Submission  to  

Commonwealth  Consumer  Affairs  Advisory  Council    

 

 

 

 

Subject  

Issues  Paper:  App  purchases  by  Australian  consumers  on  

 mobile  and  handheld  devices              

Date  January  31,  2013  

 

 

Introduction    The   Interactive   Games   and   Entertainment   Association   (iGEA)   and   the   Game  Developers’  Association  of  Australia  (GDAA)  welcomes  the  opportunity  to  respond  to  the  Commonwealth  Consumer  Affairs  Advisory  Council’s  (CCAAC’s)  issues  paper  on  app  purchases  by  Australian  consumers  on  mobile  and  handheld  devices  (Issues  Paper).      Set  out  below  is  a  summary  of  our  submission,  a  brief  description  of  iGEA  and  GDAA  followed  by  our  detailed  response  to  each  of   the   issues  raised   in  the  Issues  Paper.  Since  the  questions  raised   in  the  Issues  Paper  were   largely  directed  at  consumers,  rather   than  answering   the  questions  directly   this   submission  addresses   the   topics  listed  in  the  Issue  Paper’s  terms  of  reference.    Summary    

1. The   significant  majority   of   users   enjoy  mobile   and   handheld   games   and   in  app   purchases   (IAPs)   without   any   issues,   and   only   a   small   percentage   of  users  have  reported  problems  with  mobile  games  and  IAPs;      

2. The   industry   are   reactive   to   consumer   demands   and   concerns   and   already  provide  sufficient  processes  and  systems  to  address   the  problems  that  may  arise   with   IAPs   and   arms   consumers   with   the   tools   needed   to   securely  manage  the  purchase  of  IAPs;  

 3. Consumers   must   actively   use   the   systems   and   processes   introduced   by  

industry   to   address   any   problems   that   may   arise   with   mobile   games   and  IAPs;  

 4. Regulation   on   this   issue   is   unnecessary   as   there   are   sufficient   protections  

currently  available  such  as  consumer  protection  laws.    Any  regulation  on  this  issue   would   be   problematic   and   may   affect   the   availability   of   content   in  Australia.  

   About  the  iGEA    The   iGEA   is   an   industry   association   representing   the   business   and   public   policy  interests  of  Australian  and  New  Zealand  companies  in  the  computer  and  video  game  industry.  iGEA’s  members  publish,  market  and/or  distribute  interactive  games  and  entertainment  content  and  related  hardware  including  mobile  and  handheld  games.  iGEA’s  members  publish  or  distribute  over  95%  of  all  games  sold  through  retail   in  Australia  and  New  Zealand.        

 

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About  GDAA    Formed  in  1999,  the  GDAA  is  a  NGO,  not-­‐for-­‐profit  organisation  that  represents  the  interests   of   the   national   game   development   industry.   The   GDAA   is   tasked   with  promoting   the   game   development   industry   (locally   and   internationally),   retaining  and  attracting  development  talent,  attracting  investment  and  global  game  publisher  interest,   engaging   with   educational   institutions,   advising   government   of   industry  trend  and  opportunity,  and  fostering  the  Australian  game  development  community.    The  GDAA  currently  has  in  excess  of  180  game  development  studios  in  its  national  database.      Features  and  trends  of  app  markets  in  Australia      The  Australian  market   for  mobile  games  has  grown  significantly  and,  according   to  PricewaterhouseCoopers’   Outlook   2011-­‐2016   report,   will   continue   to   experience  significant  growth  over   the  next  5  years.   In  2012,  Australia’s  mobile  game  market  was   worth   $400   million,   representing   approximately   4.2%   of   the   global   mobile  game  market1.   The  mobile   game  market   is   populated  with   games   that   have   been  developed   from   all   over   the   world   by   developers   that   range   from   one   person  hobbyists   to   larger   developers   that   employ   hundreds   of   people   from   all   over   the  world.   The   proliferation   of   Internet-­‐enabled   mobile   devices   has   provided   such  developers  with  instant  access  to  a  global  market  with  little  to  no  barriers  to  entry.  The  ease  of  such  access  has  paved  the  way  for  the  development  of  exceptional  game  content  and  the  introduction  of  new  and  innovative  business  models.    ‘Free-­‐to-­‐play’   or   ‘freemium’   games   are  prime  examples  of   the  new  and   innovative  business  models  that  have  been  developed  in  the  mobile  game  market.  These  apps  are   provided   to   the   customer   for   free,  with   the   developer   or   publisher’s2  revenue  derived   from   alternative   sources   such   as   in   game   advertising   or   IAPs.   While   the  Issues   Paper   focuses   on   IAPs   in   mobile   and   handheld   devices,   it   is   important   to  acknowledge   that   the   IAP   model   is   now   being   used   in   a   variety   of   devices   and  platforms,  including  in  console  and  computer  games3.    IAPs  are  used  for  both  free  and  paid  games.  For  example,  a  customer  may  download  a  game  for  free  or  for  a  nominal  price  and  then  through  subsequent  IAPs  they  can  unlock  further  levels  or  features  for  the  game.      There  are  several  key  benefits  for  consumers  that  have  emerged  through  the  use  of  IAPs  in  the  games  industry,  including:                                                                                                                  1  http://www.pwc.com.au/industry/entertainment-­‐media/publications/outlook/index.htm  2  Since  developers  are  now  regularly  self-­‐publishing  their  content,  and  publishers  are  also  incorporating  game  development  within  their  businesses,  there  is  often  little  distinction  between  a  ‘developer’  and  a  ‘publisher’.  Accordingly,  for  ease  of  reference,  this  submission  will  be  referring  to  both  developers  and  publishers  as  ‘developers’.      3  Xbox  Live  Arcade  and  PlayStation  Network  games  now  offer  IAP.  Amazon  has  also  recently  announced  they  intend  to  allow  IAP  for  the  Amazon  Digital  Games  Store  for  games  on  Mac,  PC  and  Web  platforms  (see  http://techcrunch.com/2013/01/22/amazon-­‐extends-­‐its-­‐in-­‐app-­‐purchasing-­‐option-­‐to-­‐mac-­‐pc-­‐and-­‐web-­‐based-­‐games/)  

 

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 • users   are   able   to   enjoy   games   for   free   or   by   spending   amounts   relative   to  

their  own  financial  circumstances  and  interest  in  a  particular  game;    

• users,   or   potential   users,   are   now   able   to   effectively   ‘sample’   a   game  with  little  or  no  financial  risk  to  determine  whether  they  would  like  to  spend  any  money  on  the  game;  

 • developers  are  able  to  continually  enhance  games  after  their  initial  launch  by  

building  and  delivering  more  game  content  through  IAPs;    

• developers  are  able  to  serve  a  broader  market  of  users,  from  those  users  that  would  prefer  not  to  spend  any  amount  on  games  and  are  happy  with  a  basic  game  experience,  to  those  users  that  want  an  in-­‐depth  game  experience  and  are  willing  to  pay  for  it;  

 • IAPs   have   also   been   used   to   prevent   or   reduce   copyright   infringement   of  

games   on   mobile   devices.   Games   that   provide   IAPs   are   often   initially  provided   for   free  or  at  a   low  cost  and   therefore   the  appeal  of  downloading  such   games   from   unauthorised   sources   is   reduced.   Furthermore,   the  technical   process   for   delivering   such   in-­‐app   purchases   is   difficult   to  manipulate  for  unauthorised  access.    

 While  there  continues  to  be  incredibly  high  amounts  of  mobile  apps  and  IAPs  sold  in  Australia,  we   understand   that   the   amount   of   users  who   request   refunds   for   their  mobile  game  purchases  and  IAPs  is  an  extremely  small  percentage  of  game  and  IAP  sales.   It   is   important   to   acknowledge   that   the   significant   majority   of   users   enjoy  mobile   games   and   IAPs  without   issue,   and   only   a   small   percentage   of   users   have  encountered  problems  with  mobile  games  and  IAPs  and  requested  returns  through  the  reporting  tools  made  available  by  mobile  game  stores  and  developers.        Adequacy  of  the  information  being  disclosed  before  and  after  it  is  downloaded    Annexure  A  provides  a  detailed  example  of  the  many  processes  and  systems  that  are  implemented   for   IAPs   with   reference   to   several   popular   mobile   and   handheld  games.  While  purchasing  IAPs,   there  are  multiple  steps  both  before  and  after   IAPs  are  made   to  ensure   that   such   transactions  are  properly  authorised,   that  users  are  properly   informed   and   that   users   are   able   to   report   any   concerns   after   the  transaction  takes  place.        For  example,  for  iOS  devices  such  as  iPhones,  iPods  and  iPads,  the  process  of  a  game  download  and  subsequent  IAP  is  as  follows:    

1. Prior  to  downloading  the  game,  the  user  is  provided  with  information  on  the  game,  including  a  description  of  the  game  and  the  relevant  customer  ratings  

 

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and   reviews.   This   page   also   indicates   whether   the   game   contains   IAPs  through  the  use  of  a  ‘Top  In  App  Purchases’  list.    

2. IAPs  are  displayed  within  the  game  indicating  the  real  price  for  the  IAP;    

3. After   selecting   an   IAP,   a   prompt   from   the   device   is   displayed   to   the   user  asking   for   confirmation   that   the   user   intends   to   purchase   the   IAP   for   the  stated  price;  

 4. The  user  is  required  to  type  their  Apple  ID  password;  

 5. The  user  downloads  the  IAP;    6. Within  a  reasonable  time  after  the  IAP,  an  email  is  sent  to  the  email  address  

associated  with  the  Apple  ID  account  detailing  the  transaction  and  provides  the  user  with  a  link  to  report  a  problem  to  Apple  if  necessary;  

 7. If  a  user  has  a  concern  with  a  particular   transaction,   they  are  able   to  easily  

follow  the  guided  process  and  report  the  problem  to  Apple.    The   above   process   highlights   the   many   steps,   confirmations,   notifications   and  systems  that  have  been  implemented  by  a  platform  to  ensure  that  IAPs  are  handled  properly.  These  systems  have  been  implemented  to  address  consumer  demands  and  concerns.    It   is   also   important   to   note   that   IAPs   are   distinct   and   separate   from   the   original  game  purchase  or  download.  Users  that  download  ‘free’  apps  are  not  compelled  to  make  any  further  purchases.  It  is  when  a  user  is  provided  with  an  option  to  make  an  IAP  that  the  user  is  provided  with  sufficient  information  to  determine  whether  they  wish  to  proceed  with  such  IAPs.        Current  protections  available  to  consumers      The  Issues  Paper  provides  a  comprehensive  outline  of  the  many  protections  that  are  available  to  consumers  for  IAPs.          Actions  that  can  be  taken  by  consumers,  industry  and  governments  to  help  improve  consumer  experiences      Consumers    As  set  out  above,  there  are  a  number  of  accessible  systems  and  processes  available  to  consumers  that  allow  them  to  control  and  monitor  how  IAPs  are  made  on  their  

 

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device.   It   is   important   that   users   take   the   time   to   learn   about   these   systems   and  processes  and  use  them  when  appropriate.      We   also   encourage   parents   to   take   time   to   learn   about   the   various   games   and  devices   their   children  are  using.  This  would   include   familiarising   themselves  with  the   features   of   the   device   such   as   parental   control   tools.   This  would   also   include  actively   reading   game   reviews   and   ratings   and   ensuring   that   passwords   remain  secure.   In   circumstances  where   parents   have   concerns   about   the   use   of   IAPs   in   a  particular  game,  it  is  also  reasonable  for  parents  to  communicate  their  concerns  by  providing   feedback   in   game   ratings   and   reviews.   If   necessary,   it   is   also   important  that  consumers  use  the  available  reporting  features  to  communicate  any  concerns.      Industry    As  demonstrated  by   the  many  processes   and   systems   implemented   to  protect   the  interests   of   consumers,   industry   continues   to   actively   respond   to   consumer  concerns  and  demands.  This  has  been  illustrated  by  the  example  used  in  the  Issues  Paper   itself,   where   Apple   quickly   updated   its   iOS   4.3   to   address   concerns   with  IAPs.  While  industry  will  continue  to  respond  to  consumer  concerns,  it  is  important  that  consumers  actively  utilise  the  solutions  provided  by  industry,  such  as  securing  passwords,  parental  controls,  ratings  and  reviews  and  reporting  functionality.      Industry  is  also  sensitive  and  reactive  to  consumer  concerns  that  are  communicated  through  game  ratings  and  reviews.  The  popularity  and  commercial  success  of  apps  are   highly   dependent   on   high   customer   ratings   and   positive   customer   reviews.  These   ratings   and   reviews   are   prominently   displayed   on   all   of   the   mobile   game  stores.   Developers   recognise   that   aggressive   strategies   utilising   IAPs   are   likely   to  reflect  negatively  on  customer  reviews  and  ratings  and  ultimately  have  a  negative  impact   on   the   commercial   success   of   the   game   and   the   developer’s   business.  Accordingly,   it   is   in   the  best   interest  of  a  developer   to  be   reasonable  and  sensible  with  their  use  of  IAPs.        Government    iGEA  and  GDAA  strongly  believe  that  further  regulation  is  unnecessary  as  industry  already  provide  sufficient  processes  and  systems  to  address  the  problems  that  may  arise  with  IAPs  and  arms  consumers  with  the  tools  needed  to  securely  manage  the  purchase   of   IAPs.   Additionally,   Australia’s   consumer   protection   laws   currently  provide  an  adequate  framework  for  any  unresolved  issues  that  may  arise.    Care  needs  to  be  taken  with  the  introduction  of  any  regulation  that  could  negatively  impact   the  market   and   availability   of   content   to   consumers.   As  mentioned   above,  the  popularity  and  success  of  the  mobile  games  market  has  largely  been  dependent  on  developers  having  low  cost  and  instant  access  to  an  international  market.  Should  Australia  impose  restrictive  regulatory  requirements  on  mobile  games,  it  is  feasible  

 

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that   international  developers  will   simply   choose  not   to  deliver  games   to  Australia  and  avoid  the  cost  of  compliance,  or  worse,  bypass  the  more  credible  supply  points  that  exist  in  preference  to  those  who  may  not  offer  the  same  safeguards  as  the  more  popular   distributors.   This   outcome   is   realistic   considering   Australia   represents   a  small  percentage  of  the  global  game  market.  This  would  impact  developers’  ability  to   do   business   in   Australia   and   ultimately   result   in   a   disservice   to   the   Australian  consumer.        If  improvement  in  this  area  is  needed,  it:    

1. needs  to  be  at  a  platform  level  to  ensure  consistent  and  efficient  implementation  across  all  mobile  and  handheld  games;  and    

2. should  be  done  via  self-­‐regulation  and  industry  working  groups,  rather  than  through  regulation.    

             

 

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ANNEXURE  A:  IAP  EXAMPLE    The  following  is  an  example  of  how  IAPs  are  used  in  popular  games  on  iOS  devices  such  as   the   iPhone,   iPad  and   iPod   including  Australian  developer  Kumobius’  game  ‘Time  Surfer’4,  Electronic  Arts’  game  ‘The  Sims  Freeplay’5  and  Supercell’s  game  ‘Clash  of  Clans’6    Time  Surfer  is  an  endless  runner/action  game  where  users  surf  across  the  galaxy  to  escape  the  end  of  the  universe.  The  user  can  purchase  a  number  of   in-­‐game  items,  such  as  character  costumes,  using  ‘cakes’  that  are  progressively  earned  throughout  the  game.  To  unlock  these  features  faster,  users  can  purchase  more  ‘cakes’  using  real  money  through  IAPs.        The   Sims   Freeplay   is   a   life   simulation   game  where   users   create   their   character  called  a  ‘Sim’,  build  a  house,  begin  a  career,  start  a  family  etc.  The  Sims  Freeplay  has  two  types  of  virtual  currencies  called  ‘Simoleons’  and  ‘Lifestyle  Points’.  The  Sim  can  earn   Simoleons   and   Lifestyle   Points   by   achieving   certain   goals   within   the   game.  Simoleons  and  Lifestyle  Points  are  then  used  in  the  game  for  certain  features  and  to  purchase  in-­‐game  items.  Simoleons  and  Lifestyle  Points  can  also  be  purchased  with  real  money  through  IAPs.    Clash   of   Clans   is   a   strategy  and   simulation  game  where  users  build   a   village  and  protect  it  from  goblins.  The  user  can  build  their  army  and  buildings  using  ‘gold’  and  ‘gems’  that  are  earned  throughout  the  game.  The  user  can  also  spend  gems  to  speed  up   the   process   of   creating   buildings   in   the   game.   Both   gold   and   gems   can   be  purchased  with  real  money  through  IAPs.    Users   are   able   to   download   The   Sims   Freeplay   and   Clash   of   Clans   for   free   from  Apple’s  App  Store.  Time  Surfer  is  currently  sold  on  Apple’s  App  Store  for  $0.99.  The  App   Store   provides   a   general   description   of   each   game   and   allows   the   user   to  browse  the  ratings  and  reviews  for  the  games.  Users  are  also  able  to  see  the  ‘Top  In  App   Purchases’   for   each   game.   The   ‘Top   In   App   Purchases’   list   clearly   indicates  whether  IAPs  are  available.    For  example,  the  current  screens  for  Time  Surfers  are  set  out  below  in  Figure  1.    

                                                                                                               4  https://itunes.apple.com/us/app/time-­‐surfer/id549361775?mt=8  5  https://itunes.apple.com/au/app/the-­‐sims-­‐freeplay/id466966101?mt=8  6  https://itunes.apple.com/us/app/clash-­‐of-­‐clans/id529479190?mt=8  

 

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       Figure  1  -­‐  App  Store  reference  to  IAP  on  game  description  and  list  of  IAP  for  Timesurfer    

As  mentioned  above,   users   are   able   to  purchase   the  virtual   currencies   for   each  of  these  games  through  IAPs.  The  current  screens  to  purchase  such  virtual  currencies  are  set  out  below  in  Figure  2,  Figure  3  and  Figure  4.    

         

 

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 Figure  2  –  Time  Surfer  -­‐  Online  store  to  purchase  Cakes  

 

 Figure  3  -­‐  The  Sims  Freeplay  -­‐  Online  store  to  purchase  Life  Points  

 

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 Figure  4  -­‐  Clash  of  Clans  -­‐  Online  store  to  purchase  Gems  

 The  above  screens  demonstrate  how  IAPs  are  often  sold  within  games.  These  IAPs  clearly  indicate  the  price  of  the  IAP  and  allow  the  user  to  make  an  informed  decision  about  their  purchase.  Once  the  user  has  selected  an  IAP,  an  official  prompt  from  the  device   is   displayed  on   the   screen   to   confirm   the  user’s   purchase.   Examples  of   the  prompts  for  each  of  the  games  are  set  out  in  Figure  5,  Figure  6  and  Figure  7.    

 

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 Figure  5  –  Time  Surfer  -­‐  Prompt  confirming  purchase  

 

 Figure  6  -­‐  The  Sims  Freeplay  -­‐  Prompt  confirming  purchase  

 

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 Figure  7  -­‐  Clash  of  Clans  -­‐  Prompt  confirming  purchase  

 Once   the   user   confirms   that   they  wish   to   buy   the   IAP,   a   further   prompt   from   the  device  is  displayed  requesting  an  Apple  ID  password  to  proceed  with  the  purchase.  Figure  8  sets  out  how  this  prompt  is  currently  displayed.    

 

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 Figure  8  -­‐  Request  for  Apple  ID  password  

 Once   the   user   provides   their   secure   password,   the   IAP   is   complete   and   the  purchased   content   is   delivered   within   the   game.   Currently   by   default   and   as   a  matter   of   convenience   to   users,   once   a   user   has   submitted   their   username   and  password,   the   device   does   not   require   the   user   to   resubmit   their   username   and  password   for   the   following   15   minutes.   Users   can   change   this   device   setting   to  ensure  a  username  and  password  is  required  for  all  purchases.    Within  a  reasonable  time  after  the  IAP,  the  authorised  email  address  associated  with  the  Apple  ID  will  receive  an  email  containing  details  about  the  transaction.  On  this  email,   the   IAP  will  be   listed  along  with   the  purchase  price  and  a   link  enabling   the  user   to   ‘Report   a   Problem’.     If   an   account   holder   queries   an   IAP,   they   are   able   to  follow  the  prompts  to  report  the  issue  to  Apple  through  the  ‘Report  a  Problem’  link.      The   above   process   highlights   the  many   steps,   cautions,   notifications   and   systems  that  have  been  implemented  by  a  platform  to  ensure  that  IAPs  are  handled  properly.  These   systems   have   been   implemented   to   address   consumer   demands   and  concerns.