As the year comes to a close and the world looks forward to 2017, it’s important to look back on significant events that have made an impact on our industry, and to learn from them.
We’ve seen some troubling events happen in 2016, particularly as it relates to cybersecurity. From Pokémon Go getting hacked within the first two days of its release, to the FBI indicting scammers who swindled Electronic Arts (EA) for millions in in-game currency, there have been plenty of cyber attacks that have, and will continue to, affect video game developers, publishers, and players.
Reflecting on the past year, there are three major cybersecurity trends that have emerged that had an enourmous impact on the video game industry in 2016, and which will doubtless continue to do so in the upcoming year:
- Increasing awareness. When we started Panopticon Labs three years ago, Kaspersky Labs was the only organization talking about the cyber threats faced by the video game industry. Now, it is all over the news, as cyber attacks on video games increase in frequency and their resulting financial and reputational damages are realized. In fact, Trend Micro released a report in October detailing the increasing threats to the video game industry through the use of the gray market for online video game currency and items.
- The industry and media are starting to assign real money value to the losses that the industry is facing. From talking to video game publishers and through our own industry research, we have found that video game publishers lose up to 40% of their in-game micro-transaction revenue due to fraudulent and abusive activity inside of their games. However, there are many ways in-game fraud can erode video game profits – from decreased ad revenue, to increased staff costs, to server and legal fees.
- Government/legal involvement. Real money is being lost and real people are being hurt. Sooner or later, the government is going to regulate the industry in relation to fraud and protecting their customers. We are encouraging the industry to develop its own standards to avoid government involvement as much as possible.
In short, it appears that the video game industry is finally realizing what we’ve been warning publishers about since we founded Panopticon Labs in 2013. As the first in-game cybersecurity company to protect online video game publishers from the financial and reputational damage of in-game cyber attacks, we're uniquely positioned to help mitigate the threats facing publishers today and in the future, But for this to happen, executives and operations-level folks must come together, acknowledge the true size and scope of the challenges in their current fraud and risk environment, and put a pragmatic plan in place designed to neutralize bad actors' corrosive affect on the games, and the virtual worlds, we love. I know it's not an easy task, and nobody likes talking about these issues, but in our current monetization enviromnent, where an online game's financial success often depends on reviews, Let's Play videos, and continued microtransaction sales made by players who return to compelling virtual worlds again and again, they must be addressed.
