The9 lost that right earlier this year. As reported fully on Bloomberg News in April of this year, “The9 Ltd., a Chinese online-game provider, fell the most since November 2007 in New York trading on speculation the company failed to renew its license to operate the “World of Warcraft” game. ” That same article noted that “NetEase, China’s second-biggest online games provider, rose 2 percent to $29.79, a record high.” Those rumors were substantiated as NetEase is now the provider for WOW in China.

For more specifics on the class-action lawsuit, you can part of the law firm’s press release at Coughlin Stoia Geller Rudman & Robbins LLP , and also reference the complaint itself at their their home page.

There is also a very concise summation of the case on JLM Pacific Epoch which distill the scenario in a couple of paragraphs. One notable quote, “Shares in The9 dropped 18% to $8.35 on July 15, after The9 reported a $36.9 million or 72% reduction in 2008 net income due to the loss of its operating license for World of Warcraft.”

If you’re desiring a little more background information on China and gaming, you can read:

Gamedaily: China to See Nearly 65 Million Online Gamers This Year

Gameindustry.biz interview with Blizzard(WOW publisher) about the size and scope of the manpower and computer resources used to run the online world across the globe

Gamasutra article from September 21 that World Of Warcraft Restarts Commercial Operation In China. The most notable quote: “Close to half of World of Warcraft’s 11.5 million users are Chinese — but analysts such as Lazard’s Colin Sebastian have estimated that, due to the Chinese business model and licensing structure, the region accounts for just 6 percent of WoW revenues”.

And an article from 2005, but still extraordinary in its relevancy, by “Gaming Steve”. It details his reading of the public disclosure required, and some financial truths, and then further some estimates, that can be gleaned from that public information.

I will be following this case as it unfolds, and hopefully we will all learn what level of transparency is required by a gaming company, publisher, or distributor in its public statements. As the money made from virtual worlds and games increases exponentially, we will most likely look forward to an increase in similar types of lawsuits.

Jay Moffitt is a Tennessee attorney. This blog is for entertainment and educational purposes only and does not consitute legal advice or create an attorney/client relationship. Jay Moffitt is not certified as a specialist in this area by Tennessee and Tennessee does not certify specialists in this practice area. All comments will be answered promptly and courteously as long as they are germane to the discussion and do not contain specific game names or incidents.

Blogger Freebies Could be Ad Fraud (Yahoo) This is a very informative article, the main surprising point being “The voluntary guidelines offer broad suggestions for how advertisers can avoid deceptive marketing strategies. These guidelines, however, were last updated in 1980, so the agency wanted to consider new marketing techniques, like blogs.”

Do you know how many smalltime bloggers?(CNet) The article notes “The practice of free products for bloggers, most of whom are not bound by ethical guidelines that journalists have historically followed, has been making headlines for some time now.”

WSJ article about Paid to Pitch

With the new social media the last 5 years, bloggers have taken on a larger role in commentary and influence. As the articles explain, Congressional hearings have taken commentary on possible ethics issues with bloggers. As the top bloggers, including video game sites, have audiences in the millions, they often give reviews on sports games, video games, and computer games. The new FTC oversight will purportedly assist the readers in understanding whether a blog has been given a game, accessory, or software – as that information helps the reader determine whether a reviewer might be biased.

Even though the concept of the rules make sense overall, the difficulty of this is the enforcement. Does the taking of a free console game make the reviewer a criminal if they do not disclose it and give a good review; are they less of a criminal if they take the game and give a bad review anyway? Does that prove they are ethical, or just prove they’ll not get another free game from that company? Other sites have commented on the overall ethics of video game reviews, and it seems murky water for the FTC to be covering. (For some perspective, read this article from a video game publisher about negative reviews)

FTC takes on pay-per-post This article describes the new regulations covering social media. It’s possible, said the article, that the regulations could impact Google adsense words. The main point made by the article seems to be that bloggers are responsible for maintaining some ethical guidelines.

Well, it’s early on these regulations. For now, here’s 3 for the B(usiness)

1. If you’re a video game reviewer for a blog, or in any way give a positive or negative input on a game, you should disclose whether you received the game as a comp or not. Morally and ethically it’s the high ground, and if there’s a worst case scenario you have a good defense against a possible (though extremely unlikely) event of FTC questioning.
2. If you are running a site or online magazine reviewing games, you need to include guidelines for your reviewers that if they receive comps or discounted pricing for games they put forth an opinion on, they must make a clear disclosure of this fact as a condition of their continuing participation.
3. If you are the legal counsel for an online magazine or games blog, you should consult these regulations to make certain your clients are fully protected.

Jay Moffitt is a TN attorney. The statements here are not legal advice, and no attorney/client relationship is created. Jay Moffitt claims no certification in this specialty, and TN does not offer a certification in this area of law. Copyright, Jay Moffitt, 2009. Comments are welcomed and will be answered promptly and courteously.