Lets Talk About the FPB…Again

So…let’s talk about the FPB…Again.

People are rightly up in arms with the FPB changing the classification of #InxebaTheWound from a 16 rating to X18. X18 is usually reserved for hardcore pornography, as it amounts to an effective ban on the film, since it can now only be legally distributed through licenced adult entertainment stores (which they are unlikely to do). A lot of people are starting to question whether the FPB’s mandate or system of operation is even constitutional. The thing is, it probably is, and our Constitutional Court has even ruled as much.

I’ve previously talked about the FPB and specifically the recent Films and Publications Amendment Bill and what it means for content published on the internet. But I’d like to go back to 2016 when the bill first became open for public comment. On behalf of @IESAorg I submitted a response, the crux of which was that based on the constitutional court’s ruling in Print Media South Africa and Another v Minister of Home Affairs and Another 2012 (12) BCLR 1346 (CC), that the entire Act needed to be redrafted since the core mechanism of how classification happens is unconstitutional.

So what was the Print Media Case all about?

Many assume that the Films and Publications boards’ mandate is to classify films and games, but what you may not know is that the FPB is a rebranding of the old Apartheid Governments Censorship board, and the FPB inherited a lot of its powers. In terms of s16 of the FPB Act the FPB has the authority to classify any “other publication” which includes (among other things) artworks, statutes, poetry, and even books. One of these other things was newspapers and magazines. Print Media South Africa rightly contested these powers (specifically that a government entity could prevent news media being published, and more so that publishers had a responsibility to submit works for classification prior to publishing it). In this case the court spent a great deal of time examining how the FPB’s classification system works. Ultimately they found that the Act’s “administrative prior classification” system was unconstitutional, some choice excerpts from the case are:

At para 45 “In my view the respondents have failed to demonstrate that the Act’s administrative prior classification system is constitutionally defensible

At para 51 “Because freedom of expression, unlike some other right, does not require regulation to give effect, regulating the right amounts to limiting it. The upper limit of regulation may be set at an absolute ban, which extinguishes the right totally. Regulation to a lesser degree constitutes infringement to a smaller extent, but infringement nonetheless.”

As I see it, the free flow of constitutionally protected expression is the rule and administrative prior classification should be the exception.

At para 63 “On analysis of the statutory scheme, there is little doubt that section 16(2)(a) is not the exclusive means through which the Act’s purposes and its own purposes may be achieved. In fact, prohibiting the publication and creation of child pornography and the exposure of children to pornography are already governed by two other sections of the Act, which are altogether independent of the classification system. Consequently section 16(2)(a) is not necessary to achieve the Act’s purpose insofar as they pertain to children

At para 72 “In my view, the central constitutional deficiency lies in the administrative and compulsory nature of the Act’s prior classification scheme, in circumstances where there are less restrictive alternatives for achieving important legislative purposes

At para 73 “As the applicants correctly pointed out, the lamentable reality is that sexual offences, besting our communities, are perpetrated with alarming frequency and cruelty. The need for redress is immediate and crucial. It is, however, difficult to conceive of how section 16(2)(a) might contribute to solving this problem.

Print Media South Africa won their case and the court ordered that the FPB Act be amended so that it no longer applied to print media, and that the system of administrative prior classification should not apply to “other publications”. However because the sections relating to the classification of games and films was never raised, these sections, and the administrative prior classification of these media was never dealt with.

It is my contention that the courts logic would apply equally to administrative prior classification of films and games as I truly don’t believe that they are so different to other forms of media that they should be the exception.

This formed the basis of our submission to Parliaments Communications Sub-Committee who was tasked with dealing with the amendments to the Act.

The FPB was asked to respond or justify their amendments to the act given the submission made. Their full response can be seen here.

How did they respond to our submission? And specifically that we were concerned with the constitutionality of the classification system in its entirety?

  

Unfortunately, due to how the parliamentary process works we were never given the opportunity to respond to these statements. But let’s have a look at them in turn:

The FPB claims that the De Reuck case shows that the Constitutional Court has already ruled that the prior classification of films and games IS constitutional. Except… De Reuck never deals with this. At all. What De Reuck does say is that child pornography is not protected by the constitutional right to freedom of speech. The words “administrative prior classification” is never mentioned in the case, and the arguments raised where never around the constitutionality of this system, this case was solely about whether one could claim that the right to freedom of expression protects the creation and distribution of child pornography. You can read the full De Reuck judgement here.

The claim that our reading of the case is selective, or misleading is never expanded on. We state in the submission that we recognise that the Print Media case was only asked to deal with s16, and specifically as it relates to news media. We did raise that given the statements of the court should the constitutionality of the remaining sections re: classification not be considered and changed. Though this statement by the court seems pretty unequivocal:

“In my view the respondents have failed to demonstrate that the Act’s administrative prior classification system is constitutionally defensible”

The notion that the games industry could be trusted to do self-classification is, in fact, not absurd. The two largest games classification systems currently used in the world (PEGI and ESRB) are run by industry bodies, and they seem to function very well. The FPB has even been given the opportunity to join IARC (the International Age Ratings Coalition) which would ensure that nearly all games made available online would have their ratings system applied to it. The FPB has refused to join, primarily on the basis (as it appears from my discussions with IARC) that they would be unable to charge the platforms who use IARC a fee to have their content classified (which is a requirement to join the system). As a side note, it is very interesting to see how these fees are determined and what is motivating them. One would think that the opportunity to have classification done to their standard applied in a worldwide system would be welcomed.

The FPB usually responds to calls to adopt international systems or at least recognise them with an argument that international classification system are not “ in line with South Africa’s societal values and norms”. I’d like to finish reflecting on this. The #InxebaTheWound debacle perhaps highlights this best, the FPB shouldn’t be classifying content that is in line with what our social morals are, but rather what they should be. Hopefully the media storm that this will create will bring the FPB and its classification system back in the spotlight and we can discard this relic of an old regime that has no place in our constitutional democracy.

Lets Talk About Loot Boxes and Gambling

It was inevitable, the rise of free-to-play and gaming companies looking at alternative revenue streams, someone was going to compare the monetisation models adopted to gambling, so let’s talk about Loot Boxes and Gambling.

Background

Battlefront II launched on 17 November 2017, and was immediately met with consumer back-lash, specifically for the monetisation model it used. Battlefront II sells at full retail price of $59.99 (or R949.95), however the game also included a microtransaction system that allows the developers to potentially earn more revenue of its player base. The microtransaction system is implemented via loot boxes. As players play the game they have the potential to earn loot boxes which can include a variety of in-game items (such as weapons, playable characters, skills and cosmetic items). However players can opt to simply purchase loot-boxes increasing the chase (and opportunity) for them to get powerful items or characters. Many have viewed this as “pay-to-win” i.e. the person who spends the most is more likely to win, given that loot boxes contain especially powerful items, and some of the most powerful weapons, skills and characters can only be obtained in loot boxes.

Unusually for the video game industry, players are now calling on policy makers to regulate this sort of behavior, with many comparing the system implemented (and others like it) to gambling. A Belgian politician has launched an inquiry into whether it is gambling and two senators from Hawaii are making similar moves to outlaw the model.

I think it will be worthwhile to do another article on WHY game companies have adopted this model and WHAT consumers are actually angry about, for a later time as this will be long enough just dealing with the question of if loot boxes (and in-app-purchases driven by content unlocks) is gambling.

 

What is gambling in South Africa?

To answer the question “Are Loot Boxes Gambling?” we first need to understand how gambling is defined in terms of South African law. Gambling is primarily regulated by two pieces of Legislations, the Gambling Act  and the Lotteries Act. Lets first start with lotteries as that a lot easier to define.

Are Loot Boxes lotteries?

The Lotteries Act defines a lottery as;

any game, scheme, arrangement, system, plan, promotional competition or device for distributing prizes by lot or chance and any game, scheme, arrangement, system, plan, competition or device, which the Minister may by notice in the Gazette declare to be a lottery

At first glance, it appears that a game that uses a loot box system does meet this definition as it is a game/system that distributes prizes (the contents of the loots box). However, they are not considered lotteries since the purpose of these games (Battlefront II, Overwatch etc) is not to distribute the prizes (i.e. the game wasn’t developed as a means solely to distribute loot boxes, the game is an entertainment product in and of itself). In other words, you are not playing the game to win loot boxes, you are playing the game to play the game.

Since games are not considered lotteries we can now focus on the more difficult question of if loot boxes are considered gambling in terms of the Gambling Act.

Are Loot Boxes gambling?

The Gambling Act applies to all “gambling activities”, which it defined in section 3 as;

  1. placing or accepting a bet or wager;
  2. placing or accepting a totalisator bet; or
  3. making available for play, or playing bingo or another gambling game or an amusement game, (if provincial law requires amusement games to be licenced)

Loot Box mechanics definitely do not met the criteria of placing bets, so the important question is then, what is a “gambling game” and what is an “amusement game”.

Gambling Games

Gambling games are defined as:

  • a game that requires one to pay (in any form) to play the game, and
  • if by playing the game the person would be entitled to receive a “pay-out”
  • regardless if the game requires skill, or chance to become entitled to the “pay-out”.

A “pay-out” is defined as “any money, merchandise, property, a cheque, credit, electronic credit, a debit, a token, a ticket or anything else of value won by a player” except where the pay-out is an opportunity to play a further game or the pay-out is given to a player or team in a sporting event for that teams participation in the sporting event.

Let’s examine each of these points in turn and see how they would apply to games.

Do you need to pay to play? In the case of free-to-play games, no. But what about premium titles? I’d argue that the licence fee or purchase price for a premium title does not meet this criterion since it is clear from the wording in this section, and through out the Act, that the legislature intends to regulate games that require some form of payment, every time one wants to play (like putting your money in a slot machine, arcade machines or “buying-in” for a round of poker). Regardless of the premium title, once you have paid the licence fee or purchase price, once that payment has been made, you can play the game without having to pay any further, and you certainly don’t need to pay to play in each match or session within that game. So for premium titles I would also say no.

By playing, are you entitled to a pay-out? This question hinges on whether the digital goods received in a loot box could fall in the definition of “anything else of value”. This has been the traditional deference raised by most in the games industry. The digital goods have no inherent value, outside the game. The fact that a grey market, outside of the game created by players may exist where you could purchase items for fiat currency, does not mean that the items have value. This defense was tested and found to be correct many years ago when Wizards of the Coast had to justify why their collectible card game, Magic the Gathering and it’s booster pack sales model was not the same as gambling. They argued that the playing cards had no inherent value, and was only an item of value to a small segment of the population. The fact that this population by their own means created and maintained a grey market for the resale of cards should not put the burden on Wizards, especially since they did not officially recognize or support the practice. If this still holds true, then the digital loot in loot boxes would not be considered as things of value. However where officially maintained parallel markets (like steams trading platform, of the real money auction house in Diablo 3) may weaken this argument (though again it would be argued that any of the items have no base-line value, and instead the value is being ascribed purely by the player base).

The last criterion of the pay-out being subject to skill or chance is relatively moot, as regardless of whether the loot box systems is modelled around random drops or levelled progression it would still fall within criterion.

So, because there is no pay-out nor is their a requirement to pay every time you want to play the game, games with a loot box mechanic will not be considered as gambling games under South African law.

Amusement Games

Amusement games are defined by the Act as “a game that has a restricted prize, and that may be regulated and licensed in terms of provincial law contemplated in section 47”

A restricted prize is undefined, but I would interpret it to mean that the prize is of nominal value or of a fixed amount, and feeding from the discussion above I don’t believe that the loot in loot boxes will meet this threshold as they have no inherent value.  Regardless an amusement game will only need to get a licence if provincial law requires them to get a licence. Currently none of the provinces require amusement games to be licensed and therefor even if games with loot boxes where considered amusement games, they would remain unregulated.

So they’re not gambling, should they be regulated?

From the above, I don’t believe that games that use loot-boxes are gambling, and I doubt local judges would find otherwise. However this does not mean that maybe the practice should not be regulated. I think exceptionally predatory monetisation practices that result in significant harm for vulnerable groups will do a lot of damage to the industry in the long term and steps should be taken to prevent this. However the video games industry is often pointed out as one of the success stories of self-regulation, with the ESRB and PEGI being used as the poster children for this argument. I would like to see the video games industry being given the opportunity to attempt self-regulation first prior to formal legal regulation being put in place.

Let’s talk FPB, Steam, online distribution and ratings

Let’s talk FPB, Steam, online distribution and ratings

Who’s the FPB, and what are they doing?

Let’s get everyone on the same page before going into the nitty gritty details. The Films and Publications Board (often abbreviated to the “FPB”) is South Africa’s content ratings agency. Currently the FPB is mandated to rate all ‘games’, ‘films’ and other ‘publications’ that are distributed in the Republic. It is important when discussing what the FPB does, and what it is proposes to do, to understand that it is a creature of statute (it exists because a piece of legislation says it exists, in this case the Films and Publications Act 65 of 1996 as amended). Crucially the FPB only has the power to do things that its governing legislation allows it to do. So what are these powers? Well the ones important to this topic are:

  • Classifying all films and games ‘distributed’ in South Africa;
  • Requiring all ‘distributors’ of films and games to register with the FPB;
  • Being able to charge ‘distributors’ a fee for registering;
  • Being able to charge ‘distributors’ a fee for classifying their content; and
  • Fining ‘distributors’ who fail to comply with the above.

Currently because of how the words “distribution” and “distributor” are defined in the Act it is questionable if the FPB has the power to classify games, films or other publications that are made available online. It was for this reason that the FPB has had to start a process to amend the Act to clarify and make certain that it does have the power to classify online content. These amendments are currently being debated in parliament by the communications committee. In the current draft of the amendment a distinction is made between offline and digital distributors, along with commercial and non-commercial distributors.

The source of the most recent outcry against the FPB has been because of them publishing new tariffs for distributors and classifying content. If the new tariff structure is implemented then online distributors such as Steam, the Android Play Store and Netflix would be looking to pay millions of Rands in registration fees (currently the registration fee for a distributor is only about R2000) on top of then having to pay further fees to have each item in their content library classified. This has had many in the games community concerned that major online distributors will choose to stop servicing the South African market.

How valid are these concerns?

A very important starting point is to know that the new tariff structure can only be legally enforced if the amendment bill is passed. If the amendment bill is not passed, then the FPB does not have the authority to charge different registration rates based on how you distribute. In terms of the current legislation, there is only one kind of distributor, and therefore there can only be one registration fee. Any foreign company that paid the proposed tariffs would very likely be in breach of global anti-bribery or corruption laws, so attempts by the FPB to bully foreign distributors into paying should be resisted. Currently the amendment bill is stuck in parliament, and it is not clear when or if it will ever become actual law. So, for now at least, the proposed tariffs and its implications for the South African gaming community is moot.

But what if it is passed?

If we assume that the bill and tariffs are passed and become law, then what? Well, along with the changes to how a distributor is defined, a ream of new sections have been added which allow for the possibility of self-classification and the use of other classification guidelines instead of the FPB’s. Online distributors would have three options:

  • Register with the FPB and submit all their titles for classification.
  • Register with the FPB and apply to self-regulate.
  • Register with the FPB and apply to have another classification system used.

Option 1 will be unpalatable for nearly all online distributors and it is highly unlikely that they would be prepared to commit the dedicated resources to comply with option 2.

That leaves us with option 3, which is what I would predict most platforms would go for. If they elected to use something like the German’s USK, the EU’s PEGI or the American ESRB systems, they could be certain that most of their titles will have a classification.

You will notice though, that these options require the distributor to register, and therefor pay the annual fee. The proposed annual registration fee is based off the number of titles currently available on the distributors platform. Journalists have already used the available information to work out that Valve would need to pay about R3.17 million to be able to distribute game via Steam in South Africa. It is estimated that the consumer spend for PC digital games was R124 million in 2016. It is safe to assume that the majority, if not all, of this spend is going to Valve. However this value is reflective of the retail price. If we account for the fees paid to the developers, Valve would only be generating about R37.2 million in revenue from South Africa. The proposed fee is therefore nearly 10% of the earnings from South Africa, and that may be too much for Valve to stomach.

Which leads us to option 4) Ignore the changes and continue as is. If Valve elects to do this, then they would potentially face fines of up to R6 million, but the FPB would have great difficulty trying to enforce this against a foreign entity with no physical presence in South Africa. The FPB has explicitly stated that in cases where foreign entities refused to comply, and they would be unable to fine appropriately, they would move to block access to that entities platform from within the country.

While I believe that age classification is important consumer information, I do not believe that it is so important that it should lead to the complete banning of content or the walling off of sections of the internet.

How will this affect Developers?

If the amendment bill is passed, it won’t have a dramatic effect on local developers, apart from the rather sad eventuality that locally produced games may not be sold in South Africa. The only time a developer would need to register and have content rated is if they elected to sell their games through their own website. The bigger concern is that if the FPB does block platforms it may be difficult for developers to access the developer side of certain platforms (like Steam). It would also potentially lead to the blocking of much smaller distributors or platforms that deal with more experimental games (like Itch.io or the Global Game Jam site). I believe that if this did happen we would see an exodus of developers from the country.

How will this affect Consumers?

While it is not a crime for consumers to purchase or play unrated content, they stand to be the most effected as access to digital games may become very difficult, especially for laymen consumers who do not know about VPN’s or other methods of by-passing the FPB’s block. I think with a scarcity of digital platforms, we would almost certainly see an increase is piracy as consumers turn to easier and cheaper methods of getting their games.

What can I do?

While there is nothing that you can do now about the amendment bill, the proposed tariffs is open for public comment until October 29th to submit your comments to the FPB. You can submit your responses to the following email: tariffs.submissions@fpb.org.za