Competitive gaming shows why some IP business models are outdated

Team Newbee from China win The International

This weekend there was a sports event which was watched by 10,000 people live at a sports arena in Seattle, boasted millions of viewers online, was shown on ESPN, and the winners won an astounding $5 million USD. This was not golf, basketball, football or baseball, this was the final of The International, the major tournament in the DOTA2 calendar. If you have not heard of the game, it is just one of the two most popular games in the growing eSport scene,  together with games like League of Legends, Starcraft 2, World of Tanks, and Counter Strike (just to name a few).

Before you dismiss the idea that competitive gaming is something to be taken seriously, a quick look at the figures will prove to be an eye-opening experience. Last year the League of Legends (LoL) finals were watched by 32 million people, 8 million of those live. Twitch, the game streaming hub, receives 43 million viewers per month, and has been rumoured as a big purchase target for Google. Individual gamers are starting to make some substantial amounts of money, and the top tournaments are becoming so popular that there is growing mainstream interest in the phenomenon.

But what does IP and business models have to do with the rise of competitive gaming? The first obvious issue is one of branding and generating value through advertising. A lot of the money pouring into the gaming scene comes from old-fashioned sponsorship deals, the same as we see in other sports. Hardware manufacturers will sponsor a team or a tournament to entice the gamers watching at home to purchase their goods. This aspect is just a corroboration that eSports are indeed profitable ventures.

But to me the most interesting aspect is the nature of the two top games, and how these popular titles are fan-made derivatives from existing platforms that would simply not exist in an IP maximalist world. Interestingly, both DOTA 2 and LoL are follow-ups to a fan-made multi-player modification of a map in Warcraft III called Defense of the Ancients (some say that the map goes back to Starcraft). Like many popular games with an online component, Warcraft III allowed users to generate their own maps and scenarios (I spent hours playing the World War II Civ2 map). The customization feature allows for a much richer gaming experience, but it also has an interesting side-effect: game developers get an in-depth idea of what players like, and how they often are using the content in ways that were not designed initially. Good modifications get picked up and can become as popular than the original title.

“The Sentinel and The Scourge base” by Warcraft III: The Frozen Throne, via Wikipedia.

 The original DOTA is a deceivingly simple concept, the map is divided into two halves housing the Sentinel and Scourge sides, each hosting a base that needs to be defended. Each team member selects a hero from a pool of characters sporting different abilities and vulnerabilities. The key is to pick and match a good team formation that can overwhelm the opponent Heroes, and then destroy the enemy base. Players earn experience through gameplay, allowing them to purchase more abilities.

The simplicity of the idea translated into runaway popularity, and eventually led to the creation of the two commercial versions, LoL and DOTA 2. But how did a fan-made map graduate into a multi-million industry? Here is where the IP gets interesting. Warcraft III is a title owned by Blizzard Entertainment, who also make Starcraft and World of Warcraft. As mentioned, Blizzard included several tools that allowed customisation, such as the Map Maker and the Art Tool. The licence for these tools gives ownership of all derivatives to Blizzard. See for example the Art Tool EULA:

” Ownership. All title, ownership rights and intellectual property rights in and to the Program and any and all copies thereof, and any New Materials (including but not limited to any titles, computer code, themes, objects, characters, character names, stories, dialog, catch phrases, locations, concepts, artwork, animations, sounds, musical compositions, audio-visual effects, methods of operation, moral rights, any related documentation, and “applets” incorporated into the Program) are owned by Blizzard Entertainment or its licensors. The Program is protected by the copyright laws of the United States, international copyright treaties and conventions and other laws. All rights are reserved. The Program contains certain licensed materials, and Blizzard’s licensors may protect their rights in the event of any violation of this Agreement.”

So DOTA is owned by Blizzard, a very cynical person would say that they are simply crowd-sourcing the development of a new generation of games.  The mod was created and curated by a number of players, but it was mostly the brainchild of a player nick-named IceFrog. Eventually, the original DOTA outgrew the platform, and it started showing its age. Around 2009, game company Valve reached out to IceFrog and offered to allow him to create his very own game, and eventually hired him. This in itself offers a very interesting copyright question, as Valve suggested to create an entirely new game based on the concept of the map which was owned by Blizzard. Could they do that legally? They would not use any code nor tools from Warcraft, so the EULA would not apply. DOTA 2 is its own game, it maintains the very concepts of the original, but it is clearly a new piece of work. At the same time, another games company, Riot Games, decided to develop their own version of DOTA, calling it League of Legends. I could not find any information about any copyright licensing deals at the time, so it seems like Blizzard was happy with letting the mod be developed further by others.

To complicate matters, Blizzard is currently developing its own version of the original DOTA mod, calling it Heroes of the Storm. Can you imagine IceFrog suing for copyright infringement? Anyway, there has been litigation, but it was regarding the DOTA trademark. Blizzard sued Valve over the use of the DOTA brand, as it was argued that it originated from its IP. Eventually the case was settled out of court, with both parties apparently happy to allow Valve to develop the brand further, maybe in exchange of no further copyright action.

What is the moral of the story? Blizzard has behaved rather well for the most part, firstly allowing its users to play with the game, but also mostly leaving them alone further down the line, even when the mods spawned commercially successful sequels. It pays to keep your customers happy, and there is talk that their own version of DOTA might blow the opposition out of the water (nuclear launch against Diablo, the Queen of Blades and the Lich King in the same team, what’s not to love?). In the end, maximalism is the short-term solution, winners look at the end-game.