Key contents and implications of the comprehensive plan for promotion of game industry (2024-2028)

I. BACKGROUND

On May 1, 2024, the relevant ministries jointly announced the Comprehensive Plan for Promotion of the Game Industry (2024-2028) (the “Comprehensive Plan”).

The domestic game industry has reported an average annual growth of 11.8% since 2018, with the reported revenue reaching KRW 22.2 trillion in 2022. In particular, game exports in 2022 amounted to approximately USD 9 billion, accounting for 67.8% of Korea’s total content exports. Korea’s game industry has grown to become the fourth-largest in the world.

The game industry is evolving by integrating advanced technologies such as artificial intelligence, augmented reality, and virtual reality. Moreover, the industry has the potential to grow into other content fields, as new games can be produced based on original works such as movies, novels, and webtoons.

However, supplier-focused regulations that do not account for the changes in the gaming environment, such as technological advancements, are burdening both the industry and users and restricting the industry’s growth.

Against this background, the Korean government has announced the Comprehensive Plan centered on the vision of a “second leap forward for the game industry.”

Below, we will take a look at the highlights of the Comprehensive Plan and the implications to be noted.

II. KEY CONTENTS

The Comprehensive Plan contains three strategies: (i) enhancing the global competitiveness of the game industry, (ii) innovating regulations and creating a fair gaming environment, and (iii) expanding the base of the game industry.

A. Enhancing the global competitiveness of the game industry

• Establishing an ecosystem specifically focused on console games

The size of the global console game market is USD 59.14 billion with a market share of 28.4%, second only to mobile games (44%). However, the domestic game industry’s share of the global console platform market is only 1.5%. In response, the government has announced plans to support the development of the console market.

In particular, the government plans to provide tailored production support, taking into account the average production period (29.5 months) and cost (KRW 3.36 billion) for console games. Also, to facilitate the production of games using webtoons, dramas, and class games, the government plans to identify IP-holders of webtoons, dramas, and classic games who will provide IPs and coordinate with console game producers to produce 50 games by 2028.

B. Innovating regulations and creating a fair gaming environment

1) Expansion of autonomy in preventing online game overindulgence

• Abolition of online game self-verification

Currently, to prevent online game overindulgence, the Game Industry Promotion Act (the “Act”) requires (i) self-verification of all users and (ii) consent of legal representatives of those under the age of 18 when signing up for online games (Subparagraphs 1 and 2 of Paragraph 1 of Article 12-3 of the Act). As a result, teens without a self-verification method are unable to play online games that are rated suitable for all ages.

To alleviate this situation, the government plans to amend the Act to make self-verification optional for games rated for all ages, while treating the members who do not undergo self- verification as minors and requiring them to obtain consent from their legal representatives.

• Transitioning of the selective shutdown system to self-regulation

Currently, the Act mandates restrictions on game play time upon request by minors themselves or their legal representatives when using online games (Subparagraph 3 of Paragraph 1 of Article 12 of the Act). However, this has been controversial due to its potentially reverse discriminating effect as compared to mobile games which are not subject to such mandate, and due to concerns about its effectiveness.

As a result, the government plans to amend the Act to abolish the mandatory provisions related to game play time limits and allow game companies to operate autonomously with respect to this issue.

2) Improvement of game rating system

• Currently in Korea, strict standards are applied to some game products due to concerns about the increasing distribution of games containing speculative and/or sexually suggestive content. This has sometimes resulted in the same game products that have been rated suitable for ages 16 and above in Europe and 7 and above in Japan ending up being rated as not suitable for youths in Korea. In response, by December 2024, the government plans to establish advanced rating standards by reflecting the changing social perceptions and global standards.

• Game business entities are currently required to report to the Game Rating and Administration Committee any modifications to rated game products, including technical, supplemental, and improvement changes, within 24 hours of the modification. This has resulted in having to report even simple modifications that do not affect the game from a ratings perspective, such as adding game items or characters or changing the design aspects of the game (Article 21(5) of the Act). Therefore, the amendments to the Act contemplate exempting minor modifications that do not affect the existing rating from the reporting obligation.

• Under the current Act, the designation as a self-rating business entity is granted for a period of up to three (3) years (which is renewable) and includes certain revenue threshold and a “plan on contributing to the development of the game industry and the creation of a healthy game culture” (the “Self-Regulator Plan”) as the evaluation criteria (Article 21-2(1) of the Act). The Comprehensive Plan contemplates amending the Act to extend the period of the self-regulator designation to five (5) years, changing the revenue threshold to revenue and capital thresholds, and removing the submission requirement for the Self-Regulator Plan.

3) Improvement of business environment for arcade games and game service providers

• In the United States, Europe, and elsewhere, arcade game centers are expanding in size and are being integrated into theaters, large shopping malls, and university towns to serve as family entertainment spaces or party venues. In response, to establish arcade game centers as family-friendly complex game centers in Korea, the government plans to implement a pilot project for score-based reward games, where players can collect scores or tickets with recorded scores and exchange them for desired products.

• The government is pushing forward with a pilot project for mobile VR services, which involves modifying the structure of buses or trucks and installing VR motion simulators, among other things. However, to prevent illegal operations such as operating speculative games, the government will revise laws and regulations to allow this only under contracts with the national or local government.

• Article 28(3) of the current Act allows free gifts such as toys and stationery worth KRW 10,000 or less only for games rated for all ages provided by youth game providers. The government plans to amend this to allow youth game providers to give out free gifts in principle, prohibiting it only where there are significant concerns about speculation.

• The current Youth Protection Act designates youth game providers and providers of internet computer game facilities as “business establishments that are harmful to youths” (business establishments where the employment of youths is prohibited). (Subparagraph 5 of Article 2 of the Youth Protection Act). The Comprehensive Plan proposes revising the Youth Protection Act to exclude youth game providers and providers of internet game facilities from the category of business establishments that are harmful to youths.

4) Establishment of fair game rules

• Introduction of special remedies and dispute resolution procedures for damages incurred by game users caused by probabilistic (loot box) items

Pursuant to a recent amendment to the Act which took effect on March 22, 2024, the Act requires game service providers to disclose, among others, the types of probabilistic (loot box) items used in the game and the information on the probability of supply for each type of loot box items. The current Act, however, does not expressly recognize money damages for violation of the loot box disclosure requirements.

Under the Comprehensive Plan, the government plans to amend the Act to (i) recognize game companies’ liability for damages for violation of the loot box disclosure requirements, (ii) require game companies to prove that non-disclosure or manipulation of probabilities was not intentional or negligent, and (iii) impose punitive damages of up to twice the actual damages amount where violation was intentional.

Further, in an effort to promptly remedy damages to game users that are incurred by loot box items, the government plans to establish a collective dispute mediation system within the Content Dispute Resolution Committee, the decision from which system will have an equivalent legal effect of a trial settlement before a judge. Also included in the Comprehensive Plan is the introduction into the Act on the Consumer Protection in Electronic Commerce (the “Electronic Commerce Act”) a consent resolution system—i.e., a system whereby the game service provider voluntarily proposes remedial measures which, if approved by the Korea Fair Trade Commission (“KFTC”), will thereafter be implemented by the game service provider. The proposed amendment of the Electronic Commerce Act is intended to enable swift resolution and enforcement of the relevant disclosure requirements, without the regulator having to examine the lawfulness of each service provider’s practice in respect of the loot box disclosure requirements.

• Establishment of a monitoring system for compliance with the loot box disclosure requirements

The loot box disclosure requirements described above apply not only to game products but also to websites, advertisements, and promotional materials. To monitor compliance with such disclosure requirements, the current monitoring team consisting of 24 persons will be expanded to around 50 persons, and an advisory panel of experts in the relevant fields will be established to conduct verification of compliance. In particular, if there is clear suspicion that the game service provider is deceiving game users through false probabilities, the KFTC will initiate an investigation.

In addition, the government plans to further amend the Act and the Electronic Commerce Act to require foreign-based gaming companies of certain size that service games to Korean users to designate a local representative to ensure compliance with the relevant Korean laws.

C. Expanding the base of the game industry

• Promotion of e-sports

To foster regional identities or brands for e-sports, the government plans to establish permanent e-sports stadiums in Jinju and Asan, establish regional home base professional teams, and also create a national e-sports league.

Further, to promote investments from the government’s fund of funds in e-sports, the government plans to revise the Framework Act on the Promotion of Cultural Industries to include e-sports as one of the named cultural industries.

III. IMPLICATIONS

As the changes being proposed under the Comprehensive Plan will need to be effectuated through legislative amendments, it will be necessary to continuously monitor the progress of the legislation process and the related discourse on the various issues covered under the Comprehensive Plan.

The Comprehensive Plan, once implemented, will have a significant impact on the game industry. In particular, the plans to recognize an express cause of action for money damages for violation of the loot box disclosure requirements, to impose the burden of proving the existence of intent or negligence on the game service provider, and to introduce punitive damages for intentional violation will likely have the greatest impact on the game industry.