Select Committee on Culture, Media and Sport Minutes of Evidence


Examination of Witnesses (Questions 479 - 497)

TUESDAY 17 OCTOBER 2006

MR IAN LIVINGSTONE OBE AND MR PAUL JACKSON

  Q479  Chairman: We now turn to a specific sector of the creative industries being the electronic games industry, which is of growing importance to the UK. Can I welcome Ian Livingstone of Eidos Interactive UK, who seems to have been responsible for many of the best-known games. I do not think you were actually responsible for Lara Croft?

  Mr Livingstone: I have been a father perhaps; I found her!

  Q480  Chairman: And also I think was the founder of the Games Workshop where my children seem to spend an inordinate amount of money.

  Mr Livingstone: That was in 1975, yes.

  Q481  Chairman: And also Paul Jackson, the Director General of the Entertainment & Leisure Software Publishers Association, which I think is the umbrella group for the industry?

  Mr Jackson: That is right, the trade body.

  Chairman: Adam Price?

  Q482  Adam Price: The UK games industry has a formidable reputation, both in terms of its market share and also the quality of its output but the Committee was in Korea and I think Mr Livingstone you have returned from China recently—

  Mr Livingstone: That is right and I have been to Korea as well.

  Q483  Adam Price: Are you looking forward to the future? Are you confident that the UK games sector will be able to withstand the growing competition and particularly expansion from Korean firms and maybe Chinese into the European market?

  Mr Livingstone: My experience having visited Korea is that government in particular took a very early interest and viewed the industry very positively. In fact, there are three government agencies that support the industry and they offer support in trade shows, in education, and in helping change the perception of games, which has always been fundamentally negative, in this country particularly. They also work with the telephone companies in the mobile games sector to make sure that they understand their role, which is a pipeline rather than a content owner. In fact, you can pay micro payments on the mobile phone network in Korea using your social security number for very small amounts of money. There has been a very positive reaction from the government in Korea, much more so than there has been in this country. They have also invested heavily in broadband infrastructure for video on demand and everything on demand, including games. They have a desire for it to succeed and, of course, they are now exporting their content worldwide, primarily through on-line distribution. Massively multiplayer on-line games have been very successful in Korea and in the whole of Asia. The world is a small place when it is linked by broadband. There is a threat from Korea but we can withstand it because we are very good at creating content, but we have never had the support I think we should have had.

  Q484  Adam Price: To what extent is there some degree of offshoring happening in the UK industry? Are you concentrating on the core content development but seeking to outsource some of the elements of production? Is that the phenomenon?

  Mr Jackson: I think we are starting to see an amount of outsourcing and we have seen some of the major publishers trans-locate to other locations, primarily to Switzerland, but fundamentally I think your question is about competitiveness, can we remain competitive in this global environment, and I think there are two key things that could damage our ability to remain competitive going forward. The first is education. We need constant more and better graduates; we need better courses in our universities to ensure that we can continue to create the wonderful content we are creating. The second thing is we need better protection of the products that we are making, better protection of the IP so that it is not constantly stolen from us, which causes problems for us and does not allow us to reinvest. So I think those two things might damage our ability to be fully competitive going forward.

  Q485  Mr Hall: I am pleased to meet you, Mr Livingstone. My son is an avid Games Workshop enthusiast and has recently competed in an international in Nottingham and he is 26! It is a fantastic thing. There is some genuine concern within the industry that video games are affecting teenage development and personality development and there is a genuine concern about some of the nastier aspects of some of the more violent games. What is the potential for moving this market more educationally based and bringing it into schools? We could clearly use clearly the techniques that are there in games manufacture for educational use.

  Mr Livingstone: I think games have long been misunderstood. People do view the negatives with sensationalist headlines. They do not look at the positives because we are in the entertainment industry. The fact that games are creative, these people learn about community, they learn about puzzle solving, they learn about problem solving, choice and consequence, they learn by trial and error how to solve problems, and these things often ignored. Just playing a game, even a football game, you do learn about manual dexterity if nothing else. Not all games are violent games. In fact, a minority of games are violent. If you look at a game like Grand Theft Auto, which has received a lot of negative press, it is rather like judging the whole of the games industry on that game whereas you would not judge the whole of the film industry on the back of the Texas Chainsaw Massacre. It is a very broad church that would appeal to many people. The average age of a Playstation user for example is in his late 20s rather like your son playing Warhammer at aged 26. Games are moving through society. Whether people like it or not, they are important economically and culturally as much as music, films and television. There are many devices now that deal with music, movies and games on one device, mainly portable devices. Games are to my mind educational and they can be used as is. If you set out to make games purely educational then you are going to lose a lot of the appeal, but you can use the mechanics of what we do in education and if you play a game like The Sims or Championship Manager or Tetris or Dr Kawashima's Brain Training, you are in fact stimulating your brain, you are improving your learning processes. For me games have been a wonderfully interesting thing because it is an interactive experience rather than a passive experience. The fact that you are interacting, you are the central character in a game rather than sitting like a couch potato soaking up whatever TV or film to me is a much more compelling and entertaining media.

  Q486  Mr Hall: So you do not particularly take the view that you can design games that would aid the National Curriculum?

  Mr Livingstone: I think that would be fantastic. I am all for that. The trouble is as publishers of mainline content it is not particularly economic but for smaller concerns I am sure there should be a way. If there is an initiative by government to create an environment in which to say yes, we love games and we will have them as part of the curriculum that would be fantastic. My own children adore playing games and they get a lot of benefit positively out of it.

  Mr Jackson: Could I just say that while I was at Electronic Arts we put a project into schools in the Medway towns that worked incredibly well based around city planning, like Sim City, and that was applauded by teachers. We then found that we had no way of taking that to the rest of the educational market. We really did not know what to do with it next so the project foundered and when I look back it is one of the things I regret the most because I think it could have been something useful. It was the route to market that stopped us being able to take that any further.

  Q487  Mr Hall: I am sorry, the what?

  Mr Jackson: The route to market, being able to get it to the schools effectively and to get the schools to purchase it. That was a failure I think on our part.

  Q488  Chairman: The market in this country for console games, particularly one player and two player, is pretty well established and indeed it is very sizeable. The Committee was in Korea and we visited Nexon where we saw demonstrations of massively multiplayer on-line gaming, which is enormous in Korea. We were told of one game which had an average of 200,000 people playing it at any one time. They are about to launch in this country. Do you believe that there is an equal market here or is there a mindset that may not translate to the UK?

  Mr Jackson: I think we do not yet know the answer to that question. There has been more than one but a highly successful massively multiplayer on-line game was launched about 18 months ago called World of Warcraft. I do not know the numbers but a significant proportion of people are playing that game in the games community. However, we have not seen, I do not think, the traditional, if you might call it that, games playing fall off particularly because of that. So we do not really know. The type of Western-style game playing that currently persists here does seem to be quite resilient at the moment to those types of games coming in even though there is quite a large market.

  Mr Livingstone: I think they will take off in future. Korea has had a history of on-line games brought on partly by piracy and the fact that there is no retail market. Secondly, the culture, they have about 25,000 of these PC baangs which are Internet cafes in Korea so they are used to playing games on-line. There are massively multiplayer on-line games which consist of thousands of people playing as a character. I think the game you are talking about is Kart Rider, which is simply a game of racing cars around where they give that product away and they monetise it by customisation and personalisation of the driver and the car to give incremental benefits when you are playing to win. That is where they get all their revenues from and it has been a very successful business model. In fact it has moved in Korea from a subscription-based model to a free download of content, and as we become more Internet-savvy in this country and in Europe I think there will be a great increase in that way of playing games definitely.

  Chairman: That brings me neatly on to Alan Keen.

  Q489  Alan Keen: Yes, that was the question I was going to ask. Can I ask you about the next stage. I have no knowledge about this and when we went to Korea I could not believe that people did this sort of thing. What is the next stage, will it be where people will wear something and be affected physically by what they play? How far away is that?

  Mr Livingstone: I do not think they will actually get to wearing stuff. They might take a digital image of themselves and have their avatars, their "mini-me" in the game world and connect with their friends via the Internet and play collectively in a virtual world and because the technology expands at such an amazing rate and the horsepower machines and broadband available to content providers allows you to display yourself realistically in 3D. Remember, this is still a relatively new industry. 25 years ago it was single pixel moving across a black and white screen in Pong and now we have come to near TV quality imagery. There is a great chance of virtual worlds because people need to escape. When I was a child I could run out of the door, leave the door open, into the street and play football or go on to the playing fields and play cops and robbers. The fact that that is less available to children today, they need those adventures and they can get them interactively through playing games and they can create these virtual worlds. They should not be a threat; they should be embraced. People are scared of games, rather like my parents were scared of my Superman comics and Rolling Stones records, but if you have grown up with games you are not threatened by them. The powers that be running this country in 20 years' time will be so games-savvy there will be a new evil on the horizon rather than games.

  Q490  Alan Keen: What about the business models? We saw in Korea where people paid extra money, you called it incremental benefits, to get certain customisation on the car that they were driving in races. How is it moving in this country? What is going to happen next with business models? What will the industry be aiming at?

  Mr Livingstone: It is rather like model railways of yesteryear where you liked to buy bits and pieces for your hobby. You are not obliged to do it but if you want to do so, the avatars that you create, you want to make them look better, you want some sort of bragging rights. You are creating your own virtual world and you want to customise it and make it better than somebody else's virtual world, so there was a lot of monetisation of things like that. Plus people like finding things that other people have not got. In places in China there are people who play games for a full-time living to find virtual items which they will then sell for real money to other players for their virtual world. So there are many ways of monetising virtual objects. Perhaps that is an area where you need to look at the impact on the law of selling virtual objects around the world.

  Q491  Paul Farrelly: At the risk of turning this from an evidence session to a series of personal anecdotes, I have just succumbed to pester power and bought my seven year old son a subscription to an on-line game called Club Penguin. Fortunately, he is not going round crashing cars or shooting policemen. In this game you waddle around the world and make new friends and you buy yourself a better igloo or more little pets called puffles. In that sense it is really harmless which is why I have paid for it but, boy, is it addictive. Morning, noon and night, it causes more rows in the house with "Can I use your computer?" Is there a level of use that the industry does consider excessive or addictive and what can you do about it?

  Mr Livingstone: Games are addictive in the sense that anything you enjoy doing you want to repeat endlessly. It is a question of balance and parental control. People probably complain now that their children do not watch enough television whereas 10 years ago they were watching far too much television. There are always things that people enjoy doing and it is a matter of getting a balance. Parents have to take the responsibility. I would probably play golf all day given the chance but you have got to have a balance in life, and most people do. If you look at the distribution curve of any activity there are people who do things for a normal amount of time and there are some people who do them extreme or not enough, and games are no different to the huge entertainment industry. So if children feel they are enjoying themselves you have to say, "That is enough, you have to do something else."

  Mr Jackson: I think the industry takes it very seriously. We have set up a programme Ask About Games. There is a website, there are leaflets that go out with the games, we have advertised it, and you can go on to that website and they give you advice about age ranges, what that means, the sensible use of games and the sensible use of computers. So I think we do take that seriously as an issue.

  Q492  Paul Farrelly: I appreciate the practical point. It is really in the lap of the parents. A related matter: I can enforce age restrictions by what I pay for, such as waddling around the world rather than crashing cars, so I can enforce that age restriction in what I choose my son or daughter to be involved in, but how in your experience does the industry approach enforcing age restrictions and how easy or difficult is it?

  Mr Jackson: It depends what you mean by enforcing age restrictions. It is very easy for us to ensure that every game that is sold in the UK is properly age-rated and it is something we take incredibly seriously. We have a European system called PEGI which rates all games business in Europe. That is backed up by both the VSC, the Video Standards Council, and the BBFC, so that if anything is of adult content it has to go through the BBFC as well. So we have that well covered. In terms of enforcement at shop level, most games are now sold in very professional environments and all retailers understand how the age ratings should be used. If we have a problem, it is potentially in the theft area where car boot sales can sell anything unrated and unregulated to anyone they want, but I think in terms of the formal, legal commercial industry we are in good shape.

  Q493  Paul Farrelly: I am thinking more on-line.

  Mr Jackson: On-line we are still in relatively early stages. PEGI are working on a European age-rating scheme and I am more than happy to give the Committee more information about that in the future.

  Q494  Chairman: Just while we are on that point, you will be aware of the concern that has been expressed in the House by some Members about the effect that particular games have had. I am thinking of Manhunter and Bully. To what extent does the industry believe or accept that games can have a damaging effect on the psychology of young people who are exposed to inappropriate content?

  Mr Jackson: Well, I am not the best person to talk about the evidential basis for those sorts of issues, but I would say that it is inappropriate for young people to see inappropriate material and they should not, and we do everything possible, given the entertainment nature of our industry (like other entertainment industries) to ensure that does not happen. What I would say is that we take incredibly seriously those issues and we think age rating is incredibly important and it is something we spend an enormous amount of time ensuring that it is done properly. It is straightforward; inappropriate material should not be seen and used by underage consumers.

  Mr Livingstone: PEGI and the BBFC are robust systems and we do take our publisher responsibilities very sincerely. We try our best to educate people, but from my awareness and knowledge there is absolutely no evidence whatsoever that playing a game can affect how you behave in real life. If I could play a football game and get better at football I would love to do that.

  Q495  Chairman: The other side of the coin, it has been suggested to me that the manufacturers are quite keen that some games should be certificated 18 because your prime market is the early twenties and they will regard that as something that makes the game more attractive rather than puts them off.

  Mr Jackson: I think that if they were thinking that that would be pretty cynical of them. In my career at EA I would insist that certain games were put forward to be age-rated to ensure that they were properly rated to ensure that there was no question mark over them. Now that normally got me rebuffed and I got told it just is not by the rating bodies, which was fine, but I think we were very serious in making sure that we did not put inappropriate material into the wrong hands, and that can sometimes lead to a bit of jitteriness.

  Mr Livingstone: It seems to me also it is always the games industry that is singled out with this sort of problem whereas it is fine for the film industry and for TV and for music to be sold with mature content. As long as we have got mature people buying mature content they should be able to act responsibly.

  Q496  Chairman: Paul Jackson, you have said the other big challenge to the industry, as well as maintaining creativity in this country, is protection of intellectual property, which clearly is a theme running throughout our inquiry affecting all the creative industries. Can you tell us how the games industry is tackling that and in particular what role you think digital rights management has to play?

  Mr Jackson: Over the last 15 years ELSPA has had an anti-piracy unit working very closely with trading standards organisations and the police to encourage the enforcement of anti-theft activities, what has historically been called piracy. Theft is a major issue for us in two ways really and that is why this is so important. Firstly, it obviously deprives us of revenues that we can reinvest in that creative content. Secondly because in a more subliminal way if what we do is not valued, if what we spend all our time and energy in creating is not protected, it knocks back the whole energy within the industry, and if that gets out of control it leads to the things that have happened in the Far East where they do not even bother to produce some of the creative things we have produced. So we have worked very closely to try and fix this issue of theft. I have to say probably the most important thing we can do is to come here and talk to you about what government can do to help us deal with this. I am reminded particularly of the issue of the Copyright, Design and Patents Act and section 107A which has not been implemented. I only recently joined the trade body, I was in commerce until a couple of months ago. If I understand things correctly, this law was implemented over a decade ago and this section, which would be so helpful to us in that it would empower and enforce the dealing of this issue much more vigorously, has not been implemented. I must admit as a relative outsider I do not understand how that can be. I am bemused by that, to be honest, and we would very much like to see that enacted.

  Mr Livingstone: And the other thing for me is I would like government to change the perception of theft, which is effectively what piracy is. If you go into a store and take something and steal it in a physical format and then try and sell it, people say that is wrong, but if you then have something like file sharing, because it is an ethereal product and does not have any physical properties about it, that is somehow seen as not stealing and yet it is the same cost to us having created that content from the intellectual property that we produce, and the copyright is needed to unpin our industry. We are moving more and more to digital distribution and it would be even more important to us to have our copyright protected. Also the Government loses huge tax revenues because we will not be getting the revenues that we should have been getting. It is a lot of lost revenue to the companies that produce these games and also a lot of lost revenue in VAT and in income tax, so a change in perception for me is one thing that would really help.

  Q497  Chairman: I think we would share that view. Can I also just ask you about the way in which the industry will develop which also has a bearing on copyright. The record industry has moved a long way towards distribution digitally over the net and some people have predicted that CDs will disappear. The film industry is now moving down that same path, a little behind but that may eventually lead to the disappearance of DVDs. Your industry at the moment is still, in the main, physical products sold through retail outlets in the high street. Do you see it also moving towards digital distribution? If that is the case, how are you going to protect copyright then?

  Mr Jackson: We are definitely seeing a move in that direction. We would be third in line because our products are generally larger than the music and film industries, or they are getting larger, and because the technologies have not settled down yet there is some disparity because the technology is constantly changing and it could lead to dysfunction there. I think that going forward, digital rights management will be very important to us being able to protect our products. Because again the technologies have not settled down, the issue of DRM has not settled down for us yet. We have a number of different platforms and how are they going to physically manage the digital rights is not settled yet, but I think we are heading in that direction. I do not think we have got anything particularly constructive we can say yet because there is still such a lot of flux in terms of hardware platforms.

  Chairman: If my colleagues do not have any other questions, could I thank you very much.





 
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