Tobold's Blog
Friday, June 26, 2015
The economy of abundance

In 2014 Steam added 1,400 games to its library, more than 100 per month. Even if you would just spend 1 hour 59 minutes with each new game (and then sneakily refund it), that would take more hours than a full-time job. The Apple app store is even worse, it added nearly 10,000 games per month in 2014. Even if you spent just 5 minutes testing each game you couldn't possibly keep up. There aren't hundreds of MMORPGs out there, but given how much time each of them takes there are also far more than a single person could play.

Not only are there too many games to play, but there is also the problem that there are far less types of games than there are games. Of the 379,313 games in the app store, how many are match-3 puzzle games? How many are about building a base and raiding the base of other players? Steam is full of sequels, or games that while being from different companies still strongly resemble each other. The expert might be able to see the difference between all those multiplayer shooter games, but for the layman they are all pretty much the same. For example I don't play zombie apocalypse survival games, so I can't tell the dozens of them on Steam apart. Being well versed with MMORPGs I can see the difference between all those different MMORPGs, but honestly at the core many of them are very similar and have the same basic structure.

The economic consequence of that is that given the choice between too many similar games, players tend to flock to a few market leaders, while the rest of them distributes between all the others. There is more supply of games than there is demand for them, which is one of the reasons why people have been increasingly protesting about "too high prices" for games, in spite of the fact that inflation-adjusted even triple-A games have become cheaper over the last 20 years. But why pay $50+ for a game any longer when there are lot of viable alternatives for cheap in a Steam sale or on some app store?

In the past making computer games was a profitable business because there are lots of idiots who are willing to work twice the hours for half the pay making a game than they would get for writing banking software. But even that competitive advantage isn't cutting it any more if people aren't willing to pay much for games any longer. I recently stumbled upon a quote on Blessing of Kings saying: "Steam is essentially reverse piracy. Instead of playing games you didn't pay for, you pay for games you'll never play.". But that isn't a situation that can continue indefinitely. At some point people will stop buying, because they already have a lot of similar games unplayed in their libraries.

Now in many cases players won't care if some video game developer goes out of business. But the danger is that in the last years more and more games have turned in online services. And when the company goes broke and the servers go down, the game you bought isn't playable any more. There might be some dark clouds ahead for gaming.

I have a massive amount of games in my steam library (933 today). A lot of these come from my using Humble as a monthly way of donating to charity with benefits.
This has completely changed my way of thinking about games. With the exception of a couple of games per year which I seek out which I play a lot, choosing a game to play is like flicking channels on cable TV. Tons of options, some rubbish, some things you have to be in mood for and some hidden greats.
Most of those games are in steam are indi games that I do not even try to open. The market of the big players is still small ( 1-3 by month), and feels sustainable. I think that in your analysis you conflate those 2 markets (big games with big budget and big revenue VS small indy games made in thousands).

After a catchup period, where I bought the games I have missed during my study, I no longer buy games in Steam Soldes, and I am back to buying 2-3 games a year.

But yes I miss the time where looking for the "New game" and "future game" in steam was fun, as I was looking for the video. Now thoses slots are filled with crap games.
This really isn't a new thing for any artistic medium. The number of books produced dwarfs the number of games massively, and has for gaming's entire existence - and just like games, they tend to show up in a number of tightly-defined genres.

However, the unique problem that MAY dog games in regards to this is the amount of play time a single game offers.

With books and films, the sales might obey an inverse square law curve, but the length of time that it takes to consume a single example of the medium remains linear. With games, though, play time also obeys an inverse square law rule - WoW, Minecraft, Counterstrike or LoL all offer potentially thousands of hours of play time. Even single-player games offer hundreds.

That's a real problem of scale if you're trying to compete for attention as a game developer.
I don't see what dark clouds you are talking about. Since there is extreme abundance, even if 90% of the games would close, we would barely notice it. Sure if your favorite game goes down you are hurt for a day, but then you install one of the survivors and go back gaming.
The move to gaming as a service is what makes me cheap with my money. If I know this deal is a long term rental, I want to pay rental prices.
"But why pay $50+ for a game any longer when there are lot of viable alternatives for cheap in a Steam sale or on some app store?"

What viable alternative did you have when Skyrim came out?

Not 'what other RPG was available", but what viable alternative, that gave you even 90% of what Skyrim was at release?

When Fallout 4 is out in Nov, will there be a game also released around that time for $20 that will be 90% of what F4 will be and provide a viable alternative? I highly, highly doubt it.

Cheap games of lower quality simply cater to people who value small amounts of money (~$50) over time. For people with jobs above minimum wage and basic financial management, paying $10, $20, even $50 more for higher quality entertainment for even 10 hours is an easy trade, that clearly millions are willing to make, as the full-price sales of Skyrim, Pillars, Cities, etc have shown.
I think "cheap games of lower quality" as Syncaine puts it, don't quite cover the alternatives. Expensive games tend to have high production values and to be very immersive. But you might want a particular puzzle genre and not care much about production values. Or a game can be so different from the norm that its problems don't matter too much.
Well, of course there are more games being made than one person could play. There's more music than one person could listen too, more books and movies than one person could read. It would be disturbing that in a world of 7 billion people if only enough culture was being produced that one person had the time to experience all of it. Very disturbing. That might be the objective definition of a dead art form.

People can whine about prices, so what? I wish a new car didn't start at $20000, doesn't mean I'm going to walk. The internet is a silly place full of whiny turds. Big deal. Last time I checked the video game industry had grown to 12 billion a year during the worst economy in decades. So I'm not sure things are really all that dire. Even in good times game studios are notoriously unstable, so the issue of games evaporating is a legitimate concern in good times and bad.
The end must be nigh, because I agree with Syncaine too. Games like GTAV and the Witcher 3 only went at most 10% off in the last Steam sale, and they aren't hurting for sales. The cheaper, $10 games that are sometimes on sale for $5 or less, are not direct competitors.

I would also say the dollar per hour of play time is not so different between the types. The cheaper games I own include a lot of games that I either didn't like and stopped playing after just a few hours, or haven't played at all. Even of the cheaper games I really liked and played out completely, nearly all of them have less than 20 hours play time.

Meanwhile, I would guess the median play time for full AAA titles I have bought is closer to 50 hours, with several I have played for hundreds of hours.
Dark Clouds for the industry maybe, but not the consumer? The flood of the market suggests we have a lot of good, maybe from that perspective. But the market is flooded with crap, so not so good. Therefore, if the market for games crashes then it can only clear up the tidal wave of garbage Unity Engine and match three games we've been brutalized with for the last couple of years.

If you want to talk about something that has real impact, it's Steam's decision to do the refunds. Look at what happened with Batman: Arkham Knight PC edition....that is clearly a reaction from a AAA publisher to the realization that they couldn't just leave a shoddy game port up for sale anymore. That, there, is dark clouds for the AAA industry, and a clear sign we're going to see a change in thought process about how publishers look at the "release state" of their games in the future.
I also fail to see any dark clouds, at least not for consumers. I think it's more worrysome for record keepers / gaming historians.
There is more supply of games than there is demand for them, which is one of the reasons why people have been increasingly protesting about "too high prices" for games, in spite of the fact that inflation-adjusted even triple-A games have become cheaper over the last 20 years.

How can you lump so broad a spectrum of games into one market segment? The supply is not indicative of them all being Triple-A titles, and with the inclusion of item shops in a great number of newer games, one could present a viable argument that games have actually become -more- expensive over the past few years. If there are dark clouds, they're indicative of an increasingly smarter gamer base who are decrying the asinine revenue generation schemes which are responsible for the immersion breaking design elements being employed by many developers.
Immersion breaking design elements like slicing the game into DLCs sold separately instead of selling a full game are a consequence of consumers not willing to pay enough for a game to be profitable when sold in traditional ways. Developers need to survive somehow.
I like to drink beer but there are way more pubs in my town than I can ever visit. How do the ones I don't visit stay in business? Not my concern or obligation.

It's the same with video games. I buy some (thanks to steam admittedly more than I can play) and the other developers have to find their own customers.

There already was an industry wide crash 1983-1985, developers will adapt if another one comes around. Oversaturation is bad for every product, although I count video games as Art it still is an industry like every other.
The problem with app stores (apples at least) isn't that there are 300,000 games, it's the lack of any useful way to find what you're actually interested in.
I think the Steam sale mentality is risky for game companies in the long term. Short term it is great.

To use Syncaine's example, Witcher 3 can compete very effectively with Bill&Teds $5 Indie. But everyone knows you can buy Steam games with more content and fewer bugs for far less money in the future. W3 was a big hit. But how many times can the $60 purchaser read about friends and bloggers paying $5 for W3 before deciding they don't need to spend $60 for Witcher 4 or 5?
Developers need to survive somehow.

You are correct, but the redistribution of wealth method is not the way to go about achieving this. I want my money to benefit me and the developer, and no one else. To think that I am supposed to support revenue schemes that are designed to benefit me, the developer and X% of other players is completely asinine.

I don't think most players have a problem with DLC until you reach the mini-DLC stage, where DLC is offered as a "pre-purchase" incentive, and a games balance is shot to hell by the untested DLC the moment a game is released. There should not be risks associated with DLC at any level, and developers who screw the pooch with DLC deserve all the backlash they can get.

I am still flummoxed by the fact that games have not gone up in price. There are developers who have earned my loyalty to the point where I am willing to throw my money at them. I can afford and am willing to shell out $100 for a major title. I am also willing to pay .01 cent a minute for my online activities. Hell, with my /played time in a single game like WoW, Blizzard would have made roughly $5265 off of me over the past 11 years, versus the roughly $2000 cost of my subs.

I'm sorry, but if someone cannot afford a title until it hits the bargain bin, then so be it. Gaming is a hobby, and as with any hobby there has never been a guarantee of inclusiveness. Nor should there be.
Witcher 3 probably doesn't need to drop to $5 before Witcher 5 is out.
"Developers need to survive somehow."

I'm sorry, I just don't expect this kind of naivete from an adult who has been out in the real world for a while. Companies don't take profits only when they have to, just to stay afloat. They take all the profits they can, regardless of how profitable they already are.

I don't begrudge them this, it doesn't mean they are bad companies or have bad products. But you seem to make the assumption that companies going for the "cash grab" must be forced into it because they are hurting for revenue, when this is what most companies will do regardless of their financial situation. The few that do not are making a long term bet that by avoiding these "annoying" practices, it will pay off with customer goodwill and greater sales in the future.
With all those game studios that have closed over the last years, what makes you think that the majority of these companies is hugely profitable? Except for a few behemoths like Blizzard, I'm pretty certain that most game development studios are struggling. Otherwise they wouldn't change ownership that often.
It is no different than any industry. There are tons of companies and sometimes some of them close down or are bought out. I would more point to the existence of a huge number of game companies and huge number of games as a sign that the industry is quite profitable as a whole. Your entire post is about "the economy of abundance," not "the shortage of games because the industry is unprofitable."

There are plenty of games that are profitable with abusing DLCs. And plenty of already successful games that go on to sell lots of DLCs to pull in even more money. In fact, I think it is far safer to assume that only successful games are selling DLC. After all, you wouldn't bother making a DLC unless you thought it would sell as indicated by the success of the base game. If no one bought the original game, there is no potential market for DLC.
@Tobold a lot of game studios close because they are no longer profitable to maintain by the parent company, but that doesn't mean that the publisher/owner of said studio is suffering financially....quite the opposite usually. When a game's development is completed it is unfortunately usually smarter to close out the studio and rehire for new projects later on than it is to keep that studio going. Studios with the safest "job security" seem to be those owned by big companies like Activision where they each have a specific job, bringing out a particular title on time (such as the three studios that are assigned to CoD releases).

Behind every Deep Silver is an interesting story of poor business management, cost overruns and marketing snafus, I bet you. Sure, some may have suffered because they dumped out a poor product that no one bought....but it is much likelier that the ownership made some bad calls and didn't plan carefully for lean times between releases. It's not a sign of a failing business...but it is a clear sign that doing it right in this industry requires some serious acumen, patience and the ability to make hard calls when needed.
"there are lots of idiots who are willing to work twice the hours for half the pay making a game than they would get for writing banking software"

not everyone like writing banking software and that doesn't make them idiots good sir.

"But why pay $50+ for a game any longer when there are lot of viable alternatives for cheap in a Steam sale or on some app store?"

That $50 still gets spent regardless of it's on one game or 10, $5 games. It just depends on where one's diminishing returns of value lie.

I'm finding that in the Steam economy, I'm more willing to play more kinds of games but some not to completion. I don't feel bad that I can give up on a game like Deadly Premonition if it doesn't grab me in the first few hours; there are easily more kinds of games at various price points that I can play next.

One thing that the old world $50 piece of software didn't allow much of was that you always felt like you needed to finish it in order to get your moneys worth; once you spent the money, you were stuck with it for a while. I know I wrung every cent out of Goldeneye64 and most every console game I bought, because they were expensive.

I think developers are still making games under this mentality with side quests and optional content, and yes I think now more than ever gamers and developers are value sensitive and want their gaming dollar to go as far as possible. Blockbuster titles with high production values want to add in collectibles and side quests in order to validate their higher cost, when a lot of it is padding in my opinion.
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