Here is a PDF of the full Article.  Scroll down further for links to each section if you want to comment.

Introduction

I. Conceiving the Game

A. Rights in the Game Idea

B. Potential Third-Party Claims against the Game

C. The Business Model of the Game

II. Building the Game

A. Engaging a Developer

B. Underlying Intellectual Property Rights

C. Third Party Software and Open Source Software

III. Operating The Game

A. Gambling, Contest, and Sweepstakes Laws

B. Virtual Currency Laws

C. Revenue Recognition and Taxes

IV. Ending The Game

Ending the Game

One final concern is always how the publisher will eventually end the game. Every game has a life cycle. The publisher needs to make sure that the TOS or EULA for the game allows it to shut the game down without any further obligation to its users. As discussed above, it is important to make clear that users do not have property rights in the virtual goods.

Additionally, the publisher might want to offer players some value in a new game or a third-party property as goodwill. If the publisher has other comparable games, it can use this transition as an opportunity to promote them as well. In August 2010, Zynga shut down its Street Racing game. Zynga did not offer refunds on in-game purchases but gave credits equivalent to the amounts purchased in the previous 90 days, plus an extra 100 units of virtual currency. These credits were usable in other Zynga games.[65]

Operating the Game

Gambling, Contest, and Sweepstakes Laws

Many activities in social games wander into the highly regulated areas of gambling, contests, and sweepstakes. Lottery and sweepstakes laws may apply when virtual currency is used to pay to enter a game of chance and the winner is determined by random selection and awarded a prize. Contest laws may apply when the virtual currency is part of a game of skill and the winner is determined by judging on set objective criteria and awarded a prize.

Gambling laws may apply if the game allows users to exchange the virtual currency for cash, provides methods for users to transfer virtual currency between accounts, or does not restrict secondary markets offered by third parties. The Unlawful Internet Gambling Enforcement Act of 2006 (UIGEA) codifies unlawful Internet gambling as a crime by prohibiting accepting payments for unlawful Internet gambling.[45] The UIGEA could be implicated if players can enter contests or games with the virtual currency or if players can win virtual currency by entering contests or playing games. The UIGEA defines unlawful Internet gambling as placing, receiving, or otherwise knowingly transmitting a bet or wager by any means that involves the use, at least in part, of the Internet, when such bet or wager is unlawful under any applicable federal or state law “in the State or Tribal lands” in which the bet or wager is initiated, received, or otherwise made. Under the UIGEA, a bet or wager means risking something of value on the outcome of a game subject to chance upon an agreement or understanding that the person or another person will receive something of value in the event of a certain outcome.

In December 2011, the US Department of Justice changed its interpretation of the federal Wire Act,[46] outlawing only sports betting and not other forms of Internet gambling.[47] Previously, the Wire Act has been interpreted to outlaw the use of interstate telephone facilities to transmit any gambling-related information. As a result, it will be important to watch how the interpretation of unlawful Internet gambling evolves.

To date, Facebook does not permit gambling for actual money within its platform. Therefore, if the game is being designed primarily for Facebook, the publisher should also be prepared to put it on other platforms if it wants to support actual gambling. In this scenario, the publisher is probably best off partnering with a company already in the gambling business.[48]

Even if the federal law opens up Internet gambling, the publisher needs to remain concerned with various state laws and regulations. When others have argued that Zynga’s Texas HoldEm game might violate anti-gambling laws, Zynga countered that, although players can buy chips, they cannot redeem them for money. A prosecutor could argue that the chips constitute something of value, since they can be used to buy virtual gifts or extend game play. There are also secondary markets in which the chips are bought and sold, but these violate Zynga’s terms of service.[49] PopCap games, a subsidiary of Electronic Arts (EA), entered the gambling arena with the launch of Lucky Gem Casino on Facebook in March 2011. Like Zynga’s Texas HoldEm game, Lucky Gem Casino players will be permitted to gamble Facebook credits that can be bought with real money, but there is no cash-out mechanism.[50]

Virtual Currency Laws

To understand how the law impacts a virtual economy, it is necessary to understand virtual goods and currency generally. Virtual goods are a digital representation of objects, which can be real or imaginary. Many virtual goods are digital re-creations of objects that exist in the real world, such as clothes, furniture, and accessories, or are at least inspired by real-world objects. Other virtual goods have no real-world counterpart. Virtual goods

can be literal items which a player or character buys in order to enhance their in-game abilities, or they can be instantly consumed “items” which grant the user more turns, or access to some previously-unavailable feature. They can also be purely cosmetic items which stroke a user’s vanity by letting them customize the way their character or car or card or farm animal appears to other players. These items can be a core component of gameplay, or they can be special, even seasonal items.[51]

Virtual property exists in a different form than physical property; it is essentially lines of computerized code, ones and zeros, which only spring into existence when that code is interpreted by a machine. This characteristic does not preclude legal protection however; the law often protects intangible property such as domain names or intellectual property rights.[52]

Virtual goods usually have some level of persistence so that they exist even when the owner is not online, which can be for an indefinite length of time, depending on a user’s actions. Virtual goods also may exist for limited duration based, for example, on time, use, or other criteria, such as food for a virtual pet. For any copy of a virtual good, there is usually one user who can rightfully exercise dominion and control over it at any one time. Virtual goods often can be traded, exchanged, and sometimes stolen, just like real goods. Virtual goods usually do not exist in isolation on one person’s computer. They are at least perceptible by, affect, and/or interact with other users or systems.

Ownership of and rights to use virtual property in a game are typically governed contractually by the terms of service (TOS) or end user license agreement (EULA).

Underlying just about every virtual goods dispute is one fundamental question: is ownership of virtual goods to be treated as being akin to ownership of property and goods in the real world, or is it to be treated as a service provided by the operator of an online gaming network or virtual world and therefore governed by the terms and conditions of the [EULA] or [TOS] between the user and the operator (which the user will no doubt have had to agree to wholesale in order to access in the first place).[53]

Many TOS and EULAs for popular games and virtual worlds state that users do not own their virtual goods but that they have only a license to use them within the game. The game operator often has the right to terminate a user’s account in its own discretion, taking away virtual goods without compensation.

Alternatively, some TOS and EULAs have a more mixed approach, prohibiting a player’s ownership of virtual property rights, while allowing a player to exchange and sell virtual items within a designated arena.

Gamers who want to convert their virtual property into real money use online auction sites to sell their items to other gamers; this type of transaction is known as a real money trade or transaction (RMT). An RMT is distinguishable from an in-game transfer between gamers because it involves real money in a recognized national currency.”[54]

Many TOS and EULAs prohibit resale of virtual goods and currency to avoid unauthorized secondary markets and deter “gold farming.” Gold farming is when people in countries, generally with less-developed economies, are paid low wages to play games and obtain virtual goods that can then be sold in secondary markets. In the most egregious cases, if there is sufficient volume, secondary markets could be used for money laundering.[55] The addition of RMT can impact game play: “RMT breaks the fairness of the game. If powerful characters can be bought for real money, the playing field is no longer level, but favors wealthy players. This decreases players’ enjoyment.”[56]

Stored value and gift card laws often apply whether or not there is a physical card. These laws usually cover a situation in which a gift card or code is distributed to a consumer in exchange for monetary value.

Broadly speaking, state and federal gift certificate laws apply when consideration is paid for a record evidencing a promise to provide goods or services of a certain value to the bearer of the record. State and federal definitions vary, but can apply to virtual currency digital records and account balances. Gift certificate laws could restrict an issuer’s ability to expire virtual currency, impose inactivity or service fees on virtual currency accounts, require conspicuous disclosure of key terms, and require an issuer to provide cash refunds of unused virtual currency. Certain exemptions apply, however, for gift certificates provided on a promotional basis without payment of money or other consideration from users.[57]

The federal Credit Card Accountability Responsibility and Disclosure Act of 2009 (CARD Act) restricts fees, prohibits expiration in less than five years, and imposes strict disclosure requirements on most prepaid instruments. The law applies to almost all prepaid products. Also, the CARD Act does not preempt more restrictive state laws, so their restrictions on terms like expiration dates or fees or additional disclosures requirement continue to apply.[58] Many state gift card laws prohibit or restrict the imposition of expiration dates or service fees.

Many states have enacted escheat laws, which provide that when property has been abandoned by the owner it must be transferred to the state after a specified time. If the virtual currency is considered property, these laws apply based on the state of the holder of the virtual currency. “Unclaimed property compliance in the virtual currency context is more complicated than programs involving paper gift certificates and plastic gift cards because virtual currency Issuers often maintain online user accounts with information about the identity and location of the user, whereas paper gift certificates and plastic gift certificates are often anonymous.”[59] Some states exclude gift cards with no expiration or service fees from their escheat laws. Time frames for turning over the property to the state vary, but are often three years or five years.

Facebook follows California law: If a user doesn’t access their account for three years, the company forfeits the money to the state, per its Unclaimed Property Law (which is based on the common law doctrine of escheating). Developers, especially those based elsewhere, may account for breakage differently, per the state and national laws where they are based. They may, for example, count the initial purchase of virtual currency as revenue, and—entirely within the law—keep the breakage for themselves.[60]

Federal law prohibits engaging in the business of receiving deposits without a banking license. Most states also require a state banking license. An issuer of virtual currency is probably not affected by state banking laws if the virtual currency can be used only to purchase the issuer’s own goods and services, known as a “closed loop” gift card. If the virtual currency can be used to make purchases from third parties, known as an “open loop” gift card, state banking laws may apply.

There are risks when a virtual currency can be redeemed for cash, especially if more than one party is involved. Federal financial services laws then apply, including those used to prevent money laundering. Compliance with the federal Bank Secrecy Act and the Patriot Act may also be required. Almost all states also have laws that require any non-bank that accepts money from customers that will be transferred or paid to third parties to obtain a money transmitter, bill payment, or other type of license.

Revenue Recognition and Taxes

It is not completely clear how virtual currency transactions should be taxed and what jurisdictions’ laws should apply.[61] There is some debate whether virtual goods and property should be equated to their real-world counterparts for tax purposes. For instance, clothes that a player procures for her avatar could be subject to a value added tax (VAT), profits of in-game businesses could be subject to income taxes, or development of assets could be subject to capital gains taxes.[62] Recently, the increasing size of digital economies has made it more common to make sales and use taxes apply to digital goods.[63] This is such a detailed topic that it could be the subject of an entire article. The most important thing for the publisher to do is to review its tax treatment with its accounting and tax advisors and make sure to act consistently across all of its virtual economies.

Zynga, currently the top games company on Facebook, uses its own method of accounting for virtual goods revenue. Zynga disclosed both “Revenue” and “Bookings.” “Bookings” represents the dollar amount of virtual goods sold to game players in the period, whereas “Revenue” is the amount bought in prior periods amortized over the expected life of the virtual goods.[64] In short, Zynga is amortizing its virtual goods revenue.

Building the Game

Engaging a Developer

Once the publisher has determined the type of game it wants to make, the underlying IP assets it is going to use, and the business model to monetize the game, it is time to engage a developer with a formal development agreement. All of the previous three considerations are important in finding the right developer with experience developing the type of game that the publisher has chosen and who can support the publisher’s business model.

There are a number of business models that a publisher can use when engaging a developer: the developer pays the IP holder, the developer and IP holder share the costs, or the IP holder pays the developer. The publisher’s decision may depend mainly on its budget and internal resources available for the game.

If the publisher is building a game based on its own existing IP, it can license it to the developer for a license fee and in return receive a revenue share on the profits, often after the developer recoups the license fee. This business model is often best when the publisher has limited resources, wants to ensure revenue, and is willing to limit its upside. This type of relationship is usually memorialized with a license agreement. A license to develop a Facebook game will often be exclusive, meaning that the IP holder cannot license or use the same IP for other games on the same platform during the license term. It may also require the IP holder to promote the game in its other exploitations of the same IP, like on-air spots in a related television program. It is important for the license agreement to have very specific milestones that give rise to license fee payments, a specific term length, and a clear definition of future revenue sharing, specifically detailing a cap on development cost and limits on deductions that can be taken from gross revenue.

If the publisher is building a game based on its own existing IP, it can also co-publish a game with a developer. In this model, the IP holder would provide its assets and the developer would provide its technical assets, with an agreed-upon allocation of other expenses, such as operations, hosting, and analytics. Then the parties would share the profits in an agreed percentage. This is a good model when both parties have resources to contribute but limited financial resources for the project. This type of relationship is often memorialized in a development and publishing agreement. Similar to a license, it will often be exclusive and may require the IP holder to promote the game as part of its contribution. As with a license, the development and publishing agreement should have specific milestones, a specific term length, and clear definitions of each party’s contributions and any revenue sharing. Also, in this type of relationship, the development and publishing agreement should contemplate what happens to the game when the term ends with regard to IP ownership.

Finally, whether the game is based on existing intellectual property or something new, the IP holder can hire a developer to build the game as a “work made for hire.” Under this model, the IP holder will pay for development and then own the game as soon as it is developed.[40] In a work-made-for-hire arrangement, the IP holder should also receive all of the underlying code from the developer, subject to some restrictions on pre-existing materials as explained in more detail below. The IP holder should not be surprised, however, if the developer wants some upside on the profits once the IP holder recoups its development and operations expenses. Many top-level developers are in high demand and are able to get this arrangement. This arrangement is ordinarily embodied by a master services agreement describing the relationship between the IP holder and the developer, followed by multiple statements of work (SOWs) describing the developer’s obligations, milestones, and payments. There may be an SOW for initial development, a different SOW for live operations, and other SOWs for ongoing development.

To emphasize, a key consideration with all of these options is how expenses, revenue, and any revenue share are calculated. It is very important to provide a detailed description and even a cap on deductions allowed before revenue is shared.

While most of the discussion assumes that the IP holder will be the publisher, there is also a scenario in which the IP holder could engage a developer and then work with a separate publisher for a social game. If the IP holder has few games, a third-party publisher that publishes many titles does offer some advantages. These advantages include: experience managing operations for large games, cross-promoting the IP holder’s game in other games it publishes, and using the publisher’s tools to optimize the game.[41]  An example of this is the AMC channel using RockYou to publish its Walking Dead game on Facebook.[42]

All of the agreements mentioned above usually have some variation of milestones as follows: (1) first playable build, (2) alpha build, (3), beta build or closed beta build, and (4) gold master build or open beta build. Sample definitions for a Facebook game are shown below.

(1)         “First Playable Build” means a demo version of the Game (not necessarily including implementation of graphics, content, sound and text) that is playable outside of the development environment to show proof of concept. The First Playable Build does not need to be free of bugs and may not include all planned features or functionality.

(2)         “Alpha Build” means a preliminary version of the Game (including partial implementation of graphics, content, sound and text) with functionality sufficiently complete and usable to enable Publisher to test and evaluate the Game for distribution on the applicable Platform. The Alpha Build does not need to be free of bugs and may not include all planned features or functionality.

(3)         “Beta Build” or “Closed Beta Build” means a working version of the Game (including full implementation of all graphics, content, sound and text) that will enable Publisher to test and evaluate the Game for operation on the applicable Platform. The Beta Build must be reasonably free of bugs and include all analytics, planned features and functionality.

(4)         “Gold Master” or “Open Beta Build” means a working version of the Game for the applicable Platform(s), meeting all of the specifications in the Final Game Design Document. The Gold Master must be free of bugs and must include all analytics, planned features and functionality and comply with the rules for distribution on the Facebook Platform.

Underlying Intellectual Property Rights

Often, a publisher hires a developer that has experience in the applicable game genre. For example, if a publisher is building a fighting game, the best option would be to hire a developer that has previously created successful fighting games. This is the best course of action because the developer’s experience and its pre-existing materials eliminate the cost of paying extra for the developer to learn this game format.

It is important to carefully identify the pre-existing materials that the developer is providing. In a work-made-for-hire arrangement, the rights that the publisher obtains in the pre-existing materials will not be the same as the custom developments. The pre-existing elements that a developer includes will usually be licensed to use as part of the finished product. Also, if a third party is being used to operate the game, or the operations team in the future, the publisher needs to make sure that it has adequate rights in the developer’s tools to modify the deliverables in order to continue to operate and modify the game.

Like with all deliverables, the publisher also needs to ensure that the developer properly warrants that the pre-existing materials do not violate any third-party intellectual property rights and that they will perform as expected for a certain period of time.

Third-Party Software and Open Source Software

Games will often incorporate third-party software. It is important to identify which party is responsible for obtaining such software and who is paying the cost. If the developer is obtaining any third-party software, it must identify if there are any restrictions on the publisher’s use and ensure that the developer can assign any warranties to the publisher. Examples of third-party software include analytics tools, server management tools, and hosting APIs.

Additionally, many developers use open source libraries when developing games. While this is often the most cost efficient route, it comes with some obligations. Open source software is provided under various complex licenses, many of which require that the code remain “open.”[43] Such openness may require the publisher to include certain links to the applicable code on a Web site or in the game and even to share openly the adaptations to the code made for the game.

Open source libraries do not come with any warranties of operability or non-infringement. Thus, the publisher may not have the recourse of seeking indemnification for infringement claims based on any open source libraries used in the game.[44]

The publisher should ensure that all open source libraries are identified in advance and that it is aware of the restrictions and obligations that their terms entail. The optimal situation would be to attach them as exhibits to the development agreement or SOWs.

Conceiving the Game

The initial task is coming up with the topic for a social game. Many Facebook games are often developed from original IP, and others leverage existing IP. Zynga is an example of the former, developing its popular “-ville” franchises.[3] Kabam’s recently released “The Godfather Five Families” game is an example of the latter, using the five families from the Godfather saga, but situated 10 years before the start of the Godfather story.[4] An example of a successful television-based game is Pawn Stars from the History channel, where players operate their own pawn shops like the show’s stars.[5]

Rights in the Game Idea

If the game will be based on an existing television show or movie, whether it is the game publisher’s own property or the rights are being licensed from a third party, the first task is to ensure that the publisher has all rights necessary to include the television show or movie elements in the game. These often include rights from the producers and talent, which may require additional approvals during game development. The game publisher may need additional music rights and licenses beyond those acquired for the show or movie. Additionally, certain elements or brands that appeared in the show or movie, whether licensed or through product placement, may not be available for the game without additional approvals and licenses. The publisher should make sure that it has the internal processes in place to cover the approvals before development gets started.

Potential Third-Party Claims against the Game

If a new game is being created, it is important to make sure that it does not violate a third party’s existing IP rights. The publisher should be careful not to create a game that is very much like another game. There are subtle examples that cause problems, like when the developer uses screenshots of existing games in a proposal. These might lead the publisher into a gray area where it has to defend the game’s origins.

An early example of a dispute over the origins of a Facebook game was Scrabulous,[6] one of the first popular games on the platform. Scrabulous looked like a clone of the Scrabble board game, and it didn’t help that the name was similar to Scrabble. In early 2008, Hasbro, the North American rights holder of Scrabble, sued Scrabulous’ game developers in the US District Court for the Southern District of New York, claiming that Scrabulous violated its IP rights. Scrabulous was soon removed from Facebook, but the same developers then launched Lexulous, which was less similar to Scrabble and did not draw the same ire of Hasbro.[7] A more egregious example of game copying is Brazilian developer Vostu’s copying of Zynga’s CityVille with its own MegaCity. The copy was so obvious that it even included the bugs from the original game.[8] The parties settled in December 2011.[9]

The issue of game cloning continues to be all over the news in 2012, often with a prominent publisher on one side.[10] In January 2012, Spry Fox, the creator of the game Triple Town, took action against LOLApps for its release of Yeti Town, which it claims to be a Triple Town Clone.[11] Spry Fox asserts that it had been negotiating for LOLApps to publish Triple Town at the same time LOLApps was building its clone, which gave LOLApps special access to many game details.[12] Spry Fox claims that Yeti Town is a “nearly perfect copy of TripleTown . . . [including] . . . tons of little details, from the language in the tutorial, to many of our UI elements, to the quantities and prices of every single item in the store . . .”[13] SocialApps LLC has made similar claims against Zynga regarding comparable discussions and access leading to similarities between SocialApps’ myFarm game and Zynga’s FarmVille game.[14]

In addition to the developer’s trying to avoid cloning claims, it may have to think about what to do if a third party clones its game. Despite all of the litigation mentioned above, these copyright claims are hard to win. It might be easier to protect a game if the developer has secured a patent, but unlike a simple copyright filing, gaining patent protection is much more costly and time consuming.[15] In any case, there is much debate about what parts of a game may be entitled to patent protection.

The publisher also needs to make sure that it has the rights for all of the other third-party elements in the game. Electronic Arts (EA) is currently in litigation with Textron (the parent company of helicopter maker Bell) regarding the images of real helicopters in EA’s Battlefield games, which contain helicopters that look like the ones manufactured by Textron. In this case, EA is seeking a declaratory judgment that it may use the helicopters.[16] EA is arguing that the use of the helicopters is similar to how a filmmaker would use them in a military drama, together with descriptions of the helicopters.[17]

EA also has had ongoing legal battles regarding the use of the likenesses of former college athletes in its sports-themed games.[18] In 2008, a group of retired football players won a suit against the National Football League Players Association regarding the rights to retired players in Electronic Arts’ John Madden Football game.[19] Additionally, a number of former college basketball players have joined former UCLA basketball player Ed O’Bannon in suing the NCAA for unauthorized licensing of their likenesses to videogame makers.[20]

In addition to copyright claims, the developer also needs to beware of potential patent infringement claims. In August 2011, Segan LLC sued Zynga for an alleged violation of a patent entitled “System for Viewing Content over a Network and Method Therefor.”[21] The claim alleged that Zynga’s games infringed the patent in the way that it associated a user with a character icon and managed updates to the character.[22]

The Business Model of the Game

Facebook games are free to play but often monetized with virtual goods or other virtual transactions. These transactions, also known as in-game transactions or micropayments, are the foundation of the social gaming economy. The items and abilities that a player can unlock via microtransactions vary from game to game.[23] Virtual currency to use for microtransactions can be purchased, earned through playing, or provided for exposure to offers or advertisements. Some virtual currency can be used only with the entity from whom it was acquired, while others can be used with third parties or exchanged for real currency.

The key to a successful virtual economy is to give players an option to gain something where they perceive value. Players will spend money to differentiate themselves from other players or to get to higher levels or rankings within the game.[24] It is often difficult to convert a large percentage of customers from a free service into paying customers.[25] Game publishers tend to find that a small percentage of users spend most of the money in the game. These users, often referred to in fish metaphors (i.e., minnows, salmon, tuna, and whales) generate a relatively high average-revenue-per-user (ARPU), and as their numbers increase, a publisher can produce significant revenue from its game.[26]

Many virtual currency systems use a dual currency model. Often, “coins” are purchased with real money, and “points” are earned by playing or gaining experience. Additionally, players may be presented with offers to earn currency. Effective July 2011, Facebook developers may reward users with offers by using only Facebook’s approved offer partners. Facebook explained that the rule was designed to protect users’ personal information. TrialPay was the first approved offer partner.[27] Unapproved offer providers can still serve offers that do not require personal information.[28]

Facebook games use Facebook Credits as their virtual currency. “Facebook Credits is a virtual currency that is an integral part of the Facebook Platform. Credits offers a consistent experience for people to buy, earn and spend a virtual currency across all games on Facebook.”[29] As of July 2011, Facebook Credits became the only payment option for games on Facebook.[30] As a reason for this requirement, Facebook explains that it is “committed to offering people who use Facebook a simple and consistent experience when buying virtual goods in games. For developers, the greater the adoption of Facebook Credits, the greater the benefits for everyone in the Facebook Platform ecosystem.”[31] Facebook now supports purchases in 47 currencies.[32]

In building a business model for a Facebook game, it is important to account for Facebook’s fees. Facebook takes a 30 percent cut from all transactions that use Facebook Credits. The developer might also want to consider building a parallel game version for other platforms. Even though they bring fewer users, they result in a higher return. Google+, the newer social network from Google, is expected to host games on its own servers, reducing the cost of self-hosting for Facebook games and taking a smaller cut of transactions.[33] Additionally, Zynga has recently created its own platform to publish its own social games, which is expected to be made available to third parties.[34]

The other avenue for revenue on Facebook games is through advertising. This can even take the form of rewarding game players with virtual goods for watching video advertisements or completing a task.[35] The History channel’s Pawn Stars game did this in 2012 as part of a TurboTax promotion by rewarding players with virtual currency for completing a tax return with TurboTax. If a publisher plans on generating income this way, it should first get familiar with the Facebook Advertising Guidelines[36] to make sure that its intended advertising model fits the requirements.

The publisher also needs to be conscious of Facebook’s current and changing rules. In the past, Facebook has changed its application programming interface (API) in ways that have hurt the ability for a publisher to grow a game virally. An API is the source code that lets programs communicate with each other. While Facebook has improved its communication with publishers, it may change its API at any time, and with little notice. For example, in late November 2011, Facebook informed page administrators that it was going to phase out its old insights tool in December 2011.[37] This required recoding in order to capture analytics using the tool.

Additionally, some publishers have a special relationship with Facebook that gives Facebook a competitive advantage. Zynga has a deal with Facebook that helps Zynga sell ads and gives Facebook a share of advertising revenue associated with Zynga’s games in the Facebook ecosystem.[38] Zynga is likely to retain this relationship since its payments to Facebook made up 12 percent of Facebook’s revenue in 2011.[39]

Developing and publishing social games is a tough business.[1] Games must be engaging and well marketed to break through the clutter. Once a game is a success, it requires ongoing creative development, maintenance, and technical support.[2] New game publishers face strong competition from established social game developers that have the ability to promote new games virally within their popular games. Additional competition comes from established media and entertainment companies looking to leverage their already popular brands. If that is not enough dissuasion, this article examines some of the key issues to think about if your client decides to develop and publish a social game. This is not an exhaustive analysis of all issues, but a good place to start for the aspiring social game publisher. The details in this article focus on the Facebook platform, since it is currently the most popular distribution channel for US-based social game developers.

The draw of social games is that they are often easy for players to learn. These games are designed for players to come back often to complete tasks or challenges, competing against the contacts in his or her social graph. Most social games on Facebook involve asynchronous game play with a user’s Facebook friends. This means that friends do not have to be playing at the same time. The social aspect includes interactions like competing against friends for ranking and levels, giving gifts to friends and taking other actions for the benefit (or detriment) of friends.

There are many parties involved in the development and distribution of a social game. As used in this article, “publisher” means the party that decides to create and distribute the social game. The publisher is often the holder of original intellectual property (IP), such as a television network with an existing show, and in that capacity is also referred to as the IP holder. The term “developer” refers to the party that actually builds the game for the publisher/IP holder, whose services may include game design, programming, support, and operations.

Today it really hit home for me.  My 8 year old son (who guards his piggy bank savings) came to me with two 1 dollar bills in hand to purchase currency in the Icee Store app on his iPod Touch.  He enjoyed the game and really wanted to make more Icee’s with different flavors.  Remaining in character though, he did insist on his 2 cents change for the 99 cent purchases!

Reed Hastings, Netflix’s CEO, has been particularly vocal on the topic.  He summed it up with a Facebook post: “The same device, the same IP address, the same wifi, the same internet connection, but totally different cap treatment.”

I think that Hastings misses the point.  Comcast is offering its XFinity service over its own last-mile connection to its subscribers.  These views never cross the public internet, like Netflix and Hulu.  In short, Comcast is using a computer or 3rd party device to function as another cable box.  When a subscriber watches cable television it doesn’t count against his bandwidth cap.  Same programming, same data, different device.    If Hastings’ point was carried to its logical confusion, used of Comcast’s cable television service and IP telephone service would need to be counted against the cap.

Read more:

Paid Content - Netflix CEO calls out Comcast on net neutrality

TechCrunch - Netflix’s Reed Hastings Chastises Comcast Over Net Netrality And Its Shady Xfinity App

A+E Networks has announced the promotion of Seth A. Metsch, who joined A+E in 2007, to VP & Digital Media Counsel, Legal & Business Affairs. Working across the networks and corporate divisions at A+E, Metsch focuses on agreements for domestic and international digital media transactions, including video distribution over broadband internet, IPTV and mobile platforms. He also focuses on the development and distribution of mobile apps, casual games and social games.