International video game law: how quality assurance and localisation services can address emerging legal issues

Two increasingly important types of service providers in the video game industry are those that provide quality assurance (QA) or localisation services. Put simply, the purpose of such services is to achieve as polished a game as possible, at a general level in the case of QA (primarily the absence of bugs in a game) and at a target market level in the case of localisation (to enable players to experience the game in their preferred language). 

Without QA, there would be more game launches met with groans from players about how broken or unplayable the game is. Without localisation, Clair Obscur: Expedition 33 may not have broken out of French-speaking markets and become the worldwide smash hit that it is today (a parallel world it is hard to imagine).

Studios may undertake QA and (to a lesser extent) localisation internally, but there will invariably be a portion of the activities that are outsourced to a third party. 

The boom years in the industry, in the not-too-distant past, also benefited these areas: as game development spend rocketed and studios increasingly leaned on the expertise of QA and localisation vendors. However, it is no secret that the video game industry has been experiencing some difficulties since the turn of the decade, both financially and in terms of emerging legal issues, with challenges arising from both the customer-related and service-related fronts.

What are some of the key issues faced by QA and localisation vendors, and how can they be mitigated? 

Customer-related challenges

Increasingly complex financials 

The financial modelling for contracts in this area is becoming increasingly complex. This is due in part to the growing sophistication of the relevant parties; the greater focus on developers' costs leading to them driving harder bargains; and the higher value of the contracts. If different types of QA services are involved, or multiple different languages, then even the base layer of fees can get a little cumbersome. 

This can be compounded once discount mechanisms are brought into the mix, be that a straightforward volume discount or a more bespoke, tailored discount mechanism (for example, to incentivise the developer to use the provider more widely). In all cases, clear drafting is imperative to help mitigate any later disputes about what fees are applicable to what services and how any discount mechanism was intended to operate. This is especially so when there are multiple discount mechanisms at play.

Given that the commercial terms are ultimately the heart of the contract, it is critical if a rate card (or other payment mechanism) has been agreed that any assumptions or conditions should be set out in the contract (for example,  payment period, annual rate card adjustment, inclusion/exclusion of project management costs). 
Care should be taken to ensure that this is not achieved in a way which actually introduces more uncertainty in the contract, for example if terms in the front end of the contract are in conflict with a rate card inserted into a schedule (such as different payment periods). 

Limiting downside-risk

One further consequence of the increasing cost-conscious nature of developers is a desire to limit their exposure if they later need to cut their losses. There could be many reasons for this (from financing for the project being pulled or, if the game is live-service, poorer than expected player numbers) but the upshot is that many developers will be looking for rights to (i) get out of the contract, or (ii) scale down the services. 

These are difficult issues to negotiate as the interests of the parties are diametrically opposed and the QA or localisation vendor will not want to, as between the parties, bear a disproportionate amount of the risk. This is particularly so if employees or contractors have been hired specifically to service the contract. However, reasonable solutions can be found which afford an acceptable level of protection for each party.

Developers may also seek to limit their downside risk in other ways in the commercial terms, for example by including favourable provisions for acceptance of the services, the structuring of milestones and deliverables or other service levels, and the standards or specifications which the vendor must meet. Where the parties land on these issues will often depend on the nature and value of the services, and – of course – their respective bargaining positions.

Customer flow-downs

As with all service providers, QA and localisation vendors face requests from their customers for flow-down terms. These requests can be benign but, in some cases, can require more thorough consideration or effort to assess. For example, if the developer is requiring the vendor to adopt certain positions on AI in its talent contracts (which may result in longer talent negotiations) or if there are complex information security policies which the vendor needs to gap-assess. 

In some cases, such flow-downs can be a result of corporate policies and therefore be non-negotiable. However, it is important that positive and constructive channels of communication are fostered so that vendors can help developers to understand where some flex may be desirable to achieve the best outcome (for example, where the developer may not appreciate the nuances of the local jurisdiction).

Service-related challenges 

Management of workforce

Managing a workforce is an industry-wide topical issue, with layoffs and redundancies being announced with unfortunate regularity. QA and localisation vendors are not immune from this trend. 

While the use of contractors can help to manage internal exposure, they are not a silver bullet and can introduce complexities of their own.   Vendors need to stay alive to risks related to the operation of any applicable employee transfer legislation – upon both entry into and exit of contracts – in order to avoid any nasty surprises, particularly where the services are being provided on a retainer or similar basis.  

Leveraging AI

There has been early adoption of artificial intelligence in both areas of QA and localisation, whether that is to use it to enable more frequent testing (with reduced testing times) or to streamline the translation of descriptions for thousands of in-game objections. As in all sectors, the benefits of AI are attractive and can result in a competitive advantage but, when it comes to the video game industry sector in particular, ensuring that AI is leveraged in a thoughtful and considered way is key (including to enable compliance with increasingly greater disclosure requirements on AI from game platforms). 

There have already been examples in the press where errors in text localised through the use of AI has led to gamers raising concerns about the extent to which it has been used for the game more widely. This can put developers and publishers on the defensive and potentially affect the reputation of the game or company, so responsible use of AI is paramount. 

Widening scope

Finally, service providers are widening the scope of services they provide. While this is to a large part driven by customer demands, diversifying and expanding the services to include the likes of player support services and social media management services can help to drive and maintain revenue levels. 

The challenges come in ensuring that the same level of performance is provided for those services, particularly in the case of those that may be more nebulously described in the contract. Service providers should be alive to the differences between the emerging services and those which they have historically provided, including from a legal perspective (for example, where there is potentially higher risk processing of personal data). 

Osborne Clarke comment

There are currently lots of opportunities for QA and localisation vendors, not least the growing amount of services which they can provide; the increased focus on localising games in key growth territories such as China; and the upsides of sensible AI deployment. 

However, the challenges remain real and the pressures in the industry are showing, with some vendors going under or consolidating with their competitors. The era of tighter development budgets is firmly here but providers in this area can look to position themselves as partial solutions for the resourcing issues related to the industry-wide scale back on employee numbers. We expect that the legally sophisticated and agile suppliers will be well set up to navigate – and benefit from – this changing landscape.  

If you would like to discuss any of the above, or other issues related to selling or procuring outsourcing services in the games industry, then please connect with one of our experts below.