The Lawbringer: Self-regulation and the video game industry

Pop law abounds in The Lawbringer, your weekly dose of WoW, the law, video games and the MMO genre. Running parallel to the games we love and enjoy is a world full of rules, regulations, pitfalls and traps. How about you hang out with us as we discuss some of the more esoteric aspects of the games we love to play?

Hello, friends. I hope you all enjoyed the discussion last week about Schwarzenegger v. EMA that took place in the article and in the comments. People get very passionate about the role of government, and I thought the conversation was a very positive one, so thank you. This week, I've got a little more self-regulation talk for you, so please come in, sit, and get ready for another fun look at the video games industry.

Last week, I touched on the self-regulatory nature of the video game industry for just a paragraph or two. It's a bit of a tricky subject, as many people don't know exactly how regulations and laws differ, or rather what is even governed by law. Sometimes we think that state or federal governments have more power than they in fact do. And many of you outside the United States are probably just scratching your heads, anyway. So this week, I'd like to talk about the ESRB and self-regulation of the video game industry in the United States.

As we talked about last week, the federal government of the United States does not control the mechanics behind video game ratings. I think it bears repeating that video game ratings are conducted in a similar fashion to the movie industry. The ratings board that controls movie ratings is the MPAA (Motion Picture Association of America). You know them -- they are the "You wouldn't steal a car..." ad guys who desperately don't want the people who paid to see a movie to steal it.

The MPAA and movie ratings

Here's how the MPAA works, in a nutshell. The MPAA is a group of analysts, corporate guys, film pundits, and others who come together as a rating board and analyze films on the basis of their content. Then, after they have conducted their review, they give the film a rating. These ratings are known to many of you -- G, PG, PG-13, R, and NC-17. Since the MPAA has no state, local, or federal power; these ratings are basically just suggestions. The self-regulation comes in when you factor in the theaters that show these movies.

Since theaters are not by any right guaranteed new film releases, theaters agree to the MPAA and the movie studios that they will enforce these ratings, under the condition that they will have access to new film releases. Essentially, follow the rules and you get to show new movies. This is a form of self-regulation, as there are no federal or state laws controlling the ratings system, but all the parties involved agree to work under the ratings system.

Video games deal with a similar system of self-regulation that only works because everyone under the system agrees to be part of it. The question on all of your minds is, I'm sure, "Why would anyone want to be a part of this system?" Well, it's potentially much better than the ever-looming alternative. First, though, we need to discuss how the ESRB came into being.

The fight against violent video games and the creation of the ESRB

We've been fighting about video games in one way or another for over 30 years. Between 1992 and 1993, the U.S. Congress was all about violence in video games. With Mortal Kombat hitting the arcades in October 1992 and Night Trap hitting the Sega CD in the same month, violent video games were all over the news. From late 1992 into 1993, congressional hearings were held on the state of video games and violence in video games, giving politicians a nice little podium to stand on to decry an indefensible position. "Won't somebody think of the children?" and all that. You might remember one Joe Lieberman at the head of these congressional hearings; it was his pet project for a good, long while.

Out from these hearings came the ultimatum -- create a self-regulatory body that works within a year or risk government intervention in your burgeoning, hugely successful industry. Thus, after a few failed attempts, the ESRB was born in 1994. The original ratings were sparse and more akin to movie ratings, but as time went on, the ratings evolved into the current system.

How the ESRB works

The ratings process for the ESRB is a very interesting one, as it probably isn't exactly what you would imagine would happen. First, a developer or publisher sends captured footage of the game's most "obscene" or graphic material to the ESRB, along with a rating fee based on the game's total development cost. The fee is much lower for games under $250,000 in development cost, presumably to keep the ratings burden low for indie developers. Production costs over $250,000 incur a $4,000 fee, while games under $250,000 fork over $800.

Three raters then review the footage and attempt to come to a rating consensus. After that consensus is reached, the publisher/developer is notified of the rating via a certificate. It may then change the game in certain ways and resubmit the game for re-rating to get a less severe classification. There is also an appeals process.

When the game is finally complete, a finished copy is sent to the ESRB for packaging review and random game testing to make sure the entire process has been accurate. There are potential fines and penalties if the publisher or developer has been less than truthful or accurate during the ratings process.

Enforcement

Self-regulation requires a system that can enforce its own rules and parties that are incentivized to follow the rules. In the case of video game ratings, the system works something like this: Major retailers like Walmart, Target, GameStop, and others agree to only sell games rated by the ESRB and to enforce their ratings.

Of course, enforcement isn't always perfect. That's actually one of the reasons that Schwarzenegger v. EMA is even at the Supreme Court level -- kids can still potentially purchase games rated above their age with little consequence to retailers.

Also, many people have expressed outrage over the fact that not all of the games rated by the ESRB are put through the ringer, so to speak, as they are rated. It is up to the developer/publisher to disclose the worst stuff and for the ESRB to make a judgment call based on those disclosures. Remember that whole Grand Theft Auto: San Andreas hot coffee business -- secret code not even really accessible to the public without some serious tinkering embroiled that game in immeasurable scandal.

Activision Blizzard's stance on self-regulation

Activision Blizzard likes the ESRB and self-regulation, if only for the fact that it's a cheaper and less risky alternative to any type of government regulation. The company even filed an amicus brief supporting the games industry in Schwarzenegger v. EMA. If you're a company, chances are the more government regulation you have to deal with, the more money you have to spend dealing with those regulations. Look at corporations after Enron and Sarbanes-Oxley. Suffice to say, when you make your own rules, you get to make your own rules.

Self-regulation is also more predictable. The last thing a game company wants is to start making a game, invest tons of money into the development of the game, and then be denied rating on an unknown or unclear standard. The ESRB is tied to the video game industry and therefore can be a better arbiter of the trends in the industry. We don't know how long it would take government to be able to create those same standards.

So there's my little piece on self-regulation. There's more to talk about, sure, and I would like to discuss it more in the future. The ESRB and the self-regulating nature of the video game industry in America is one of the hallmarks of its new age, from the beginnings of the ESRB in 1994 to our first Supreme Court case in 2009.

This column is for entertainment only; if you need legal advice, contact a lawyer. For comments or general questions about law or for The Lawbringer, contact Mat at mat@wow.com.