Hi guys!
Welcome to Make2 and a discussion of how certain video game companies handle early access and
information leaks around their products and updates.
Most people who are longtime gamers are aware of the update cycle -- that time when new
content drops, either for free or for sale.
We're always waiting for the next new thing, and since a lot of developers and community
managers have social media accounts, some of us even like to talk to them directly to
ask for stuff we want in the game.
The flipside of this is that it can be frustrating when the game producers are silent about upcoming
content or just don't answer certain questions.
Players feel there's a lack of communication and transparency, and especially for paying
customers, it feels like we're being unfairly ignored.
But what we may not realize is that information about certain updates or new releases can
actually be very harmful if it's not handled correctly.
And this is why the producers behind some of our favorite games take information and
access very seriously — because it can actually get them and their employees in trouble.
The things they're allowed to say, and sometimes even the things players are allowed to say
on the producers' official channels, are literally regulated by the law.
Now before I get into the main part of the video, please note that I'm going to be summarizing
some aspects of the law in an extremely simplified and condensed way.
I'm also talking about United States federal law only, although many of the 50 states and
also many countries have very similar laws about this kind of stuff.
I'm definitely not giving legal advice, and I'm purposefully avoiding a lot of technical
terms because I want to make this video as clear to understand as possible.
I will do my best in the video description and also in the comment section to link to
more information for anyone who has questions.
You might be wondering why the law even matters when it comes to video game updates.
The context here is that the gaming industry is so huge right now that many producers are
publicly traded companies.
That means shares of companies are bought and sold on the stock market to investors.
EA, Activision Blizzard, Take Two, Nintendo, Ubisoft -- all of these companies are available
for investors to buy in various stock markets around the world.
Even ordinary people like you or me or your grandparents can become investors and own
a piece of these companies as well as a piece of their future profits.
Buying shares in a company and buying products from a company are different.
Buying a copy of Star Wars Battlefront from EA doesn't mean you'll get any of the company's
future profits, but you do get a copy of Battlefront.
In comparison, buying a share of EA as an investor doesn't mean you get any of their
games, but it does mean you could potentially make more money in the future depending on
how many copies of Battlefront EA sells to other people.
Or The Sims, or Madden, or any other EA game.
Because investors could be any member of the public like you or me or your grandparents,
the government wants to protect us and our money by making sure we have accurate information
about these companies.
During the Great Depression, a lot of people ended up losing their money and starving -- and
even dying -- all over the world because certain companies weren't fully transparent and truthful
with their investors.
The government then passed a bunch of laws and regulations which required any publicly
traded companies to be extremely careful with any information that could affect their share
prices.
A share price is basically whatever investors are willing to pay for shares at any given
time, based on what they know about the company's financial situation.
It could be a higher price if an investor believes a company's in a good financial position,
or a lower price if the investor believes the company's in a bad financial position.
How do they know what the company's financial position is?
Mainly because the government makes the company explain it to the public.
Every three months a company has to make a small report and every year they make a big
report.
They have to talk about a lot of things in these reports, but what most investors care
about is how much revenue the company made from selling its products, and how much the
company's expenses were -- stuff like salaries, taxes, research and development.
Because when you subtract expenses from revenue, you get the company's profit, and based on
these numbers you can then make some reasonable estimates about how much profit you could
potentially get a piece of as an investor, or how much money you might make if you sell
your shares, or how much other investors would charge you if you bought shares from them.
So okay, how does all of this affect gaming companies?
Remember how I said that a publicly traded company has to report their financial information
every three months as well as every year?
Many gaming companies end up linking their update and release cycles to this timing,
because new updates and new releases mean more sales, more revenue, more profit.
That looks great to investors, which hopefully increases the share price and makes it seem
like the company in general is worth more.
But remember how I also talked about the Great Depression and companies not being fully truthful?
After that crisis, the government wanted to make sure ordinary people like you and me
and your grandparents would have some protection before we spend our hard-earned money buying
pieces of companies on US stock markets.
And also because even if people like you and me and your grandparents are not actually
investing in anything ourselves, we can still be affected by things that happen on stock
markets and by the behavior of companies which are bought and sold on stock markets.
See for example, the last eleven years of the global economy.
As I mentioned, information is something that really affects the stock market.
The government will punish a company severely if any information is used in an unfair or
shady way to affect their financial positions or their share prices.
That includes information which only insiders of the company know, and also information
which becomes public about the company.
This absolutely affects what gaming companies are allowed to say about their updates and
new releases, and what they can allow other people who are involved with them to say.
There's a lot of careful timing involved in when a gaming company can announce certain
kinds of content compared to when they can tell investors about the money they earn from
releasing that content.
The rules for how they have to do their financial accounting versus their announcing are complicated.
But the basic idea is that investors need to be able to depend on the company's reported
numbers when they're trying to decide what to do with the company's shares.
So the company has to be open and clear and precise about exactly when and how they're
making money and spending money on updates and releases.
And they need to make sure any information about what's coming up in the future is also
as correct and accurate as possible.
For example, look at what happened with Tesla and its CEO Elon Musk in 2018.
Tesla makes fancy electric cars and Elon Musk is the billionaire who started the company
and runs it.
In August 2018 he made a big mistake.
He posted on Twitter that the company was about to get all this money from another source
and they were going to take all their shares off the stock market.
So that made the price of the shares go up and down like crazy, which really messed with
investors' money.
Then it turned out that the tweet wasn't even accurate, because Tesla wasn't able to get
this money after all.
Elon Musk said something he thought was going to happen, or hoped was going to happen, and
then it didn't.
And a lot of people lost money because they relied on what he said.
Ordinary people.
People like you and me and our grandparents.
So some investors sued, and the US government investigated, and they decided that Tesla
the company would have to pay $20 million in fines.
And also Elon Musk personally would have to pay $20 million in fines.
That's $40 million over a single tweet!
Because the stock market acted on a piece of information which the head of the company
posted on social media.
Why the hell did Elon Musk run his mouth like this on Twitter?
I'm going to go ahead and assume he either didn't listen to Tesla's lawyers, or he didn't
have lawyers who knew how to make him listen.
Actually, that is basically what the government *said* happened, and then they apparently
required Tesla to hire a special lawyer to monitor all of Elon Musk's public communications
about the business going forward.
Yes, he apparently needs a lawyer to look at his tweets.
The United States government -- at least this particular branch of it anyway -- does not
mess around.
Like Tesla, a number of video game companies like EA and Blizzard and Take Two have shares
which are bought and sold on stock markets in the United States.
Nintendo is publicly traded in Japan and Ubisoft is publicly traded in France, and as I mentioned
earlier, the laws and regulations they'rre subject to are very similar.
Which means they all need to be careful about the news and information they post on Twitter,
on Instagram, on Reddit, on YouTube, on anything that the public can see.
By the way, smaller companies may not have to worry as much about these laws applying
to them since they're not traded on stock markets.
But some of them still have private investors who expect their money to be used wisely.
And they still of course have customers.
Being careful about what you say and how you say it, and how you manage expectations -- that's
just always good business practice.
Because these companies' products are the main things that lead to their revenue and
their profit, and for publicly traded companies, they're the main things that affect stock
price.
If the wrong information gets out, or gets out at the wrong time, or is just wrong, then
all of these numbers could be affected.
Maybe the information reveal gives their competitors and rival companies an edge.
Maybe players hate it and don't want to play.
Sidenote: Honestly, I think it's debatable how much players' opinions on particular
game titles actually affect the stock prices and investors' decisions over time.
But the important part is the information, and how the government wants companies to
properly explain anything that has even the potential to have an effect.
Badly timed information, uncontrolled information, incorrect information — all of this could
potentially affect the company's stock price and investors could suffer.
If investors suffer, the government tends to want to step in to figure out whether they
suffered because the company was sloppy with information.
If it turns out something illegal happened, the government gets all kinds of happy with
their fines and their punishments.
Sometimes the people who were sloppy with information end up losing their jobs, and
sometimes they get sued.
Sometimes they even go to prison.
So, you know, when you're on Twitter asking the game developers and other company employees
about when updates are going to be released, or if something you want will ever be in the
game in the future, it can definitely suck to feel like they're not listening.
But remember, they've most likely got lawyers and accountants telling them what they're
allowed to reveal, and when, for all the very good and important reasons I've been discussing.
And this doesn't just affect the game developers and employees.
It affects what players can say, too.
For one thing, it affects certain players and influencers who get early access to game
updates, such as EA Game Changers like us.
These players, in exchange for getting special access, have to sign strict contracts -- also
known as Non-Disclosure Agreements or NDAs.
These contracts keep us from releasing any information about updates or games or products
until the company is ready to tell the public about it.
We also agree *not* to talk about things which the company tells us not to.
Usually this is because the company has a particular plan they've worked out with the
marketing department and the lawyers and accountants to make sure they're doing everything right
by their investors.
Now this is just my own speculation because they don't usually tell players what the plan
is.
Which is fine, since we don't work for them.
But basically, all we get told is a date and time, and if we break the agreement and reveal
things too early, or reveal things we're not supposed to -- then we could get in real
trouble.
People who have authorized early access aren't the only ones the companies are concerned
about.
This also affects people who leak information they get in unauthorized ways.
Maybe they do this by hacking -- which, by the way, is a violation of the terms of service
and user agreements which players automatically consent to by playing these games.
Or maybe information gets leaked by an insider with a big mouth, who knows?
Either way, unauthorized reveals flat-out go against the company's legally prepared
plan.
If unauthorized reveals get posted to the company's official channels, it could potentially
look like the company's okay with that information being out there, like they did in fact authorize
it.
And that could put them in a bad spot if the information is actually wrong, or if the company
has to change something at the last minute.
And like we've been saying, bad information, or information which investors perceive to
be bad, could potentially affect the company's expected revenue and profit and share price.
The questions then would be, how much did the information actually affect investors'
decisions?
how was the information revealed and distributed and who was able to see it? did it unnaturally
affect the company's share price? did investors lose out because of it?
And if investors lose out in a way they shouldn't have, well, rewind to the part where I talked
about Tesla and Elon Musk.
I mean, I don't think punishments for video game companies would be as much as $40 million,
and maybe the government would accept a defense if, for example, EA explained that it wasn't
the company's fault, it was just that the game got hacked or somebody talked too much
and it wasn't in their control.
But maybe the government would say, too bad for you, but you should have had better controls
in place.
So you still need to pay up some big money.
And by the way, look out for separate lawsuits from investors!
What I'm saying is, a lot of money is on the line when it comes to information, especially
and most importantly when it comes to revealing future plans to the public.
Careers and livelihoods could also be at stake.
So it shouldn't be a surprise when companies come down hard on people who put them at risk.
They have to do this to protect themselves under the law.
I mean, it shouldn't be a surprise now that you hopefully know a little more about the
law.
We obviously understand that players get really excited about our favorite games, and we also
find it so hard to wait for whatever's coming up next.
And as content creators on YouTube, we also understand when people want to be the first
ones to release videos or pictures or walkthroughs of the new stuff.
Information is powerful, and so is timing.
But sometimes, it's just not worth the risk.
If you've watched all of this video and you've still got questions, of course you do.
Like I said, this is all really complicated and there was no way I'd be able to summarize
everything in a single video.
People go to school for years and work for years before they fully understand even a
percentage of this stuff.
But please do check the video description and the comment section for more links.
And in the meantime, if you're new to our channel, please feel free to subscribe because
we've got plenty of actual video gaming stuff on the way.
Thanks for watching!
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