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Despite Ruling, Videogame Fight Is Far From Over

Monday, 27 Jun 2011 | 2:24 PM ET

As the videogame industry celebrates Monday's U.S. Supreme Court ruling, which formally recognized videogames as entitled to First Amendment protection, many are assuming the political fight that has loomed over the industry for years is finally over.

Nintendo 3DS
Photo: nintendo3ds.com
Nintendo 3DS

That's wrong. In fact, it's simply the start of Act 2.

Critics of the videogame industry are already vowing to carry on their battle to keep violent games away from children, despite the Court's decision.

"We respectfully disagree with the Court when it comes to their analysis of the First Amendment rights of children and families," said James Steyer, CEO of Common Sense Media. "This is a sanity issue, not a censorship issue. If parents decide a violent game is okay for their kid, that’s one thing, but millions of kids are not able to judge the impact of ultra-violence on their own.

"Today, the multibillion-dollar videogame industry is celebrating the fact that their profits have been protected, but we will continue to fight for the best interests of kids and families. Moreover, we look forward to working with national and state policymakers on another common-sense solution in the very near future,” Steyer said.

While it's hardly a surprise that interested parties plan to continue pressing their beliefs, attorneys who specialize in the videogame industry say a more direct threat to the industry could come from the evolving nature of games.

"I don't think this puts an end to it," said Dan Offner, a partner with Loeb & Loeb, who specializes in the videogame industry. "It may put a pin in it for a short period of time, but I see the regulation of mature content with respect to minors as a hot button issue for the Federal Trade Commission and the various state governments."

The reason for that is increased use of digital distribution methods, including social networking games and mobile titles. Playdom recently settled a dispute with the FTC for allegedly providing online content to minors without the proper age gates.

Playdom, of course, is part of Disney these days, having been acquired for $763 million last July. But digital distribution is a field in which virtually all major publishers are scrambling to get a foothold these days.

Electronic Arts recently revamped its online store, expanding its focus and renaming it Origin in the process. The company plans to use it as the exclusive distribution point for several upcoming big budget titles including "Star Wars: The Old Republic" and "Battlefield 3."Activision-Blizzard, meanwhile, has a heavy online presence with "World of Warcraft" and other upcoming games.

Microsoft , Sony and (to a lesser extent) Nintendo all have robust online platforms and distribution systems that could be affected by FTC intervention. And, of course, burgeoning game giants like Zynga could be severely impacted.

The FTC is less likely to be concerned about violence and games, and more with how online game costs can creep up, due to microtransactions and add-ons. Both are a growing method of revenue generation by publishers. (When Activision , for example, released the First Strike add-on for "Call of Duty: Black Ops" in February, the company sold 1.4 million units in 24 hours—adding up to $21 million in gross revenue.)

"It's less about the content in the online environment as it is in fair warning and fees," says Michael Zolandz, partner at SNR Denton. "I think that's the big issue in the commission's context. It's not so much what children are able to access. It's hidden fees or circumstances where it's a free download that then smacks you with hundred of dollars in add-ons."

There's no disputing that the industry received a very solid victory in Monday's ruling. The Court set the bar high for the regulation of games and any form of entertainment conduct.

But industry opponents are likely to ramp up their efforts to scientifically demonstrate that video games—specifically violent ones—have a long-term, harmful effect on minors that is demonstrably different than the effect of reading a violent book or watching violence on television. Coupled with the FTC threat, gaming industry attorney may not have too much of a chance to rest on their laurels.

"It's the end of round one, but round two is about to start," Offner said. "I don't see the industry getting a big breather."

Questions? Comments? TechCheck@cnbc.com

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