Continuous evolution in technology drives massive advancements in the video gaming industry, creating rich, immersive playing experiences along with confusion and conflict as lines between console, online, and mobile blur. The recent class action filing against Take-Two, publisher of the NBA 2K basketball franchise, offers a great lens through which we can view these dynamic and important shifts in gaming content playing out in real time.
In this two-part series, WIT and IP Advisory Panel member Josh Grant takes a brief look at the growth of gaming and how gaming has evolved over the past 20 years into an entertainment behemoth. We’ll also review recent litigation related to commercial practices in the industry.
In Part One, we look at how video gaming content has transformed in the face of fast-evolving tech. The industry’s ongoing expansion has moved the market from arcades to single-player console experiences to anytime, anywhere gaming for everyone, causing conflicts as content capabilities expand.
The Past & Present of Platforms
For the first thirty years of video games, consumers bought a console for a fixed price and then purchased video game cartridges or disks, getting a complete gaming experience for a set cost. Playing was largely a solo affair unless you had multiple controllers and friends over for some Techmo Bowl on NES or FIFA on Xbox. To some extent, that experience still exists today, although at a much greater cost to the player. Since the introduction of Sony’s PlayStation 2, consoles have risen in price from around $299 in the US to almost $1,000 today and the per-game cost of most premium console franchises is in the $70-$80 range. And if you want your friends to join in on the fun, prepare to pay between $50 and $200 for each additional controller.
These trends match the increasing costs of game production and marketing, naturally ballooning over the years on account of massive gains in console processing power, memory, storage, connected play, and the size of the overall gaming market. Game production costs have increased by more than 200%, and manufacturers have struggled to lower their production expenses for next-gen consoles as parts become scarce with current supply chain disruptions. And while these producers attempt to navigate rising costs, many online and mobile gaming platforms continue celebrating rising profits.
Stepping Off the Platform
For nearly 15 years, online and mobile experiences have brought mass appeal to the video games space in the form of connected, social gaming adventures on non-dedicated platforms like Facebook and other online/mobile options like Apple’s App Store and Google’s Play Store. According to Statista, smartphone games are now the top-grossing video game segment, garnering $81.5 billion in annual revenue and accounting for 52 percent of the global gaming market. Console games were ranked second with $50.4 billion in global revenue.
These games introduced several new marketing and business modalities offering opportunities for profit growth: virtual stores, virtual currencies, free-2-play games, subscription models, micro-transactions, and downloadable content. And while these new additions may seem exciting in the world of innovation, they are creating some issues in the realm of litigation.
Consoles’ Platform Pivot
As the gaming world’s adoption of non-dedicated devices increased— bringing anytime, anywhere gaming for everyone— console companies, traditional publishers, and developers all took notice. The market and revenue were expanding rapidly, and virtually every major video game publisher did what it could to participate in the explosive growth of the market brought on by non-dedicated platforms being used by non-traditional gamers. EA bought Jamdat, Disney bought Playdom, and Activision bought King. Many developed internal studios or began producing versions to publish third-party-developed titles on alternative, mass-market channels, allowing them to appeal to a wider audience of consumers that the traditional console model could not reach.
Because of this, it should not come as a surprise that the marketing, operations, and business models that made mobile/online games so successful would be incorporated by console manufacturers and publishers to deliver compelling social and connected gaming content. But have these practices transferred over to the console market as seamlessly as developers hoped?
The Case for Content
Take-Two (and virtually every other console game publisher) has responded to these major shifts by adapting the methods used by new market entrants for its core console business. And with the recent litigation against publishers, we have the opportunity to examine the benefits and hazards of implementing new avenues for paid content in the video game market as a whole. Again, it needs to be stressed that we are discussing common practices across gaming and not the particular actions of one publisher.
There are five areas worth looking at that are core to litigation claims. First, there is an allegation of deceptive advertising and marketing practices related to the use of post-purchase content. Formerly, the common practice in consoles was to sell a complete game with all the content necessary to play on a single disk. But the ubiquitous connections to the internet have allowed the publishers to sell add-on content well past the release date.
Second, users have the option to buy downloadable content with virtual currency. While games allow you to work for in-game currency (“grind”), the incentive is to speed up gameplay by purchasing virtual currency to speed things along.
Third, buying virtual currency with fiat money is not a simple exchange, but involves the purchase of bundles of currency that incentivize the user to spend more.
Fourth, the practice of using “loot boxes,” which are randomized value bundles of in-game “loot” with varying payoff probabilities, is alleged to be designed to drive behaviors more akin to gambling than gameplay.
Finally, there is the issue of minors making purchases on the platform. This is a loaded issue and hardly new to gaming in 2022. What controls should be in place and are minors especially susceptible to these elements of game design?
Virtual currency, pay v. grind, and loot boxes have been a mainstay in gaming content (in one form or another) for more than a decade, evolving based on commercial considerations and success. Is this the proper measure?
In Part Two of this series, we examine the specific issues currently being faced by the gaming industry as brought to light in the Take-Two case, and where major players should be looking for future litigation.
If your company needs help preparing for these challenges, reach out to WIT for the best experts who can advise you on your strategy. Our expert teams were created to address what we expect to be the key areas of litigation in emerging video gaming content and technologies.