Microsoft has finally posted the long promised "Revised" Game Content Usage Rules. They are available here. Now that they are available, what has changed? The short answer is "Not much."
1. The "reverse engineering" rule was re-written to clarify "not normally permitted by the game." As such, things like the Halo 3 Forge or the Halo CE included editors seem to be acceptable.
2. One of the most notable changes is the specific reference to film festivals. You are allowed to enter film festivals, even those with prizes, with machinima. However, this seems like a fine line as there is also a specific note as to contests. Generally, the difference seems to be securing Microsoft's permission for the use.
3. The music/soundtrack/sound effect issue is more resolved, and for Halo fans, Halo 3 is specifically noted as having a usable soundtrack for machinima. This, as I noted in previous articles, falls about in the manner you would expect. The soundtracks are often licensed, and it's more noticeable in some games (i.e. PGR where the tracks are named) than in others. Microsoft seems committed to making notice of this on a game by game basis on the Xbox.com site/forums, which seems like a more reasonable course of action than an outright ban.
4. The phrase "You'll know it when you see it." appears a lot. On the plus side, this leaves a lot of room for interpretation. On the negative side, this leaves a lot of room for interpretation. I suppose we'll find out more as this is enforced, both as to the content and as to "Microsoft approval" on contests.
5. The backstory/lost chapters rule has changed significantly. You are now allowed to tell any story, but if your story contains elements from the game's story arc or surrounding content, then you're providing Microsoft a license to use that content. This is actually a fairly good solution to a real problem, even if it seems as though the machinimist is losing the rights to their "story." There have been many cases (mostly in the film and literary arenas) where someone writes a story, then without knowing, someone else writes a related story. Or, a writer sends a script in, the script is returned and the film company makes a similar movie. This often results in a lawsuit. What Microsoft is trying to avoid is the instance where they already have a story planned, and then one or more machinimists create something similar, Microsoft releases their content and the machinimist sues for infringement. If you want to work in Microsoft's universes, you have to accept that Microsoft may use a similar story, and you're giving up recourse if that happens. On the other hand, if you create something totally original, you've given up nothing.
6. You can let other people build on your work, but it's governed by the same rules as your work. Basically, it's a trickle down license.
7. They actually provide a contact email for people interested in getting a commercial license or for film fesitval sponsors who want approval. The address is gamevids*at*microsoft.com.
All in all, while the changes are not unexpected or dramatic, they are all positive and address many of the concerns of the machinima community.
Past Microsoft Machinima Rule Coverage
Blizzard Machinima Rule