Xbox Live 360.com. Games and Games.

In Response to:
Uk gov't urged to act on 'virtual goods': Anti-fraud laws should apply to Second Life

I have dealt with a wide variety of consumer protection issues in my career, primarily ones dealing with franchising. Consumer protection, in general, is a double edged sword: on the one hand, naive consumers should be protected from frauds; on the other, government regulations do not always work as planned and always inevitably lag behind real world progress. With the evolution rate involved with online commodities and virtual goods, the gap between the world the regulations are designed for and the present reality will always be vast. I, however, will grant that some sort of consumer protection needs to exist. I would propose, rather than allowing government regulators to handle the situation, the creation of a multi-national regulatory body to handle issues in virtual goods. The body would basically parallel a licensing board (much like doctors and lawyers deal with) that can adapt its rules at a much faster pace to conform to the reality of the business, but at the same time have the ability to censure members.

The first step would be the creation of the body with some recognition by governments. The only real restriction that the governments need to authorize is that in order to be a virtual commodity supplier and/or broker, you must be licensed by the board. This would mean that games that wish to have real world currency transactions, such as Second Life, must be registered. Additionally, if someone wanted to act as an independent virtual goods broker (a profession which will undoubtedly appear in the not too distant future), they must be registered as well. The exact details of license requirements would have to be detailed by the board. More than likely, games without real-world transactions (i.e. Word of Warcraft) would be exempt from registration and licensing.

Ultimately, then, the board has the responsibility to field complaints issued about their members. Upon review, the board would be free to fine members or suspend licenses, just like bar associations and medical boards. Assuming the policing is adequate, the consumer protection desired would exist without bogging the entire system down in government action. Moreover, the board would be able to address new technological issues as they emerge, whereas a government would be horribly behind and lack the experts to completely understand the problem (not to mention the partisan political element and typical inter-nation bickering).

Let’s Talk About Machinima is a 3 part series. The first was Machinima from the perspective of the Machinimist. The second tackled Machinima from the point of view of the game developer. Finally, the third is a bit of a forward thinking proposal on Machinima.

Part 3

“So, Where is Machinima Going?”

While I make no claim to being the Nostradamus of the machinima world, I do believe I have a model that could simplify machinima for both the machinimist and the developer, while protecting everyone’s rights and hopefully letting some start-ups make money without having to take out a second mortgage (or sell their game collections on eBay). Of course, what I’m proposing will likely take the backing of a major machinima operation like Rooster Teeth or Machinima.com as well as the cooperation of a few game studios. Think of the proposal as taking the next step past what Machinima.com has built to date.

A Modest Machinima Proposal

To boil this down to its basic level: YouTube for Machinima, but with a model by which the end user can actually make money. The site, for the sake of this proposal let’s call it NewMachinima.com, is the key to the entire proposal. It allows all users to upload video content. This content will be limited to machinima for which the site has acquired a specialized license. That content can then be classified by the uploading user as “free,” “donation,” or “subscription.” Free content is just that, free. Donation content allows people to choose to donate to the machnimist, but the content is still free. Subscription content is limited to paying subscribers. On the latter two, when payment is made, 70% goes directly to the uploading user. The remaining 30% is divided, with 15% going to the game company and 15% retained by the site. Of course, these numbers are variable, depending on actual application.

Why This Idea Works:

1. Developers Keep Their Rights

The most important thing from a developer’s standpoint is protecting their rights. Under this plan, the developer has issued a license, one time, to the site. They have avoided the fees associated with repeated licensing, but have maintained a license for the end user. They only have to police other video sites (like YouTube and Google Video) for possible infringers.

2. Machinimists Can More Easily Publish Works

YouTube already makes putting video on the internet easy, and that is not the main purpose of this site. The main purpose is to take some burden off of the machinimist in procuring a license to create their art. Moreover, with the engine appropriately licensed already, the machinimst will have little trouble retaining the rights to their portion of the work or registering a copyright.

3. Everyone Profits

The key problem with YouTube is they make money off your hard work. The key problem with posting your machinima independently without securing a license and charging for it is that you’re making money and the developer is both losing money and rights. This concept solves both of those issues. The machinimist can make money from his or her work. The developer makes some money for providing the license. And, of course, the website makes money so it can continue to provide the service (although ads may be a necessary evil, at least for the free videos).

So, when can we start?

The business model is right here, and it is relatively simple. In fact, I would be happy to work with anyone on a project like this. The difficulties, however, are not insignificant.

1. The group creating this site needs startup money.
2. The group also needs some industry connections to at least procure those initial licenses.
3. The legal work involved is fairly complex, so a competent attorney would be needed to coordinate the licensing.

Those are just the three main issues, as I’m sure a few dozen smaller issues will likely pop up in the interim while bringing this idea off the ground. However, properly executed, this could be the next step in the machinima evolution, bringing even more machinima content to the masses. And from here, who knows what the future could bring, be it Xbox Marketplace integration or something even newer and more revolutionary.

Can an independent developer create an MMORPG? That question has been poised, and was addressed at least in part by the recently held Indie MMO Game Developer Conference. One key issue, however, with rolling out any MMO game is server usage. MMOs are highly demanding, obviously, and typically require multiple servers as the user base expands. Depending on the connections available, these servers may need to be strategically distributed ad various points across the US and in other nations worldwide to avoid issues with lag that take away from the gaming experience. To date, this has either required a significant investment by the developer/publisher or volunteers with varied servers. A concept that has not yet been rolled out, accordingly, would be a franchise-type system for servers.

Franchising is what has brought a McDonalds to every nation of the world, among other things. The basic concept is this: A franchisor develops a business model, a “system,” which they license to franchisees. In return, the franchisee runs the business according to the model and pays a license fee back to the franchisor. Through this system, the franchisee bears an individual risk of loss smaller than the company would bear for rolling out the system to so many locations at once. Conversely, the individual franchisee stands to make substantial profit but does not have to generate an original business model or develop the brand.

This concept could be applied to MMORPG servers. Before I begin the outline of the system, I must emphasize that before anyone considers actually proceeding with a model such as this that they absolutely must consult an attorney because the Federal Trade Commission regulations on franchises are very specific, and no one wants to be caught in violation of those regulations or the corresponding state level regulations.

To simply state the model, an indie developer created an MMORPG. They then license the server end to various server providers at strategic locations in the US and/or other countries to minimize player lag. The server would collect the billing for its players, and in turn pay a percentage back to the developer. The developer has then earned the license fee and the royalty (the percentage of the sales) while the server owner is earning the remainder of the monthly fee.

Under this model, the developer could be free of the burden of maintaining servers on a day to day basis and could focus on additional development of the game. Conversely, someone with available server space could get an income stream for the future without having to develop the software. Moreover, a well crafted agreement could include options on future software, allowing those who enter in early the potential to secure a spot on sequels and new series by this developer.

There are many finer points to the exact agreement that would have to be worked out, but this structure, properly created, could be hugely beneficial. Rolled out on a larger scale, a publisher of indie MMORPGs could use a server franchise network to roll out multiple games at once. In any case, it is a possible way to rapidly deploy an MMORPG that is not backed by a mega-corporation with an existing server network.