Not surprisingly, the fallout over last year's Hot Coffee scandal has made game developers a bit gun shy when it comes to edgy content.

MTV's Stephen Totilo has an excellent recap of the situation. Among the highlights:

Chris Taylor (pictured), Gas Powered Games: "I don't think it's chilling anyone's creativity, but it probably is making designers think twice before moving ahead with violent or edgy games, because they might have a harder time getting them funded."
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If, as Wal-mart officials maintain, Jack Thompson's Florida lawsuit wasn't what motivated the retail giant to block Bully pre-orders from its website last week, what is?

One answer may lie in June 14th's contentious House subcommittee hearing during which chair Cliff Stearns (R-FL) grilled several video game industry executives including Wal-mart's Gary Severson. Here's what Rep. Stearns had to say to Wal-mart during that hearing:

"I'll start with the questioning. I went, Mr. Severson, I went to the Wal-mart website, where you sell Grand Theft Auto and it's rated "M" there on the the website... (the website said) by ordering this item you are certifying that you are 17 years of age. If you agree to the above terms click 'I agree.' If you click, 'I agree,' you can get this pretty easily."

Stearns next launches into a somewhat confused explanation of last year's Hot Coffee scandal:
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Someone in the New York District Attorney's Office must be an avid GP reader...

Last week, in response to a public tongue-lashing handed out by Congress to the ESRB and FTC, GamePolitics ran an editorial calling on the House to subpoena Take-Two Interactive and Rockstar directly, since they were the companies at the center of the Hot Coffee fiasco.

A short time ago Reuters reported that Take-Two Interactive received grand jury subpoenas, not from Congress, but from New York's D.A. for documents relating to the Hot Coffee incident, as well as other financial information dating back to October, 2001. The subpoenas were served on the publisher on June 19th.

Specifically, the grand jury is seeking documents related to "company officers' and directors' knowledge about the creation and inclusion" of the Hot Coffee sex mini-game, as well as information about the submission of Grand Theft Auto: San Andreas to the ESRB for rating.
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He's one of GP's best-known readers. And now he has earned a place in gaming history.

Patrick Wildenborg, the Dutch modder who discovered the hidden Hot Coffee animations in Grand Theft Auto San Andreas was named by MTV as one of the "10 Most Influential Video-Gamers Of All Time."

Here what MTV had to say about PatrickW:

"'Grand Theft Auto: San Andreas' wasn't just Dutch gamer Patrick Wildenborg's favorite thing to play last year. It's also the game he inadvertently managed to get knocked from store shelves for a time after he discovered animations and controls for a half-cooked sex-game buried in the code. Hackers have been scouring game guts for years, sometimes finding cool extras developers never fully programmed (like a skateboard also found in 'San Andreas') or sometimes to fix games they think are broken (like the mangled ending of the second 'Star Wars: Knights of the Old Republic'). But no previous discovery quite outraged U.S. politicians and parents, got a game re-rated for Adults Only and forced publisher Take-Two to re-print a sellable M-rated version at a $24 million cost"

Long-time GP readers may recall that Patrick's revelations on GamePolitics were instrumental in bringing the Hot Coffee affair to light.

Others named by MTV include University of Michigan professor Peter Ludlow for being kicked out of The Sims Online by EA for publishing critical stories in a virtual newspaper; top-scoring 1980's arcade player Billy Mitchell and the Penny Arcade team, Mike Krahulik and Jerry Holkins.

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Capitol Hill is very much interested in video games these days.

Wednesday's hearing before the House Subcommittee on Commerce, Trade, and Consumer Protection was both lengthy and contentious. Subcommittee Chair Rep. Cliff Stearns (R-FL) and colleagues were not kind to game industry witnesses, especially ESRB President Patricia Vance.

GP does not quarrel with the ability of Congress to hold hearings on the video game issue.

We just think they grilled the wrong people.

With 99% of political attention in relation to video games directed at the Grand Theft Auto series in general and the Hot Coffee scandal in particular, Congress should have skipped intermediaries like Doug Lowenstein and Patricia Vance and posed their questions directly to the people who run Take-Two Interactive and Rockstar Games.
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KUTV-2 News in Salt Lake City might have won an award for its Hot Coffee coverage - if it ran at this time last year.

The station's consumer reporter, Bill Gephardt, did a story yesterday on the FTC's recent ruling in the Hot Coffee investigation.

So far, so good, except Gephardt's report makes it sound like Hot Coffee is happening now, instead of last summer. Check out these lines from Gephardt's story, and note the continual use of the present and future (but never past) tenses.

News anchor Mark Koelbel starts the story on its downhill slide when he intros Gephardt with, "Bill Gephardt is here and he says there is a loophole in a kid's game that could actually allow players to see... porn?"
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When a company happily accepts a public thrashing from the Federal Trade Commission along with the threat of crippling fines for future violations, you know they must have been really worried about the alternatives.

According to Next Generation, Take-Two CEO Paul Eibeler said yesterday, "We are pleased that the FTC has concluded its very thorough investigation, and that the matter has been resolved. We recognize the importance of the FTC investigation, and the necessity of maintaining public confidence in the ESRB rating system, and helping the ESRB educate parents and consumers about the rating system. We look forward to putting this behind us."

The embattled CEO was reacting to Thursday's FTC Hot Coffee report which said that Take-Two and its Rockstar subsidiary had engaged in deceptive marketing practices and circumvented the industry's rating system. The FTC threatened fines up of to $11,000 per unit sold for future servings of Hot Coffee.

Eibeler made the remarks during a quarterly conference call with investment analysts in which the firm disclosed a $50 million loss for the second quarter of 2006.

Take-Two stock (NASDAQ: TTWO) dropped nearly 14% in overnight trading to 14.45. TTWO has lost roughly half of its equity value since its pre-Hot Coffee high point.

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In a long-awaited ruling, the Federal Trade Commission has found that the companies behind Grand Theft Auto San Andreas engaged in deceptive marketing practices.

The FTC issued a press release this morning, wrapping up a 10-month investigation into the so-called "Hot Coffee" scandal.

Although the FTC concluded that Take-Two and Rockstar used deceptive marketing practices by not revealing that hidden sex animations were on the GTA San Andreas disc, the proposed penalty was quite moderate, at least in economic terms. The ruling is a blow, however, to the public image of both companies as well as the video game industry.

Under terms of a proposed consent decree, the FTC will require Take-Two and Rockstar going forward to clearly disclose all content relevant to a game's rating on its packaging. The companies must also set up a content review system to spare the gaming public additional servings of Hot Coffee. Finally, the companies agreed that they would be subject to fines of up to $11,000 per game sold if they commit such violations in the future.

Essentially, the FTC is saying, "Don't do it again."
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One would-be video game regulator moved ahead in yesterday's California primary, while another fell by the wayside.

Leland Yee (D, seen at left), architect of California's video game sales law, grabbed 65% of the vote in yesterday's State Senate contest. His closest opponent, Mike Nevin, received only 29%. Running in a heavily-Democratic district, Yee is virtually assured a seat in the California State Senate come November's election.

Meanwhile, Los Angeles City Attorney Rocky Delgadillo was hammered by former Governor and one-time presidential candidate Jerry Brown in the Democratic primary for California Attorney General. Delgadillo, who made headlines earlier this year when he filed deceptive marketing charges against Take-Two and Rockstar over the Hot Coffee scandal, received only 21% of the Democratic vote to Brown's overwhelming 78%.

Want to talk about it? You can discuss this story via the "comments" feature (click below), or in the new GamePolitics Forums...

Whatever you think of the Elder Scrolls IV Oblivion ratings mess, give Bethesda Softworks points for standing tall.

In a press release posted on Bethesda's website, the Oblivion developer admits that it - and not co-publisher Take-Two Interactive - handled the ESRB rating application process. Take-Two, of course, took a major hit over last year's Hot Coffee scandal, and their involvement - however peripheral - with Oblivion has already caught the attention of some game industry critics.

Bethesda reports that it will "will promptly implement the ratings change that the ESRB has ordered for Oblivion."

The company does not plan a product recall or a change in Oblivion to meet T (teen) rating standards. Nor will Bethesda contest the ESRB's decision. The company will work with Take-Two (whose name is, curiously enough, completely absent from the press release, which refers to it only as "co-publisher") to re-sticker existing inventory. New copies will be printed with the M (mature) rating ordered by the ESRB.

As far as it role, Bethesda said it made what it believes was a "full, accurate, and comprehensive submission on Oblivion to the ESRB months before the game's release. Bethesda used the ESRB's application forms and believes it adhered closely to their requirements. Nothing was hidden from the ratings agency. No effort was made by Bethesda to lobby or influence the agency for any particular rating."

Bethesda goes on to say, "There is no nudity in Oblivion without a third party modification. In the PC version of the game only... some modders have used a third party tool to hack into and modify an art archive file to make it possible to create a mesh for a partially nude (topless) female that they add into the game. Bethesda didn't create a game with nudity and does not intend that nudity appear in Oblivion. There is no nude female character in a section of the game that can be 'unlocked.'"

The Oblivion ratings issue does not bode well for the mod community, as witnessed by Bethesda's comment that, "Bethesda can not control tampering with Oblivion by third parties. Bethesda is taking steps to ensure that modders can not continue to hack into Oblivion's art archives to create partially nude figures."

Depite the problems presented by this rather messy episode, Bethesda reaffirms its support for the ESRB as well as for Elder Scrolls IV Oblivion.

GP: ...and well they should. It's a fantastic game. As far as their comments about the mod community, it's a concern, but who can blame Bethesda?

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He may the one thing that the ESA, ESRB and Jack Thompson all agree on: they don't like him.

Despite that - or perhaps because of it - Dr. David Walsh, 60, president of the National Institute on Media and the Family (NIMF), is celebrating the organization's 10-year anniversary.

An Associated Press report terms Walsh "low-key" for a crusader. GP would tend to agree, and add that gamers may not often agree with Walsh, but he always treats them with respect.

"We're not, in any way, any kind of a censorship organization," Walsh told the AP. "We're not anti-media. We believe very strongly in the importance of the First Amendment."

"The real impact of media violence is, it starts to shape how it is that we treat one another - from 'have a nice day' to 'make my day,' Walsh quipped. "The 15-year-old brain is not the same as a 30-year-old brain, and so things are not going to affect it the same. And that's true of alcohol and it's also true of violent video games."

Walsh cites last summer's Hot Coffee scandal as NIMF's biggest moment, and it's true that Walsh's National Parental Alert moved Hot Coffee from a web-only story (broken by GamePolitics) to a mainstream sensation via his contacts with U.S. Senators Hillary Clinton (D-NY) and Joe Lieberman (D-CT).

"We were the nonprofit that exposed the fact that there was explicit pornography in the best-selling video game on the market. And the producer of that game denied for a month that it was there," recalled Walsh.

In demand as a speaker, Walsh made some 200 speeches last year. He also was a guest on a December GamePolitics podcast.

Things are certainly not in warm-and-fuzzy territory between Walsh and the video game industry just now. As reported on GamePolitics, NIMF's 2005 Annual Video Game Report Card was harshly critical of the industry, including awarding a failing grade to the ESRB. Walsh plans to call a national conference in September to address video game ratings.

The ESRB, in turn, was equally scathing in its reaction to the Video Game Report Card, saying, "NIMF's real agenda... is to destroy the commercial viability of games it deems objectionable. Unlike NIMF, ESRB's job is to be a neutral rater, not a censor... The ESRB rejects this year's MediaWise Report Card just as we did last year..."

To be honest, whatever one thinks of the NIMF-ESRB controversy, there were some other glaring problems with the 2005 report card, including its ridiculous assertion of a cannibalism trend in games and its disputed claim that the National PTA concurred with NIMF's findings.

Walsh also made big news when - in a story broken right here on GamePolitics - he publicly distanced himself and his organization from vitriolic anti-game activist Jack Thompson.

GP: You can discuss this story via the "comments" feature (click below), or in the new GamePolitics Forums...

Take your pick.

The financial prognosis for Take-Two (NASDAQ: TTWO) is either rosy or moribund, depending on whose analysis you believe.

In an article titled, "Three Video Game Firms with Long-Term Tailwinds," Morningstar lists TTWO along with Activision and EA as stocks investors should consider purchasing. While Morningstar lists Take-Two's risk as "above average" and cites "poor corporate governance" as "an ongoing issue for the firm," its report essentially argues that the stock is underpriced: "There is a reasonable argument to be made that Take-Two trades for a modest premium over the value of its GTA franchise alone, so a corporate event may help realize value for shareholders."

Here at GPHQ we'd call that unexpectedly good news for a company buffeted by board defections, shareholder suits, bad press and government investigations. But here comes the pain:

Marketwatch columnist Herb Greenberg reports that Take-Two has dumped its auditing firm, PriceWaterhouseCoopers, and hired Ernst & Young in its place. As Greenberg writes:

"...the timing of the dismissal, on the heels of a delayed 10-K with disclosures of multiple material weaknesses, suggests otherwise. You think Take-Two, without prodding from its auditors, wanted to disclose that it 'did not maintain effective controls over the existence and valuation of its accounts payable related to inventory purchases?' I think not."
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GP loves running this site. You just never know what's going to happen next. And what just happened is really cool.

Patrick W, the Dutch modder who discovered Hot Coffee, just forwarded GP an e-mail with some very special Pixelante shirt pics. If you don't recognize him, the dude in the shirt is none other than CJ from GTA San Andreas. Hmmmm... Did he pay for that shirt?

If this doesn't convince you to buy a Pixelante shirt for charity, nothing will.

Troubles continue to pile up for Take-Two Interactive.

The latest bad news is a class action suit filed this morning in federal court by the City of Flint (MI) and its pension fund. The suit alleges securities fraud and insider stock trading. According to allegations in the suit, Take-Two deceived the city's pension fund as well as other investors, by misrepresenting the assets of the corporation and hiding the financial damage done by the Hot Coffee scandal.

The suit also alleges that while the Flint pension administrators were buying TTWO in hopes of raising the value of its portfolio, insiders dumped $18 million worth of shares based on knowledge that Hot Coffee would cause the stock to tank.

Mayor Don Williamson (left) said, "Fraud against the taxpayers of Flint and our retired Flint police officers and firefighters will not be tolerated. Not only was the city pension fund deceived as to the value of the stock, but the true nature of what this company was selling was being concealed too."

The Associated Press has more on this story, including word that Flint invested $524,000 in TTWO, ultimately taking a $176,000 loss.

"This is the kind of investment you did not want to make," city attorney George Peck told retirement board members Tuesday. "The bottom line is you were deceived."

Could reading GamePolitics every day help you earn an Ivy League sheepskin?

Um, sure. Well, maybe.

Vladimir Cole, an MBA student at the University of Pennsylvania's prestigious Wharton School, reported on Joystiq that his Business and Public Policy prof included a Hot Coffee question on the final section of a recent exam.

Students were issued a copy of a CNN Hot Coffee report (what! Not GP's massive Hot Coffee coverage?) and were asked to:

1. Use the frameworks learned in the course to analyse the market and nonmarket effects of this issue on Rockstar's business.

2. What statement would you make in response to these issues, and how would you advise Rocktar's CEO to handle the anticipated effects of this news?

How would you answer?

The prof, Dr. Justin Wolfers (left), gets extra credit for making the exam fresh and real-world.

We hear Take-Two CEO Paul Eibeler had a lot of red ink on his exam book.

-Andrew Eisen

Is it Hot Coffee all over again?

Not exactly, but...

The National Institute on Media and the Family held a press conference today during which NIMF president Dr. David Walsh issued a so-called Nationwide Parental Alert. NIMF took the action in order to warn parents of graphic sexual content in a free online game being used to promote the upcoming movie Running Scared.

The only other time NIMF has taken such a step was in response to last year's Hot Coffee revelations. Today's NIMF release reads in part:

"Parents need to be aware of explicit pornography in an online game easily accessible to children readily available on the Internet. 'It is clear to everyone that this content shouldn't be accessible to children,' said Dr. David Walsh. 'New Line Cinema, should be ashamed that it thought it could get away with this tactic, without being held accountable.'"

GamePolitics and other news outlets reported on the game, which features player-controlled oral sex, last week.

In large part, NIMF's July, 2005 parental alert moved Hot Coffee from a web-only item to a mainstream news story that continues to have repercussions for the video game business. The Running Scared online game, of course, has no connection to the ESA, ESRB or any major video game publisher, and a NIMF spokesman told GP the organization is aware of that.

Still, the game industry may take at least part of the bad publicity hit should Walsh's alert resonate with the media, parents and politicians the way Hot Coffee did. Not fair, of course, but the average soccer mom is only going to hear "video game sex" and probably won't grasp the distinction.

Piling on is a penalty in football, but not, apparently, in legal circles.

In recent weeks GP has reported on a number of stockholder class-action suits filed against Take-Two, publisher of the Grand Theft Auto series, and here comes another.

Milberg Weiss, a New York City law firm, has filed Max Kaplan vs. Take-Two Interactive.

Kaplan, much like the other suits, cites Hot Coffee, the recent resignation of Take-Two board member Barbara Kaczynski, and the deceptive marketing suit filed by Los Angeles City Attorney Rocky Delgadillo.

GP coverage of other recent Take-Two class-actions can be found here.

By the way, that sound you're hearing is Take-Two coming apart at the seams.

So there's this videogame, and there's a scene where you control your character as he performs explicit sex acts with his significant other, and it's available online...

No, it's not the multiplayer version of Grand Theft Auto: San Andreas. It's the "adult" level from New Line Cinema's advergame for the upcoming movie Running Scared, available on the movie's website. According to a report on MTV.com, there are two levels that are playable on the website via Macromedia Shockwave. One which is accessible by anyone, and the other is an "mature" level, which includes a "bonus" section of the main character performing, er, a "love scene" with his wife, as she sits on a laundry room appliance.

But there's a catch.

Instead of relying on the often-mocked "please enter your age, we trust you", New Line has opted for a newer method of age verification. According to New Line, they verify your name, birth date, and zip code with local state DMV records. How they access DMV records is not clear.

Once verified, you can use your e-mail & password to "verify" your age on any New Line website. Of course the only people who can verify their ages are US residents with drivers' licenses - or those who know their friends' DMV info.

Paul Walker, whose movie character "Joey Gazelle" is portrayed in the game, had virtually no input into the creation of the game. "I haven't actually played the game; it was rumored that they may have shut it down... It's a marketing tool... But, seriously, I wouldn't want my 7-year-old daughter playing that game."
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Video game ratings, video game violence, video game sex, Hot Coffee - their political and cultural impact are debated endlessly by politicians, gamers, parents, media pundits, activists and the video game industry itself. It's a battle that rages on but never seems to get anywhere, in large part due to the irreconcilable disconnect between those who "get" games and those who don't.

Thoughtful observers have long realized that, in the minds of many, games are inherently a form of child's play. It's not hard to understand why. When video games came along a quarter-century ago, even their creators saw them as children's entertainment. They were marketed to kids in retail toy stores - still are, in fact.

Such critics will always equate "games" with "toys" - and thus with children. And it's not just the nay-sayers. Too many parents either don't understand game content and ESRB ratings or simply can't say no to when their kids ask for age-inappropriate games. And, although the retailers, publishers and ESRB have made great strides, there will still be a certain amount of games sold or rented to kids who aren't old enough for its content. No system is perfect - not voluntary compliance systems like the one currently in place or legislated systems such as those currently under review by the federal judiciary in California and Michigan.

Things have changed, of course. Video game content now runs the gamut from kid-friendly titles like Curious George and LEGO Star Wars to adult-themed offerings such as GTA San Andreas and Black to the highly socialized online communities of World of Warcraft and Second Life or the largely adult-populated casual game scene of Pogo.

Over the years, gamers and game designers have recognized the artistic and expressive potential of video games, along with their power to enlighten and entertain players from four to ninety-four. But there are also millions who missed that particular cultural bus. Perhaps they had no gamer children. Or they weren't into technology. Or they simply just don't hold with video games. No one says - or should say - that video games are for everyone.

So there will always be people - adult people, voting people, influential people - who either don't understand or don't care to understand video games. Thus the video game industry finds itself in a Vietnam-style stalemate: an endless culture war it probably can't win, but can't lose, either - thanks to a series of successful First Amendment holding actions.

So it may be time to change the name of the game.
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