Microsoft has set forth an interesting new content policy, found here, that seems to be giving the non-profit machinimist a break. In fact, I would go as far as to say this is really what needed to be done, but only addresses half of the issue.
The rules boil down to this: You can use the following games:
-Age of Empires (all versions)
-Flight Simulator (all versions)
-Forza Motorsport (all versions)
-Halo: Combat Evolved, Halo 2, and Halo 3 (when released)
-Perfect Dark Zero
-Project Gotham Racing (all versions)
-Rise of Nations (all versions)
to make machinima, provided you put the following disclaimer on it:
[The title of your Item] was created under Microsoft’s “Game Content Usage Rules” using assets from GAMENAME, © Microsoft Corporation.
AND it follows these rules:
"1. You can’t reverse engineer our games to access the assets or otherwise do things that the games don’t normally permit in order to create your Items.
2. You can’t use Game Content to create pornographic or obscene Items, or anything that contains vulgar, racist, hateful, or otherwise objectionable content.
3. You can’t sell or otherwise earn anything from your Items. We will let you have advertising on the page with the Item on it, but that’s it. That means you can’t sell it, post it on a site that requires subscription or other fees, solicit donations of any kind (even by PayPal), use it to enter a contest or sweepstakes, or post it on a page you use to sell other items (even if those other items have nothing to do with Game Content or Microsoft).
4. You can’t use the soundtracks or audio effects from the original game. We often license those from third parties and don’t have the rights to pass them on to you.
5. You can’t infringe anyone’s IP rights in your Item, even if the IP rights being infringed don’t belong to Microsoft. Among other things that means you can’t use any of Microsoft’s trademarked logos or names except in the ways described in the pages linked from www.microsoft.com/trademarks.
6. You can’t add to the game universe or expand on the story told in the game with “lost chapters” or back story or anything like that.
7. You can’t grant anyone the right to build on your creations. We don’t mind if other people help you out, but you have to be clear with them that it’s not you giving permission, it’s us. (That’s how we make sure everyone plays by the same rules.)"
Consider these the 7 Deadly Sins of Microsoft Machinima. In short, they are:
5. Other IP
Presuming you play by these rules, Microsoft will leave you alone. There are, of course, still a few particular issues with this scheme.
1. You essentially have to overwrite the entire audio track. While this is understandable to the extent of background music, many machinimists do use the sound effects. Moreover, dedicated players will know that the effect is different for, say, the ghost in Halo. I estimate that many people may hear from Microsoft on the sound effect issue, if the plan to enforce it.
2. Of course, you're not allowed to make any money, at all, whatsoever. Since many machinimists do have a "donate via paypal" link on their site, the link will need to be removed to comply with the new rules.
3. There's also no stated method for contact for obtaining a commercial license, although they do mention the commercial license. I assume this means that still, for the most part, the answer is "no" on that particular front, unless you happen to be Rooster Teeth Productions.
All in all, I think this is a good move for Microsoft and it would not surprise me to see other companies follow suit. This license generates a positive reaction from the fans and really doesn't hurt the owner of the IP license. Additionally, it retains control over the assets, so issues of the items becoming "public domain" due to use by the consumer should be mitigated. It, unfortunately, doesn't really offer anything for the aspiring professional machinimist.
[Thanks to Overman for the tip.]