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Briefng Note

Virtual Worlds,Social Gaming,Serious Money.

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The Web Goes Social

They say that the rst version o theInternet was all about pages web pagesas content rst moved online but that thesecond, Web 2.0, was all about people.That, o course, is a simplication. Theprimitive bulletin boards and chat roomswere always about social interaction, andwere usually the stickiest areas that keptpeople online and were the major revenuedrivers or the early subscription services.Yet, it is certainly true that online lie in thelast ve to ten years has been dominatedby the rise o social networks and usergenerated content.

The sheer scale o those platormsis obviously impressive: Facebook nowclaims 800 million active users worldwide in 70 dierent languages, Twitter userssend a billion tweets a week. Thereare, however, two other powerul driverso online activity. Virtual worlds, romimmersive communities like SecondLie to multiplayer games such as Worldo Warcrat, have developed their ownlarge, loyal and passionate user bases.Gambling is, o course, another key onlinephenomena. An EC study quoted sectorrevenues or Europe alone o 11 billionEuros in 2012.

Games and Growth

True, each o these sectors has receivedmore than its air share o hype. Yetit would be shortsighted to ignore theincreasing interaction between them asthe next generation o online services startto emerge. The commercial potential orthose services which successully harnesssuch dominant orces is clearly signicant.Indeed, leading market players are alreadyreaping the benets. Whilst some othe valuations and fotation talk may haveled to resh warnings o nancial tech-bubbles, the user numbers, growth ratesand global reach are undeniable.

The current ocus is on socialgaming: combining game-play withthe interactivity o social media or onlinecommunities, oten with viral promotionand distribution. Social games typicallyhave two urther identiying components.First, a mainstream target market oso-called casual, rather than hard-core, gamers. It was estimated last yearthat close to 60 million Americans wereregularly playing such games on a socialnetwork. Secondly, a ree-to-play or lowaccess price model with additional brandvalue or revenue generation, in particularthrough virtual goods.

Briefng Note

Traditional gambling games are also now beginningto appear on social media platorms. Users can playslots, poker or other card games without winning orlosing a penny.

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Hybrid Services

ith the rise o social gaming generallynd traditional gambling games ormatsparticular but also other developmentsound contests and sweepstakes in

ocial media, video games and virtualorlds there is a potential blurring oese regulatory edges. Crucially, it is

ot necessarily true to say that, simplyecause a user stakes no money in aame, gambling law can be ignored. UKambling legislation, or instance, explicitlyates that whether or not a playersks losing anything is irrelevant or theurposes o its denition o gaming.

In act, some o the user protectioneasures adopted in other services otenok similar to, or are actually based on,ocial responsibility requirements underlevant gaming laws. We could evene seeing the emergence o a hybridgulatory model as new EU rules ormoney now make limited licences more

vailable and law-makers and regulatorsegin to pronounce on the new servicesppearing. Ultimately, the social gamingrategies or operators o all kinds will bed by creative and commercial decisionsut regulatory actors have to be an

mportant element.

Conclusion

The market or online social games isbooming and many gaming operatorsare adapting accordingly in order toseize this opportunity. The introductiono traditional gambling ormats withinthe realm o social networks can buildamiliarity or new audiences, as usersplay with riends and engage with thesegames within a well-known setting.Some operators may eel challengedby the limitations o delivering theseormats on social networks, not leastby allowing users to play without stakingreal money bets. Nonetheless, operatorsare nding new ways to monetisesuch games by incorporating virtualgoods, virtual currency and maximisingadvertising revenue streams. The newElectronic Money regime aims to easethe regulatory burden within the EUand promote e-money markets, butgaming operators should still considercompliance requirements careully ithey intend to incorporate virtual currencyor similar unctions into their ormats.Also, as the regulatory lines blur,gaming operators should always reviewtheir gambling licence position beoretaking any gambling game ormats tosocial networks.

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Total Compliance Limited

A Total Compliance Group Company

Phone +44 (0) 207 286 3960Fax +44 (0) 207 289 0802Email ino@totalcompliance.co.ukwww.totalcompliance.co.uk

Author Credits

Duncan Calow, Partner, DLA Piper UK LLP

Duncan is co-author o Digital Media ContractsOxord University Press 2011 (ISBN 978-0-19-956220-6)

Filippe Scalora, Director, Total Compliance Limited

Adam Vaziri Zanjani, Total Compliance Limited