Friday, 28 August 2009

Selling your stuff

Right back in the early days of Moviestorm, back when it was called Machinemascope (yes, it was spelled like that), and existed only in the minds of Dave and myself, we realised that in order to be successful, we'd need to allow modders to make and distribute content. Not only that, but we'd actually benefit from allowing modders to sell content. The reasoning was quite simple. We cannot possibly make all the content required to make the movie in your head. That would require us to make every costume ever worn, anywhere in the world, at any time in history. Not to mention every costume you've seen in a movie, or in a picture, or in a comic book, or in a game, or in some strange fever dream. And then we'd need to start on props, sets, faces, hairstyles, critters, vehicles and everything else. And you'd want them in a range of styles: some hyper-realistic, some exaggerated and cartoony... basically we'd have to model the entire universe, including the bits that haven't happened yet, as well as a load of universes that don't exist. It's just not going to happen, not even if we had a thousand artists.

Instead, we opted for making the basics, and making our stuff as customisable as possible, and in due course, you guys will make the rest. This, of course, is where the modder's marketplace comes in.

Easy, so we thought. We make a site, you upload stuff, we take people's money on your behalf, we take a cut, and everybody wins. Except it's not that straightforward. This is where everyone jumps up and says, "yes it is, look at XXXX.com". Well, you're probably wrong. Unless you're a lawyer, you probably have no idea how tangled the law is in this regard. In fact, even if you are a specialist international IP/tax/commercial lawyer/accountant, you'll have problems making sense of the legislation. Bear in mind, since we're operating a global business, we're talking about transactions for virtual goods that may involve people and companies from several different jurisdictions. That immediately complicates everything. And just because XXXX.com is doing it doesn't mean it's legal, and we don't want to find ourselves sued or shut down.

Here are a few things we're having to bear in mind.
  • You upload a mod. The customer pays us. Who are they buying from? Us or you? That makes an immediate difference. If it's us, then as the vendor, we have a bunch of responsibilities under EU and UK law, and a different bunch of responsibilities under US law (and who knows what under Australian, Brazilian, Chinese or Indian law). If it's you, then we have to make you aware of those. In many ways, resolving this one issue clarifies a lot of the rest of the issues, in that we can then say categorically "it's our problem" or "talk to the modder". However, it's not even clear how the law stands on this, and whether we can easily assign the role of vendor. It's likely that we have to be the vendor, and that we would have to require to to sign a warranty which allows us to come after you if anyone has a go at us. This, of course, then begs the question of what happens if you weren't entitled to sign that warranty (say, you're a minor). And, indeed, what happens when we get sued for squillions but you only have six bucks and a Gnarls Barkley CD to your name.
  • Your mod causes Moviestorm (or the user's computer) to crash. How do we deal with the irate customer? Who's going to sort him out? Should we require all mods to go through our QA and be certified? If so, are you prepared to pay for it?
  • Your mod isn't what it claims to be, or doesn't work. How does the customer complain, and how does he get his money back? If we've already given you your money, how do we get money back from you?
  • Our server goes down and we can't sell anything for a while. So what? Well, if you're doing this as a business, then this is affecting your trade. Can you sue us? Are you expecting a guaranteed level of service?
  • Tax - what taxes apply? Applying VAT (or not) is complicated enough, but we need to figure out what we have to report to the tax office. And if you're the vendor, then you may have to charge local taxes, which we don't know about.
  • How do we apply special offers to a mixture of our content and yours? If someone has a "buy one get one free" offer, and they get yours free, do you get any money at all? Or are mods excluded from special offers? In fact, is 3rd party content treated completely separately?
  • Your mod infringes someone's copyright. How does the rights holder deal with this? How do we avoid being sued? How do we allow you to respond to allegations? Do we have final say?
  • Your mod has a different license to ours. Our content is licensed for people to use in commercial productions. You can mash it up with footage from other sources. You, on the other hand, may want yours to be non-commercial. Can you do that? If so, how do we make that clear to the user.
  • Your mod contains content that is offensive to some people. What mechanisms do we have in place to address this? Is it up to us to decide what gets sold through our site, and if so, do we have to vet everything before it goes up, or only respond when someone complains? What standards do we need to put in place?
  • Your mod contains content that is age-restricted in some countries. How do we ensure we comply with local legislation, and what legislation applies anyway? Do we have to be aware of what restrictions exist everywhere?
  • Taking the above to extremes, your mod contains illegal content. (This is the really tricky one.) Does that mean illegal where you are, illegal where we are, illegal where the servers are, or illegal where the user is? How are we supposed to know what's legal? How are you supposed to know? What jurisdictions can you be sued in?
Let's take an example. A few years ago, at a previous company, we made a mobile phone game that contained an image of a Nazi soldier with a swastika on his helmet, and sold it to a major global telecoms company. They distributed it throughout Europe. We then discovered that images of swastikas are banned in Gemany, and we had in fact just broken the law without knowing it. Fortunately, we were able to change the image before we got taken to court in Germany, along with the telecoms company, and we managed to talk them out of what could have been a very nasty breach of warranty. (We had had to state that the content was legal, which, in the UK, it was.)

On a similar note, while watching Burn After Reading, I noted that Americans use the word "spook" to mean a spy, and asked why the British TV series Spooks was renamed MI5 for the US market. I wasn't aware that it was an offensive slang term for a black person in the US.

In other words, there are a whole bunch of issues where you can act in complete good faith, and find yourself in an unexpected and tricky situation. The law's a minefield, and so we're treading carefully through it. Yes, it's frustrating. We'd love to have had the modder's marketplace up and running a year or more ago, but until we get the OK from the lawyers and accountants, we're not prepared to take the risk.

But be assured, we are working on it.

6 comments:

Armanus said...

Machinemascope? Cool name, but I like Moviestorm much better lol

Wow! I knew there would be some tangled webs of red tape to slice through, but I never quite fathomed the depth of it all!

I have some suggestions, and I started to type them here before realizing that I may just write a novel heh. I thought maybe this is something where the entire community could also help with some brainstorming and input, which your more likely to get in the forums. So, with those two things in mind, and hoping you would approve, I'm going to start a discussion in the forums about this blog if it hasn't started already.

Matt Kelland said...

We're always happy to hear suggestions and feedback from the community on any subject. However, as we made clear, these are complicated legal issues, and we have to be guided by specialist legal advice covering a lot of different legal systems. It's not necessarily a matter of common sense, logic, or what we (or you) want to do. It's a matter of adhering to laws that weren't designed to cover this kind of business.

Where you could be of most use is comments about whether you'd find certain restrictions or requirements acceptable. Would you, for example, be prepared to pay a fee to have your mod certified by us? Would you be prepared to sign a warranty that your mod was legal everywhere in the world? As a buyer, how would you feel if you bought a mod from the Moviestorm marketplace which didn't work and we told you to go and talk to the creator if you wanted your money back?

We absolutely, categorically, cannot say that we will act on any of your suggestions. But do, please, feel free to tell us how you feel.

Incidentally, if you are in fact a qualified international IP lawyer and tax specialist with experience in transactions of virtual goods, then do please get in touch - and feel free to say so on any of your forum posts! :)

bllius said...

Blech. Just be like the Lindens, charge the modders for rent. In your own currency. That's all.

Anthony Bailey said...

When I read that huge list of complications, the message I get is that you guys should stay out of the way - let other parties buy and sell content that can be used with Moviestorm without your mediation. At least in practice, individual transactions are a lot less complicated than regulated economies.

I'm not sure you can enforce a tax on transactions by controlling technical aspects of this market in any case. People can buy and sell (and promote and discover) Moviestorm content outside of whatever system you come up with. From my (limited, external, unrequested) perspective your main value proposition is a software product that you own the development of; I think your income needs to be based more directly on that, rather than on a platform or market or community that you can influence but not own.

Armanus said...

Alas Matt, I am none of those things, if I were I would gladly help in that capacity.

I understand that most of this is going to be a legal matter and beyond the scope of what the community can help to resolve. My thought in starting the thread would be to perhaps offer up suggestions or scenarios that would give the necessary feedback to go forward legally with a clearer idea of what the community would like to see.

To answer your questions, in order to participate in the marketplace I have to understand that by doing so our businesses are then interlinked...we become partners of a sort and our success is tied together, mine of course is more dependent on the success of MS then vice versa, so with that in mind I have to be willing to accept certain things, such as whatever terms SF lays down and standards must be met.

So, I would gladly have the MS team certify my mod, and would pay a fee to have it done. It's common in business to "spend money to make money"...every new venture requires an initial investment, so I don't find paying a fee unreasonable (provided the fee is reasonable of course).
I would sign a warranty that my mod was legal globally, PROVIDED I had an understanding of what is illegal. If I am to sign a warranty, I must be able to do so on an informed basis or I'm a fool. To avoid any potential legal issues, MS should make sure that modders have this information, or access somewhere to this information, and the warranty should explicitly state that I have and understand this information.

The last one is tricky. As a buyer, if I were just told flatly to go talk to the modder, I might be put off by that. However, if when I first entered the marketplace (or prior to a purchase) I was told that each "store" was responsible for all customer service issues, including refund, then I wouldn't have a problem with contacting them, provided SF would be willing to act as a mediator if for some reason the modder was unwilling to provide the refund, or were not responding to complaints, etc.

And that's the sticky part isn't it? What if the modder doesn't resolve issues (like don't give a refund)? Putting the shoe on the other foot, how does the modder handle customers with unreasonable complaints?

Here's another scenario: Let's say a customer buys a mod, uses it to make a movie with, then goes back and tries to demand a refund? How do they handle that? Is SF required to mediate or make a final call? What limits will you put on warranties, refunds, etc.

It's almost like opening Pandora's Box, isn't it? lol

remixr said...

Hey, Matt. I tend to agree with @Anthoney Bailey on many of his points. To allow a community of modders to develop outside of direct corporate control can only make your product better. And be less legal hassle for you.

If those communities flourish, it only helps Moviestorm. Every one of those modders and every one of THEIR customers also has to own a copy of Moviestorm. Look at the Manga model in Japan for an example of these economics, or even the Apache Webserver and the Open Source Development model. Apache is THE standard now -- nobody uses IIS except Microsoft.

They don't even sell it. They give it away. But they still made bank.

I don't know the answer. I don't pretend to understand all the legal or the licensing issues. My business skills are limited to convenience store transactions. But I do know when a development model opens up there is always an upsurge in creative that grows around that model.

Just my anarcho-socialist $.02

Jeff