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Month: December 2017

The “microtransaction” of buying a console

This morning, I made a tweet that I believed would make sense to everybody I ramble to about discussions being uninformed, but that is incredibly hard to follow if you’re not approaching the tweet from the developer-centric angle I’m talking from. As communication is a two-way street, I take full responsibility for any confusion, and for making my Twitter a hilarious mess of angry gamers. It remains absurd to me that I’m somehow thought to be shilling for exploitative microtransactions, especially since the tweet doesn’t actually contain any defence of microtransactions, and even more-so considering given Ridiculous Fishing staunch premium model, and my continued vocal opposition to exploitative microtransactions going as far back as 2011.

Regardless, the point I’m trying to make I feel is worth explaining, because while I am a vocal opponent of exploitative microtransactions, I am also a vocal opponent of incredibly uninformed but popular objections to exploitative microtransactions getting in the way of the industry figuring out real solutions regarding the topic.

The games I listed are ‘First Party Games’, ie. games made by studios owned by the same company that makes the hardware or platform. Nintendo is well-known for its focus on First Party – series like Zelda, Mario, Metroid, but similarly Microsoft has Gears of War and Forza, and PlayStation has Uncharted, Killzone, Horizon, and The Last Guardian. Steam, for example, has Half Life, Team Fortress, Left 4 Dead, Portal, and DOTA.

Even though these games are often highly successful, the purpose of these first party titles is not necessarily to make a profit. The purpose is to sell the platform – the console – by showing the audience what these platforms are capable of. As soon as a user has bought a game for the platform, after all, the platform-holder could make a profit through sale of any related hardware or accessories, but it will certainly make a profit on every game bought by that user thereafter, as platform-holders usually take a 29 to 31 percent cut of sales of any game sold on that platform, no matter who the developer is.

Consider that Steam, for a long time, let developers freely create as many keys as they wanted to give along with Humble Bundles. They’re not making a profit from the sale there, but they’re paying for server costs for downloads. The reason they do that is simple: if all your games are on Steam, you’ll buy your new games on Steam too. You stay locked in, they take a cut from every game you buy. If you buy a game on Steam occasionally, you’re self-subsidising that free Steam code. And it should not be surprising that Apple, with its billions of dollars shifting through the App Store, still thinks of the App Store as a selling point to convince you to buy an iPhone or iPad, rather than as the major revenue stream.

Such is the power of holding a platform: you could literally develop a game against a loss, and still end up making a profit through all the revenue you’ll make from selling other developers’ games.

Third Party Games is any game made by a studio independent from the platform. They can be published studios, be part of Ubisoft, Activision, EA, etc., or they can be fully independent. Either way, they don’t have that luxury. If the game, merchandise, licensing, DLC, microtransactions (cosmetic or not), subscriptions, or whatever the revenue model is, doesn’t return the investment and enough to invest into new products, the studio is done for. In some cases, if the projections for a project dip under profitable or profitable enough, publishers take the relatively small hit of the already invested capital rather than invest more.

My point is that a First Party Game can never be compared with Third Party Games in terms of how they handle monetisation. A First Party Game can return on its investment through console sales, or through the cut the platform takes from games sales on that console. A Third Party title will have to make its money through the game and any sales related to it.

For games made in countries with lower labour costs or with strong subsidies for digital industry, like CD PROJEKT’s The Witcher series growing into a behemoth, the risk is smaller (not to mention they own GOG, an actual games platform of their own). For smaller budget titles like NieR: Automata, games funded by other games doing well, the risk is smaller. For the Star Wars: Battlefront II‘s of this world, it just takes a look at Bethesda’s relatively disappointing Wolfenstein II: The New Colossus sales to understand a lot of Third Party Studios feel forced to be experimenting with alternative revenue streams now.

But Mario? It already got a little “microtransaction” out of you. You’ve already paid some dollars when you bought the Switch, and you paid some extra dollars to Nintendo through their revenue cut when you bought Rocket League, and some more when you bought Stardew Valley, and some more for every other unrelated game you bought for the Switch, and it will take a cut for every game you will ever buy for the platform. So when people say ‘how come Zelda can do without microtransactions‘, what they’re saying is ‘I am completely unaware of the fact that Zelda earns Nintendo money through console sales and through any game sold on that console, too, and as such is far less dependent on other income‘.