Race to the bottom Archives

Alternate Payment Models for Games

Deus Ex Mankind Divided tried some new ideas... in a premium game... it didn't go down well. — Deus Ex Mankind Divided tried some new ideas… in a premium game… it didn’t go down well.

So I wanted to follow on from last month’s blog and continue to discuss the possible future of games monetization. To briefly sum up what I’ve said before, I’m concerned by an increasing trend towards heavily discounting games earlier and earlier (Battlefield, Call of Duty, and Titanfall last Christmas, for example) and the effect that this has on the perceived value of games.

The success of Spotify and Netflix’s models in other industries concerns me and we see a bit of a move in that direction with things like Humble Bundles, EA Access, and console equivalents.

If we’re not careful, we’ll get to where there’s no money to be made in games and only the most trite, generic, relatively low cost and mass-appealing titles (the Call of Duties and FIFAs) will be financially viable. We stand to lose so much as gamers if certain trends take root over the next decade or so.

The problem as I see it is that there’s a race to the bottom happening with the traditional pricing models, and while many, including myself, still prefer to pay for and own a copy of the exact game they’re looking for, the margins are shrinking all the time and in the future we may have far less games to choose from as smaller developers may no longer be able to afford to run studios, and even larger ones will be far less willing (even less than they are now) to innovate with their games.

I want to look at what is being done, and what might be done about this.

What’s Happening Today?

Library Subscriptions

This is where you basically pay a subscription and get access to a library of games as long as you’re still paying. The Spotify or Netflix model. In the last post, I mentioned how things like EA Access or a potential Steam equivalent could be disastrous for smaller games, but this is one way that EA is already trying to battle the downward trend in the perceived value of games. Hats off for trying, but I really hope they don’t succeed with this. Imagine you get laid off from work (as is quite the modern reality). Suddenly you’ve way more time to play games, but now have to cancel your subscription because you can’t afford it. You’ve got nothing.

End of Game Subscriptions(?)

If WOW has gone Free To Play, that's saying something... then again, it's 10 years old so... — If WOW has gone Free To Play, that’s saying something… then again, it’s 10 years old so…

Eve Online and World of Warcraft have both been retreating a bit from their monthly subscription models, chasing after their dwindling player bases. Both now offer the game for free at lower levels of play, but retain the subscription if you want a more complete experience. Granted, these games are both over a decade old, but if these titans don’t think that a subscription fee for their games is completely viable any more then it’s doubtful that newcomers will adopt the model either; though it remains to be seen if this F2P/subscription blend will do the job for either of them.

DLC

AAA has been trying for years to squeeze extra pennies out of their fans by charging more for more content, and it’s gone as far as the total DLC costs sometimes now even costing as much as the core game. This was never a popular approach, but it did work, and it helped AAA games remain viable despite their massively inflated budgets.

Now, however, they’re beginning to realise that charging for extra multiplayer maps, and having only some players migrate over leaves all of their map servers underpopulated. We don’t have details yet, but Battlefront 2 this year seems to be saying that they won’t have DLC, or at least none that prevents all of their fans from playing together.

So we’ll see some changes to how DLC works, it seems, but it’s likely to stay around in some form for a long time yet.

Loot Crates

Overwatch, Counter-Strike, Battlefield and countless others are tapping into the dark side of human psychology by charging players to maybe win something they want. They’re actually working gambling into their games to keep the coins rolling in. Well, it had to happen eventually, and because it works, we seem to be stuck with it. The disgusting part to me is that they charge you money for the chance of winning one instance of a digital good that costs them nothing to produce. I hate this (which is ironic because of what I’ll argue for later, though it’s mainly the gambling element that I dislike). I have never and will never go along with it, at least not in a game I’ve already paid for, but this article is about how games are going to make money in the future, so this stays, and my personal tastes be damned.

Free To Play (F2P)

This is really looking like it may become the most popular payment model in future (it pretty much is now, especially in the East), but there are so many variations on it. On mobile it often means that you view ads or pay to unlock new levels, whereas in online traditional games it often means paying for cosmetics, XP bonuses, or in-game items.

We’re seeing that on YouTube, advertisers increasingly try to sponsor a video directly so that their message is given by the host, instead of in a skippable ad which usually isn’t worth their time. What will happen to mobile F2P when advertisers decide that they’re not getting the return they need in paying everyone else’s way? Because make no mistake; advertisers pay for the party, and we all hate looking at ads. Mobile payment models will have to change, and largely I have no problem with that. With the vast majority of mobile games that I’ve played, it seems that the payment model infects the game design and almost dictates that many of these games feel the same as one another. This might just be me, but the only mobile games I’ve truly enjoyed are ones that I’ve paid premium for; namely 80 days, Reigns, Monument Valley and some others, where I pay to get in and they cease trying to sell me things. I can get immersed then.

Players by and large don’t have a problem with these payment models except for when you can pay more to have better items than other players (“pay to win”) or when they’re mixed in with premium models (“fee to pay”. This is sadly becoming the norm, it seems).

Etc, etc..

Okay and there’s more examples and more combinations, but let’s move on.

Economics 101

I mentioned at the start how the value of games seems to keep falling. In traditional economics, the price is set where supply meets demand. The problem we face in the modern age is that with digital goods, supply is infinite (for all intents and purposes. Ignoring potential server costs). Demand for games is still a finite number because it’s based on people, but since we’re not tied to a limited print of 1 million physical cartridges (or whatever), one extra game code has no inherent value in the eyes of many. It has even less when you consider the sheer volume of games on offer nowadays.

People attempt to justify piracy and theft on this basis, but others are also less willing to pay the asking price for their digital copy of a new game because it doesn’t cost as much to produce as the physical copy on the GameStop shelf (they’ve got a point, but that’s another topic).

Whatever the extent of the problem today (we could argue on that) I doubt you’ll disagree that gamers seem willing to pay less and less for games, but are still willing to pay the guts of $1,000 (those who can afford to) for a new iPhone. Physical goods hold value because their supply is limited. Classic vinyls or SNES cartridges are more valuable now than when they first sold, but people think nothing of pirating The Doors’ Greatest Hits or emulating Zelda digitally.

So how do we shore up the value of our wares to prevent a crash when supply is unlimited? Appealing to consumers’ generosity and sense of idealism isn’t the answer. Pay What You Want models are rarely successful and we’ve seen CryTek almost go out of business attempting it with their game engine.

Well, just for fun, let me throw out a few ideas and we’ll see if there’s anything to be said for them.

What Might Be Done?

Let me disclaim that I’m not necessarily hoping to see many of these in practice, and currently gamers would never stand for many of them, but since I’m talking about radical changes to how games are sold anyway, let’s just go with it. The idea that everyone should be able to afford a game and that all games should cost around the same as their peers is fundamentally flawed, doesn’t apply to many other luxury goods anyway (like sports cars, watches, hotels, food, seminars, online training courses) and will likely be something we leave behind in the future. Just saying.

Limit the Supply anyway

What if you announced that you would only sell 10,000 copies of your game, but that it would cost $100? Could you sell it to your true fans? Probably. They wouldn’t want to miss out. Okay it would depend on what the game is and the reputation of the creator(s), but I do think it would work. The economic theory is sound, anyway.

What if you built an online, living, open world like nobody had ever seen and made a bounty hunting game, but you only allow 100 access codes to the game at any one time? Access costs $2,000 and when you’re done with ownership you can auction off your right to play (so its value may rise) and the developer gets 50% of the resale? I’m only throwing around numbers, but the theory holds, I think. Could I find 100 rich YouTubers who would pay a premium to be one of the few broadcasting this historical new game? I think so. They’d make their money back on the stream, then resell their access and make more.

Virtual Real Estate

Let’s talk about the apartments in GTA V Online, but this could apply to any hub world. You pay in-game currency to buy swanky (or not-so-swanky) safe houses to store your cars in and launch heists from. The suburban bungalows come in pretty cheap but the penthouse apartments cost a lot more. You buy them with in-game cash so it’s more of a progression reward than a monetization, but since you can also buy game currency with real money the lines are blurry.

It's a pretty nifty safehouse to be fair. — It’s a pretty nifty safehouse to be fair.

The thing is, the game just puts you into your own instance of the penthouse apartment. It might be the most exclusive high-end safehouse in the city, but pretty much everyone has it after a bit of play time or direct payment. What’s the value of that? There’s no exclusivity/scarcity. So what if they only allowed one instance of each safe house? Now, okay, since you can buy in-game cash with real world money then we would probably just have some entitled little troll lording it over everyone, and that’s not much fun for players, but I’m just trying to point out some lateral thinking. The game’s developers would be selling virtual property for real money. Real property holds value pretty well because it’s limited. Virtual property doesn’t offer real shelter, granted, but when limited in quantity it would suddenly be something that creates value. If it could only be transferred within the game, and the developers took a cut, then suddenly MMOs are still games, but now monetised by rules similar to real estate economics.

Say what you want about Star Citizen, but it’s proving that traditional payment models aren’t the only way to go. When they sell an Idris mini-carrier for €1,000 and say that they’re only selling a dozen of them, they’re snapped up in moments because the goods are (or will be when released – whatever) unique.

Pay for bullets

My friend Colm Larkin (Guild of Dungeoneering) suggested jokingly the other night that you could charge for bullets. Although he was joking, I’m going to address it earnestly. What’s the difference between a round of deathmatch and a round of paintball? Sweat and limited ammunition. That’s basically it.

Airsoft is a hobby where those who can afford it buy all the best gear, sidearms, grenades, etc, and the others just rent the site’s bog standard gun and try to conserve ammunition over the day. Nobody really complains that it’s “pay to win”, yet it kind of is. What if you had an F2P shooter where you charge admission to the servers for a day, or a reduced rate for a month’s membership? Or if extra ammo cost real money?

Nobody would go for this because shooters are a dime a dozen, but fundamentally there’s not a whole lot of difference to the entertainment value of how you spend your Sunday afternoon. I pose the question: why couldn’t it work? After all, before home internet was much of a thing, my friends and I would often pay to hang out in the local internet cafe and play Delta Force, Unreal Tournament or Half-Life on a LAN. If you think that that’s a thing of the past, just take a look at South Korea, where going to a café with friends to play League of Legends all night is very much a common past time.

Airsoft pay to win. Click for the video.

Rent the hardware

Speaking of internet cafés and the like, I’ve recently heard how VR is really taking off in China and Japan. They love it, but the size of the average home or apartment is way too small to house a VR system, so they go to shopping malls and arcades that have set up high-end VR PCs that can be rented by the hour (or so).

Here we have a limited amount of real estate and hardware being rented, so it’s not the case that digital games are providing fixed value here, but we’re still fundamentally talking about games and, if anything, this just proves my point that limited supply is how value can be created, and infinite supply is a problem for the future of video game pricing.

Cloud Gaming is becoming a thing, too. It’s now possible to have your games running on high end PCs “in the cloud” and streamed directly to your smaller, cheaper device that could never ordinarily run them. You can essentially rent someone else’s gaming PC as desired, and stream the results to your TV or tablet. Again, we’re talking about renting hardware, but you can imagine how certain specific games or controllers could only be provided by one proprietary company, and they then charge for access. Here, supply is limited, and price well be set where that supply meets demand. Think of the hang-gliding VR tech or the Virtuix Omni which most people couldn’t fit in their home. Tying your game to custom hardware may be more difficult to produce, but it does ensure that you retain value in the units that you do supply.

Competition Entry Fees

Here’s another quite simple option. You run tournaments in your game. Fighting games, sports games, or deathmatch games seem likely candidates for this, but it could even work with single player games where victory is determined by the highest score or fastest completion time.

Let’s say 50 people pay $5 to play. There’s $250 in the pot. The winner takes $100 and the next two runners up take $35 and $15 each. The developer then has the remaining $100 per tournament to pay server costs, staff, and recoup development costs.

Would that work? Why not? Games are pretty social now, so I don’t see a whole lot of difference between this and going to bingo or a table quiz, especially if some of the money went to charity.

Be a Superstar

You know how most actors wait tables and earn very little from acting but Brad Pitt earns millions for the exact same job? It’s not because he’s a million times better than the next guy, it’s just because he’s not subject to the market forces of supply and demand for actors. He’s not in the acting business. He’s risen above that. He’s in the Brad Pitt business. He can sell watches or fragrances or cars. It doesn’t matter.

If the vast majority of games were being sold for 99c, and Hideo Kojima made a new game, do you think he’d also sell for 99c? No. He’d charge $50-$100 and (as long as the game reviewed well/was finished/etc) people would pay it. Gladly. Because his name carries weight. In a world where any simpleton like myself can teach themselves how to make games in less than a year, it pays to be a celebrity.

Jonathan Blow managed to charge over the odds (for an indie game) for The Witness because he’s the guy who made Braid. It didn’t have anything to do with The Witness being twice as good as the next indie game out there.

Isn’t that a little uh….?

Sort of. I mean, I’m happiest when I pay GOG a fixed fee (under $60) for a DRM-free copy of a game that I want to play and replay whenever I want. I’ll be very sad if this goes away, but things are shifting too. I hate Season Passes, most DLC, and especially fee to pay or loot crates, but I also don’t want to see my games on a service like Spotify-For-Games earning me $100 in their entire lifetime, because then I won’t be making games. I’m just trying to look ahead here.

We have to remember that games used to be extremely difficult and try to kill you off quickly so that you’d keep pumping quarters into the machines… and we loved it!! It was the birth of the modern games industry, but you could see that approach as being pretty nefarious, too. The fact that we want everything free now because it costs less (not ‘nothing’, remember) to produce each additional unit is a fairly entitled view and, I suggest, it would lead to the destruction of the games industry in the same way that it’s gutted the music industry.

In Conclusion

This topic is wide open to debate and interpretation, but the core idea that got me thinking was “what happens to the Supply and Demand model when Supply is infinite”? Price has to drop. When the price drops too low, games will cease being made. There’s no arguing with that core logic, but what happens over the next decade is fairly wide open and hard to predict.

What trends do you see emerging or disappearing? I’d love to hear from you so hop into the comments.

Until next time..

Perpetual Sale Demon casts 96HP damage on unsuspecting party

It’s that time of year again. Assuming you live in the Northern Hemisphere, it’s Summer! Meaning the Sun is out, and you’re likely incarcerating yourself inside buying dozens of ludicrously cheap games and racing to put enough hours into them to feel like you’ve gotten your 99c of value before the next flash sale pops up 6 hours later.

That’s right! It’s the Summer Sales. I’d have said Steam Summer Sale but GOG are currently doing one too and Humble just finished up with one also – not that you’d know as, without scrolling, I can see the word ‘sale’ three times on the Humble home page right now.

For laughs, and I haven’t planned this in advance (having written the blog title after the article), I’m going to give you, dear reader, 100 HP (hit points / health – but if you don’t know that you’re probably not reading this blog), and each time we discover damage, I’ll subtract HP and see if you make it through this blog-dungeon intact.

I’m going to subtract -7HP now for the aforementioned time of year and the fact that Summer sales are making you miss good weather. If you live in Australia I’m still subtracting those points because it’s probably sunny and warm there too right now, chances are.

To set the scene, there are two major sales periods on Steam annually; Summer and Winter. These sales are huge, nearly everything gets a discount, and they last about 10 days. The rest of the year there is something on sale every day, and the weekends are always worth looking at too for free-weekends where you can install the game and play it normally for free all weekend, then buy it at a hefty discount if you want.
Humble Bundles are always selling games, though the selection is far more limited, and GOG are a quickly-growing competitor to Steam who are following suit with very regular sales as well as larger seasonal ones.
In short, if you don’t have to play a game on day-one, and you keep an eye on these sites or just drop in for the big sales, you need never pay full price for a game. Ever!

Great for us, sure, in the short term, but let’s look at the problems this might cause.

As consumers, and I’m as guilty as anyone here, we don’t often pay full price for games any more. This means that retailers and developers can expect to never really get full price. Considering that games make us gamers happy, and developers and retailers make and sell the games while they’re happy (financially speaking) to do so, we can agree that it’s best that everyone is as happy as possible. Lower selling prices make consumers happier (supposedly, we’ll look at that) but can thin out developers’ profits, making them less happy, when we want to be aiming for win-win.
In the past year, there’s only one game that I’ve bought at full price, and that’s GTA V for the PC. It wasn’t offered on sale, wasn’t likely to be soon, and I’d been wanting to play it for years while it was out on consoles, but waited for the PC version. Furthermore it’s actually worth the money by any measure. Amazing game! Apart from that, though, I couldn’t tell you the last game I paid full price for, and I’ve bought new AAA games like Far Cry 4, Alien Isolation, Watchdogs and Wolfenstein. I suppose I paid “full price” for Sid Meier’s Starships, but that was only €15 (actually, my 1-sentence review: Just about worth €15 but there’s not a full game there).

The reason for this is not that I wouldn’t pay full price for some of the games I have bought, but because I don’t need to. I’m still busy playing the last lot of games I got on sale by the time the next one comes around, and I’m mostly pretty good at limiting what I buy to what I’m actually going to play. Many people buy games on sale and never play them at all. This is bad for the games as innocuous art pieces, as nobody is enjoying them. Poor games. -6HP there.
It’s bad for the consumer too as they will regret their purchase. €1 wasted is still money wasted, after all. Even if they do get around to playing them, until they do they’ve added a task to their mental To-Do list and this adds to our stress levels. Whichever of the two is your problem, that’s -11HP.

You’d think that for consumers, particularly cash-strapped ones, that it’s great there are so many sales, and in a way it is. For the same money we get to play more games. We like games and we like saving money. But the amount of games most of us want to play is far longer than the amount of games that we can play, especially if we want to both do the game justice and get maximum value for ourselves by completing it!
I could easily argue here that the benefit to consumers is illusory. The cake is a lie! For me, who likes to beat games I feel it is, though I acknowledge that people might buy games cheaply in a shotgun approach, try them all for a little bit, and play the one they found themselves to like. I just find it hard not to fuss over the games left underplayed.
Whichever your problem there I think you’ll find games are taking up more of your time than they perhaps ought to. The lowered price point makes them “too cheap not to buy” and you’re going waste hours playing games that you know aren’t really for you (everyone has their own taste) just because people recommend it, though they’re maybe an RPG player and you’re an action guy. -9HP for leisure hours spent doing something you knew you didn’t really want to do.
(edit: I’m all for trying new games, but sometimes you just already know, you know?)

Moving on, are the sales good for the vendors? Sales obviously have their origins in the physical goods industries, where vendors need to clear stock either before it perishes, or just to clear room for newer seasonal stock. Sales make sense there. They make zero sense for digital distribution, looking at it that way. Bricks and mortar game shops had discount bins because they needed to clear the shelves of ageing stock, not to give gamers better value or to boost sales particularly. It’s likely that the marketers, in their divine, short-sighted wisdom, decided to apply sales to the online stores purely because of the psychological effect it has on consumers. People are more likely to buy something if it’s discounted, and to feel good about it. This would have started as 10% off, say, but if you look on Steam today, you can find multiple titles, some of them really good games, with 90% off! It’s a race to the bottom! Once your competitor is doing sales, you have to do them too, and do them better, if you can! So Steam and GOG, for example, now have to out-do each other in discounts every day of the year, and especially at the arbitrarily-set bi-annual mega sales times. So while they may have increased volumes of sales, the cash-value of each sale is lowered, and so even for them, they’re potentially doing themselves more harm than good in the long run. -11HP for opening that Pandora’s Box, because that monkey won’t go back in his cage too easily.. not to mix metaphors or anything.

Following on from that is the stupidest example of all of this. The meta-sales games. I don’t want to get too into it because I’ve never wasted my time with the nonsense, but during Steam’s big sales, you can get reward cards for voting on what sales are next, or buying games on sale, or other random stuff. The rules change each time as they try newer and stupider ways of making a game out of the very selling of games. Essentially you turn the cards into badges, or gems, when you collect enough, and you use those to.. craft more badges? Or something? Oh and you’re on a team now.. and can trade the cards with other people so you can… what?! Look, I feel I did it all the justice it deserved with that explanation and I’m not looking further into it. All I know is that somebody actually buys these stupid cards so I can actually sell the ones I get (for doing nothing) for about 10c a go to some joker, and thus I get maybe €1 store credit when all’s said and done that I can put towards my next purchase. That’s after Steam’s commission, of course, clever bastards. Make something out of nothing, give it to somebody for doing nothing, then get someone else to pay you and the the first somebody just so they can be the one to have that nothing. Genius! That’s the easiest to understand version anyway. But the existence of such a system is ludicrous! Constantly selling the product (which is games, Steam! remember?) so low has made even the sales unexciting and Steam feel they have to jazz them up with this marketing tripe.
GOG’s current equivalent makes more sense, at least. If you spend a certain amount during the sale period, you’ll get a free game. A higher amount means another, better free game. This, at least, I can understand, but it’s symptomatic of the race to the bottom and it really hits me hard in the sense part of my brain. Let’s say -15HP.
(edit: have you figured out that my numbers are arbitrary yet? I’m not even rolling a dice here!)

What is this shite?! Click the picture to go read the full rules.. if you want to..

Having established that serious gamers like myself would actually pay full price for many games but never really have to, it’s clear that games are becoming less and less valuable. I actually now always check how long a game will take to beat before I consider buying it on sale. I’d like the experience, but not if it takes more than 8 hours. Kid-me would hate me for that. -5HP for making your kid-self cry with your first-world “problems”.

Finally, I want to look at it from the developers’ viewpoint. Games are very expensive to make, and individual games being less valuable means you can’t count on getting your RRP (recommended retail price) for each unit. Or even close to it! So AAA publishers releasing the big games, in the knowledge that many people must have them on day one, are pushing that RRP higher and higher, and adding on day-one DLC and season passes. A standard game is pushing past €60 now, while with DLC and a Season Pass for more of it, games like Evolve can break the €100 mark. Arkham City is €80 if I want to play the ‘whole game’. Which I do. But I’m not going to pay that much. -18HP for either taking more from our wallets, pushing games out of our price range, or withholding content behind a pay wall.

Batman can't save you when soaring prices, season passes, and day-1 DLC join forces! — Batman can’t save you when soaring prices, season passes, and day-1 DLC join forces!

It also tends to normalise the games that are being made, with big studios less and less likely to take risks because they need to know what their sales are likely to be for a given game-formula. This results in less interesting games coming out from the AAA side. Ever wonder why Assassin’s Creed is (debatably) the same game every year? -5HP.

Wait a second; rising prices, less and less value per unit currency, product not worth what you’re paying for it? Sounds familiar, particularly if you bought a house between 1990 and 2007. It’s not unrealistic to suppose that the AAA bubble might be going to burst in the next few years. It’s worth noting that EA actually shy away from doing too many of these major sales on Origin. They know the harm that the perpetual sale is doing to their sector and they’re not contributing, or trying not to. They do seem extremely unwilling to takes risks with their games franchises though (unless you count risking shipping them as unfinished buggy messes).

On the indie side, where a full price game is rarely more than €20 and DLC is rare, they don’t have far to go to the bottom. Before long they might not be able to count on selling at more than €5 per unit average (and that’s before vendor commission – often 30% – and before all other costs) on their €20 RRP game. (As a disclaimer, the numbers are my own fabrication as I’m hypothesising on the future.)
-9HP for making it harder on the little guy. It’s notoriously hard to make a living as an indie game developer unless you have that big success. Indies need to stand out to have that success though, so on the positive side, this does at least result in more interesting games being made, rather than a normalisation (if you exclude the myriad zombie survival games out there). This would be true with or without sales though so I can’t really add back any HP, sorry. Healing spell failed!

Final tally: Since we had 100HP to begin with we're still alive, but we've taken some serious hits. I didn't plan the numbers, I just took points based on how bad I reckoned things were relative to each other. Interesting that we got as low as 4HP remaining. — Final tally: Since we had 100HP to begin with we’re still alive, but we’ve taken some serious hits. I didn’t plan the numbers, I just took points based on how bad I reckoned things were relative to each other. Interesting that we got as low as 4HP remaining.

In all areas of life, it’s very hard to be a responsible consumer. We know we should recycle, we don’t want to support slave labour or animal cruelty, or the killing of the bees, or the harming of our beloved industries, but it’s not always easy to see how we’re doing these things as the end consumer. I do think we should stop and think once in a while instead of always jumping for the carrot. Do I have a useful suggestion though? No. Am I going to stop buying games on sale? No, probably not, although I’ll buy them full price if I’m ready for a new game and it’s not on sale.

Short of all parties agreeing to stop sales and get back to selling games at reasonable recommended retail prices (and there are laws against collusion like that, see ‘cartels’) I think we’ll just have to ride this wave until it crashes into the shore and see what the industry looks like after that. Change is not always a bad thing, after all, even if it can be painful. Just make no mistake, these perpetual sales are definitely driving a change in how we perceive, play, purchase, and create games, and it’s not necessarily a good thing. We behave like the consumer is king, but even the all-consuming bushfire can run out of fuel and burn itself out.