CONTENTS. 3 A 2014 Message from ESA President and CEO Michael D. Gallagher Years Later: ESA Celebrates Growth, Industry Evolution

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1 2014 ANNUAL REPORT

2 CONTENTS 3 A 2014 Message from ESA President and CEO Michael D. Gallagher 4 20 Years Later: ESA Celebrates Growth, Industry Evolution 6 Leveraging Games for Learning 8 E Dominates Global Stage 10 Promoting Civic Education, Engagement Through Play 12 Video Game Voters Network Rocks The Vote 14 Federal Government Affairs 18 State Government Affairs 22 Communications & Industry Affairs 24 Legal, Policy & Regulatory Affairs 27 ESA Foundation 29 Entertainment Software Rating Board 34 Entertainment Software Association of Canada 36 ESA Members

3 A MESSAGE FROM MICHAEL D. GALLAGHER Dear Friends: It is with great pleasure that I present the Entertainment Software Association s (ESA) 2014 Annual Report. It was a momentous year for our association as we proudly celebrated 20 years of representing the video game industry. During that transformative period, we had the honor of communicating the vital role that video games play in modern society, defending our industry from critics and celebrating the innovative ways games improve how people live, learn, work and play around the world. In 1994, our association started with seven companies and represented a $7 billion industry. Today, ESA features 32 members and entertainment software companies now generate more than $20 billion in U.S. sales. As our "Video Games in the 21st Century: The 2014 Report" found, our industry s economic power touches communities across the country, directly and indirectly employing tens of thousands of Americans and contributing $6.2 billion to the U.S. economy. In fact, the video game industry grew by nine percent from 2009 to 2012 four times the growth of the U.S. economy. While other industries shed workers in that time period, video game industry employment grew annually by 9 percent, more than 13 times the growth rate of the overall labor force. Underpinning this growth are the innovative products and technologies that have long made video games the most cutting-edge industry in the world. The newest generation of consoles the Microsoft Xbox One, Sony PlayStation 4, and Nintendo Wii U offers players stunning HD graphics, immersive game play, lightningquick multiplayer connections and the best multimedia experiences on the market. Advancements in wireless platforms, broadband connectivity, streaming services and cloud computing allow consumers to access games and entertainment content across multiple screens, giving on-demand game play a whole new meaning. Tens of millions of Americans play video games on their smartphones and tablets, which has revolutionized the industry and introduced more people to video games than ever before. The global revenue forecast for mobile game play for 2014 is $25 billion; that number is expected to rise to more than $30 billion in The last two decades have involved a sea change in our industry; games that once purely entertained now solve pressing global challenges and push society in new, exciting directions. Taken together, those 20 years offer a glimpse of our very bright and limitless future, not because of individual games or platforms, but because of how far we have come in such a relatively short time. The path forward undoubtedly will be just as vibrant, exciting and rewarding. Sincerely, Michael D. Gallagher President and CEO Entertainment Software Association 2 ESA 2014 ANNUAL REPORT 3

4 20 YEARS LATER ESA CELEBRATES GROWTH, INDUSTRY EVOLUTION Video games have transformed in the last two decades. Once viewed purely as entertainment for the few, video games are now a mass medium that plays a pivotal role in solving some of society s biggest challenges. In 2014, ESA proudly marked 20 years of representing this dynamic industry and celebrated both the growth and evolution of video games. ESA President and CEO Mike Gallagher speaks with guests at ESA s 20th anniversary reception. A new report ESA released in November, "Video Games in the 21st Century: The 2014 Report," highlighted the industry s growth and demonstrated its position as an economic powerhouse. From 2009 to 2012, the video game industry s revenue grew by 9 percent four times the growth of the U.S. economy. This economic activity touched communities across the country, contributing $6.2 billion to the American economy in While industries around the country shed workers from 2009 to 2012, video game industry employment grew annually by 9 percent, more than 13 times the growth rate of the U.S. labor force. These economic contributions are even more staggering when compared to industry sales 20 years ago. In 1994, the year ESA was founded, the retail video game industry represented a $7 billion market. Today, interactive entertainment software companies generate more than $21.5 billion in U.S. sales and directly and indirectly employ more than 146,000 Americans. The rise of mobile, broadband and connected play, along with a continually expanding consumer base, is expected to complement the steady growth of consoles and PC games. Some analysts project that the overall video game market will top $111 billion by To keep pace with the rapidly advancing industry, ESA expanded its membership and services. Founded by seven companies, ESA now features 33 members, including industry leaders such as Microsoft, Nintendo of America, Sony Computer Entertainment America, Activision and companies that publish games for every platform available. ESA supports a robust global content protection program, conducts penetrating market research and ensures that the industry s voice is heard through its government relations accomplishments. Notably, decades of work defending video games resulted in a 2011 victory before the U.S. Supreme Court, which affirmed that, like books, music and movies, video games are a form of creative expression protected by the Constitution. ESA also runs Electronic Entertainment Expo (E3), a globally-recognized premier trade show for entertainment software. Additionally, ESA partners with various organizations to advance the use of games and game technologies that improve everyday life. For instance, a partnership with Electronic Arts, Institute of Play, the MacArthur Foundation and the Bill & Melinda Gates Foundation was responsible for creating the Games, Learning and Assessment Lab (GlassLab); an unprecedented research and development effort that is transforming learning and assessment practices through digital games. ESA continues to encourage gamers civic engagement and provide parents with information about video games. Through the Video Game Voters Network (VGVN), a grassroots organization of more than 600,000 voting-age game enthusiasts, ESA educates gamers about political issues and motivates them to take action. ESA also backs a variety of dynamic tools, including the world-class video game rating system Entertainment Software Rating Board (ESRB) that helps parents and consumers make informed entertainment choices. ESA celebrated its anniversary with a reception during the holiday season that highlighted the association s many accomplishments, but also the industry s growth and evolution. ESA also partnered with the Congressional Caucus for Competitiveness in Entertainment Technology (E-TECH Caucus) to host a Capitol Hill briefing about the many ways video games improve our economy and daily lives. Rep. Derek Kilmer (D-WA) was one of several policymakers who attended the briefing. As someone who grew up playing Madden Football and Mario Brothers and as the dad of two little girls who have worked their way through half of the apps available, I have a tremendous appreciation for the video game industry, said Rep. Kilmer. First, the products are fun, empowering people young and old to be creative and active to box against Muhammad Ali or build a new world in Minecraft. But this industry is also playing a key role in sparking interest in math and science. Preparing all our children for the jobs of the future will increasingly mean teaching students to learn how to create code or design apps. Developers and innovators are key to creating the games that get kids excited about math and science while giving them a chance to develop needed skills. This industry is also playing a key role in sparking interest in math and science. Preparing all our children for the jobs of the future will increasingly mean teaching students to learn how to create code or design apps. Rep. Derek Kilmer (D-WA) ESA leaders look forward to a promising future. The next 20 years will undoubtedly build on the many successes long-term industry growth, a broad consumer base, continued innovation and expanding social benefits of games that have established and continually promote video games as an integral part of society, said ESA President and CEO Mike Gallagher. We are excited to see what the next 20 years will bring. 4 ESA 2014 ANNUAL REPORT 5

5 LEVERAGING GAMES FOR LEARNING Today, educators recognize the impact of entertainment software and utilize games as a teaching device in a growing number of classrooms and business settings. Entertainment software helps impart knowledge, teach life skills and reinforce positive habits in students of all ages. ESA engaged in a number of partnerships in 2014 to highlight and encourage this trend, including sponsoring The Atlantic s fourth consecutive Technologies in Education Forum in Washington, D.C. The September event convened education experts, education technology innovators, policy makers and industry representatives for a series of discussions about how to leverage new technologies, policies and other tools to transform our education system. Many participants advocated for an increased use of educational technologies in the classroom and a greater focus on fostering students digital literacy. ESA also supported the Games, Learning and Assessment Lab (GlassLab), a ground-breaking collaboration with Institute of Play, Electronic Arts, The Bill and Melinda Gates Foundation and The John D. and Catherine T. MacArthur Foundation to research and develop digital game-based learning and assessment tools. GlassLab launched its newest game, Mars Generation One: Argubot Academy, at the 11th annual Games for Change Festival in April. Developed in partnership with NASA, the tablet-based game teaches students how to make evidence-based claims and is aligned with Common Core State Standards. Another ESA-supported initiative, the 2014 National STEM Video Game Challenge began accepting submissions in November. The annual game design competition challenges students and developers to create original games that stimulate interest in science, technology, engineering and math (STEM) learning. By stressing the importance of STEM education and developing creative new ways to stoke students interest in these highly sought-after skills, the Challenge helps prepare students for the high-skilled jobs that await them. Challenge partners include The Joan Ganz Cooney Center at Sesame Workshop, AMD Foundation, E-Line Media, the American Library Association and the Boys & Girls Clubs of America. To help educate and empower the next generation of video game industry leaders, ESA partnered with the Hispanic Heritage Foundation s Leaders on the Fast Track (LOFT) program to offer the second annual ESA LOFT Video Game Innovation Fellowship. Now in its second year, the fellowship program challenges minority youth ages to design video games and apps that promote social change within their community. Twenty fellows were selected based on their creativity and their games potential to generate positive impact. Winners received a $1,000 grant to develop their game and traveled to Washington, D.C. in October to visit the White House and present their ideas to Administration officials and Members of Congress. ESA also supported the creation of the Higher Education Video Game Alliance (HEVGA). Launched in July, HEVGA is a first-of-itskind organization that will provide leading academics with a platform to highlight best practices for video game education, publish research, and strengthen connections between the industry and academia. HEVGA will also inform policymakers and the media about the critical role that video game programs play in preparing students for the 21st century workforce. According to ESA s annual college list, nearly 400 U.S. colleges, universities and trade schools offer video game-related courses and degree programs a number which has increased by 50 percent since HEVGA will support the continued growth of such programs and foster collaboration to meet workforce needs. With video games poised to revolutionize education in the years ahead, ESA remains committed to advancing the medium s potential as a learning tool through these and other partnerships. ESA LOFT Video Game Innovation Fellows traveled to Washington, D.C. to visit the White House and present their ideas to Administration officials and Members of Congress. 6 ESA 2014 ANNUAL REPORT 7

6 48,900 Approximate number of video game industry professionals, investor analysts, journalists and retailers who attended E DOMINATES GLOBAL STAGE Hosting the video game industry s premier global trade shows requires eight football fields worth of meeting rooms and exhibit space. It requires enough Ethernet cables to stretch from New York City to Chicago. And it requires more bandwidth than most U.S. cities require in a year. Attendees from 100+ countries Above all, it requires months of preparation and an integrated plan including unique partnerships, compelling displays, social media engagement and outreach to stakeholders and media. In 2014, ESA drove E3 to be the most engaging event in the show s history. Notably, E broke its previous engagement numbers across all social channels, recording more than two million posts on Facebook, Twitter and Instagram combined. Partnering with Twitch to be E3 s official streaming partner also drew millions of online viewers. Increased attendance, participation in E3 s VIP buyer program for retailers and media impressions were just a few of the show s successes. 4 million unique Facebook likes, an increase from 3 million in 2013 A record-setting 5.9 million unique viewers the most viewers for any event Twitch has streamed 490,000+ Instagram photos and videos tagged with #E3 and #E32014 #E3 and #E32014 trended in the U.S. and worldwide 49+ billion impressions worldwide 12 million unique Twitch viewers over the four days of the event 8 E attendees experience the latest video game innovations firsthand million tweets ESA 2014 ANNUAL REPORT 9

7 PROMOTING CIVIC EDUCATION, ENGAGEMENT THROUGH PLAY Run for president? Check. Pass federal laws? Check. Take a seat on the U.S. Supreme Court? Check. These opportunities are all available to students through icivics, an ESA Foundation grantee that provides online learning platforms that leverage games to teach kids about American government and encourage them to become engaged citizens. Students learn about government, constitutional law and community service through icivics games. Established by Supreme Court Justice Sandra Day O Connor in 2009, icivics offers nearly 20 web-based games that provide instruction on a variety of topics, including community service, government powers, constitutional laws, civil rights and more. Each of the games comes with suggested learning plans that are tailored to meet state-specific learning standards. Since 2010, the ESA Foundation has played an important role in icivics development, bolstering its ability to serve as a repository of effective and engaging educational resources for teachers. Educational games and interactive learning experiences are at the core of what icivics stands for, and how they advance the goals of civic education, said Carrie Ray-Hill, program director at icivics. Games provide virtual settings for students to move through civic spaces, which allows them to experience situations as engaged citizens. icivics most recent project involved the development of DBQuest: Eyes on the Prize, an online learning platform designed to teach students about the Civil Rights Movement. Funded solely by the ESA Foundation, DBQuest allows students to explore the experiences of those involved in the civil rights movement, particularly the Nashville sit-in movement of 1960, and challenges them to consider the complexity of social change. U.S. Supreme Court Justice Sandra Day O Connor speaks with students as they play some of icivics educational online games. Beyond teaching students about a critical period in American history, the platform seeks to enhance students core literacy, critical reading and persuasive writing skills by requiring them to distill information presented in the game into a series of short persuasive essays. Our rapidly changing world has made the age-old skills of reading for comprehension and understanding our country s historical documents more important than ever, said Justice O Connor. icivics newest literacy tool, DBQuest: Eyes on the Prize, provides students with opportunities to build these crucial skills. We are grateful to the ESA Foundation for their support in bringing DBQuest to classrooms nationwide. icivics games and curriculum are now actively used by more than 50,000 educators annually, reaching more than four million students every year. The American Library Association named icivics to its Best Websites for Teaching & Learning, which recognizes sites that foster the qualities of innovation, creativity, active participation and collaboration. The American Library Association named icivics to its Best Websites for Teaching & Learning, which recognizes sites that foster the qualities of innovation, creativity, active participation and collaboration. The ESA Foundation s support allows us to create and provide unique learning experiences for students and teachers alike, said program director Ray-Hill. They embrace nonprofits who rely on philanthropic support to continue to serve youth across the country at no financial cost. 10 ESA 2014 ANNUAL REPORT 11

8 VIDEO GAME VOTERS NETWORK ROCKS THEVOTE As part of VGVN s partnership with Rock the Vote, nearly 50 members shared stories about the importance of video games and civic engagement in their lives. Gamers are an enthusiastic group and are not afraid to speak up. In 2014, the Video Game Voters Network, a grassroots organization of more than 600,000 voting age gamers, partnered with Rock the Vote to help gamers stand up and be counted by registering to vote. Known for its signature mix of politics and pop culture, Rock the Vote mobilizes young American voters and protects voting rights. With its extensive reach and longstanding use of innovative technologies, Rock the Vote was a natural partner for VGVN to promote voter registration among the gamer community ahead of the 2014 midterm elections. While Americans have embraced video games for decades and playing has become an important part of our culture, video games are sometimes the target of political criticism or intrusive legislation. Elections provide gamers with an important opportunity to defend the video games they love. Working with Rock the Vote, VGVN launched a new online voter registration tool on VideoGameVoters.org for members to create and submit digital voter registration forms in every state. This tool allows users to register to vote in five minutes. VGVN also sponsored a Rock the Vote concert event that helped to recruit new community members. Nearly 50 community members shared stories about the importance of video games in their lives and why civic engagement is crucial. Voting is your voice! If you don t register and vote, you are missing the most important opportunity you have to facilitate change Vote every chance you get, wrote one member. VGVN continued to partner with a variety of organizations to help engage and activate gamers. This included a sponsorship of One Nation of Gamers Hearthstone tournament that drew more than 58,000 new members, a free Bonus Round concert at South by Southwest Interactive that resulted in 34,000 new advocates and Red Bull for their Battle Grounds esports tournament where VGVN members could purchase discounted tickets. 12 ESA 2014 ANNUAL REPORT 13

9 The Landscape for the Growing Video Game Field: Higher Education Programs and Industry Across America DRIVING EDUCATION, INNOVATION & JOBS CA OR 1 NV 14 WA AZ ALASKA ID UT 5 13 MT NM 1 WY 3 CO HAWAII 1 2 Higher Education Video Game Alliance: A platform to connect top video game design academic programs with thought leaders, policy makers, and industry stakeholders. This map shows the current ecosystem of higher education video game programs and development studios The Alliance seeks to augment and support. TX ND SD NE KS OK 3 3 MN IA 2 2 LEGEND SCHOOLS Numbers of studios MO STUDIOS AR LA WI IL MS 2 TN MI IN 13 AL 1 GA VT 1 1 SC SCHOOLS NH 3 1 NC 1 NY FL STUDIOS 11 PA OH WV 7 VA 1 KY ME MA RI 2 1 CN 6 9 NJ 9 11 DE DC 3 1 MD Higher Education Video Game Alliance P.O. Box Washington, DC HEVGA ( ) info@higheredgames.org HigherEdGames.org FEDERAL GOVERNMENT AFFAIRS ESA s Federal Government Affairs (FGA) program advances the computer and video game industry s policy priorities with Congress and the executive branch. ESA leverages the industry s economic success, technological prowess, innovation and self-regulatory practices to inform Congress legislative agenda and raise ESA member company and industry visibility. In 2014, FGA continued building support for the industry by educating policymakers about key third-party and government partnerships that underscore video games potential to stimulate education innovations. HIGHER EDUCATION VIDEO GAME ALLIANCE In 2014, ESA worked with several representatives from leading video game design college and university programs to launch the Higher Education Video Game Alliance (HEVGA). HEVGA creates platforms for higher education leaders to underscore the cultural, scientific and economic importance of video game programs in colleges and universities. A robust network of resources, including unified advocacy, policymaker engagement, media coverage and external funding, will incubate and harness the community s impact in the 21st century learning environment. HEVGA launched at the Aspen Ideas Festival in June HEVGA has 55 member colleges and universities and is growing. WHITE HOUSE OUTREACH In October, Vice President Joe Biden met with Electronic Arts (EA) CEO Andrew Wilson, ESA CEO and President Mike Gallagher and ESA Senior Vice President of Government Affairs Erik Huey in San Francisco to discuss innovation and workforce issues pertaining to the video game industry. ESA also convened a roundtable at EA to discuss the state of the industry, innovation, jobs and policy matters with Department of Commerce Secretary Penny Pritzker. Afterwards, Secretary Pritzker toured GlassLab and received game demonstrations. Commerce Secretary Penny Pritzker tours GlassLab. LAUNCH EVENTS MADDEN NFL 15 On September 18, ESA and EA co-hosted a reception on Capitol Hill celebrating the launch of EA Sports Madden NFL 15. More than 300 guests, including EA CEO Andrew Wilson, played the new game and received a demonstration by former Washington Redskins player and Madden video game designer Clint Oldenburg. A CELEBRATION OF THE PLAYSTATION 4 On April 2, ESA and SCEA co-hosted A Celebration of the PlayStation 4 at the Carnegie Library in Washington, D.C. The event attracted nearly 500 guests including lawmakers, Capitol Hill staff, 14 ESA 2014 ANNUAL REPORT 15

10 White House executives, stakeholders, thought leaders and friends of the video game industry. In attendance were: Rep. Jim McGovern (D-MA), Rep. Scott Peters (D-CA), Rep. Michael Burgess (R-TX), Former Senate Majority Leader Tom Daschle (D-SD), White House Office of Science and Technology Policy Senior Advisor for Digital Media Mark DeLoura, and White House Senior Domestic Advisor Tom Kelly. SCEA General Counsel Riley Russell and ESA Senior Vice President of Government Affairs Erik Huey speak with E-TECH Caucus Co-Chair Rep. Jim McGovern (D-MA) at A Celebration of the PlayStation 4. Congressional staffers enjoy the latest video game technology at A Celebration of the PlayStation 4. MICROSOFT XBOX ONE RECEPTION On November 13, ESA and Microsoft co-hosted a reception for the Xbox One at the W Hotel in Washington, D.C. Four hundred guests attended, including: Rep. Doug Collins (R-GA), Rep. John Barrow (D-GA), White House Office of Science and Technology Policy Senior Advisor for Digital Media Mark DeLoura, White House Office of Public Engagement Associate Director Raul Alvillar, Commerce Department Office of Policy and Strategic Planning Senior Advisor Josh Mandell, New Democrat Network President (NDN) and Founder Simon Rosenburg, USA Today reporter Greg Toppo, Business Software Alliance CEO Victoria Espinel, and More than 90 congressional staffers. LEGO MOVIE VIDEO GAME On February 7, ESA featured Time Warner s The Lego Movie Videogame in conjunction with a screening of The Lego Movie at the Motion Picture Association of America s Washington, D.C. office. GAMES FOR CHANGE FESTIVAL On April 22-24, Huey spoke at the 11th annual Games for Change/ Tribeca Film Festival in New York, N.Y. Also at Games for Change, GlassLab launched its second educational video game, Mars Generation One: Argubot Academy, which it developed in partnership with NASA. ESA worked with NASA s Jet Propulsion Laboratory (JPL) to feature JPL Systems Engineer Bobak Ferdowsi (known as the Mohawk Guy) on the panel which announced the game. GAMES & LEARNING SUMMIT AT E3 On June 10, FGA hosted the fifth annual Games & Learning Summit at E in Los Angeles. This public-private partnerships policy workshop was the incubator for several industry initiatives, including GlassLab and the National STEM Video Game Challenge. The event program featured several prominent speakers, including: White House Office of Science and Technology Policy Senior Advisor for Digital Media Mark DeLoura; President s Council on Fitness, Sports & Nutrition Executive Director Shellie Pfohl; Boys & Girls Clubs of America President and CEO Jim Clark; Microsoft Studio Manager of Team Dakota Michael Saxs Persson; Microsoft Executive Producer of Xbox Fitness Michelle Tatom; Ubisoft Associate Director of Brand Marketing Carrie Feigel Bischke; and Senior executives from organizations such as AARP, Gates Foundation and Sesame Workshop. BUILDING INDUSTRY PROFILE TECHNOLOGIES IN EDUCATION On September 11, ESA hosted The Atlantic s fourth annual Technologies in Education Forum in Washington, D.C. ESA CEO and President Mike Gallagher was a featured panelist on a discussion titled Best Practices: Implementing and Maximizing Technology in the Classroom. The Atlantic Washington Editor-at-Large Steve Clemmons moderated the panel, which also included Georgetown University Director of Children s Digital Media Center Sandra Calvert, Amplify CEO Joel Klein and Alliance for Excellent Education President and the Honorable former West Virginia Governor Bob Wise (D). Mike Gallagher speaks at The Atlantic s Technologies in Education Forum. NPR MARKETPLACE On July 30, National Public Radio s Marketplace program profiled ESA s federal and state apparatus in a three-minute, nationwide segment titled Video Game Lobby Answers Call of Duty on the Hill. BUILDING POSITIVE RELATIONSHIPS AND ENVIRONMENTS ESA and 1776 co-hosted an Ed Games Expo sponsored by the U.S. Department of Education. ED GAMES EXPO On September 3, ESA and tech incubator 1776 co-hosted an Ed Games Expo sponsored by the U.S. Department of Education. The event, which was inspired by the White House Office of Science and Technology Policy, showcased over 20 educational games for more than 100 representatives from the White House, Department of Education, Smithsonian American Art Museum, Boys & Girls Clubs of Greater Washington, NDN, Partnership for a Healthier America, National Science Foundation, EverFi and staff from key congressional committees. ESA and 1776 co-hosted the first Ed Games Expo, where guests played several educational video games. Inspired by the White House Office of Science and Technology Policy, the event showcased more than 20 educational games for representatives from the White House, Department of Education, Smithsonian American Art Museum, Boys & Girls Clubs of Greater Washington, New Democrat Network, Partnership for a Healthier America, National Science Foundation, EverFi and staff from key congressional committees. 16 ESA 2014 ANNUAL REPORT 17

11 STATE GOVERNMENT AFFAIRS ESA s State Government Affairs (SGA) department focused its energy and resources on the positive aspects of computer and video games among elected opinion leaders through advocacy, education and building allies at all levels of government across the country. Leveraging its relationships with legislators, governors and state attorneys general in 2014, SGA worked to enhance environments that support industry growth, job expansion and innovation. TAX INCENTIVES Throughout 2014, SGA advocated for new tax incentive legislation to make certain game-development expenses reimbursable and support the video game industry s expansion in Illinois, New York and Pennsylvania. SGA continues working to ensure Florida s Entertainment Industry Financial Incentive Program and Texas Moving Image Industry Incentive Program are renewed and adequately funded. NEW YORK New York State Sen. Martin Golden (R) proposed legislation to create a stand-alone incentive program for the computer and video game industry worth $10 million annually. While the Mike Gallagher welcomes Redmond Day participants to Nintendo of America. legislation was unsuccessful, SGA s efforts resulted in greater support from Gov. Andrew Cuomo s (D) administration, and positioned the legislation well for the coming legislative session. On September 16, ESA Senior Vice President of Government Affairs Erik Huey gave an industry overview at a field hearing hosted by Sen. Golden. A follow up to several roundtables held last year, the hearing, Next Steps in Growing the Future in Computer and Video Game Development in New York Industry and Entrepreneurs Roundtable, continued to discuss how to move tax incentives forward. Vicarious Visions President and Founder Guha Bala and Take-Two Interactive Head of Finance and Corporate Development Rowan Bajaj participated, along with several local academics and game company representatives. On March 19, ESA coordinated a tour of Activision Blizzard s Vicarious Visions studio in Albany, N.Y., with Sen. Golden to highlight the potential economic impact of the industry on upstate New York. TEXAS On October 24, ESA sponsored a Lunch and Learn panel discussion during the International Game Developers Association s (IGDA) Captivate Conference in Austin, Texas, at the Highland Center of the Austin Community College. Huey moderated a discussion about the value of maintaining the state s Moving Image Industry Incentive Program. The discussion featured Texas State Rep. Larry Gonzales (R), Texas Film Commission Director Heather Page and Electronic Arts (EA) Senior Director Global Government Affairs Craig Hagen. On August 27, ESA Vice President of State Government Affairs Tom Foulkes and Texas Film Commission Director Heather Page testified before the Texas Select Committee on Economic Development Incentives to support the Texas Moving Image Industry Incentive Program, and to highlight its success in cultivating the state s entertainment software industry. Additional activity on economic incentives included ESA Director of State Government Affairs Tim Johnson s testimony before a committee hearing in Austin on April 23 and Foulkes testimony on February 28 at a field hearing in Dallas. PENNSYLVANIA SGA advocated for new tax incentive legislation to make certain gamedevelopment expenses reimbursable and support the video game industry s expansion in Illinois, New York and Pennsylvania. In advance of Pennsylvania s 2015 legislative session, ESA worked with legislative leaders to build grassroots support among local elected officials, academics and industry representatives to encourage creation of an incentive program to support Pennsylvania s growing digital media industry. Through a series of roundtable discussions, ESA promoted the economic benefits of an incentive program and demonstrated that the state s digital economy brain-drain can be mitigated through targeted, pro-industry policies. On September 11, Pittsburgh City Councilman Dan Gilman (D) chaired a hearing on video game production in Pennsylvania, including how government can keep Pennsylvanian graduates in the state. Huey represented ESA on the panel, which also featured the heads of college video game design programs at Carnegie Mellon, Drexel and Harrisburg Universities. ESA Senior Vice President Erik Huey takes part in a hearing chaired by Pittsburgh City Councilman Dan Gilman (D) (left). As part of the Thrival Festival, a Pittsburgh-based multi-day innovation economy event focused on video games, music and the arts, ESA hosted a panel of academics, elected officials and local game company representatives to discuss how to grow Pennsylvania s video game industry. The panel discussion was a follow-up to previous panels ESA hosted in Pittsburgh and Philadelphia. Foulkes moderated the panel. ESA Vice President Tom Foulkes (foreground center) moderates a panel at the Thrival Festival. 18 ESA 2014 ANNUAL REPORT 19

12 On May 6, ESA and Harrisburg University hosted a roundtable policy discussion in Harrisburg about how government policies can foster industry growth. State Reps. Paul Costa (D) and Brian Ellis (R) attended, along with a representative of Sen. Daylin Leach (D), who introduced a digital media incentive last year. Members of the Pennsylvania Department of Economic Development and representatives from local game companies Schell Games and Dark Tonic attended as well. ADDITIONAL OUTREACH In the fall, SGA and GlassLab introduced Jessica Lindl, GlassLab s general manager, to superintendents across the country to increase its name recognition and expand schools use of innovative education software. Working closely with GlassLab executive leadership, SGA identified more than 50 school districts as outreach targets for GlassLab is now being actively promoted in 15 states. TEXAS ESA was part of a roundtable policy discussion that featured heads of college video game design programs at Carnegie Mellon, Drexel and Harrisburg universities. During the South by Southwest Gaming Expo, ESA President and CEO Mike Gallagher presented an award to Texas Gov. Rick Perry (R) at an ESA-hosted reception at the governor s mansion to thank him for his work promoting the video game industry. Several members of Austin s video game community, Blizzard Entertainment General Counsel Eric Roeder, Microsoft Director of Industry Affairs Suhail Khan, SCEA Director of Corporate Compliance Kevin Chung and Rep. Blake Farenthold (R) attended. On October 24, Huey and Foulkes honored more than 75 students who completed ESA s Digital Living Project at a certification award ceremony at Mendez Middle School in Austin, Texas. Texas Education Agency Commissioner Michael Williams and Austin Independent School District board members Jayme Mathias and Ann Teich participated. ESA President and CEO Mike Gallagher presents an award to Texas Gov. Rick Perry (R) for his work promoting the Texas video game industry. ESA Senior Vice President of Government Affairs Erik Huey, ESA Director of State Government Affairs Tim Johnson and Texas Education Agency Commissioner Michael Williams (between students) help students play educational computer games. WASHINGTON On April 28, SGA coordinated with member companies Microsoft and Nintendo of America (NOA) to host nine Washington state legislators, a member of the Department of Economic Development and seven legislative staffers for ESA s inaugural Redmond Day. Attendees toured Nintendo s and Microsoft s offices, discussed policies needed to keep the state s video game industry competitive, and participated in product demonstrations. ESA President and CEO Mike Gallagher, and NOA President Reggie Fils-Aime and Microsoft Vice President and Deputy General Counsel of Devices and Studios Rich Wallis participated in the program. 343 Industries General Manager Bonnie Ross discusses what it takes to create Halo with Redmond Day participants at Microsoft. MINNESOTA On August 20, ESA hosted a video game lounge reception featuring the PlayStation 4, Wii U and Xbox One for a Young & New Professionals event at the National Conference of State Legislatures Annual Meeting. Foulkes spoke to more than 150 attendees about the U.S. video game industry. CALIFORNIA On May 19, Foulkes joined representatives of Los Angeles elected leadership and local educators to honor more than 150 graduates of ESA s Digital Living Project at Vaughn International Studies Academy. This interactive, new-media learning platform prepares students for the digital world. Sponsored by ESA and powered by EverFi, Inc., this program is currently in more than 60 Los Angeles Unified School District schools. SGA, Microsoft and Nintendo of America hosted Washington state legislators, the Department of Economic Development and legislative staffers at ESA s inaugural Redmond Day. On June 10, California Lt. Gov. Gavin Newsom (D) attended E and toured the PlayStation, Microsoft, EA and Ubisoft booths. Lt. Gov. Newsom met EA CEO Andrew Wilson, Ubisoft President of North America Laurent Detoc and 343 Industries Studio Head Bonnie Ross. Lt. Gov. Newsom also attended an event hosted by Wedbush Securities Analyst Michael Pachter and met several ESA board members and senior industry executives. BUILDING POSITIVE RELATIONSHIPS AND ENVIRONMENTS ESA introduces GlassLab and its innovative games to school administrators. GlassLab General Manager Jessica Lindl visited superintendents across the country to educate and expand schools use of education software. Together, SGA and GlassLab identified more than 50 school districts as outreach targets for SGA is promoting GlassLab in 15 states. Attendees play Mario Kart 8 at the Young & New Professionals reception. Graduates of the ESA Digital Living Project at Vaughn International Studies Academy in Los Angeles, Calif. 20 ESA 2014 ANNUAL REPORT 21

13 COMMUNICATIONS & INDUSTRY AFFAIRS Through a program of media outreach, events, digital communications and grassroots advocacy, Communications & Industry Affairs (C&IA) educated policymakers, members of the media, other opinion elites and the general public about the evolution of the video game industry. The department underscored gamer audience diversity and highlighted the contributions that games made to the U.S. economy and in social issues, including the education and health fields. C&IA publicized ESA s major partnerships, initiatives and legislative efforts, including support for HEVGA. INDUSTRY COMMUNICATIONS C&IA organized the 2014 E3 College Game Competition that recognizes top student video game design talent from U.S. colleges and universities. Student teams represented more than 40 universities in the competition. A blue ribbon panel of industry professionals selected the Savannah College of Art and Design s team as the winner. Their game, Prisma, follows a girl on her journey through different dimensions. A student team from the University of Utah was among the E3 College Game Competition finalists who had an opportunity to present an original video game at E In November, C&IA released "Video Games in the 21st Century: The 2014 Report," which quantified the industry s economic impact. The report s key findings included that the video game industry added more than $6.2 billion to the U.S. economy in 2012, and grew by more than 9 percent from C&IA also released a series of state-specific reports to showcase the industry s value added and employment growth in 36 states. The report generated positive media coverage in state and regional print, broadcast and online outlets across the country. C&IA collaborated with the Hispanic Heritage Foundation s Latinos on the Fast Track (LOFT) program to offer the second annual ESA LOFT Video Game Innovation Fellowship. The fellowship awarded 20 minority youths, aged 15-25, with a grant to create a video game that helps solve social problems in their community. The 20 fellows traveled to Washington, D.C. in October for a STEM education panel on Capitol Hill featuring ESA President and CEO Mike Gallagher. The fellows also presented their game ideas to members of the Obama administration, Congress and national community leaders. The department developed and released the 2014 Essential Facts about the Computer and Video Game Industry, which highlighted the diversity of the gamer audience and popularity of video games delivered in digital formats. The research provided updated sales and usage data: the average game player is 31 years old, 71 percent of gamers are adults and 48 percent of gamers are women. C&IA collaborated with The NPD Group to conduct a survey examining mobile game play habits. In September, C&IA released the results from NPD s mobile games report, which found that approximately 33 percent of Americans age 13 and older play games on their smartphones, tablets and portable game devices. C&IA secured several speaking opportunities for ESA representatives at highprofile events, including the Silicon Flatirons Center s Digital Broadband Migration Conference, the Wireless Telecommunications Symposium, the Aspen Ideas Festival, U.S. News & World Report s STEM Solutions National Leadership Conference, GamesBeat and Law Seminars International s Gamer Technology Law seminar. VIDEO GAME VOTERS NETWORK VGVN is ESA s online community focused on promoting the positive impact that video games have in our society. Through legislative outreach, partnerships, active online forums and interaction with both new and mainstream media, VGVN s more than 600,000 members actively protected the rights of video game creators and consumers. COMMUNICATING ECONOMIC BENEFITS ESA research highlights the video game industry s positive economic impact. In 2014, VGVN: Leveraged its social media properties to urge members to challenge misguided claims about video games made by policymakers and the media. It mobilized members to send letters to MSNBC protesting Morning Joe co-host Mika Brzezinski s claim that video games are damaging to American minds. VGVN also launched a custom microsite to help drive member action. This initiative exposed VGVN to more than 1.6 million online users and recruited one new VGVN advocate for every 33 social engagements. Worked with video game industry personalities and advocates, including YouTube celebrity Patrick Scott Patterson and Village of Whitney Point, N.Y. Trustee Ryan Reynolds to secure and promote guest posts on VGVN s blog. Launched a redesigned website that features enhanced opportunities for advocates to join the movement. The new website includes tools for sharing stories about why protecting video games and voting are important and provides opportunities to learn about key issues and participate in activations. "Video Games in the 21st Century: The 2014 Report" reported that the video game industry added more than $6.2 billion to the U.S. economy in 2012 and grew by more than 9 percent from 2009 to State-specific reports showcased employment growth in 36 states. 22 ESA 2014 ANNUAL REPORT 23

14 LEGAL, POLICY & REGULATORY AFFAIRS ESA s Legal, Policy & Regulatory Affairs program supports the industry s collective legal interests by managing litigation to prevent direct attempts to regulate the industry s broad array of e-commerce issues that have a domestic and global effect. The department tracked cases that significantly impacted the industry and filed amicus briefs that support industry interests and provided reporting and analysis on IP, technology, privacy, security and trade. Industry interests were advanced on these issues through regulatory filings and advocacy before agencies, courts and policymakers. In 2014, ESA was a major player in the debate surrounding the Copyright Act triennial rulemaking process. COPYRIGHT HOUSE JUDICIARY COMMITTEE HEARING ON 1201 ANTI-CIRCUMVENTION PROTECTIONS On September 17, former ESA Senior Vice President and General Counsel Christian Genetski testified at a House Judiciary Committee hearing to highlight how technological protection measures fostered unprecedented growth in the video game industry by enabling game publishers to protect their works from piracy and to experiment with consumerfriendly business models. INTERNET POLICY TASK FORCE COPYRIGHT POLICY GREEN PAPER On November 13, ESA responded to the Department of Commerce s request for comments on a range of copyright issues, including the applicability of the first sale doctrine in the digital environment and the operation of the Digital Millennium Copyright Act s notice and takedown system. Genetski testified at a related public meeting on December 12, at the Department of Commerce s invitation. ESA represented the industry in two Department of Commerce roundtables held July 29 and 30 on whether the first sale doctrine should enable consumers to re-sell content obtained online. Disk burners and games were seized by agents during a raid in Mexico City. HOUSE JUDICIARY COMMITTEE HEARING ON DIGITAL FIRST SALE On June 3, ESA submitted an industry position paper in connection with the House Judiciary Committee s hearing on potential reforms to the first sale doctrine. In advance of the hearing, ESA met with staff from key House offices, including: Chairman Bob Goodlatte (R-VA), Ranking Members Jerrold Nadler (D-NY), Rep. John Conyers (D-MI), Rep. Judy Chu (D-CA), Rep. George Holding (R-NC), Rep. Ted Deutch (D-FL), Rep. Doug Collins (R-GA), and Rep. Hakeem Jeffries (D-NY). COPYRIGHT OFFICE INVITES ESA TO ROUNDTABLE DISCUSSION On April 4, in response to the Copyright Office s request for comments regarding whether Congress should comply with obligations under the World Intellectual Property Organization s Internet Treaties, ESA argued that U.S. law affords commensurate protection and cautioned against unintended consequences. In connection with the submission, the Copyright Office invited Genetski to participate in a May 5 roundtable. There, he reiterated the industry s concerns as expressed in the filing. INTERNATIONAL ESA represented the industry in two Department of Commerce roundtables held July 29 and 30 on whether the first sale doctrine should enable consumers to re-sell content obtained online. INTERNATIONAL TECHNOLOGY AGREEMENT NEGOTIATIONS During the months of November and December 2014, ESA worked closely with t he U.S. Trade Representative (USTR) and ESA local counsel to persuade the Malaysian government to drop its objection to the inclusion of game consoles on the list of items proposed for the International Technology Agreement (ITA) expansion. Following China s concession on consoles and Point of Sale Activation Cards, Malaysia was the only obstacle for items relevant to the video game industry. USTR officials applauded ESA s and local counsel s successful negotiations with Malaysia. Products included within the ITA receive tariff-free treatment on exports to the 54 countries that are party to the agreement and which account for roughly 90 percent of global tech-related trade. REGULATORY NETWORK NEUTRALITY In July and September, ESA submitted comments on the Federal Communications Commission s (FCC) Notice of Proposed Rulemaking outlining a new approach to implementing Open Internet principles on broadband ISPs. ESA s comments emphasized the need to protect the gamer experience, focusing on the importance of low-latency connections along with overall broadband speed. ESA s reply comments urged the FCC not to expand the reach of any proposed regulations to capture edge providers. On November 10, President Barack Obama issued a statement of support for network neutrality and urged the FCC to ban paid prioritization and reclassify broadband Internet under Title II. VIRTUAL CURRENCIES ESA s comments emphasized the need to protect the gamer experience, focusing on the importance of low-latency connections along with overall broadband speed. On October 21, ESA submitted comments supporting the New York Department of Financial Services proposed regulation to create a licensing regime for virtual currencies businesses, which included an exception for game-related virtual currencies. 24 ESA 2014 ANNUAL REPORT 25

15 CONTENT PROTECTION PROGRAM ONLINE ENFORCEMENT From January through September 2014, ESA s content protection efforts resulted in the removal of approximately 4.2 million infringing game files from host sites and approximately 6.1 million links used to drive traffic to infringing files. HARD GOODS ENFORCEMENT On February 4 and 6, ESA worked with Brazilian law enforcement in two operations to seize 102,500 counterfeit games and 84 disk Games seized from Feira da Madrugada marketplace in São Paolo. burning devices used to supply sellers in the notorious Feira da Madrugada marketplace. Officials arrested one individual during this raid. On May 7, ESA coordinated with Brazilian authorities to seize approximately 17,600 games from a distributor who supplied infringing games to retailers in a popular market in Brasilia s Distrito Federal. On September 9, ESA worked with several Brazilian law enforcement agencies to seize approximately 15,600 counterfeit games and approximately 33,500 counterfeit game labels, and to arrest seven individuals in the Feira da Madrugada market. On October 29, ESA s counsel in Mexico secured the Mexican Attorney General s Specialized Investigation Unit of Crimes against Copyright and Industrial Property s support for a raid in Mexico City s notorious Tepito marketplace. This was the first enforcement action taken by the attorney In connection with the submission, the Copyright Office invited Genetski to participate in a May 5 roundtable. There, he reiterated the industry s concerns as expressed in the filing. general s office on behalf of the game industry in more than two years. Authorities searched 10 warehouses and three disk duplication laboratories, and seized approximately 32,150 counterfeit games, 284 disk burning devices and one R4 circumvention device containing 61 infringing game files. ESA FOUNDATION The ESA Foundation was created by the American video game industry to develop meaningful opportunities for America s youth. It provides scholarships to the next generation of industry innovators and supports charitable organizations and schools that leverage entertainment software and technology. The ESA Foundation is supported by its signature annual gala event, Nite to Unite (NTU) and other industry initiatives. DEVELOPMENT The 17th annual NTU was held October 22 at The Galleria in San Francisco, Calif. The event honored the work of past and present grant recipients and featured Children s Miracle Network Hospital s (CMN Hospitals) Extra Life program. A partnership was established with online media retailer Humble Bundle to feature the ESA Foundation as its charitable partner in various digital game bundles. Humble Bundle allows consumers to purchase digital games and add-on content, pay what they want and choose how their payment is divided between game publishers, Humble Bundle and a partnering charity. Dunlap Valley School, located in Dunlap, Ill., will use SimCity to teach seventh- and eighth- grade students about the core elements of science, technology, engineering and math (STEM). Students will work in small groups to conceive, design, build, destroy and ultimately rebuild a virtual city. They will identify and resolve problems that arise during this process in order to create a successfully operating city. Jefferson Middle School, located in Jefferson, Wis., will challenge eighth-grade students to use Minecraft to construct their own civilization while developing a greater understanding of American government and economics. Throughout the course, students will blog about their settlements and attempt to persuade their fellow classmates to adopt certain economic ideas. Counterfeit games were seized in early February from a warehouse in São Paolo. SPEAKING FOR THE ENTERTAINMENT SOFTWARE INDUSTRY ESA engaged federal regulators on important policy issues. EDUCATION In June, the National Museum of Crime & Punishment in Washington, D.C. unveiled an ESA-sponsored exhibit titled Counterfeit Crimes: Are You Part of the Black Market? The interactive multimedia exhibit teaches visitors how to identify counterfeit games and illustrates the global scale of video game infringement. It will run for five years. The museum receives approximately 500,000 visitors per year, including many school groups. ESA submitted comments on the Notice of Proposed Rulemaking that urged the Federal Communications Commission (FCC) to reject imposing Open Internet principles on edge providers. ESA outlined a new approach to imposing Open Internet principles on broadband ISPs and emphasized the importance of ensuring a quality experience for gamers. President Barack Obama issued a statement of support for network neutrality and urged the FCC to ban paid prioritization and reclassify broadband Internet under Title II. COMPUTER AND VIDEO GAME SCHOLARSHIP PROGRAM Scholarships were awarded to 30 women and minority students, which totaled $90,000. The recipients attend 25 schools across 16 states including Becker College (Mass.), Carnegie Mellon University (Pa.), DigiPen Institute of Technology (Wash.), Drexel University (Pa.), George Mason University (Va.), Northeastern University (Mass.), Rochester Institute of Technology (N.Y.), Syracuse University (N.Y.), University of Florida (Fla.), and University of Idaho (Idaho). EDUCATION CHALLENGE GRANT COMPETITION The ESA Foundation sponsored the 2014 Education Challenge Grant program. A blue ribbon panel of judges selected the following schools as grant recipients: Bronx Compass High School, located in Bronx, N.Y., will establish a program to support ninth- through 11th-grade students who will work with mentors to design and produce computer games that address real-world issues GRANTEES The ESA Foundation awarded 11 grants to organizations and educational institutions in 2014 to support interactive entertainment software and technology projects that create educational opportunities. Based at Becker College, the Massachusetts Digital Games Institute (MassDiGI) is a center for economic development and academic cooperation across Massachusetts interactive media and game development landscape. The ESA Foundation provided support for MassDiGI s expansion of its annual Game Challenge and launch of MassDiGI 101 a workshop series that teaches underserved middle and high school students about interactive media and game development. Bootstrap, a program of Brown University, is a curricular module that teaches algebra and geometry concepts through game programming to students ages Participating students design their own games and engage in professional programming practices such as code review. The ESA Foundation provided Bootstrap with a grant to help expand its 26 ESA 2014 ANNUAL REPORT 27

16 in-school offerings in Washington, D.C. and on the West Coast. With the ESA Foundation s support, Bootstrap was integrated into more than 120 schools across the country. The ESA Foundation partnered with CMN Hospitals to host Extra Life, an annual video game marathon benefitting children s hospitals. Prior to its engagement with the ESA Foundation and the video game industry, Extra Life grossed less than $1 million dollars annually. Extra Life 2014 raised a record of more than $5.6 million for medical equipment, treatment and research at CMN Hospitals in the U.S. and Canada. EverFi leverages technology to teach K-12 students critical life skills through its Ignition Digital Literacy and Responsibility program, launched in partnership with the Southeast Community Development Corporation. The ESA Foundation provided EverFi with funding to fully implement Ignition in 30 schools in Los Angeles, Calif. and 10 schools in Austin, Texas. Students at Mendez Middle School in Austin, Texas receive certificates for completing ESA s Digital Living Project, a program offered in partnership with ESA Foundation grantee EverFi. Girl Scouts of Greater Los Angeles (GSGLA) is the leading girlserving nonprofit in the region, benefitting more than 43,000 girls from all racial, ethnic and socioeconomic backgrounds, as well as all gender and sexual orientations and abilities. The ESA Foundation provided funding for GSGLA to develop a video game patch program for video game design-related topics and STEM fields. The Hispanic Heritage Foundation (HHF) is recognized by the White House, Congress and Fortune 100 companies for its mission to identify, inspire, prepare and position Latino leaders in the classroom, community and workforce. The ESA Foundation provided funding for HHF to create and sustain the ESA Leaders on the Fast Track (LOFT) Video Game Innovation Fellowship. HopeLab Foundation harnesses the power and appeal of technology to improve children s health and motivate young cancer patients to follow their treatment regimens. HopeLab released Re-Mission and Re-Mission 2, free video games for youth with cancer, to induce positive health behaviors that support successful, long-term treatment outcomes. The ESA Foundation supported HopeLab s distribution and promotion of Re-Mission 2. icivics, founded by former U.S. Supreme Court Justice Sandra Day O Connor, helps teachers prepare the next generation of active and engaged citizens through innovative, educational resources. icivics offers comprehensive civics curriculum and is freely available online. The ESA Foundation provided funding to underwrite icivics pilot of DB Quest: Eyes on the Prize, a learning platform focused on the civil rights movement. The Pulitzer Center on Crisis Reporting works to address issues affecting journalism by supporting journalists work and raising awareness about what constitutes good journalism. The ESA Foundation provided the Pulitzer Center with funding to create an educational game that increases media literacy and global issue awareness among high school students from lowincome communities. ThanksUSA is an organization that mobilizes Americans to thank the men and women of the U.S. armed forces. It provides scholarships to children and spouses of military personnel. ThanksUSA also offers Treasure Hunt, an American history game that reminds players of the freedom sustained by members of the armed services. The ESA Foundation has supported both programs since The Tiger Woods Learning Center delivers unique experiences and innovative educational opportunities for youth worldwide. The ESA Foundation provided funding to bolster the organization s computer and engineering programs delivered at campus locations across the country. Participating students learned about video game design and programming while exploring video game industry careers. World Wide Workshop works to harness the potential of computers and the Internet to enhance technological fluency for creative learning, leadership, innovation and livelihood skills among underserved children and youth worldwide. The organization developed the Globaloria learning network to leverage game design to empower youth in disadvantaged communities. The ESA Foundation s grant supported Globaloria s use at locations in 13 states. ENTERTAINMENT SOFTWARE RATING BOARD As the nonprofit self-regulatory body for the video game industry, the Entertainment Software Rating Board (ESRB) administers a world-class content rating system for video games and apps that continues to be among the most comprehensive and trusted entertainment rating systems in use today. ESRB also enforces industry-adopted advertising and marketing guidelines through the Advertising Review Council (ARC), and helps companies maintain compliance with the growing complexity of online and mobile privacy protection laws through ESRB Privacy Certified. In 2014, ESRB continued to develop the International Age Rating Coalition (IARC), a ground-breaking initiative with other rating organizations from around the world to establish a streamlined process for assigning age and content rating information to digitally-delivered games and apps. INTERNATIONAL AGE RATING COALITION Led by the ESRB, the IARC began assigning rating information for games and apps on Mozilla s Firefox Marketplace on January 14, 2014, with other digital platforms and mobile storefronts to follow in The IARC rating tool is accessible through a digital storefront s on-boarding process and generates age and content rating information and interactive elements for ESRB (North America), PEGI (Europe), USK (Germany) and Classificação Indicativa (Brazil) along with a generic rating for the remainder of the world. IARC is engaged in ongoing discussion with other potential rating authority participants from around the world. Working with the other founding rating authorities, ESRB established the IARC as a Delaware-based nonprofit 501(c) 6 organization. ADVERTISING REVIEW COUNCIL In 2014, ARC continued to monitor and enforce advertising and marketing guidelines so products are labeled appropriately and marketed responsibly. In August, ESRB updated the ARC Manual to reflect new e-sports competitions and social media channel guidelines to reflect the changing media landscape. ESRB President Patricia Vance is joined by other senior representatives from various international classification authorities around the world at the 2014 International Ratings Summit held at E3. 28 ESA 2014 ANNUAL REPORT 29

17 A ground-breaking global rating system for digital games and mobile apps administered by many of the world s game rating authorities. T o measure compliance with its guidelines more broadly than the game publishers themselves, ARC implements biannual website audits of ESRB Website Council (EWC) members, which includes the top video game enthusiast sites. The most recent audit, conducted in November 2014, found significant improvements. EWC members posted the correct rating information and used age-gates for trailers for Mature (or Ratings Pending anticipated to be Mature) rated games. (Additional rating authorities to be announced) A RC created the IARC Storefront Rating Display Guide to illustrate how participating IARC storefronts should best display rating information to ensure consumer use prior to downloading a product. How the system works: 1 ESRB PRIVACY CERTIFIED PROGRAM A new app or game is created. Developer starts to submit it to a participating storefront. 2 3 The ESRB Privacy Certified Program (EPC) provides its 28 member companies with: Developer answers questions about content in the game or app. This includes interactive elements like sharing location, UGC, or in-app purchases. Children s Online Privacy Protection Act Safe Harbor protection since 1999 with a perfect track record; I ndividualized privacy risk assessment for online and mobile products; Assistance with global privacy compliance, including Canada, Europe and Asia-Pacific; A Federal Trade Commission (FTC)-approved solution for obtaining verifiable parental consent; IARC calculates and assigns ratings globally. Regional ratings reflect local standards and cultural norms. Guidance on consumer-friendly privacy disclosures and privacy policies; and Ongoing consultation, monitoring and reporting to ensure continued compliance and protection. EPC ADDED FOUR NEW MEMBERS IN 2014 Level-5 Inc. is an ESA member and independent video game developer and publisher that creates fun and engaging games for children of all ages. Hasbro Inc. is a popular toy and board game company operating multiple websites, mobile games and apps. Vegas Games is a developer and publisher of classic games of chance on websites and mobile apps. Kpass provides parents with an online resource to help manage which websites and apps collect their children s personal information. CONSUMER RESEARCH To measure compliance In August 2014, ESRB with its guidelines, commissioned Peter ARC implements D. Hart Research Associates to conduct biannual website audits an online survey of over of ESRB Website 600 parents with kids Council members, that play mobile and which includes the online games and who top video game recently purchased enthusiast sites. a video game from a store. The project aimed to better understand parental opinions and attitudes about the efficacy of the ESRB ratings and concerns about the online safety and privacy of their children. Here are the key findings: high degree of parents (84 percent) are aware of the ESRB Aratings, with 69 percent using the system regularly to select video games for their children. 4 7 percent of parents say that they would be more likely to 8allow their child to play an online game (79 percent for a Storefront ingests and maps regional ratings for display to users. IARC s localized ratings are familiar and trusted by parents and other digital consumers. mobile game), if ESRB rating information was displayed. 9 percent of parents say they prefer the ESRB ratings as 6compared to the generic age and content information currently provided by the leading mobile storefronts for mobile games. 5 Regional IARC authorities monitor ratings to ensure accuracy. Corrections, if needed, are implemented promptly. ESRB Privacy Certified Seals G L O B A L R AT I N G S. C O M 30 majority of parents (64 percent) are aware that mobile and Aonline games may collect personal information; 87 percent say they are either very concerned" (51 percent) or somewhat concerned" (36 percent) with games that collect personal information. ESA 2014 ANNUAL REPORT 31

18 While 63 percent of parents say they have prevented their children from playing mobile or online games because they felt unsure about the collection and use of their children s personal information, a substantial majority (96 percent) say they would be more comfortable allowing their children to play games with the ESRB Privacy Certified Seal. RATINGS EDUCATION OUTREACH In September, the Public Relations Society of America recognized the public service announcement on ESRB ratings and parental controls as Public Service Announcement of the Year. ESA members, non-members, retail partners and parenting groups supported the campaign, which generated over 300 million impressions. Vice President Joe Biden tweeted a link to the video, and thanked ESA for producing it. Notable coverage included mentions in Politico and consumer and industry outlets. On September 16, ESRB issued a press release announcing its 20th anniversary, which included quotes from Sen. Joe Lieberman (D-CT), ESRB President Patricia Vance, Insomniac Games President and CEO Ted Price, ESA President Monica Vila, The Online Mom, hosts parental control instructional videos. and CEO Mike Gallagher and GameStop Senior Vice President of Merchandising Bob Puzon. ESRB also distributed video testimonials featuring insight, advice for parents and the continued support for ESRB from key industry members. ESRB created a banner ad campaign and infographics summarizing ESRB s history and 1994 in Gaming. In total, the 20th anniversary campaign generated more than 320 million impressions. The ESRB website and rating search mobile app continue to be a useful resource generating 2.5 million rating searches annually. Working with ESA s SGA team, ESRB distributed a series of instructional guides and online videos hosted by Monica Vila of the OnlineMom.com, in both English and Spanish, to support parental control education for the PlayStation 4, Wii U and Xbox One. SGA will use the guides and videos in outreach to local officials, while ESRB will share the content on social media and partner websites. ESRB AND RETAILERS The ESRB Retail Council (ERC) consists of seven national retailers that represent 85 percent of the overall packaged game sales market in the U.S.: Amazon, Best Buy, GameStop, Redbox, Target, Toys R Us and Wal-Mart. ESRB implements two mystery shopper audits of ERC members retail outlets annually to measure compliance with store policy enforcement and signage. The most recent audit, conducted in November 2014, found (weighted by market share) that store policy was enforced 82 percent of the time while 84 percent displayed the correct rating signage. KEY SUCCESSES AND ACCOMPLISHMENTS The FTC released the following statement on June 24 at the Better Business Bureau Self-Regulation Conference in Washington, D.C. Self-regulation, such as that done by the Entertainment Software Rating Board for video games, is an effective way for companies to modify their behavior to protect consumers where the government could or should not act. The electronic game industry continues to have the strongest selfregulatory code and enforcement of restrictions on marketing, advertising and selling mature-rated games to younger audiences. FTC Commissioner Maureen K. Ohlhausen ESRB continues to lead the development and adoption of IARC, the global rating system. In 2015, additional digital storefronts are expected to begin using the IARC rating system and more regional rating authorities are expected to join IARC. ESRB ratings are recognized by parents as a trusted and preferred resource to help manage which games their children play. As a sign of continued support of the ESRB, 82 percent of the time, ERC retailers enforced their voluntary store policy not to sell Mature-rated games to children. To maintain high levels of awareness and use of its ratings, ESRB continues to promote new ratings education outreach campaigns. These campaigns collectively generated more than 1 billion impressions in HOW THE THE ESRB VIDEO GAME RATING SYSTEM WORKS 1 ESRB RATING CATEGORY ICONS 2 CONTENT DESCRIPTOR 3 These icons suggest age appropriateness of each game. Language Suggestive Themes Content descriptors indicate content that may have triggered a particular rating and/or may be of interest or concern. ESRB INTERACTIVE ELEMENTS AND DEFINITIONS Interactive elements inform potential users about interactive aspects of a digital game or app, including users ability to interact, the sharing of users location with other users, or the fact that personal information may be shared with third parties. SHARES INFO: Indicates that personal information provided by the user (e.g., address, phone number, credit card info, etc.) is shared with third parties SHARES LOCATION: Includes the ability to display the user s location to other users of the app KEEPING CONSUMERS INFORMED ESRB led IARC s development toward implementation in early IARC assigns rating information for games and apps on Mozilla s Firefox Marketplace a digital storefront that generates age and content rating information along with interactive elements. Members include: ESRB (North America), PEGI (Europe), USK (Germany) and Classificação Indicativa (Brazil). The ESRB ratings provide guidance about video games and apps so that consumers, especially parents, can make informed choices about the ones they deem suitable for their family. USERS INTERACT: Indicates possible exposure to unfiltered/uncensored user-generated content, including user-to-user communications and media sharing via social media and networks DIGITAL PURCHASES: Enables purchases of digital goods completed directly from within the app (e.g., purchases of additional game content, levels, downloadable music, etc.) 32 ESA 2014 ANNUAL REPORT 33

19 ENTERTAINMENT SOFTWARE ASSOCIATION OF CANADA The Entertainment Software Association of Canada (ESAC) is the voice of the Canadian video game industry, which employs approximately 16,500 people at nearly 350 companies across the country and contributes CAD $2.3 billion to Canada s economy. ESAC works on behalf of its members to ensure that the legal and regulatory environment is favorable for the long-term development of Canada s video game industry. (Left to right): Warner Brothers Games Montreal Vice President and Studio Head Martin Carrier; Ubisoft Vice President of Corporate Affairs Francis Baillet; ESAC President and CEO Jayson Hilchie; Prime Minister of Canada Stephen Harper; Electronic Arts Senior Director of Global Government Affairs Craig Hagen and Frontier Developments Chief Operating Officer David Walsh. ESAC President and CEO Jayson Hilchie speaks at Ottawa Parliamentary Day Association members include the nation s leading interactive software developers and publishers, such as EA, Ubisoft, Activision Blizzard, Microsoft Canada, Nintendo of Canada, Sony Computer Entertainment, Disney Interactive Studios, Take-Two Interactive, Square Enix, Warner Brothers Interactive Entertainment, DeNA Studios, Frontier Developments, Gameloft, Glu Canada, Longtail Studios, Silverback Games, Magmic, Funcom, Ludia and United Front Games, as well as distributors Solutions to Go and Team One Marketing OTTAWA PARLIAMENTARY DAY On February 4, ESAC held its annual Ottawa Parliamentary Day, which included meetings with parliamentarians and the Canadian Video Game Industry Showcase. ESAC staff and association members discussed efficient access to global workers with the office of the Minister of Citizenship & Immigration and the Minister of Industry, and met with the Prime Minister of Canada. The showcase drew over 250 people, 45 members of parliament and eight federal cabinet ministers, including the Ministers of Industry, Citizenship & Immigration and Canadian Heritage. ESAC PRESENCE ON PARLIAMENT HILL ESAC President and CEO Jayson Hilchie attended the opening day of Parliament in Ottawa in September, as well as a major address by the President of France in November to establish relationships with cabinet ministers and key staff from relevant departments and the Prime Minister s office. TEMPORARY FOREIGN WORKERS ESAC worked diligently in 2014 to tackle problems with the revised Temporary Foreign Worker (TFW) Program. As a result, Service Canada Officers will now determine eligibility for temporary immigration by offer salary instead of the National Occupation Codes. Companies can now satisfy the Transition Plan by helping a TFW obtain Permanent Residence. ESAC also worked through the Chamber of Commerce to ensure that concerns are heard about the Employment and Social Development Canada s upcoming enforcement regime, which would feature heavy fines for condition breaches, as well as potential permanent bans from TFW programs and the removal of good faith exceptions. NPD RESEARCH AND ESSENTIAL FACTS In spring 2014, ESAC commissioned research from NPD Canada to gauge public opinion of the Canadian video game industry. ESAC publicly released the data, which supported its advocacy on tax credits, in its 2014 Essential Facts about the Canadian Video Game Industry report. E ESAC President and CEO Jayson Hilchie and other staff attended the International Ratings Summit and associations policy meeting at E and held member development meetings to promote ESAC s work. Staff also attended press events, ESA-led initiatives and toured the expo floor. MEMBERSHIP ESAC welcomed four new members in 2014, including one full member and three associate members: Square Enix, which includes Eidos Montreal and Square Enix Montreal, is ESAC s newest full member. Eidos Montreal Head of Studio David Anfossi joined ESAC s board of directors. REPRESENTING THE CANADIAN VIDEO GAME INDUSTRY ESAC educated Canadian lawmakers about issues important to the industry. DeNA Studios Canada, a Vancouver-based studio with approximately 100 employees that specializes in games for social and casual platforms, joined ESAC as an associate member. Funcom Canada, which is located in Montreal and specializes in massively multiplayer online games, joined ESAC as an associate member. Magmic games, a Canadian-owned independent studio from Ottawa, joined ESAC as an associate member. STUDIO TOURS In collaboration with member companies, ESAC facilitated studio tours for elected officials, including the Premier of Ontario, the Ontario Minister of Economic Development, key official opposition Members of Parliament and provincial Members of the BC Legislative Assembly. These tours continue to yield positive results. INDUSTRY CONSULTATION DINNERS Ontario Premier Kathleen Wynne toured Ubisoft s Toronto studio in October. ESAC hosted regional industry roundtable dinners again in These dinners ensure that the association is visible across Canada with a wide cross-section of the industry. Approximately 12 major companies, including ESAC members and non-members, attended each dinner to network and share insights on the future of the industry. ESAC, the office of the Minister of Citizenship & Immigration and the Minister of Industry discussed access to global workers during Ottawa Parliamentary Day. ESRB met with the Canadian Video Game Industry Showcase and the Prime Minister of Canada. The event drew more than 250 people, 45 members of parliament and eight federal cabinet ministers. 34 ESA 2014 ANNUAL REPORT 35

20 ESA MEMBERS AS OF JANUARY Games 505 Games Activision Blizzard, Inc. Bandai Namco Games America Inc. Capcom Co., Ltd. Daybreak Game Company, LLC Deep Silver Disney Interactive Studios, Inc. Electronic Arts, Inc. Epic Games, Inc. Focus Home Interactive Grey Box GungHo Online Entertainment America, Inc. Konami LEVEL-5 Inc. Little Orbit, LLC Mad Catz Interactive, Inc. Microsoft Natsume, Inc. Nexon America, Inc. Nintendo of America Inc. NVIDIA Sega of America, Inc. Slang Sony Computer Entertainment America LLC Square Enix Ltd. Take-Two Interactive Software, Inc. Tecmo Koei America Corporation Tencent Ubisoft, Inc. Wargaming Public Company, Ltd. Warner Bros. Interactive Entertainment Inc. XSEED Games Inside back cover and back cover photos: E attendees experience the latest video game innovations firsthand. 36