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The False Link Between C-11’s Digital Lock Rules and Video Game Industry Jobs

Debate resumed on Monday on the copyright bill with the opposition parties citing correspondence from Canadian after Canadian concerned with the digital lock rules found in Bill C-11. Thousands of Canadians have called on the government to adopt compromise legislation that provides legal protection for digital locks but ensures that the copyright balance is retained by linking circumvention to copyright infringement. As I have chronicled in more than 50 daily digital lock postings, this view is shared by business groups, consumer organizations, cultural groups (including the leading performers and publisher associations), education and library representatives, as well as Canada’s leading consumer organization. There is no serious debate about where the overwhelming majority of Canadians that have spoken out on the bill stand.

The task of defending the bill has lately fallen to Paul Calandra, the Parliamentary Secretary for Canadian Heritage. As I posted last month, Calandra has focused on the claim that there is no jurisdiction “where digital locks have been used and the actual availability of content has been reduced.” The argument is a complete red herring as no one has argued C-11 will reduce the availability of content but rather that it will eliminate many of the rights consumers obtain when they purchase that content. 

Calandra has now also turned to the video game industry as a major source of support. Given the fact that writers, performers, publishers, musicians, documentary film makers, and artists have all called for greater balance on digital locks, the government has been left with fewer and fewer creative industries that support its position. On Monday, Calandra repeatedly referenced the video game industry and the prospect of lost jobs as a reason to support restrictive digital lock rules. For example:

I wonder if the member and her party opposite are talking about putting an end to the video gaming industry in this country with weak TPM measures.

Later, Calandara asked an MP:

Could he explain to the House how, in the absence of effective technical protection measures, that industry could continue to flourish in the province of Quebec?

Calandra regularly referenced the 14,000 jobs in the industry and suggested that they would be put at risk with “weak” TPM measures. Given the focus, it is important to examine the evidence that supports claims that jobs are at risk.

The Entertainment Software Association of Canada has been one of the most outspoken proponents of restrictive digital lock rules that create a two-tier legal system with greater rights for content with locks (this is the same ESAC that appeared before the Supreme Court of Canada last week to argue against two-tier copyright in the context of paying for music rights). When defending the provisions in 2010, the head of the ESAC said that digital locks are needed to prevent “cheating” at games that “gives other players unfair advantages.” While it may be true that locks can be used for those purposes, it cannot possibly be the case that the government needs to enact legislation designed to stop people from gaining unfair advantages in video game play.

Assuming the ESAC wants the rules for more than just preventing cheating at games, its own evidence demonstrates why so-called “weak” TPMs (more correctly described as balanced, WIPO compliant TPMs) do not put the industry at risk. In 2007, it released a report called Entertainment Software: The Industry in Canada, which estimated that there were approximately 9,000 video game jobs in Canada. Four years later, the industry has grown to 16,000 jobs, yet Canada has had no digital lock legislation during that period. In other words, without any changes to Canadian copyright law, the industry has emerged as a major success story. Yet Calandra implausibly argues that adding legal protection for digital locks that comply with international treaties and that are consistent with countries like New Zealand (whose video game industry grew by 46 percent last year with those “weak” TPMs) will somehow put the Canadian industry out of business.

Not only is the claim unsupported by years of experience, but when the industry was recently asked about perceived risks, copyright concerns fell well down on the list. Earlier this year, the ESAC commissioned a study by SECOR Consulting that surveyed the industry and asked for the top three risks faced by the Canadian video game industry over the next two to five years.  Their responses, in order of priority:

Concern % of total responses
Changing industry dynamics 50.7%
Lack of talent 42.0%
Government support 33.3%
Rising costs (labour, dollar issues) 30.4%
Lack of funding 21.7%
Outsourcing and foreign competition 21.7%
Patent, piracy, or copyright issues 15.9%
Economic recession 13.0%
Competition 11.6%
Other 39.1%

The reference to copyright as a concern was so low – barely above concerns about an economic recession – that SECOR did not discuss it further. Instead, it focused on the real risks to the video game industry, namely competitive issues, the need for talent (many in the industry recognize that focusing on education may be more important than copyright), and government support.

The latter issue is particularly noteworthy since the video game industry is heavily subsidized by tax credits, so that Canadians already effectively spend hundreds of millions of dollars to support these 14,000 jobs. When Calandra asks about the future of the video game industry in Quebec, MPs might note that taxpayers in the province have spent nearly half a billion dollars in subsidies, covering up to 37.5% of labour costs. This is estimated as a taxpayer contribution of $11,428 per employee. Quebec is not alone – the B.C. Interactive Digital Media Tax Credit covers 17.5% of qualified labour expenditures, to a maximum of 60% of production costs and Ontario has provided hundreds of millions in breaks to the industry as well. The irony of directing hundreds of millions of dollars that could be allocated toward education or health care toward an industry that then becomes one of the largest lobbyists opposing education and consumer interests on the copyright file should not be lost on anyone.

The video game industry has been a Canadian success story and copyright is certainly an issue for some companies within it (though not all – others, such as Ancaster, Ontario-based Battlegoat Studios, oppose the ESAC position). But the government’s claim that adding balanced digital lock rules to Canadian copyright law would destroy the industry is plainly false and completely unsupported by recent experience and studies commissioned by the ESAC. Based on the industry’s own data, opinion surveys of Canadian video game makers, industry growth in other countries with balanced digital lock rules, and the massive taxpayer investment in the industry, there is little reason to believe that amending the Bill C-11 digital lock approach would harm the Canadian video game industry.

20 Comments

  1. I think that it’s not really so much an issue of harming the video game industry as much as it is an issue of really just not giving any additional strength to their preferred business model, like an unamended C11 would.

    As a professional video game developer, I can sympathize somewhat with the industry’s position on this point, but in the end I cannot say that I agree with their conclusions. I can respect that they want to prevent cheating at their games, and I believe they should certainly be free to implement whatever measures they desire that might impede any player’s ability to harm the experience for other players, but I do *NOT* think that such freedom should extend to an expectation that the law provide some framework to protect their interests in that regard.

  2. Andrew Butash says:

    This is just depressing.
    Every article of coverage about the debate surrounding C-11’s digital lock rules just destroys my faith in humanity, or at least our own government. They cannot possibly be blind to the overwhelming opposition to the digital lock rules. They simply will not budge on them, and I don’t understand why they’re being so absolutely pig-headed stubborn about them. Okay, I know they want to pander to the US, but they’re not pandering to them on other issues within the bill! We have notice and notice, instead of notice and takedown. We have differentiation of commercial and non-commercial infringement and caps on damages. This is good, and the US hates this, especially the notice and notice. I just don’t understand how they can strike a balance on other issues but completely miss the digital lock issue so badly. I just can’t wrap my head around it.

    At this point, it looks like there’s no hope at all of changing the bill. They have a majority, so they don’t have to listen to anyone, and it’s clear they’re not going to. They don’t understand the issue, and they’re like a herd of cattle stampeding towards a cliff now. I think our only hope might be the idea of a constitutional challenge to that part of the law, on the theory that not linking circumvention of digital locks to actual copyright infringement means that it’s actually affecting property rights, which are provincial domain. The federal government has control over copyright only.

    Professor Geist, is there any way citizens can mount such a challenge? Or is the only possibility for someone to actually be charged under this law in order to fight it in court? I’m not sure if it’s possible to challenge the constitutionality of laws without actually being charged with them.

  3. What they mean by the digital locks stopping cheating probably has to do with Blizzard Entertainment using the DMCA to shut down a piece of botting software using the anti-circumvention rules that don’t have much to do with copyright. Now I think that’s a poor reason to keep the lock provision the way it is, since there was no actual copyright infringement in the case above (found during an appeal) but that’s likely the reason.

    Though it would be nice if the conservatives stopped trying to defend the stupidity of the digital lock rules with overly shaky reasoning and just said the actual reason why they are sticking to their guns on it.

  4. SO going by his logic there should be no more video game industry left anywhere for the last 20 years. Maybe someone should send him a link to http://www.humblebundle.com oh and notice those “free culture” loving Linux, on average they pay the most.

  5. Yes Ki, it would be nice if the government came clean for their real reasons on this (or any) issue. The repetitious banal excuses that no one, even themselves, do not believe is tiring to say the least.

    Instead we are subjected to what modern politics has become … endless posturing and ‘theatre’. In this way at least ‘the arts’ are supported in the house of commons ūüėČ

    At this point it looks futile to expect any changes on this issue before it is rammed through. It is the job of blogs such as these though, to at least have on record that someone was watching.

  6. So its a law to prevent cheating in video games? Maybe we should make a law to prevent cheating in board games?

    On a side note, does the DRM preventing me from playing a Japanese imported game count as reduced access to content due to a TPM(DRM)?

  7. I second Andrew Butash’s query – what would it take to mount a constitutional challenge? I’d certainly be willing to donate $ to that cause.

    I’d also like to throw out a somewhat off-the-wall suggestion of a day of mass civil disobedience where as many people as possible rip an encrypted DVD (the crappier the movie the better) *that they own* (can’t emphasize that enough) and turn themselves in. I suppose the result of that could go many ways, but it would be interesting to see how the courts deal with it, assuming the police are even willing to lay charges.

  8. “… I don’t understand why they’re [the conservatives] being so absolutely pig-headed stubborn about them”

    I think it’s because they are wanting to close the book on this issue… because once C11 passes, the industry will have nothing left to clamor for, at least not in terms of any new legislation – they can achieve all of the protection they desire to legally prohibit absolutely any and all copying by other people (even if such copying would not have been copyright infringement, such as private use copying) simply by incorporating a digital lock on the work.

    Of course, the above is nothing but speculation on my part… I could be entirely wrong about their motives.

    Regardless, I’m pretty sure that an unamended C11 will become law in Canada within months now, if not mere weeks, and I don’t think there’s anything that anyone can do to stop it.

  9. George Geczy says:

    One point I constantly make is that ESAC does not represent the Canadian Video Game industry – not even close to it. ESAC’s membership does not include a single Canadian-owned developer, instead its studio members are all US and multinational studios ( http://www.theesa.ca/?page_id=284 ). ESAC’s position comes straight from its parent, the US-based ESA. While it is true that these companies do provide a lot of Canadian jobs in their Canadian-based studios, it is also true (as pointed out above) that those jobs were brought here in the past decade under our current copyright system, and so to say that they are at risk of leaving if we implement balanced TPM protections is an incomprehensible stretch.

    On the other hand, most Canadian-owned studios do not have a problem with a balanced approach that respects their customers and permits legal uses of their products, and that fact was proven by the SECOR survey.

    — George Geczy, Co-Owner, BattleGoat Studios.

  10. Digital Locks Reduce Sales in the Video Game Industry
    Ubisoft in Montreal is one of the worst abusers of digital locks and their products suffer immensely from them. If they didn’t use them their brand would be much more respected. Issues currently include not being able to play an offline game without internet, not being able to play an offline game if Ubisofts servers arn’t responding and being forced to install intrusive marketing and account management software as overhead to game.

    It’s a running joke that people who pirate Ubisofts games receive a better experience then those who purchase it legitimately because they are always able to play the game. One of their major launches last year was unplayable because their DRM servers went down the first week. Only paying customers suffered. Electronic Arts in Vancouver isn’t much better. They’ve attempted to move into a digital distribution system that has been extremely poorly received because of it’s heavy handed digital locks.

    It would be nice to see a major player here in Canada realize that providing services and giving incentives gets you customers, not locking down legitimate purchases with faulty digital locks. I know I don’t buy from these companies because of this. A lot of independent game companies are catching on to this and learning that rewarding your customers is much more profitable then punishing them. The Humble Bundle mentioned above is a great example. They’ve made $1M in 24 hours selling DRM free games with a blank price tag. Other break out indy successes like Minecraft really demonstrate how better of a service you provide when dealing with pirates is no longer something you worry about. I’m sure the investors wouldn’t be happy if they realized these companies were spending millions on digital locks just to reduce sales and alienate customers.

  11. Legislation to prevent cheating in games requires putting out of one’s mind the notion that these are only games.

    Government subsidies are not cost-effective when the subsidy is more expensive that direct payments to the would-be employees.

  12. Cheating?
    Either Paul Calandra doesn’t know, or he is being very deceptive.

    The “cheating” that’s being discussed here applies to on-line games. In order to do that, you need an account with some service (PSN, Steam, etc.). As part of the service, the agreement can specify that if you are caught cheating, your account will be suspended. This is already in place.

    When properly motivated, it would probably not be that difficult to get some “player aids” working with the TPM intact; in any case a TPM is not a guarantee against cheats.

  13. …”where digital locks have been used and the actual availability of content has been reduced.”

    It sounds like Paul might be in the wrong career path. Isn’t he supposed to be a politician representing the electorate? And their rights?

    Alternatively; this is an amateur debate tactic, attempting to refocus the debate into an unrelated area. This is usually recognition that they don’t stand a chance if they stick to the proper focus.

    Quick, look! A wookie!

  14. Get on the phone and make some noise.
    DRM affects your and my property rights.

    You won’t even be able to repair your own VCR in this wonderful tomorrow we’re building.

  15. “Could he explain to the House how, in the absence of effective technical protection measures, that industry could continue to flourish in the province of Quebec?”

    By restating the same: that they are already flourishing in the absence of legislatively-condoned consumer-abusing DRM.

    … Couldn’t help myself.


  16. We should definitely be able to send SWAT squads to fix teenagers cheating in online games.

  17. Alex Skinner says:

    In referencing the video game industry in Quebec, I instantly think of Ubisoft’s Montreal studio which produces some of Ubisoft’s most innovative and best-selling titles. The problem is that Ubisoft’s draconian DRM measures serve to do nothing but antagonize the people who pay for their games and have to jump through scores of hoops to prove that they aren’t thieves. The people who pirate the games have the DRM stripped out and enjoy a much smoother gaming experience. If the gaming industry finds it is losing money, it will be more likely due to their own ham-fisted actions. They should look to Valve Software for an example of a game developer who cares about their customers gaming experience.

  18. UbiSoft, e2k, et al
    In regards to such companies that use overly restrictive DRM, I will still buy their games, but not immediately and usually through Steam and if I can’t get it through Steam I won’t usually buy it. If it’s something I must have, then I wait until an established crack has been released, so the game is playable. Bioshock is a prime example of this.

  19. Independant Developers
    I would like to second the mention the Humble Indie Bundle, and independent developers in general. Small companies seem to be doing just fine at selling games without DRM. There also seems to be a trend of games having DRM removed at some point after release.

    I will also echo the statements about Steam as a driving force in game sales. It’s a success story about figuring out what restrictions the market can live with.

  20. Richard M Stallman says:

    The term “digital locks” makes DRM sound less bad than it is.

    “Digital locks” doesn’t sound like an injustice because locks, as
    such. are not one. You probably have a lock on the door of your
    house, and on your car if you own one, but they don’t oppress you —
    because you have the keys for them.

    What makes Digital Restictions Management nasty is that it’s a lock
    someone else places on you, while he keeps the key. The word “lock”
    doesn’t make this point — “handcuffs” does.

    Our enemy is powerful — why pull your punches? If you want to defeat
    DRM, call these malfeatures “digital handcuffs” which shows why they
    are bad.

    See DefectiveByDesign.org for the FSF’s campaign against DRM.