LEGAL RADAR: Chile & Colombia – Markets, Industry & Regulation

With this issue, we return to the practice of long-form features where we look at the specific areas with the guidance of an expert (or two, as in the current case). South America has been on our community's mind for a while.

(1/5) Why South America?

Our industry no longer grows exponentially. Recent layoffs highlight the pressure for studios and platforms alike to become more efficient, both through finding regions where content can be developed at a more reasonable cost and through acquiring new users in markets that have not yet turned into red oceans.

These days, the core regions are already saturated (EU, US), with new releases often cannibalizing earlier hits by catering to the same audience and/or with the recent regulation increasing the barriers to entry and operation (China, Vietnam). 

The classic “future markets” (Africa, India) pose another set of challenges: a different infrastructure that requires different product design; a different set of consumer preferences that requires region-specific content to succeed there at scale.

South America, on contrast, combines large market size with accessibility, as evidenced by the local top-grossing lists that show studios from US, Europe and Asia in the lead – with the local audience enjoying the same global hits as the other major markets do.  

Moreover, while the population of the established games markets begins to decline, South America continues to grow – especially in the younger demographics that’s crucial to the games industry.

For most of us, South America’s physical remoteness from the core markets distorts the perception of its potential; however, for some studios that overcame that bias, South America already became a source of significant revenue – the result of closer engagement with the region. 

With this look at the legal landscape of Chile and Colombia, the region’s 3rd and 4th largest games markets by revenue, we highlight the potential for growth for the studios that operate globally, in taking a closer look at this region.

Big, and getting bigger

By the European standards, Colombia and Chile are big countries.

If they were in the EU, they would be the fourth and the seventh most populous states in the union. 

Colombia’s population, already over 50 million, is on the trajectory to overtake Italy’s within a generation:

Chile, a smaller country of the two, has a population of nearly 20 million – the size of Austria and Serbia combined:

Unlike many European nations, both countries continue to experience population growth. The potential specifically for the games industry is further strengthened by the notably youthful demographics:

Considering a moderate but steady growth of GDP in both countries (1.5-2% annually, compared with EU’s 1%), the prospects of Chile and Colombia as a region relevant to the international games industry are only going to get better. The games markets in both countries currently experience a growth of 10% annually.

Accessible before, accessible now

Just like the majority of those who live in the region (apart from Brazil), the population of both Chile and Colombia speaks Spanish. This allows studios to rely on one language ('Spanish LatAm') to access the audience across the whole area.

At the moment, more players use Steam in Spanish and Spanish LatAm than in Italian, French and Polish combined:

Looking at the local revenue charts, you will find that most of the bestsellers are familiar: in terms of games culture, Chileans and Colombians speak the same language as the rest of the established markets.

If you operate a game that is successful in one of the bigger regions, you will find players in South America to be receptive to the same settings and mechanics –

 At the same time, the top creative content produced locally has a track record of successfully crossing the borders, and reaching global recognition. This is most evident in the influence that the Colombian and the Chilean literature has had: Gabriel García Márquez (Colombia), Pablo Neruda (Chile), and more recently, Isabel Allende (Chile), are the authors whose books you will currently see among the bestseller lists in both Europe and North America.

Beyond literature, local animation has recently been making its way internationally, with Chilean-made Bear Story becoming the first Latin American animated film to win an Oscar in 2016. In the TV industry, the Colombian telenovela "Yo soy Betty, la fea" (“Ugly Betty”) has been a standout phenomenon, remade as a local show in over 25 countries, while international pop stars like Shakira and Juanes are the blueprint for how one can find initial fame in Colombia, then expand career beyond the home country – first in the Spanish-speaking countries, then worldwide.

If books and films can do it... why not games?

(2/5) Our Experts

To explore Chile and Colombia, we spoke to the two members of Games Industry Law Summit’s international community: José Manuel Muñiz Herrera and Jorge Bedoya C.

José is a founding partner of ALMMA, a Santiago-based law firm which came about from his own experiences as a game developer in Chile. With a background in Commercial, Labor Law and IP matters, José focuses his practice on the legal needs of the Chilean creative industry.

José has been a board member for the Chilean Trade Association of Game Developers and the Chilean Council for the Audiovisual Arts and Industry, and has lectured on the matters of business and law for game developers and other content creators.

Jorge is a partner at IE Law LatAm, with a background in mergers and partnerships; he has expertise both as a lawyer, and as a business development strategist.

Jorge has represented multiple Latin American studios in high-profile transactions, including during the acquisition of the Argentinian studio "Three Ordinary Guys" by Ocean View and the purchase of the Colombian studio Brainz by Jam City.

(3/5) Consumer Market Regulation

When compared to the familiar regions in the west, operating games in the local consumer markets of Chile and Colombia doesn’t present any new challenges.

Local Presence

Neither country requires a studio to have a local publisher to access the market; when games companies open regional offices, they do this to facilitate region-tailored marketing campaigns and strike local partnerships (such as product placement) – but you can also be successful in the region while operating remotely out of Istanbul, Los Angeles or Berlin.

Consumer Protection

Consumer protection law is comprehensive, but lawsuits against game companies are rare. The Chilean state consumer protection agency has no legal capacity to file civil lawsuits on behalf of individual consumers, and therefore its actions are limited to the regulatory fines for individual infractions and to consumer class actions if and when an issue is big enough to result in one.

The Colombian agency for consumer protection, in turn, can take up individual claims, but it has typically focused on companies outside the interactive entertainment sector. On contrast with Brazil, local consumers themselves are not litigious, partly due to the costs of the process.

Privacy

Both countries have well-developed privacy legislation. As a rule of thumb, a globally operating publisher who is compliant with the GDPR requirements would not need to take any additional steps.

Minors

Both countries have their own age rating systems – but they don’t create a barrier for entry, as games are allowed to also use their ESRB or PEGI labels for their content.

Sales of video games (and additional content) are prohibited to minors under 14 years of age, and publishers are required to take steps to enforce this. However, self-declaration of age is still generally sufficient.

Overall, in both countries the protection of minors is more focused on children’s privacy than on filtering potentially harmful content.

Current State of Regulation

The questions of online safety, addictive design, and dark patterns in monetization, topical in the US and EU, are not yet on the radar of local regulators, and do not feature as prominently in the public debates.

Loot box mechanics – another hot topic in some of the western jurisdictions – remains in the grey zone, without any significant examples of legal enforcement.

(4/5) Local Industry Hubs

Both Chile and Colombia are emergent games industry hubs. Building upon their strong entertainment industry background, the regions already had a generation of successful small and medium-sized studios, some of which have been acquired by international industry players:

Local studio acquisitions:

• 🇨🇱 Wanako Games acquired by 🇺🇸 Vivendi Games (2007), then by 🇨🇦 Behaviour Interactive (2008).
• 🇨🇱 Atakama Labs acquired by 🇯🇵 DeNA (2011).
• 🇨🇴 Brainz acquired by 🇺🇸 Jam City (2018).
• 🇨🇱 Giant Monkey Robot acquired by 🇦🇷 Globant (2020).
• 🇨🇴 Wizard Fun Factory acquired by 🇳🇿 PikPok (2022).
• 🇨🇴 Mad Bricks acquired by 🇷🇴 Amber (2024).

Considering that local regulation presents no significant entry barriers, and that both governments display a decisively pro-investment stance, it seems unavoidable that with time, global games studios will successfully engage with both Chile and Colombia. It’s just a question of which studio will take the leap first – then the others will follow.

Challenges

Ripe for closer integration into the global games industry, the local development scene is challenged not by the lack of infrastructure (which is solid), or the lack of creative talent (which is available), or the lack of enthusiasm (everyone and their uncle understands and loves video games) – but rather by the lack of practical business experience on a bigger scale, and access to the resources that only larger international teams can provide.

Local Talent

The local pool of talent benefits from the other creative industries that are already well-established locally (film and TV in Colombia, animation in Chile). Recently, educational institutions of both countries have started to offer specialized programs in game design, development, animation, and digital arts, such as Game Development degrees in Universidad de Talca and Universidad SEK (Chile) or degree on Digital Storytelling at Universidad de los Andes (Colombia).

As in many emerging industry hubs, local creators are passionate about having a chance to bring their own games to the broader audience – but for this ambition to work well, they need the experience of a global partner.

Having a common language shared by most of the countries in South America facilitates workforce mobility, and allows to tap into the talent pools of the whole region (an advantage over Europe, where relocating a person from Germany to Bulgaria would push the dev team to resort to English as the lingua franca).

Local Studios

The local games industry started to gain traction in the early 2000s. Some of the pioneers who paved the way were ACE Team (est. 1998, Chile), Wanako Games (est. 2002, Chile) and Immersion Games (Colombia, 2003).

While some among these first generation of developers have stopped their operations since, the accumulated creative experience hasn’t been lost and brought benefit to the new crop of studios – quite a few of the Chilean developers, including Giant Monkey Robot (currently Globant, and the largest studio in the country), were established by the ex-employees of Wanako. 

At this time, with the exception of a few companies, most local studios are small teams of 10 people or less. These groups frequently form and break up, working on short-term projects based on their own creative ideas, and for many of them the goal is as simple as survival.

A low cost of operation of such creative collectives, and their enthusiasm, makes it feasible for bigger players to hire them for projects that they can try out with no risk of significant loss. However, due to the absence of prominent local publishers and a limited presence of industry heavyweights, the local industry still suffers from the relative lack of experience.

Politics & Economy

 Chile, due to its diversified economy, solid institutions and low level of corruption, has long been considered as one of the most stable nations in South America. The trust in the court system is high, even if you come across complaints that it can be somewhat slow. The local currency, Chilean peso, is one of the less volatile currencies in the region.

 Colombia had to face an ongoing internal political conflict until about 10 years ago, but the situation has improved significantly over the last decade, from both economic and political perspectives. The local currency is still relatively volatile, with the current FX rate often playing a big factor in the day-to-day lives – a reason why most Colombian creative businesses use a US-registered company as their revenue hub. On the other hand, the state institutions are stable, and the court system can be relied upon.

 In terms of conflict resolution, the local studios usually opt for arbitration, as they are unsure if the state judges would have the necessary industry-specific expertise.

Investment Climate

Both countries are investment-friendly, which is as one would expect. There are no FDI restrictions in the audiovisual sector for investors from any specific countries. Both states offer tax incentives for foreign investors, which are especially comprehensive in the case of Colombia (see the table below).

Setting up an office is quite fast, especially if you do this electronically. Chile, however, has the requirement of having a local resident act as a company representative, liable for its actions – a requitement typical for many countries in the region. Colombia, on the other hand, has no such requirement.

Labor Law & Relocation

Relocating employees to Chile or Colombia is easy to organize, with fast-track visa options available for skilled workers in Chile and a simplified process for migration from Mercosur Countries in Colombia.

Labor law, though more protective of the worker rights than in the US, is not as restrictive as in many EU countries. Employers can terminate employment unilaterally, if they are prepared to pay severance fees (up to one year's salary, depending on the specific circumstances). 

(5/5) Looking Into the Future

As consumer markets, Chile and Colombia are accessible to all the global players, and already generate revenue for most of the game studios. While the share may be yet not significant enough to consider custom marketing campaigns or local collaborations, the region as a whole – the audience that speaks LatAm Spanish and shares the same time zone – can hardly be ignored, because of its already existing footprint, and its future potential to respond well, when given attention.

As industry hubs, both Chile and Colombia have the potential to grow into proper clusters, given how receptive the regions are to direct investment, and how friendly they are to relocation of talent. The countries are currently held back by their limited inclusion into the global development and publishing networks – similarly to the regions like New Zealand, which years ago struggled, and successfully overcame, similar challenges. This is bound to change as more daring games studios enter the market.

The good news is that the games industry’s legal community is already present in both countries, with José and Jorge connecting the rest of the world to their home markets.

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June-September 2024
Prague | Santiago | Barranquilla | Vilnius

Text: Roman Romanovsky
Edits: Sergei Klimov

Roman is a senior counsel at Wargaming, working from the company's Prague studio. Roman has been with the games industry for 10 years by now, and is a frequent contributor to its community initiatives such as the Legal Challenge.