My (Odd) Take On Microtransactions.

 


You can’t move in the gaming media or indeed, around any gaming discussion online right now without bumping into people rightfully calling into question the games industries laughably self-destructive approach to microtransactions.

I have spoken about this issue – I’ve made it clear that I personally believe this is cannibalising the games market. What one consumer has to spend on DLC, Season Passes or god forbid Microtransactions in an attempt to complete or experience the full game they’ve otherwise paid for – well, that consumer doesn’t have to spend on literally any other video game. The industry laments not hitting sales figures, wary of releasing too many big games all in one fell swoop, grumbles about a dwindling market and yet not a single one seems to have the capacity to ponder if the act of demanding an additional £25-£50 per game might just be cutting into everyone else’s bottom line.

The problem is that most people agree on one thing; video games are expensive to make. But are they – and perhaps, should they – be this expensive?

Look, it’s impossible to talk about this without raising the spectre of one important video game – Final Fantasy 7. An extraordinarily expensive game even for its day, with a budget that was reportedly around $45 million, it was vastly more expensive to make than even better RPG titles of the era like Grandia (and Grandia had voice acting and 3D environments years before Final Fantasy would leap into that field – and it was still cheaper!). But the real expense – and the reason the game still gets ports to this day – wasn’t the development budget, which for the record could have easily been recouped. No, it was the marketing budget – a staggering $100 million, more than double the cost of the games actual development.

For all the nonsense about video games being expensive to make – eh, there’s some truth to that, particularly if you’re a publisher or developer building an engine entirely from scratch, but on the whole in the modern era – there are plenty of good middleware solutions like Unreal Engine, Unity and even GameMaker and Amazon Toolshed (based on the CryEngine). The expense of most modern development tends to be the boring stuff – wages, primarily, with development teams having swelled to extraordinary size, alongside taxes and insurance and utilities that of course will scale with the size of the development team in question. But even here, a lot of modern video games still haven’t gotten to the stage where it costs $45 million to produce one single video game. There are exceptions – Destiny, of course, being one of them – but generally speaking, whilst inflation has changed monetary value, most video games haven’t broached the figure set by Final Fantasy 7, even today.

Marketing budgets have, however, really increased. The Final Fantasy 7 model is the norm now; on average, a games marketing budget is much, much larger that of its development budget, which is an extraordinary thing when you consider this for a beat – if you removed the marketing, I’d wager an awful lot of video games would be profitable. Not all, perhaps not even most but a healthy 40-50% would be profitable. And you can see this in titles like Stardew Valley – without a horrendous marketing budget, the end result is the developers – or developer in the case of Stardew Valley – walk away with millions of dollars in crisp, clean bank notes.

And yet, we exist in an era where most of us would agree that marketing is nearly worthless.

This isn’t simply about a radical decline in television viewing habits – though admittedly, that has a role to play. There are far deeper cuts; video game magazines are rare to non-existent today, sales have dropped thanks to the rise of The Internet where most of us can get the same, or better, information for the grand price of free. Even there, however, thanks to a history of invasive and migraine-inducing ads, the vast majority of those who still go to video game websites or blogs (hi!) will have the likes of AdBlock on, meaning that even if you have paid for the ads – the software on the client side is filtering it out and not displaying it, if it even gets through at all to count as a hit in the first place.

I say this because you really need to appreciate how ludicrous this next bit is going to sound.

Marketing is about making a video game desirable; it’s about making you want to buy said game. But that marketing budget has to be paid for – which is where Microtransactions (and Season Passes and Nominal DLC Packs and Loot Crates) come in these days. But that, it turns out makes your game undesirable. Which means you need to raise your marketing budget to try and give them additional cash to make a game look desirable again, which means more expensive microtransactions and season passes which makes your game more undesirable so you then have to spend MORE on marketing which still needs to be paid for…

You get my drift. This has become an abusive, twisted, vicious little cycle. And it’s perhaps the most depressingly hilarious part of this whole discussion – no-one wants to admit how ludicrous this is turning out to be! No-one wants to be the voice raised in the back saying, “Uhm, this doesn’t make any sense. Like, at all.”

deusexaugment

Remember: A marketing team got paid for this. A lot.

But thing is – it doesn’t make sense. We should be making this known, someone needs to be saying how pointless this is. In an era where marketing is so difficult, because print media is more or less dead and gaming websites struggle and groan under the weight of banner ads no-one will ever see because yay AdBlock and all, marketing budgets being so enormous as they are makes less sense. Then you throw in elements which the gaming crowd has grown to distrust if not outright despise, and then you think; we gotta make this look better, we’re gonna need another X million dollars for this…

There’s a point where you do have to point and laugh at the idiocy at play here. And it is sort of funny, but it’s also I believe crippling the games industry, particularly the bigger big-budget games which end up with the larger budgets overall. There’s a point where the only way the games industry can win in this situation is not to play at all; by which I mean, dramatically reducing the marketing budget, finding better or smarter ways to pitch games to the masses, and ultimately phasing out microtransactions on the whole. Going in reverse won’t magically make them more money; but it should, by degrees, show them there’s little difference in terms of profit margins by taking a couple steps back and relying on a games quality and content to see you through.

And if your game is pitched on the entire concept of loot boxes and microtransactions, here’s a valid question; why does it cost £50/$60 to start with?

After all, for all the anger at these things – they’re not inherently evil tools. Free games have made good use of loot crates and microtransactions on the whole; many have made good money with them, and the advantage of this is that everyone can download and play at least -some- of your game, get involved and perhaps even get attached to it, before they begin to throw money at their screen. People know that nothing is free forever; so they expect to be able to buy something in a free-to-play game, particularly if they enjoy it. Black Desert does this; it’s not exactly “free”-to-play, but the entry price is less than $10 now and you can get a long way before the microtransactions kick into play (around lvl 50, as I recall, which is when it becomes an open PvP fest).

If you’re smart and mathematically gifted, this comes into more focus when you break it down; if a game costs $40 million and let’s say the marketing is $60 million, that’s an overall budget of $100 million. Which means from zero, you’d need one million people to spend $100 on in-game stuff to break even. Five million people? $50, more reasonable. Ten million? $10 each before you’re in profit. This isn’t even unreasonable – jeez, World of Warcraft still makes a staggering amount of money even this late in the day. You can sell content packs later on, or expansions for your content… all of which, done reasonably, can net you big amounts of cash.

There are better ways of going around this; the problem is the games industry, somehow in a desperate fumble for more cash, has decided to put two things which should be mutually exclusive together, and the end result is… well… we hate it. It used to be big-budget games made money and free-to-play games made money, and someone thought; hey, we can put the two models together and have ALL THE MONEY!

… except, as I said, that’s not happened. And now one of the primary reasons budgets are so huge is being contradicted by business practices. And so begins the long, pathetic spectacle of a company chasing its own tail, throwing more money at marketing to offset the negative PR of microtransactions, whose sole purpose in essence is to pay for the marketing.

I’ll take self-defeating business decisions for 600, Alex.

alextrebek

I got to use this joke twice this year…

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