Epic's surprise $520m FTC penalty: let's talk 'dark patterns'?

Also: some new hires for us, and lots (and lots) of discovery news.

[The GameDiscoverCo game discovery newsletter is written by ‘how people find your game’ expert & company founder Simon Carless, and is a regular look at how people discover and buy video games in the 2020s.]

Well, we thought things would slide quietly into the holidays, but not so! A late-breaking announce from the U.S. Federal Trade Commission has some interesting ramifications for monetization (and discovery) for bigger GaaS games.

So we’ll cover that today. But otherwise, this will be our last newsletter of 2022, since things have slowed way down. So thank you for reading the GameDiscoverCo newsletter in 2022. Our readership nearly doubled (!), and we’re having a lot of fun…

[Last chance - for Holiday 2022, we have a 25% off deal for our GameDiscoverCo Plus paid subscription. This upgrade includes our regular PC/console game trend analysis newsletter, a big Steam ‘Hype’ & performance chart back-end, eBooks, a member-only Discord & more.]

Fortnite’s big FTC fine - what takeaways for y’all?

As Epic’s hit battle royale Fortnite hits the holidays, we were expecting lots of festive fun. What we were not expecting was the U.S. Federal Trade Commission charging Epic Games $520 million - a hefty sum - over two notable issues the company is resolving.

In hindsight, it appears that Epic’s introduction of ‘Cabined Accounts’ for kids a few days ago was a precursor to the first part of the fine, a whopping $275 million, the largest ever due to violations of the Children’s Online Privacy Protection Act (or COPPA). Specifically, the FTC says that Epic:

• collected “personal information from children under 13 who played Fortnite, a child-directed online service, without notifying their parents or obtaining their parents’ verifiable consent.” Oh, and made it difficult for parents to delete their children’s account details.

• violated “the FTC Act’s prohibition against unfair practices by enabling real-time voice and text chat communications for children and teens by default.” The FTC also says that as early as 2017, “Epic employees urged the company to change the default settings to require users to opt in for voice chat, citing concern about the impact on children in particular.”

We are absolutely not COPPA experts. But we think it’s fair to say that many devs have paid only partial attention to COPPA for games that a lot of kids end up playing, but weren’t explicitly designed for kids. (I’d call Fortnite an example of this - Epic’s response to the FTC notes - “Fortnite is rated Teen [by the ESRB] and is directed at an older teen and college-aged audience.” But of course that’s not only who is playing.)

But this should be a wake-up call for all! If you are a big GaaS title with your own account system, you need an under-13s verification option like Minecraft, otherwise the FTC will absolutely come after you. (There’s a history of this - this even happened to YouTube in 2019 to the tune of $190 million.)

We think the big kid-friendly platforms like Minecraft and Roblox have a somewhat better handle on the ‘obvious’ COPPA violations - for example Roblox’s voice chat roll-out checks you are over 13. (This doesn’t stop bad content reaching children, of course - but it’s a starting point.)

And we suspect the FTC is looking very closely at these other metaverse-adjacent platforms. For example, we spotted that Roblox started blocking in-game advertising to under 13s as of late October 2022, which significantly changed discovery for some Roblox devs.

Roblox’s announce post says: “advertisers that have reached audiences of all ages with their ads in the past may see roughly half as many impressions as they did before”, so that’s a big shift. Wonder if this was proactive, or based on specific FTC discussions? Hmm…

What’s a ‘dark pattern’, and why did Fortnite have it?

Anyhow, the second charge is even more interesting, since the FTC is making Epic “pay $245 million in refunds for tricking users into making unwanted charges”. So this isn’t actually a fine to the government - it’s the setting up of a fund for refunds due to multiple reasons, which break down as follows:

• The FTC says Epic “has deployed a variety of dark patterns aimed at getting consumers of all ages to make unintended in-game purchases”, citing Fortnite’s “counterintuitive, inconsistent, and confusing button configuration” and single button presses to buy with no confirmation (since changed).

• Until 2018, “Epic allowed children to purchase V-Bucks by simply pressing buttons without requiring any parental or card holder action or consent.” The FTC adds that it “brought similar claims against companies such as Amazon, Apple, and Google for billing consumers millions of dollars for in-app purchases made by children while playing mobile app games without obtaining their parents’ consent.”

• Finally, “the FTC alleged that Epic locked the accounts of customers who disputed unauthorized charges with their credit card companies.” In other words, the chargeback process led to account bans, and “consumers whose accounts have been locked lose access to all the content they have purchased.” This is a problem that games charging $ directly have to deal with intelligently.

Some of this clearly goes into the ‘Fortnite got big, fast, mistakes were made’ category. Epic’s response notes: “We’ve updated our payment flows with a hold-to-purchase mechanic that re-confirms a player’s intent to buy, as an additional safeguard to prevent unintended purchases alongside instant purchase cancellations and self-service refunds.”

And Epic’s doing good in some places, as Tim Sweeney notes on Twitter when responding to the mom of a gamer complimenting some of Epic’s refund policies:

Tim Sweeney @TimSweeneyEpic

@KHBK Thanks. The refund token system Fortnite introduced in 2018 was inspired by Riot's work on League of Legends. The undo-purchase system was added in 2019 and I wish more games would support that.

But let’s circle back around to ‘dark patterns’. This phrase, invented in 2010 by UX expert Harry Brignull, is described as “a user interface that has been carefully crafted to trick users into doing things, such as buying overpriced insurance with their purchase or signing up for recurring bills.”

And it’s a pretty woolly concept. So it should be of interest to all of you trying to additionally monetize your game that the FTC ran a big report on it in September, and followed that up by fining Internet phone service provider Vonage $100 million for “using dark patterns to make it difficult for consumers to cancel [their service].”

We’ve been talking about an activist FTC a lot, especially since the attempt to block Microsoft vs. Activision. And we’ve got to say this is another great example. We found this article from lawyers Stroock & Stroock & Lavan after the Vonage fine which asks some questions we might also ponder.

Firstly, the lawyers note: “The Vonage settlement is significant because it demonstrates the FTC’s willingness to use the “dark patterns” framework to pursue what otherwise might be ordinary false advertising or unfair trade practices cases. The FTC also appears to be attempting to shame companies with the “dark patterns” moniker.”

And secondly, and even more interestingly: “One would hope that truth remains a defense to an unfair trade practices charge, and that the FTC does not use “dark patterns” analysis to punish companies for encouraging what the agency considers to be unwise choices. New theories of cognitive bias should not be used to substitute the social goals of government officials for the preferences of consumers in the marketplace..”

We believe this is a lawyerly way of saying: ‘Dark patterns sure are pretty subjective? We’d hate the FTC to just arbitrarily decide what is fair or not in the marketplace, by using the phrase a lot about things it doesn’t like.’

And we don’t think that Epic is the worst purveyor - by far - of things that are ‘bad for society’ in F2P games. As the company notes, its gameplay mechanics aren’t so malign: “No pay-to-win or pay-to-progress mechanics in player-versus-player experiences… no paid random item loot boxes since 2019 and no gambling ever.” And it’s now fixed a lot of its kid-centric and UX/payment loopholes.

Due to the judgment, Epic may feel a bit like it’s an unfair whipping boy. But it did make errors. And the company’s response post clearly lists all the kid/UX/refund things that large-scale online games should do to be ‘fair’ to the consumer. So: big fine, plus a clear example of what others should do - big ‘pour encourager les autres’ vibe from the FTC, right?

GameDiscoverCo: new helpers for our Pro launch!

As you might know, nowadays GameDiscoverCo isn’t just a solo newsletter company. We already have three full-time staff. And as we ramp up to launch our enterprise-level SaaS PC/console game metrics tool GameDiscoverCo Pro in 2023, we’re adding some other folks:

• Joining us to lead business development for Pro is Jordan Taylor, who knows the space intimately from his time running indie publisher Hitcents & a recent stint at Raw Fury. His laconic Kentucky vibes will be handily used to showcase our tool to y’all, and to liaise with you after you (inevitably) sign up to use it.

• As we get a bit more ambitious with the feature set for GameDiscoverCo Pro, SCS Software (Euro Truck Simulator 2) veteran and Steam expert Avi Duda has signed up with us to do web dev, help knit all the data together and point us in the correct direction.

• Two bonus mini-announcements: we’re partnering with the excellent DekuDeals.com to license its Nintendo Switch data for some post-’Early Access’ plans to integrate Switch into our stack; and we’ve deepened our relationship with our data warehouse lead Tomek at GamingAnalytics to include Steam data like owner estimates & DAU/MAU in Pro. (He also co-created our console data set.)

We still have more work to do on GameDiscoverCo Pro - it’ll be a little while until it’s ready for ‘Early Access’. And costwise, it’s aimed at medium/large entities, because of the depth & complexity of the data. (We’re now estimating DAU and MAU for every single PC (Steam), Xbox and PlayStation game, for example.)

But rest assured we’ll reach out to many of you when it’s ready to show - especially if you fill out our ‘please tell me when Pro is ready’ form. We thank you very much!

The game discovery news round-up..

We’re finishing things off for the year, as the Steam Winter Sale gets prepared to take over our discount-centric lives for the next few days. But here’s the platform and discovery news of note:

• Game Pass is tentatively exploring ad-supported tiers, according to “a survey Microsoft recently circulated to players, inviting views about the current Xbox Game Pass subscription and querying if we'd be willing to accept adverts if the subscription payment was lower.” (It’s pretty early, though.)

• The player-voted Steam Awards are rolling out nominations day by day right now, and players can “come back between Dec 22 at 10AM PST and Jan 3rd at 9AM PST to cast your vote across all categories.” Gotta say that the nominees are pretty good - slash interesting - so far.

• Noted ‘smart guy’ Ben Thompson of Stratechery wrote a longform piece on ‘consoles and competition’ which explains his own view on the Microsoft x Activision antitrust shenanigans: “For the record, I do believe this acquisition demands careful overview [but[ it’s increasingly difficult… to grasp any sort of coherent theory to the FTC’s antitrust decisions beyond ‘big tech bad’.”

• There’s an in-depth The Verge interview with Steam Deck’s designers that’s well worth poking at. For example: “not only are we excited to see other manufacturers making their own handheld PC gaming devices, we’re excited to see people make their own SteamOS machines which could include small PCs that they put next to their TV”, says Valve’s Lawrence Yang.

• Haven’t seen it discussed much, but ThatGameCompany’s multiplatform multiplayer adventure Sky - which is particularly massive in China - had 1.6 million CCU (wow!) for its recent in-game concert with Aurora. (I was impressed.)

• VR/AR things: yes, legendary tech egghead John Carmack has left Meta, expressing his own opinion-y opinions on the way out (“we constantly self-sabotage and squander effort”); HTC is introducing “a small, light all-in-one headset that promises full-featured virtual and augmented reality” at CES early next month.

• We’ve not really covered blockchain games in this newsletter. So many thanks to my old colleague Bryant Francis at GameDeveloper.com for revisiting the big claims from the sector during 2022. This is the kind of realistic take that I personally find pretty useful. (The sector’s not dead, it just smells a bit funny.)

• Did The Game Awards have good reach? If you ask The Awards themselves, they would say yes - 103 million global livestreams, up 20% over 2021, and “on Steam [alone], over 9.5 million unique customers viewed The Game Awards livestream, with a peak audience of over 850K concurrent users.” So there.

• Two more ‘be nice to players’ things: the European Union parlament’s Internal Market and Consumer Protection committee “has called for greater player protections for minors, as well as actions to control ‘manipulative practices and addiction’”; the German USK organization “will highlight the presence of online chat features, loot boxes and in-game purchases” in its country ratings.

• Wait, so you say 2023 is coming next, and even more video games are going to be released then? Polygon has a rundown on the current release dates, “from highly anticipated RPGs like Starfield and The Legend of Zelda: Tears of the Kingdom, to new, mainline entries in series like Final Fantasy and Street Fighter, and the long-awaited return of franchises like Diablo and Pikmin.”

• Microlinks: this mobile game end-of-year recap from Data.ai has a lot of handy data in it; Supercell has removed all loot boxes from its mobile hit Brawl Stars, which some players are upset with (!); after Tesla, BMW is one of the next car companies to get into ‘in-vehicle games’, thanks to a deal with AirConsole.

Finally, I grew up making music - and then creating ‘netlabels’ - on the Commodore Amiga. So what better way to end the year than via a ‘new for 2022’ Xmas chiptune Amiga .MOD created by my old buddy Keith ‘Vim’ Baylis? Happy holidays, all:

[We’re GameDiscoverCo, an agency based around one simple issue: how do players find, buy and enjoy your premium PC or console game? We run the newsletter you’re reading, and provide consulting services for publishers, funds, and other smart game industry folks.]