.  In most people's eyes there is no difference between a man who plays Professor Layton for three hours a day on his commute home from work and one who spends the same amount of time on World of Warcraft in the evenings.  The growth in uptake of the DS, along with that of the Nintendo Wii, should highlight to gamers that the gap between "us" and "them" is ever shrinking.  We were wrong to laugh at the DS - we were out of touch with the way our world was changing then and if we continue to box ourselves in then this is the way it will stay.  More than ever, we need to accept that we are no longer a minority unless we make ourselves one - we need to face that are just another niche in an ever expanding and changing market and find common ground.

Game of Peggle anyone?