Counting Rupees: The business of politics

Each week Jeff Engel and Geoff Brooks rendez-vous on Joystiq to contribute Counting Rupees, a column on the business behind gaming:

The politics of video games are well covered by other websites, but it's worth spending a little time to think about the business implications of politics on the industry and its customers -- particularly in light of recent events like the UK game study. Just how much day-to-day impact does this maneuvering really have? For all of the angst found in the gamer community over issues like the latest ridiculous violent video game ban, I'd argue that the average gamer is actually pretty well-insulated from the mess.

So who does get affected? Well, the answer lies at least in part in figuring out the touch points that politics has on politicians, developers and publishers, and the people who buy and sell games in the first place. At its most basic, there are some essential conflicts of interest between these groups that get mediated by politics, and we can use them as the lens by which to think about this further.

Let's start off with consumers themselves. What do they really want? Well, game players want to be able to play whatever they want, whenever they want to play. But they're not the only stakeholders here; for younger players, parents play an important role as intermediaries in determining what games get purchased and thus what games are available. Parents, more than anything, want control: the ability to control what their children play and filter out products that they view as offensive or objectionable. Industry figures have similarly simple incentives. They want to satisfy players' demands and supply the games they want -- that's how they make money. It's in their best interests to avoid any restrictions whatsoever on what they can produce or how they sell it. Retailers also have to worry about their brand image and how they're publicly perceived, which is why Wal-Marts don't stock Adults-Only rated games.

How Politicians Fit In

OK – so gamers want to buy games, publishers and retailers want to create and sell them, and parents want to have some control over those transactions. How do politicians fit into the mix? I'd suggest that politicians are basically interested in some mix of two things: implementing what they view as important public policies, and representing their constituencies - or at least those members that will vote for their re-election. Naturally, some of them have personal moral beliefs about what constitute acceptable games. But the majority, I would argue, are primarily concerned with what their active constituents view as acceptable.

Politicians can influence this transaction model in several ways through legislation. They can restrict what types of games are sold, how those games are sold, the information provided about each game to consumers, and what can be done with the games both before and after purchase. Although as gamers we tend to view this influence as entirely negative, politicians can provide both positive and negative impact on the industry.

Game Types

The most basic impact that politics has on gaming is to restrict specific types of games from being sold in the first place. Prominent examples include Germany, where games depicting certain images (violence, Nazi-related imagery, and so on) are banned, or China, which sharply restricts sexual content. Needless to say, game publishers and retailers are hurt by this, since it restricts their potential sales and thus limits profitability. While I personally view such censorship as a net loss for all concerned, it should be allowed that there are at least divergent views on the impact of games on people, especially youth. In other words, I think they're unacceptable. Your mileage may vary.

How Games Are Sold

Politicians can also impact where games are created and sold. The most obvious example of this is the restrictions that the US places on sales of R-rated games to minors; they might also legislate whether games can be distributed electronically or how long people can play them -- like China and MMOs. Again, these types of restrictions create a significant drag on the industry, preventing gamers from playing the games they like and preventing revenue from reaching game developers and publishers.

But this influence can be used for good as well as evil. Consider areas with tax incentives like those in Canada and France, which are designed specifically to encourage gaming industries to develop in particular regions. Although you may have your own views as to the advisability of subsidies, they're undeniably good for game companies and potentially consumers as well. Politicians also help protect gaming through intellectual property rights protection. The industry hasn't always done the best job with this subject, but IP law at its most basic creates important financial incentives to create new games and spur creativity throughout the gaming community.

Information

A more benign influence is the institution of game ratings. These ratings are designed to require that information be provided to consumers to allow them to make better decisions about what is or is not acceptable for them and their family. Since the information doesn't restrict what games can be bought or sold itself, I have a hard time viewing this as a net negative (although kids of protective parents may disagree). It's worth noting as well that higher ratings don't necessarily result in worse performance: recent studies suggest that the average M-rated game actually sells better than a comparable E- or T-rated title.

Indirect Effects

There are less direct impacts on the industry as a result of these issues as well. To protect themselves from these concerns, in the US at least, the industry makes use of associations and lobbyists through the ESA, ESRB, and related groups. This, of course, costs a significant amount of money as each side hires people to promote its views with influential policy makers and makes campaign contributions. It's impossible for me to judge how effective these lobbyists are, but presumably they have enough influence to outweigh their costs and prevent companies from being squeezed out. Otherwise they wouldn't be used. The industry must also pay for the lawyers who challenge the many unsuccessful attempts to ban a variety of games in the US and abroad. These costs are passed on to some extent to consumers through the cost of each game, as well as in the taxes that are paid to prosecute such cases in the first place.

Summary

So, what's the ultimate verdict on politics and the gaming business? In practice, I would suggest that the direct, tangible costs of politics are largely borne by the population as a whole. Companies pay legal and lobbyist fees to prevent politicians from interfering with their business model, while consumers pay higher taxes and prices for their games as a result. In some cases, gamers also suffer due to restrictions on the games that are available for production and eventual sale.

At the same time, however, these tangible costs are somewhat mitigated by the benefits that are also available. Corporations can gain from specific economic incentives for game production and the intellectual property protection that world treaties and individual country laws provide. In addition, gamers obtain increased game diversity and additional information in the form of game labeling and ratings. Ultimately, the verdict isn't as obvious as we might initially think. It's perhaps an expensive system, but it's not a black-and-white one.

As co-editors of A Link To The Future, Geoff and Jeff like to discuss, among many other topics, the business aspects of gaming. Game companies often make decisions that on their face appear baffling, or even infuriating, to many gamers. Yet when you think hard about them from the company's perspective, many other decisions are eminently sensible, or at least appeared to be so based on the conditions at the time those choices were made. Our goal with this column is to start a conversation about just those topics. While neither Geoff nor Jeff are employed in the game industry, they do have professional backgrounds that are relevant to the discussion. More to the point, they don't claim to have all the answers -- but this is a conversation worth having. You can reach them at