In Part One of this series, we looked at how video gaming 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.
Currently, we see several attacks on the fundamentals of prevalent business models common to most console games that feature online/connected play. The five issues are as follows:
Fixed Price and Post-Paid Content
In the first several generations of consoles, people paid a fixed price for a single (or offline) “campaign” experience, which might include a “party” co-op or competitive mode for people playing in the same room on the same console. Typically, one might expect 40-80 hours of gameplay from such an experience (think of Mass Effect or Halo).
To remain competitive in a market where consumers demand and pay for connected, multiplayer experiences, console publishers have begun offering online multiplayer experiences alongside the traditional single-player campaign mode. Developing, releasing, and managing additional maps, characters, weapons, and tools while balancing all this new content requires game teams staffed as “live operations” groups.
The days of buying a fixed version of a top-tier franchise for a fixed price and getting a fixed amount of gameplay have largely sunset in favor of games that have both campaign experiences and almost limitless online, multiplayer experiences. Gameplay has moved from fixed and static to customizable and dynamic, with additional fees to match. A relevant analogy might be a cruise ship offering a fixed price, 6 night/7 day vacation with an “all-you-can-eat buffet”, but then also offering a “premium food and wine” experience for an additional fee. Who is to say what the value is of this additional content, other than the consumer voting with their time and their dollars?
Pay v. Grind
Another de facto industry standard that has evolved over the last 10 years is the use of game (or even publisher) specific currency which can be purchased or earned (“sources”) and then spent within the game (“sinks”). This is meant to improve one’s game experience through faster story progression, vanity items to adorn one’s character or in-game assets, or giving one an advantage in gameplay.
Some games like World of Warcraft and Fortnite have traditionally allowed real-world investment for vanity items only. Many other online competitive strategy games, starting with Kixeye’s Battle Pirates, would allow you to purchase items to benefit the player in the arena of the game’s conflict with other players (PVP) and the computer/simulation (PVE). It has also been an equally long-held tradition that virtual currency (VC) could also be earned through “grinding”: performing time-consuming and repetitive actions in the core game loop to accumulate in-game currency which could be used to acquire the very same upgrades, assets, buffs, and content that could be obtained by spending real-world dollars. Essentially every game of note in the industry has offered players this economic choice worthy of a college microeconomics course: how much do you value your time? How much do you want to grind versus pay?
Virtual Currency and Pricing Bundles
Another common gaming practice relates to the merchandising and pricing schema used in virtual storefronts. One of the issues raised surrounds the concept that the VC system distances the player psychologically from the amount of real-world money he or she has spent within the game. This cycle is further perpetuated by game creators offering “limited-time sales” or “specials” on certain loot prices and items, creating a sense of urgency to purchase.
Another practice involves encouraging player spending by varying the exchange rate at which VC is purchased in different transaction sizes, which can force the user to buy more virtual currency than is necessary. Additionally, the game allegedly induces players into making more investments by making the purchase process incredibly easy and convenient.
Leading game publishers did not reinvent the wheel when it comes to converting fiat currencies in entertainment and leisure. Creating a single-entry purchase method and then allowing consumers to allocate their dedicated currency among the myriad of attractions based on personal interest has been a tried-and-true schema for revenue optimization for far longer than video games have existed as a form of entertainment. Discounts, promotions, “buy one, get one”, “two for one”—the list goes on and these promotional hooks have been proven effective in everything from retail shopping to late-night video infomercials. Is there any reason that retail gaming would or should act any differently?
Loot Boxes
Loot boxes are randomized bundles of variable in-game valuables for fixed prices. It might be tempting to view these practices as some new, “predatory” mechanic invented by overly aggressive game publishers in an attempt to separate gamers from their money. However, anyone who grew up collecting trading cards is familiar with this mechanism; you buy a pack of baseball or game cards for a fixed price and excitedly tear open the packaging to reveal what assortment of players or characters you acquired, knowing that the most valuable characters are also the rarest.
For consumers, the possible payoff and rewards are known upfront. These models usually run with an RTP (return to player) close to 85-95% percent in terms of expected value. So, pay $1 for a spin, and on average, you will get $0.90 in value back. BUT the distribution or variance of outcomes is large enough that some payoffs might be 100X. That unseen and unknown probability is what makes the mechanic an enduring part of the hobby and game industries, and, frankly, fun for the players as well.
Minors
The issue of minors and their ability to access storefronts presents a difficult challenge for both the industry and parents. To play games like NBA 2K, one needs a registered and active account with not only the console but also the publisher. Minors do not have unrestricted accounts and need to attach their account to an authorized one held by a parent or guardian. In addition, minors typically are not legally allowed to own or control bank accounts and credit cards, and they need some type of access to funds under the control of an adult.
Further, minors that truthfully report their age in creating their profile in Take-Two’s NBA game are prohibited from engaging in online play and do not have the opportunity to purchase virtual content, access loot boxes, or otherwise make purchases within the game.
It should be noted that the console companies themselves control the authorization and verification processes surrounding the purchase of DLC, VC, and micro-transactions. Parents with minors attached to their accounts are given a variety of controls to prohibit unauthorized spending and to be informed as to any purchases attempted or made using their accounts.
This is an issue that goes beyond gaming; we’ve all heard stories abound of those precocious little tykes racking up thousands of dollars of Amazon purchases. And the fact is that generally, children have far more access to purchasing vectors today than ever before. That is not a reflection of fiendish gaming companies or inattentive parents, but a reality of today’s connected world – a world that will only get more connected. And in an increasingly connected world, legal disputes in the aforementioned areas are proving to be inevitable.
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.