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1. Mute Observers:
When players are in the Arena, there should not be any way an active participant can receive any messages from, or in any way detect the Observers. If you add observers as a killable obstacle it will imbalance the gameplay and distract the participants. This will frustrate players more than it will bring enjoyment to the observers.
2. Observer Channel:
If you allow observers (a good idea IMHO), then limit their outgoing chat to SOLELY the Observer channel, so that they cannot spam overload the players playing. This allows for observers to interact with other observers without hampering the players.
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Without question, there should be a Channel for arena participants only, while observers are on Local/Broadcast. Much like SG's and team's channels, a participant can choose to view the Broadcast channel for morale boosters.
