Understanding (and criticizing) gaming business models

Gaming is not what it used to be. Since its humble beginnings it was an exotic hobby, often denounced as an activity for weirdos and lunatics who spend most of their time in dark basements, devoid of any social contact. While this image still is being upheld by our preceding generation in an almost self-deceptive manner, games have in fact grown up to be a huge entertainment form. A new marketing machinery aimed at a very big audience shows us that a lot of money is involved – which of course involves both spending and earning it.

Knowing your audience

500$ production and marketing costs but a mediocre public reception. Destiny is the best example how a lot of money can actually damage the image of the gaming industry.

500$ production and marketing costs, but just a mediocre public reception. Destiny is the best example how too much money can actually damage the image of the gaming industry.

In the end video games have to follow economic trends and constantly adapt to (at least seems to be) user’s needs. This balance between meeting both your audiences expectations and getting good (and timely) reviews can be reduced to very simple need: making ends meet in your project, production and marketing costs. Today it’s just not enough to develop a game and rely on word-of-mouth for its distribution – you will need to build up a brand and advertisement campaign to go with it. With the recent release of the modern first-person shooter “Destiny” the bar to achieve this goal has been raised to a stunning 500 million dollars, a hefty sum that even outshines most modern cinema blockbusters as a comparable form of mass-media entertainment.

This trend towards big markets is a huge chance for a more positive public reception, but also yields many problems.  Gaming is a relatively new form of entertainment that still needs to find a stable balance between radical exploitation and healthy self-sustainment. With such a lot of money involved, the possibility to lie at your customers is tempting one. If you just stop for a moment and have look at recent marketing and social media campaigns you’ll soon come to realize that they sometimes aim at concealing – or even overruling – any bad early press about the game. If you go a step ahead and follow personal blogs of reviewers you’ll often hear about embargos that keep any critique at bay until the game hits the shelves – sometimes even later than that.

It’s a trend that often goes unnoticed in public, as most reviewers are not allowed to publicly speak about any agreement between them and publishers. It’s also a delicate subject as publishers are the one’s that supply them with review copies days in advance, thus providing them with the needs to do their job (and earn their living). It’s easy to conclude that not every reviewer is willing to sacrifice his job for a single review.

Distrust many – believe in one?

With that much money at stake it is not too far-fetched to guess that some of the magazines feature “bought” articles and reviews but don’t disclaim them as such. This has led to a certain distrust towards established gaming media, as it can be seen in a lot of  forum discussions like this one. Combine this with the trend towards pure internet distribution and you’ll notice a steady decline of traditional print magazines. With the popularity of YouTube, the power few individuals tends to outshine the “brand” of a famous gaming magazine. Or put differently: in 2014 selling a personality and your personal taste seems to matter way more to modern gamers than just selling them a written review – no matter how good it may be. It’s the recognition factor that counts.

Gaming critic John Bain aka "TotalBiscuit" managed to build up a brand on his own. His top selling product: Integrity .

Gaming critic John Bain aka “TotalBiscuit” managed to build up a brand on his own. His top selling product: Integrity .

Steam just recently followed trend by giving personal reviewers (curators) a spot on their storefront – right next to gaming magazines and marketing box quotes. With 1.5 million subscribers on YouTube alone, TotalBiscuit has become the leading curator on Steam within just a few days. It’s a prominent example of how powerful the opinion of one being can get towards the industry, but also a clear signal that integrity is highly valued by customers.

But let’s not forget about the downside of this: targeting single reviewers instead of huge companies makes “buying” a review much easier, as there is no big label or huge army of lawyers behind these people, but just a normal person. This leaves it up to the reviewers to be totally transparent about disclaiming that he really “reviews” a game in a neutral manner or just does a paid advertisement video for the company involved.

But all negativity aside: this shift towards a more democratic approach in reviewing games is a great one – but it’s still good to take every overly positive review with a pinch of salt and get multiple opinions before making your purchase decision. Just don’t bet all your money on one horse – and most importantly – don’t purchase games based on reviews alone.

Increased upkeep breeds new ideas

Since the gaming market has grown so huge the competition has gotten intimidatingly huge, making it hard to advertise your game within a sea of similar titles. If you’re not too original with your gaming idea you need production values to back up and re-sell an existing idea with a new coating, convincing your audience that the improved looks are worth it to trigger a purchase decision.

As games have reached a near-cinematic quality level, these production costs are soaring high, up to a level that’s really hard to maintain. It’s a situation that can break the gaming industry from within, as people are not willing to pay full price for a new game with so many alternatives around. This is also a reason why so many new funding models have grown over the years – some of which many are truly questionable.

In the following section i’ll try to summarize the most common funding business models and share my thoughts about them. Keep in mind that this is a more personally flavored section of this blog entry, so feel free to question my thoughts and contribute to the discussion.
Listen up to what Fen has to say!

An overview of business models and how to see them

Classic Retail

Have you ever wondered about the price difference? Especially when games are new this is quite apparent.

Have you ever wondered about the price difference? Especially when games are new this “discrepancy” is quite apparent.

It used to be a thing when you got those huge retail boxes with lots of gimmicks inside – i was also someone who really appreciated that. But if you take that aside, this method of selling almost feels archaic today. Games are outdated as soon as they hit the shelves, forcing you to update (or outright download the complete game) as you get home, reducing the box value to the registration key inside.

In my opinion the classical “box” copy can only be justified for products that offer the extra value – and most games simply don’t do that anymore. The definition borders of games and software in general have gotten way too dynamic to be sold in such a confined manner. In addition to that, retailers also offer limited shelf space, making it hard for “smaller” games  to get the exposure they need.

On an ugly side note: big retailers are the sole reason why we are still confronted with 50-60$ price tags on digital products. On many occasions you find the online licence to be more expensive than the hard box copy – basically that’s saying “pay more to get less”. The reasoning behind this is simply called blackmailing: “you either make the online offer more expensive than its box copy, or your game won’t be displayed at all”. You can think of that what you will.

Digital Distribution (aka Steam)

With the rise of Steam every other publisher now wants to jump on the big bandwagon of digital distribution. At the beginning i was sceptical about it, still being fond of big packages, bonuses and gimmicks that came with the game packages. Now i enjoy the low prices, quick and easy accessibility. Steam has a lot to offer for all sides – easy marketing, distribution and updates for developers, quick and relatively cheap access to thousands of games. With a modern high-speed internet connection there is little to complain about this convenient distribution method.

All positive points in mind, Steam still has a lot of room for improvement. The main page still is not where it should be, favoring (obviously paid) marketing campaigns over public opinion. The reduced cost of distribution have been passed to the customer, but Steam needs more forms of quality control: Demos, Acceptance criteria, Removal due to public opinion and – last but not least – the possibility to refund games that you don’t like or that don’t work as specified!

Micropayments

Now here’s a two-edged term in the best sense. The idea behind it is that you basically buy small batches of optional content for your game, keeping it alive for many years to come. On the good side this keeps the game financed and people in their jobs for a longer period while also showing the publisher that people have an ongoing interest in the brand. It’s a good thing for everyone, right?

Well, the problem is: publishers often don’t understand the word “micro”, selling virtual items at ludicrous prices. The model also gets abused to sell things that can barely be considered as optional, stripping away content away at a full-prize game just to sell it to people later on and a prize that stands in no relation.

Sounds a bit like selling drugs, doesn’t it?

Subscriptions

World of Warcraft – albeit not being the first game featuring this model – basically made it socially acceptable. The problem is: that was many, many years ago. People like flat rates, but only for things they can consume and use on a daily basis. Playing a game doesn’t exactly count as “daily use” – and being forced into playing a game because you feel like you’re missing out for what you paid isn’t a good feeling for anyone.

Besides that it takes a lot to justify a fee of more than 10$ per month while still taking plenty of money for any upcoming content-addon. It’s basically demanding money for the right to buy further content, which doesn’t really sound like sustainable model, does it? Blizzard is the only one to get away with it because their game was so accessible and well-received, making that an exception amongst all MMOGs.

Addons / DLCs

This is a good example how you can ruin the once well-received meaning of a word by giving it a new label. Addons used to be huge expansion packs for price range around half of that of a new game. They offered new content, game mechanics, graphics, units, you name it. Addons usually allowed you to experience a game anew, completely changing your perception of the title in the process. People willingly bought them because they knew that a lot of extra effort was put into them.

What we instead get today is “DLC” (Downloadable content) – things that hardly justify the price tag they are sold for (i.e. maps for a 10-20$ price tags or a single car for a racing game for half the original retail price). It has reached a point where gamers automatically believe that DLC is something that was stripped apart from the original vision just to sell it to people later on, artificially bloating the game’s lifespan in the process.

Free to Play

Team Fortress 2 is F2P done right - ingame hats finance the whole game and lots of servers

Team Fortress 2 is F2P done right – ingame hats finance the whole game and lots of servers

If combined with micropayments this is a rather good and healthy business model. You get a lot of good things from both worlds: people get easy access to your game without a steep 60$ entry barrier. They can  try and experience your game without much effort involved and you might even get some small revenue out of it. It almost feels like a full-blown Demo version, a nice and transparent feature that has gotten so rare nowadays.

The problem is somewhat related to micropayments as well. Developers often set the pricing tags way too high because of a fear of underselling the value or people burning through content too quickly. While this is a valid point, the problem is that you have just a few people (called Whales) which stay and pay for the game while other people just quickly wander off. The problem just intensifies when you have gated content that only paying players ever get to see – think of extra levels or weapons that just can be purchased with money. The problem here is not the model, but the lack of thought that has been put into it before starting to even design a game.

Free to play has the best chances of being a huge success and there are quite successful games like TF2 out there that show how it’s done right. Let’s hope it’s not going to be dragged down like most of the other terms above.

Crowdfunding

The youngest form of financing a game. Plattforms like Kickstarter or Indiegogo seem to be a great thing: you present a good concept or a new product prototype and people give you money to develop a full-blown game. The problem here lies within the concept itself: most of the time you actually pay the full prize for a product that you’re not even sure to get in the end.

There is little to no compensation in case of a cancelled product and the success usually depends on trust alone as there is no comparable history of a developer to look at. Even gaming celebrities “Day of the Tentacle” author Tim Schafer (Double Fine Studios) fall flat on their face when it comes to planning, financing and or finishing the product they originally proposed.

But in its defense: there are successful examples of great games out there, like Wasteland 2 and Shovel Knight (check my Review here), but for each successful project there are hundreds that fail. In my opinion Kickstarter is – in its core – a great idea, but it has the same issues as Ebay: you basically throw money at something without even knowing what you get. To me that doesn’t sound like a very healthy way to do business.

Early Access

So we reached new pricing hights for a product that is not even finished?  Betas used to be free when i was young, since people are testing your game for free.

So have we reached new pricing hights for a product that is not even finished? Betas used to be free when i was young, since people are testing your game for free. Even if “Elite: Dangerous” still looks great at this point  – this just screams “wrong” at me!

Early Access is a new trend which can best be desribed as “payed beta”. You give money in exchange to access to a product that you basically have no right to influence. It’s totally up to the developer if he wants to improve the product – or even finish it. Compared to Crowdfunding this model looks a bit better for you as a consumer as you actually get a chance for some early fun.But it also yields potential to spoil your fun in experiencing something that could eventually turn out to be a good game in the long run.

Keep in mind that you are also sending a message here: it’s ok to charge me for an incomplete product and i will (and can) do nothing about it if you ever decide to end development early.

Preordering

I’ll keep this one short: Don’t do it…just..don’t! With few exceptions there is no reliable publisher out there that managed to push out multiple sequels of the same game while keeping the quality on a constantly high level. To overshadow this fact and still lure people into preordering, exclusive DLCs are handed out as an additional incentive. While this is questionable in itself it gets really funny when you talk about balance in multiplayer games.

Preordering sends a similar wrong message to publishers: we think its ok if you push out a product early and with bugs – and there’s no need to deliver better quality, becase we already payed for it.

 

 


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