"Catastrophic" and "another IDFA moment": The games industry reacts to potential EU regulations

• Supercell CEO Ilkka Paananen released a statement on potential Digital Fairness Act regulations in the EU.
• Other members of the games industry have spoken up in solidarity.

The Digital Fairness Act may bring new regulations to the free-to-play games market in the EU, with major ramifications for European studios described as potentially crippling for the vibrant sector.

Impacts could extend to in-app purchases, loot boxes, hard currency and more, including features some might deem "addictive" like log-in bonuses or punishments for lack of play.

A review of EU consumer law was published in the Digital Fairness Fitness Check last October, sparking regulatory conversations from lawmakers, lawyers, and even some stakeholders.

Supercell CEO Ilkka Paananen has now released a letter setting out his stance on the threat of potential new regulations, ahead of an official proposal on new rules expected next autumn.

"Let’s not kill one of Europe’s few tech success stories," he posted.

"It’s no secret that European tech as a whole has been lagging behind the US and Asia. The €27 billion games industry has been the outlier and one of few beacons of tech success for the continent, setting the standard for games studios globally. Yet, policymakers are about to deliver a critical blow to the sector, despite calling out for Europe to become more competitive on the global stage.

"All this value is now under threat by a future Digital Fairness Act and recent guidelines from the Consumer Protection Cooperation (CPC) Network."

Paananen suggested that proposed regulations would "break" how many games work at a fundamental level, and argued that mechanics like in-game currency allow millions of people to play games for free.

Added bureaucracy

Following Paananen’s post, debate has been rife in the sector over the reasoning behind potential new regulations and the scale of the potential impact.

Turborilla CEO John Wright called the idea potentially "catastrophic", envisaging a law that treats every in-game coin or token like a bank transaction where every player action could become a legal process, "basically turning gaming into a tax return".

"And for what? Added bureaucracy? As I parent I monitor and restrict all of my children’s gaming time and exposure. So do 98% of parents in my opinion. So if this is about child safety I think they’re going about it wrong," he added.

"This isn’t protecting anyone. It’s politicians doing something else to punish success."

Helika Ventures director Ilya Abugov also posted following Paananen’s statement, suggesting: "Any regulation that is born without a deep understanding of the subject matter, is incredibly dangerous. The regulatory changes being proposed in Europe show a fundamental lack of understanding of the gaming industry.

"We need the industry’s thought leaders to put more effort on educating the regulators on the fundamentals, and we need those responsible for forming legal frameworks to be more open-minded and diligent in their efforts."

Meanwhile, Deconstructor of Fun founder Michail Katkoff said: "EU regulators are moving in for a kill of yet another industry. Now it’s free-to-play games. And they are starting with local success story, Supercell."

He suggested regulators would fill free-to-play games with scare screens and "wipe out around 25% of all mobile gaming revenue", and is in favour of mounting a defence against such regulations. Katkoff cautioned this could be "another IDFA moment" for the games industry.

European Games Developer Federation president Hendrik Lesser commented on the issue as part of a wider statement by the organisation, stating regulation must be proportionate to the issues at hand.

"When entrepreneurial drive and innovation meet strong consumer protection and safeguarded competitiveness in the EU, that brings success. However, regulation must be proportionate and based on real, tangible issues and tensions."

Video games lawyer Isabel Davies spoke at Pocket Gamer Connects London this January to warn games developers about the coming free-to-play conversation.

She suggested the Digital Fairness Act was already being drafted, that developers should begin to think about changes to their in-game monetisation and user retention models early, and predicted how long studios might have to implement necessary changes.

More cutting-edge conversations are currently underway at Pocket Gamer Connects Helsinki.