Minding Monetization Methods

With E3 only 10 days away, it’s important to talk about the business and monetization strategies that publishers employ before the gaming press becomes a deluge of game announcements, revealed release dates, horse-trading, and faux-commentary on who ‘won’ the convention. Thus, monetization.

In my last post, I warned/bemoaned the increasing prevalence of season passes for a few reasons:

  • They reduce incentives to produce quality content by receiving most of the revenue upfront. The new goal is simply getting the DLC out the door.
  • There’s no check against publishers and developers once they have the money. There is no reconciliation/redressment process if they follow through on the incentives to simply release DLC as soon as possible.
  • They can be misleading by omission. See Borderlands 2, whose season pass only covered about 1/3 of the total DLC that would be released.
  • There is little communication. Re: Bioshock Infinite, whose DLC packs’ release dates were only announced 1-2 weeks prior to their launches, leaving passholders in the lurch for an entire year.

However, when one gets right down to it, all forms of monetization have their pros & cons. I still hold that season passes are unusually egregious in their potential downsides, but it wouldn’t be fair to criticize them without examining the alternatives.

Free-to-Play/Freemium

Free to Play has seen a number of critics appear in recent years, and those criticisms are justified. Like Season Passes, a warped incentive system is present. Players start the game for free, and the developer is forced to introduce tics and artificial limits, to encourage gamers to open their wallets. It defines the dangers of a pay-to-win scheme, as is apparent in any number of games, from Candy Crush to Tribal Wars to any number of other casual or mobile titles.

After failing a level, one is given the option to purchase more moves.

After failing a level, one is given the option to purchase more moves.

As the most prominent example, Candy Crush Saga systematically encourages players to spend money when they fail levels. When a person does not complete a stage before using up all their turns, the game immediately offers extra turns for a small sum. The conflict with this method is that it encourages developers to manipulate both the stage setup and the number of turns. During QA, it’s easy to see how many turns most testers take to finish a level; reducing the allotted number of turns is both easy and thus desirable: it guarantees that most users won’t succeed on any given attempt and then dangles the prospect of more turns or a new, sorely-needed tool. The net result? Developers acting to reduce players’ enjoyment.

This issue came up in GamesIndustry’s interview of Laralyn McWilliams, where Ms. McWilliams acknowledged that, in working on a casual title, she found herself unable to alter a level to improve user experience, when a designer suggested it:

But when I looked at our numbers that was the spot where we had our best monetisation. The awful feeling of that grind was getting people to spend money, so I had to say no to something that would make players happy because it would cut our revenue.

The very nature of Free-to-Play requires that developers deliberately introduce ‘rough spots’, unenjoyable parts of the game that players can then pay to skip over. Developers are faced with the paradox that they must frustrate players in order to monetize them, when their goal, in design and player retention, is really to create an enjoyable gaming experience.

A similar problem is present in Freemium models, where paying and non-paying players interact in the same world. A developer must intentionally withhold game features for the sole use of the paying players, and all too often, those features become essential to gameplay success. It turns into a uneven playing field, literally a pay-to-win scenario.

Nowhere is that clearer than Tribal Wars, a browser-based real-time strategy game where players wage war and conquer one another. Although free, Tribal Wars has a subscription ‘premium’ service with enough perks that, at competitive levels, stacks the deck against non-paying players. Among these perks include:

  • Your attacks are automatically remembered
  • An expanded map of surrounding players
  • One-click troop movements
  • A streamlined way to run scripts
  • Easier village management
  • Increased queue of orders

There’s even a secondary premium service that allows players to automate troop recruitment and village development. In an RTS that otherwise requires players to log in, at minimum, every couple of hours to update directives, this is a huge boon that drastically affects gameplay.

A village overview in Tribal Wars. As one progresses, one often comes to possess dozens or hundreds of villages, making each village's troop and resource management very time-consuming.

A village overview in Tribal Wars. As one progresses, one often comes to possess dozens or hundreds of villages, making each village’s troop and resource management very time-consuming.

For an example: Because of how the game is structured, to conquer villages, one must send four consecutive attacks within milliseconds of one another in order to successfully take over. For premium members, who can order attacks with just one or two clicks, and who are given access to scripts that further speed up the attack orders, this is a simple process. However, a non-premium members must go through a dozen clicks and type numbers into a handful of spaces in order to send just one attack. If two equally matched players face-off, but only one is a premium subscriber, the non-premium player is far more likely to lose.

Again, the issue with Freemium is not that premium members get extra perks. In MapleStory, there are innumerable benefits to spending money: one can obtain and play with pets, get cool clothing, and even transfer characters between servers. But none of these possibilities affects gameplay or combat abilities, which Tribal Wars’ system undoubtedly does.

On the flip-side, the primary advantage of F2P and Freemium is that they have no barrier to entry. Players bear little to no financial cost, while the opportunity to spend money and get more out of their gaming experience is ever present.

Pre-Funding

I’m putting Season Passes and Kickstarter funding under this category for a simple reason: Players pay in advance to fund the creation of content that they then consume. The risks associated with pre-funding are all things I expounded upon previously, even in this very post, so let’s look at the advantages.

First and foremost is the close relationship between developers and consumers, at least in the case of Kickstarters. Pre-funding turns interaction with the fanbase into an essential component of development, as opposed to just a time-consuming endeavor. Due to this forced interaction, funders often feel like they have more influence in development and can appreciate the final product more.

The downside to Kickstarter-type funding, of course, is the high risk that the project won’t come to fruition. Even projects where there is a near certainty of completion can face extremely delays, as was the case of the Lizzie Bennet Diaries Kickstarter, which sought to turn the already-existing Youtube videos into a DVD collection. What was projected to be completed in August 2013 was only finished in April 2014, and that was by an efficiently-run and organized group of creators.

Traditional Retail & Episodic Gaming

Are there real downsides to the old (and still primary) method of monetization? Yes. However, they are risks mostly borne by the developer and publisher, and thus are hidden from the consumer’s eye. A retail game requires millions of dollars and years of time to be invested upfront before there is any possibility of monetization, and a large marketing budget is required on top of it.

The major deterrent for a consumer is that spending a significant sum of money – now $60 – before ever trying the game. This is mostly ameliorated by marketing, gameplay demos, trailers, and other forms of informative advertising, but the deterrent still exists.

The Walking Dead, a successful episodic game series.

The Walking Dead, a successful episodic game series.

However, episodic gaming largely avoids these issues. By their very nature, episodic games have lower budgets and lower costs, which reduces risk for both consumer and developer. Moreover, the revenue from early episodes fund the development of later ones. Plus, even if a game turns out to be unsuccessful, that realization is made before even more money is poured into development for further episodes. While traditional retail is an all-or-nothing approach, episodic gaming offers faster monetization and more sales and market data, sooner.

Episodes’ main disadvantage is similar to that faced by a series in the book publishing world: keeping readers engaged during the interim. However, as long as there is a clear communication regarding the release window for future installments, readers and gamers often keep themselves informed, reducing the burden on marketing.

Subscriptions

Finally, there are subscription-based games, one of the rarer types of monetization for a few reasons. Subscription games need to be designed and have a development schedule built around their monetization method.

WoW-Boss-Compilation-Wallpaper
Frankly, subscriptions make sense with certain games, primarily MMOs. Maintaining servers for thousands of concurrent players and millions of subscribers is expensive, so having monthly fees that support those servers, as well as general tech and administrative support, is both logical and defensible. There isn’t much to say about subscriptions. That’s largely because there are relatively few games that use them, but also because the model works seamlessly in those cases.


Screen Shot 2014-05-31 at 8.53.50 PM

Summary Table (Click for larger image and easy readiing)

It will be interesting to see what kinds of games are unveiled or hyped at E3 in a couple short weeks. The inexorable march towards Season Passes over the past few years has largely been a transfer of risk from publishers to consumers, while Free-to-Play has been very disruptive in the mobile gaming space. Of course, E3 is a console-dominated space, and thus most games will rely on traditional retail methods with a heavy emphasis on digital distribution. However, the convention is still a major, even if no longer the only, space to pitch new concepts to an insatiable gaming press and legions of investors and analysts. Perhaps something notable will arise.

*This post started out as an addendum to my previous writing on season passes, but the ideas driving it relate to the entire videogame industry, and business methods more generally.

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One response to “Minding Monetization Methods

  1. I’m liking this analysis here. I’m still pretty old fashioned myself, and very rarely go beyond just buying the game outright. Even episodic games, I’ll wait until the whole season’s out before picking it up. Occasionally I might get the DLC for a game that I’m really enjoying, but that’s been becoming rarer and rarer these days.

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