Digital & Interactive Entertainment Update – October 2023

Welcome to Lee & Thompson’s Digital & Interactive Entertainment Update covering regulatory updates, news and long reads as well as some views and advice from the Lee & Thompson team.



The news has been dominated by AI and the impact it is having and will continue to have on the games industry.

Whilst it’s clear that the games sector is some way off reaching an agreed consensus on how to handle this complex issue, we are already seeing some publishers, games platforms and distributors beginning to adopt a stance of prohibiting or encouraging games incorporating AI-generated works on their platforms. This stance may become an important deciding factor for many developers when deciding which platforms they want or are allowed to publish their games on and how to approach the inclusion of AI-generated content. Find further information on this topic below together with a link to the first part of a more detailed deep dive that we have drafted on this issue.

The Online Safety Bill


We have also seen a focus on the need to ensure the protection of vulnerable individuals online with the UK Parliament passing the Online Safety Bill as well as more guidance on the use of loot boxes within games.

It’s reassuring (certainly to us lawyers) to see that industry bodies such as UKIE are pushing for greater industry regulation of loot boxes. Time will tell whether these principles are adhered to. As we get closer to the Online Safety Bill coming into force, this will certainly be one for players in the video games industry to watch closely. Find further information below on this topic and what you can be doing now.


Regulatory Updates


UKIE 11 Industry Principles on Paid Loot Boxes

Last July, the Department for Culture, Media and Sport (DCMS) called for greater protections for children, young people and adults following potential gambling concerns raised about loot boxes. The Government has since set out the view that the purchase of loot boxes should not be available to children unless enabled by a parent or guardian. UKIE worked with the Technical Working Group to design 11 principles that ensures player protections and transparency remain a shared responsibility amongst the video game industry.

One of the first industry measures will be to launch a £1 million, three-year public information campaign to raise awareness of player controls. It will support and guide parents on how to use parental controls that help manage in-game purchases including loot boxes, screen time, online interactions, and access to age-appropriate content. Read the Government’s Guidance update on improving industry protections from loot boxes.

What should you be doing now? As a minimum, you should be reviewing your current crop of published games to ensure they meet all player protection and transparency requirements. You should also be implementing robust design and compliance governance and processes to ensure your future games are developed in line with these obligations.

How can we help? We can support you to ensure full game compliance and risk management. Whether it’s providing practical, hands-on advice to your dev teams/in-house legal on age verification or loot box compliance across territories, or how best to ensure your game user journey is sufficiently transparent whilst retaining user engagement, we offer a comprehensive, hands-on, games compliance service.


Parliament signs off the UK’s Online Safety Bill

After several years, the much anticipated Online Safety Bill has been approved by both Houses of Parliament and will come into force in late 2023. The Bill heralds a ‘zero-tolerance’ approach to ensuring the safety of children online by making video game, social media and other online platforms with user-to-user interactions directly responsible for the content they host and imposing significant fines for non-compliance (up to £18 million or 10% of global annual revenue, whichever is the greater and imprisonment for senior executives).

Video game companies will be significantly affected by the Bill:

  • Any multiplayer game which features ‘user-to-user content’, such as text or voice chat, will be caught by the Bill and the game publisher will be liable for the age verification, take-downs, filtering, and monitoring requirements.
  • Whilst many game companies have been holding off taking any action until the Bill is finalised, the time for waiting is over and action will be needed.

What should you be doing nowIf you are publishing a multiplayer game which features user to user content, it is likely you will need to:

  • implement processes to block the posting of illegal content and remove it quickly when it does appear;
  • enable age verification measures to prevent children from accessing harmful and age-inappropriate content;
  • update your terms and conditions and other consumer facing documentation;
  • provide clear and accessible means for users to report illegal and age-inappropriate content; and
  • review OFCOM guidance as and when it is published.

How can we help? We can help you with all these elements and provide you specific guidance on the key steps you should be implementing and when in order to ensure compliance.


The government’s code of practice on copyright and AI

 The UK Intellectual Property Office (UKIPO) is working with the government to create a code of practice on copyright and AI. Industry representatives from the tech, creative and research sectors have been invited to form a working group to ensure that the UK copyright framework promotes and rewards investment in creativity, without stifling AI innovation. Working group meetings began back in June and we will continue to monitor this space for further updates.

What should you be doing now?  First you need to be aware of the issues and we can help you with this – in consultation with key stakeholders across the games sector Lee & Thompson has prepared a 3-Part Paper which take a deep dive into the legal and commercial risks, opportunities and challenges presented by using generative AI in video game development. Part 1 will be out shortly! 

We also offer developers and publishers an ‘AI Risk and Compliance Audit’ (on a fixed-fee basis), where we’ll conduct an audit of your businesses’ current and proposed use of AI and prepare a report identifying risk areas. The report will also set out practical steps that your business should implement to ensure you are compliant and meeting best practice standards in the use of AI.


News Round-Up


What’s the latest on the Microsoft & Activision deal?

The video games industry’s largest merger has crossed its final regulatory hurdle. On 13 October, the UK Competition and Markets Authority (CMA) officially greenlit Microsoft’s takeover deal of Activision Blizzard, following Microsoft’s proposal to divest the cloud gaming rights – for current Activision Blizzard titles and any future releases for the next 15 years – to Ubisoft.

The CMA’s initial reservations towards full approval were based on “limited residual concerns” that certain conditions of selling cloud gaming rights to Ubisoft will not be enforced or may be circumvented. Microsoft has since addressed these concerns and the CMA organised a consultation to fully consider these remedies. Approval by the CMA means that the new deal will not only prevent Microsoft from restricting competition in the cloud gaming sector, but also ensure that cloud gaming providers will be able to access Activision content using non-Windows operating systems.


Epic Games Store to trade revenue share for exclusivity window

This month Epic Games launches its new opt-in Epic First Run Program, trading the company’s revenue share in the first six months of a game’s release in exchange for exclusivity on their Store.

In a directly competitive move against Steam, this program will offer more financial incentives for developers to release their games on the Epic Games Store. This program will only apply to products launching after the launch date this month, and developers can stand to benefit from an increased promotional push, according to Epic.


Industry faces mixed approaches to Generative AI

Reports that Steam is rejecting games with AI-generated content from its platform is now front-of-mind for developers. Valve (developer of Steam) has since clarified its position, stating that developers can use appropriately licenced AI technologies in their work, but cannot infringe on existing copyrights. Similarly, Humble Games has announced it may restrict AI usage in future publishing contracts in order to steer clear of any potential legal pitfalls caused by generative AI.

In direct response to this, we are also seeing that Epic Games is welcoming games with AI-generated content. It will therefore be interesting to see how the industry continues to evolve its mindset on generative AI.


The Tetris Effect author claims filmmakers copied his story

Dan Ackerman, author of ‘The Tetris Effect’ filed a lawsuit in a Manhattan federal court claiming that Apple and the Tetris Company has infringed his copyright of the book in the 2023 film adaptation, starring Taron Egerton.

According to Ackerman, the film “liberally borrowed” specific sections of his book and claimed the Tetris Company refused to license its intellectual property for film and TV adaptations of his book by issuing a “strongly worded cease and desist letter”. An option agreement for the book would have prevented the lawsuit, but it is now up to the courts to decide whether the film is considered an unauthorised adaptation.


Unity faces widespread backlash over new ‘Runtime Fee’ model

In September, Unity faced overwhelming criticism following the announcement of its new fee model which will charge video game developers each time their games are installed. This new fee is proposed to come into effect from January 2024 and will be as high as $0.20 per install. This fee will apply subject to certain eligibility requirements.

Developers raised concerns about the new model, including the financial impact this will have on developers who now need to factor in this fee to their existing Unity licence fees and the practical issues calculating and managing the fee going forward. Unity has addressed some of these concerns, for example, by clarifying that the install fee will only apply to initial installs and installs on additional unique devices.

Unity later announced changes to the Unity Personal plan to win back smaller developers by improving the Unity Personal plan including its exemption from the Runtime Fee, increasing the cap on this plan to $200,000 and removing the requirement to use the ‘Made with Unity‘ splash screen. For Unity Pro and Unity Enterprise, developers will now have a choice between the Runtime Fee or a 2.5% revenue share, with Unity billing whichever is lesser of the two.

The general impression is that Unity has shattered the trust it had with developers by unilaterally changing its pricing model. While Unity has already taken steps to water down the Runtime Fee, only time will tell whether it is too little too late for many developers using or planning to use Unity.


Recommended Long Reads



The EU’s draft AI Act is the first attempt to enact a horizontal regulation for AI and aims to be the world’s first comprehensive AI law by a major regulator. The new rules aim to assess AI systems and assign them with either Limited, High, or Unacceptable risk. There is also a focus on transparency for foundation models. This requires generative AI tools to comply with a number of information requirements on how the model was created, what data it was trained on, what governance steps are in place to ensure suitability of data and avoid bias and providing information on copyrighted data used to train the model.  While open-source AI tools like Hugging Face will already score quite highly against these requirements, closed source tools like ChatGPT will find these requirements more challenging.

The European Parliament are in the process of finalising the new legislation and aims to reach an agreement by the end of 2023.

How can we help? Watch this space – we’ll be issuing a comprehensive overview of the EU’s AI Act once the European Parliament has signed off the legislation.


Enabling New Blockchain-Based Experiences on Google Play

In mid-July, Google Play announced that it is opening new ways to transact blockchain-based digital content within apps and games. Google is committed to fostering innovation in blockchain technologies, while ensuring that users stay protected.

This policy update requires that apps be transparent with users about tokenised digital assets. Further, developers are not allowed to promote or glamorise any potential earning from playing or trading activities.


TikTok fined millions for breaching children’s privacy in EU

TikTok has been issued with a €345 million fine under the GDPR for breaching children’s privacy after a ruling by the European Data Protection Board. Social media companies must now be compliant with the EU’s Digital Services Act (DSA) with duties to police illegal content on their platforms, prohibit certain advertising practices, and share data with authorities.

When it comes to data protection, the social media giant does not have a strong track record. The UK ICO fined the company a £12.3m fine earlier in April for illegally processing the data of 1.4 million children aged under 13 who were using the service without parental consent.


Our View: This is just another reminder that regulators across the UK, EU and US are now laser-focused on ensuring digital entertainment and game platforms, publishers and networks are taking their data protection responsibilities seriously (particularly where children’s data is involved) and are fully compliant with the data privacy law.

Our Team


Julian Ward
Partner & Head of Games
Julian’s Profile
Andy Florence
Senior Associate
Andy’s Profile
Josh Colby
Josh’s Profile
Tiffany Chan
Tiffany’s Profile


Legal 500

We’re delighted to have been ranked in Tier 2 for Video Games in independent directory Legal 500 UK 2024, with Julian and Andy ranked individually.

What we’ve been playing

  • Julian Ward is playing Crusader Kings and Fifa (badly).
  • Andy Florence has mostly been playing Lego Harry Potter – he claims this is only at the request of his children but based on his previous obsession with Lego Star Wars, very few people believe him.
  • Josh Colby is playing Baldur’s Gate 3. As an avid fan of Dungeons & Dragons and RPGs generally, Baldur’s Gate 3 rolled a natural 20 and is easily his GOTY.
  • Tiffany Chan is playing and enjoying all the new Mario Kart 8 tracks for Nintendo Switch.


Find out more

For more information about our experience and work, read about our experience on our dedicated Video Games and Digital & Tech pages.