In-game advertising: How to play it?

The trend toward advertising in online channels has grown for years, but video games are still not a popular ad platform. While large foreign entities are eager to exploit this opportunity (among game publishers such as Electronic Arts and brands like adidas, Coca-Cola and Daimler), it is harder to find examples of this type of cooperation among Polish entities.

This may be due partly to the independent nature of Polish game productions and because they rarely set their games in realistic spaces (where it is generally easier to place ads). On the other hand, many advertisers seem unaware of this form of advertising, and many publishers don’t seem familiar with this possibility for financing games.

But we believe that with the growing profile of the Polish video game sector and its positive reception, interest in placement of ad content in video games will grow. Thus it would be useful for game publishers and advertisers to know what to pay attention to in contracts for in-game advertising.

What is in-game advertising?

We should first explain that we use the term “in-game advertising” to refer to placement of ads for goods or services in a video game, so that the ads become an integral part of the world or universe of the game and play a certain function in that world. This function may be static, e.g. when a billboard advertising a product is part of the background or setting of the game, or dynamic, when advertised goods or services are used by the characters or the characters interact with the product. In-game advertising is thus similar to product placement.

We don’t regard ads appearing in the game menu on startup or during breaks to be in-game advertising. Such ads don’t make goods or services an element of the game content.

In-game advertising should also be distinguished from “advergames.” They usually have little to do with games, but are created by companies solely to promote their own goods or services. Traditional advertising and advergames will not be the subject of the following discussion.

A few examples of in-game advertising

Typical productions that have used in-game advertising for years include racing games (such as Need for Speed, where players can drive a BMW, a Nissan or a Porsche) and sports games (e.g. from the FIFA and NBA series, where the stadium banners reflect the advertising from the real world).

In the longstanding production Tom Clancy’s Splinter Cell: Pandora Tomorrow, the player’s avatar uses phones from Sony Ericsson to take pictures of terrorists and transmit their photos to headquarters for identification, and to communicate with other characters. In the game Worms 3D, a worm directed by the player consumes Red Bull to speed up and gain energy. In Super Monkey Ball, the bananas collected by the player were originally branded Dole, but in sequels the producer Sega announced a partnership with Dole’s main competitor, Chiquita. And in Crazy Taxi, the player drives passengers around town, including to KFC or Pizza Hut restaurants or Levi’s clothing stores.

Another good example is The Sims. Among other things, Sims have used Intel computers to quickly increase their resources of knowledge, a Renault Twizy electric car to increase the player’s prestige and optimise expenses, and equipment from the Dove Hair Spa serving as a shower and hair protector. Second Life became an equally popular ad platform, where for example Calvin Klein promoted his new perfumes and Lacoste promoted its spring clothing collection. Indeed, Second Life includes some modest Polish ad themes, such as the mobile phone operator Play and even the Catholic intellectual weekly Tygodnik Powszechny.

As should be apparent from this brief overview, the range of brands using computer games for advertising is broad, and the types of games offering ad platforms are varied.

What to pay attention to in a contract for in-game advertising

  • Subject of contract—what goods or services are to be presented in the game

It might seem obvious—the product should simply be depicted in the game. Nothing could be further from the truth. Before an advertiser decides to include an ad in the world of the game, it should first get to know the characters, conventions, setting and mechanics of the game. This is even more important when the advertised product is to enter into interaction with the characters. Then issues such as which character uses the product (e.g. a crook or a policeman), what the product is to be used for and under what circumstances, whether alternative products are provided for in the game (and if so, whether they are from other brands or are “no-name” products), whether the advertised product is the only one of its kind used for a specific function, will all be relevant. These aspects and the publisher’s undertaking to implement the product in the game in the specified way must all be precisely set forth in the contract. Oversights in this respect may prove fatal to the advertised product.

The game Alan Wake offers a good example. When moving in darkness, the main character uses a magic flashlight that protects him against dangers and serves as his main weapon. It might seem like an ideal advertising platform for Energizer batteries. The problem was that in the game, the advertised batteries quickly ran out. The effect of the message? Players regarded Energizer batteries as a product of poor quality. Undoubtedly that was not the aim of the brand’s owner. This blunder could have been avoided if the life of the batteries were specified in the contract (e.g. to reflect that guaranteed by the manufacturer in real life) and if the advertiser had ensured that the flashlight could also be powered by other generic batteries, which could highlight the difference in durability between ordinary batteries and the advertised ones.

  • Advertiser’s liability for advertising not complying with contract

The publisher’s liability for carrying out the advertising of the good or service in the game not in compliance with the contract should also be considered. If the advertiser asserted such a claim under Polish law, it would be based on the general provision for breach of contract (Civil Code Art. 471). The advertiser would have to show non-performance or improper performance of the contract by the publisher, the occurrence of an injury on the part of the advertiser (e.g. a decline in sale of batteries), and a causal connection between the in-game advertising as implemented and the injury. Thus the point of departure for the possibility of effectively pursuing such claims is precise agreement in the contract on the rules for presenting the advertised product in the game.

This can be illustrated by the contractual dispute that arose between the group No Doubt and game publisher Activision. The contract did not involve advertising, but the use of the images of the band members in the game Band Hero; however, the issues are analogous. After Activision published the game, the group challenged the fact that their virtual counterparts performed works in the game not only by No Doubt, but also songs by other groups. The case was settled. However, in this case, as in the case of in-game advertising, the key would be to pay close attention to the contractual provisions and the terms of cooperation agreed by the parties.

  • Integrity of game and introducing ads into the game

A condition for safely conducting in-game advertising by the publisher is not only to ensure that it has been transferred the economic copyright from the authors involved in creating the game, such as graphic designers, programmers and scriptwriters, but also to correctly handle issues of their exercise of moral rights to their work. This aspect can sometimes be overlooked in contracts. Theoretically it can be imagined that for some reason the publisher may wish, for example, after completion of the work on the game, to commission third parties or only some of the authors to introduce product advertising into the game which was not originally foreseen. In such case, if the publisher fails to address the copyright issues in advance, it may expose itself to claims by authors for example for infringing the authors’ moral rights to the integrity of their work.

  • A few other tips

There are a number of other issues which advertisers should pay attention to in the contract, such as the platforms in which the game is to be sold or delivered to players, the publisher’s plans for promoting the game, and how much time the publisher intends to devote to promotional activity. The territory where the game is to be offered should be verified, particularly to determine whether the product advertised in the game is suited to the given market and is culturally appropriate, is sold in the given market under the brand used in the game, etc. It is also worthwhile to consider the advertiser’s own promotional campaign (particularly if the product placement in the game is part of a broader campaign, e.g. connected with the launch of the product on the market in question) and its consistency with the publisher’s actions. If in its own promotion of the product the advertiser wishes to use elements of the game world in its own message (e.g. characters using the product in the game), the rules for use of such elements and the terms of the relevant licence for the advertiser should be established.

Legal classification of in-game advertising

The contractual issues also include adapting in-game advertising to comply with the applicable law. In Poland there is no single law comprehensively addressing advertising. Regulations concerning advertising are found in several different acts, some of which may apply to in-game advertising. These are primarily acts imposing bans or restrictions on advertising certain goods or services, such as alcohol (in the Act on Sober Upbringing and Combating Alcoholism of 26 October 1982), tobacco (Act on Protection of Health against the Consequences of Use of Tobacco and Tobacco Products of 9 November 1995), drugs (Pharmaceutical Law of 6 September 2001), and gambling (Gambling Act of 19 November 2009). Most of these acts provide for criminal liability for violation of prohibitions, which should be borne in mind by both game publishers and advertisers using games as an ad platform.

The Unfair Competition Act may also apply to in-game advertising, imposing liability on a business (potentially both the publisher and the advertiser) e.g. for advertising that is misleading or contrary to fair practice, advertising encouraging audiences to acquire goods or services while posing as neutral information, or impermissible comparative advertising.

Considering the growth of the game development sector, including in-game advertising, it cannot be ruled out that in the future some industry self-regulation will arise in this area of advertising or that video game entities will join existing self-regulation systems. In Poland this function is fulfilled primarily by the Advertising Council, which was established by the advertising and marketing community and provides oversight of issues such as the ethics of advertising content.

When considering the requirements of in-game advertising under Polish law, another controversial issue should be mentioned, namely notifying players that the game contains advertising content or product placement. Must the game include information on this topic? No such requirement is expressly provided for under Polish law with respect to video games. But this encourages hidden advertising and hidden product placement, which can have costly consequences (also in cooperation with influencers).

(In Poland, the same problem and lack of regulation affects all messages online, such as on blogs, forums, and video-sharing platforms. The situation of video-sharing platforms, which include such sites as YouTube, may change in connection with the November 2018 amendment of the Audiovisual Media Services Directive, which introduces informational obligations for video-sharing platform providers with respect to advertising, sponsoring and product placement. The member states are required to implement the amended AVMSD by 19 September 2020.)

The Broadcasting Act, which does address this issue, has a narrow scope of application (covering only TV and radio broadcasters and providers of on-demand audiovisual services) and does not cover advertising messages in games. Nonetheless, it appears that placement of ads in games should be subject to certain principles and conditions. Thus it would be reasonable to call for clear regulation for example of publishers’ obligations in this area. Under the current regulations, hidden advertising messages in a game could be challenged under the Unfair Competition Act or in some instances under the Unfair Market Practices Act.

Benefits from in-game advertising for both parties to the contract

For the publisher, in-game advertising can be an additional source of financing for the game. Moreover, placement of real products in the game increases the realism of the game’s universe (according to 60% of players surveyed by Nielsen in 2008), and consequently increases players’ immersion in virtual reality. This is vital for sports games, racing games, simulators and all other games set in the present day.

For the advertiser, the game is a platform for establishing or raising brand recognition. First, it allows the advertiser to reach a promising target group (the average player is a well-situated man, or less often woman, around age 35). Second, the playing time (averaging some 12 hours or more, or even days) ensures long exposure to the product. Third, thanks to virtual interaction with the product, the player can learn key attributes of the product (e.g. durability and energy-efficiency) and test it virtually in the game. Fourth, because games attract a large community exerting influence over players, in-game advertising opens the way to exploiting word-of-mouth or whisper marketing.

Obviously, it is possible to achieve these benefits only when certain fundamental conditions are met: the ad content and the manner of presentation must be consistent with the conventions of the game, properly suited to the audience, unobtrusive, and simply of high quality. But undoubtedly, in-game advertising that is well conducted from a marketing perspective and properly secured from the legal side can generate benefits impossible to achieve in any other way.

Lena Marcinoska, adwokat, Intellectual Property practice, Wardyński & Partners