YouTube superstar PewDiePie is known for his his bombastic personality and unfiltered opinions on video games — and his latest social media flare-up may have unintended consequences for the games industry at large.

Earlier this month, PewDiePie — whose real name is Felix Kjellberg — was caught saying the n-word while competing in a game of PlayerUnknown's BattleGrounds during a livestream on his YouTube channel.

Many gaming fans and developers voiced their displeasure and noted it wasn't the first time this year he had attracted controversy for a racial slur. His most loyal fans, however, defended the outburst as the result of a "heated moment" in the middle of a tense game.

After the clip spread online, the game studio Campo Santo took direct action by filing a copyright strike against Kjellberg's channel, where he had previously posted a video of himself playing their 2016 game Firewatch.

"I am sick of this child getting more and more chances to make money off of what we make," said Campo Santo co-founder Sean Vanaman. The Firewatch video was quickly made unavailable on YouTube – Kjellberg said he removed it out of courtesy – and days later, Google accepted the copyright strike, deleting it permanently. Even so, Kjellberg can still create and post videos on YouTube, and his channel continues to amass millions of views on a daily basis.

Kjellberg called a player the n-word while playing PlayerUnknown's Battlegrounds live online. (Oddshot.tv)

Online personalities like Kjellberg have been criticized for retaining their platform and popularity after making offensive comments that would likely torpedo a TV or film celebrity's career, but his latest racist outburst may have inadvertently set him — and other YouTubers — up for different fight. Campo Santo's move to distance itself from him and his brand could in fact have wide-ranging effects on the shaky relationship between the people who make video games and the ones who make money playing them.

Hanging in the balance is a question no one seems to want answered: Is it legal to broadcast yourself playing video games without explicit permission from the creators?

Gaming is YouTube's bread and butter

Video games are rarely treated the same way as other copyrighted entertainment media. Just about anyone who tries to upload more than a couple of minutes of the latest popular movie or music video without permission can expect a copyright-enforced takedown within hours.

Gamers, however, can stream a play session for hours, and post their entire archives online for on-demand viewing. PewDiePie found fame playing and reacting to video games. His YouTube videos include footage of the games he plays, along with his commentary, and his channel has amassed over 57 million subscribers.

According to GamesIndustry.biz's Rob Fahhey, most games companies "tacitly permit YouTubers to violate their copyrights, with creators and publishers turning a blind eye out of consideration of the promotional value of being featured on high-audience channels."

The creators of the game Firewatch filed a copyright strike against PewDiePie following his latest outburst on a gaming livestream. (Campo Santo Productions)

Whether that promotion actually translates into sales for developers is up for debate.

"We tend to think of streamers as just another facet of our community, and they play a role in exposing the game to new players who may then decide to pick the game up for themselves," said Raphael van Lierop, co-creator of The Long Dark. "That said, in nearly three years of streamers playing The Long Dark, I can count on one hand the instances where streaming had a noticeable impact on our sales."

Legal grey area

YouTube creators and other "Let's Players" on sites such as Twitch argue that their commentary while playing games constitutes "fair use" (or fair dealing, as it's known in Canada) of copyrighted material. This has never been tested in court. YouTubers who do this currently operate in a legal grey area.

IP lawyer Mira Sundara Rajan says the concept of fair use as it relates to video games and online play is relatively uncharted territory. (Mira Sundara Rajan) Kjellberg's Firewatch video was removed after Campo Santo filed a request through the Digital Millennium Copyright Act (DMCA), which enforces the rules surrounding intellectual property on the internet. But it was Google that removed the video. The dispute never reached a legal battleground.

Mira Sundara Rajan, a lawyer specializing in intellectual property and a visiting scholar at Stanford Law School, said the concept of fair use as it relates to video games and online play is relatively uncharted territory. Previous precedents set by traditional broadcast media don't provide a clear road map, either.

She said the problem is that "the fit between the existing copyright framework and the new technologies and what's possible through them, in terms of use and dissemination, is really, really bad," she said. "And so you get into situations where the courts are trying to figure out how to fit a round peg into a square hole."

Even if a court were to rule on video games and fair use, there's no guarantee that the ensuing precedent would stick. For example, in 2013, a U.S. Supreme Court judge ruled that providing digital versions of books was a violation of the author's copyright. But the decision was reversed two years later.

Copyright and moral rights

After the removal of his problematic video, Kjellberg contended in a follow-up video that the copyright strike abused the intent of the DMCA. Campo Santo didn't make the game he was playing, and he argued that their strike was punishment for saying the n-word in a video unrelated to them.

According to Ariel Thomas, a copyright and trademark lawyer based in Toronto, Vanaman's personal reasons for raising the strike would be irrelevant if the case were heard in a Canadian court.

"Copyright, at least in Canada, is held to be a strict liability matter. So it's not really about your motivation. If you're violating copyright, you're violating copyright," Thomas explained.

One of the many games that PewDiePie has played on his YouTube channel is Cuphead. (PewDiePie/YouTube)

But what happens when a game developer no longer wants to be associated with a YouTuber's personal brand?

It seems the n-word incident may have been the final straw for Vanaman regarding Kjellberg's public conduct. In February, Kjellberg came under fire after making anti-Semitic jokes in another of his videos, including paying two Indian comedians to hold up a sign that read "Death to all Jews."

The stunt cost him his partnership with Disney's Maker studios. Google also removed his channel from the Google Preferred advertising program, which aggregates top YouTube content for advertisers.

Campo Santo might have a stronger case raising the issue of moral rights by claiming that Kjellberg's actions on a stream would sully their studio by association, regardless of whether he was playing their game at the time.

Canada's Copyright Act contains a provision for moral law, and many equivalent provisions exist in other countries. However, U.S. law doesn't have any equivalent for entertainment media, which may explain why Campo Santo believed filing a DMCA strike was the only option to remove their video from Kjellberg's channel.

"Under the banner of the first amendment, a lot of people steamroll over the finer sensibilities, if you like, that people might have about things they create," said Rajan. "But I think it's frankly based on a misunderstanding of what free speech is, and what moral rights are."

'It would transform the industry completely'

In the world of gaming on YouTube, a copyright strike is considered the nuclear option, and for good reason. Any legal precedent on the nature of video game footage on the internet could have huge ramifications for many of YouTube's largest channels, to say nothing of sites like Twitch, which deal almost exclusively in the genre.

"I think that could have really important chilling effects," said Rajan. "It would transform the industry completely, and qualitatively change the relationship between the people who are playing games and the people making them."

But she cautioned that a collision course between creators and developers may not be as inevitable as some analysts have predicted.

"If there's a symbiosis in the industry between those groups, and there's kind of a balance that's been achieved, it may well be that things go ahead without the intervention of courts and copyright intervention suits," she said. "I think it's really hard to predict."