New Law Will Change How Digital Games Are Sold: California

Key insights

6 takeaways

01
Starting January 1, 2025, California law AB 2426 prohibits digital retailers from using terms like 'buy' or 'purchase' for digital goods unless they provide a clear, conspicuous warning that the consumer is acquiring a potentially revocable license rather than permanent ownership.
02
The legislation applies to any digital game sold with digital rights management (DRM), effectively covering nearly all titles sold through major digital marketplaces like Valve, Xbox, and PlayStation.
03
Retailers failing to comply with the new disclosure requirements face potential fines of $2,500 per non-compliant listing and sale, in addition to potential violations of California’s Unfair Competition Law.
04
Digital goods are exempt from the warning requirement only if the seller guarantees the consumer permanent access, such as providing a DRM-free, offline-capable download for external storage.
05
The bill was prompted by high-profile consumer access issues, including Sony’s temporary removal of purchased Discovery content and Ubisoft’s decision to revoke access to the game 'The Crew'.
06
While the law is limited to California, the state represents a significant market, accounting for approximately 11% of physical video game spending in the U.S. this year.

Summary

California’s newly enacted legislation, AB 2426, mandates significant changes to how digital goods are marketed and sold within the state, effective January 1, 2025. The law addresses growing consumer concerns regarding the loss of access to purchased digital content, such as video games, movies, and books. Its primary thesis is that retailers must provide clear and conspicuous disclosures to consumers that they are purchasing a revocable license rather than permanent ownership of a digital product.

The legislation requires sellers to explicitly warn users when a digital good is subject to potential revocation or requires an internet connection that could impact future access. Retailers are prohibited from using terms like "buy" or "purchase" during transactions unless they provide a clear, plain-language explanation of the license terms and the potential for content to be pulled due to factors like expired music rights or server shutdowns. Non-compliance carries potential penalties of $2,500 per violation under California’s Unfair Competition Law.

The scope of the law is broad, covering nearly all digital games sold with digital rights management (DRM). Exemptions are limited to digital goods that are free, offered via timed subscriptions, or provided as permanent, DRM-free offline downloads. While the law is specific to California, the state represents a significant portion of the U.S. gaming market, with physical game spending accounting for approximately 11% of the national total. The legislation was motivated by high-profile industry incidents, including the removal of purchased content from digital libraries and the permanent disabling of online-only titles like The Crew. By enforcing transparency, the law aims to protect consumers from the volatility of digital ownership and potentially encourage publishers to adopt more sustainable licensing models.