Consumer spend on video games
Amidst a string of exciting video game showcases, gamers have plenty to look forward to this year. Moreover, UK consumers reportedly spent £4.28bn on video game software in 2021[1] and 60% of UK adults (16 and over) reportedly now play video games[2]. High levels of consumer spend mean great opportunities for the video gaming industry, but in turn this creates greater exposure to consumer regulation.
Digitalisation
The gaming industry has steadily moved away from selling content via physical CDs and cartridges, towards digitalisation of distribution through download, streaming and cloud-based models. Whether it’s PC, console, mobile or another handheld device, consumers can access vast libraries of gaming content via online stores.
Through these stores, consumers can purchase:
- Games
- Additional downloadable content (new levels, maps, quests, characters)
- In-games items (skins, cosmetics, pets, mounts)
- Virtual currency
UK cancellations rights and refunds
B2C laws govern consumer cancellation rights in the UK. These rights depend on the type of contract (goods, services, digital content). Online store content, like the above, likely falls under ‘digital content’ in the UK.
The general rule is that consumers have 14 days from purchase to cancel their purchase of digital content for any reason to get a refund. However, the mechanics of cancellation depend on various conditions, exemptions and other criteria. In fact, if consumers aren’t provided with information on their cancellation rights before they purchase, this 14-day period can be extended by an additional 12 months.
Alternatively, cancellation rights (and their connected refund rights) can be wholly excluded for digital content purchases where the consumer will access the content immediately post-purchase. To do this, certain steps must be taken, such as:
- The consumer must expressly consent to receive the digital content during the cancellation period
- The consumer must acknowledge that their cancellation right will be lost upon access
- The publisher must confirm (1) and (2) above to the consumer in the confirmation of purchase communication
These steps are typically addressed via:
- amendments to the relevant terms and conditions
- consumers ticking an unticked checkbox (beside prescriptive language) in the customer journey
- a confirmation of purchase email.
What about the EU?
There is some similarity between the cancellation rules in the UK and the EU. For example, the cancellation rules that apply to digital content are similar. As with the UK, it’s possible to wholly exclude cancellation rights for digital content through taking similar steps to (1) – (3) cited above.
However, since the implementation of Omnibus Directive in the EU, there has been a growing divergence between the UK and EU. For example, the EU has recently introduced the concepts ‘digital services’ and ‘goods with digital elements’ into the consideration of rules under cancellation rights. This has triggered analysis on whether games and in-game content constitute digital content or digital services. For example, guidance states that whilst downloading an individual game could constitute digital content, where a consumer subscribes to an online cloud environment and streams a game, that could be a digital service.[3]
It’s important to get classification right because this impacts the rules around cancellation rights.
Final thoughts
Consumer cancellation rights and refunds remain a complex area. Unfortunately, it’s also an area where it’s easy to make costly mistakes. This is particularly true for smaller publishers, or those based internationally seeking to enter the UK and EU markets. The good news is that this refund exposure can be addressed through robust terms and conditions, and adjustments to consumer purchase journeys.
[1] https://ukie.org.uk/consumer-games-market-valuation-2021
[2] https://www.ofcom.org.uk/__data/assets/pdf_file/0023/238361/online-nation-2022-report.pdf
[3] EU Guidance on the interpretation and application of Directive 2011/83/EU of the European Parliament and of the Council on consumer rights (2021/C 525/01)
