Tobold's Blog
Tuesday, June 14, 2011
Conflicting desires

Players desire a maximum amount of fun and entertainment from a game for a minimum amount of money. Game companies have a profit obligation towards their shareholders, and thus desire to minimize their cost while maximizing their revenues. While there is a lot of pretense going on in the communication between game developers and players, the underlying desires of the two sides conflict on a fundamental level, and that has consequences on game design.

People are most aware of that conflict in the so-called Free2Play games, which are obviously not totally free. The profit obligation of the game company forces them to sell things that people would actually be willing to buy. Which more often than not tends to upset the people who wanted to play the game really for free, and see somebody else getting an advantage in the game for money.

But monthly subscription games aren't actually any better: To be profitable, the game needs to hang onto their subscribers as long as possible. And that means NOT giving them all they want right now. Content is expensive to produce, and infinite content is impossible anyway, so there is a lot of redoing the same content over and over: From daily quests, to having to visit the same raid dungeon for months, to various other forms of "grind", a lot of game elements are just in the game to keep people subscribing longer and thus paying more.

Even classic single-payment games have their problems. If a game is sold on the strength of first impressions, demos, and day-of-release reviews, we don't have to be surprised that these games tend to be flashy, but short. Replayability is often lacking, or is being sold extra as "downloadable content" (DLC).

Blogs and game forums being dominated by gamers, there is a lot of discussion of how "unfair" various payment models are, and how greedy the game companies. That always makes me wonder whether those companies have internal forums where they are complaining how unfair the players are to want all these games and all this content for free.

I do not think that anybody has a "right" to get any specific game or content for free. The company making that game or content has the right to set whatever price they want, and the player has the right to either pay the price and play, or to refuse paying and not play the game. I do not think that any business model is inherently more fair or unfair than another, because you couldn't even get people to agree on a definition of fairness. Is a game in which everybody pays the same, but some people play much more than others fair? Is a game in which everybody pays depending on how much he plays fair? Is a game in which everybody pays whatever he wants fair?

Every payment model has different advantages and disadvantages. In the end the only thing one can do is to take a long hard look at a game and its price tag, and decide for yourself whether this is worth it to you. And we need to accept the fact that this decision is highly individual: There is no absolute measure with which we could determine whether a sparkly pony is worth 25 bucks, or whether a monthly subscription is worth 15. This is just what it costs, and we are free to take it or leave it. The idea that just because we don't want this game or content for this price, everybody else also should refuse to buy it is silly.
I'm certainly seeing a lot more MMO companies using multiple business models for their games, offering a subscription mode with full access to everything, and a F2P mode where you have to purchase most of the core necessities for gameplay. An Italian-made MMO I ran across last night called Craft of the Gods has this system, and a lot more than I can name at 6:00 in the morning seem to be heading in that direction as well.
When you talk about people complaining about companies being greedy. I do think there is some truth to that. It was, in part, why I left Warcraft. When you read their quarterly statements and see how much money they bring in and then look at what they are offering you, you will make a judgement call. In my opinion Blizzard was taking in truck loads of cash and filtering the vast majority of that to Activision/Titan/Diablo. If they were putting their money into content that "I" wanted to see I wouldn't feel that way, but alas that's how the ball bounces.
I still think it's pretty helpful that we complain even though from a Mr Spock type stance it may be illogical. The world runs on feelings more than logic and I'm happy to have game companies feeling they should make their products cheap.
Being greedy is not a problem. But I have little sympathy for companies that sabotage their long term goals by focusing on the short term goals.

The perfect example is once again Blizzard vs. CCP. Blizzard|Activision pays their shareholders 2.2 billion and adds 6 bossses and 60 dailies during 6 months after Cataclysm. 2.2 billion is an immense amountin the gaming industry. Rift cost about 50 miollion!
Activision|Blizzard claim they do it, because they have no good uses for the money. Absurd.

Then look at CCP. They invest almost every dime they earn. Their annual revenue is about 50 million. And the have about 600 employees alone!

And then look at Dust 514. I won't play it, because it's a console game. But this is actually driving the genre forward !!

In every industry I have had the joy of working, the joke has always been that "this would be a great job if it weren't for the customers". I'm sure they crack that one in Irvine too.
Voting with your wallet is more effective if you can convince others to do the same. That's why, while it is a personal, subjective decision, we are so quick to try to convince others to follow.
I don't think convincing others to quit or vote with their wallet is really necessary. Its a personal choice. I wasn't feeling like I was getting any value for my time. My wife on the other hand uses WoW to connect with her sister, they chat, quest, do dailies and generally goof off in game. To them $15 a month is a great bargain. But for most players $15 a month is nothing. The cost is in the time you sink into it. The value comes as: are you getting a good product you are enjoying for the amount of time you put into it. The amount of time we give to a game also gives value to the game itself and its publisher. Without players sinking their time into a MMO it would be dead and have less value even if 12 million people were still subscribing. How much is your time worth?
How much of homo oeconomicus is left in a player who, in the midst of playing a free2play game, is being presented with the possibility to buy access to content that he has been working towards for the last few hours?
Depending on his adrenaline level, not much.

I'm convinced that the model of the client who rationally weighs pros and cons of a consumption only represents part of what's really happening.
There may be a point in players complaining based on feeling this.

Now can I have my pony?
Isnt't that whay you pay World of Tanks?
Every player plays the same amount of time (one game) and if someone plays longer/pays more then you, you never get to see him anywhere near your battlefield. You get your 29 opponents that match you like a glove.

Subscription models elimitnate the enquities created by real world money, so to many they do seem fairer then F2P P2W games. But that't not written in stone and in no way a rule.

WoT has eliminated the rivalry over spending both money and time on the game. When you play, you play with equals, so you can't experience any disproportions with regards to other players. That's kinda awesome.
I guess I tend to think that most of the forum whiners that bitch about the cost are just adolescents who don't comprehend reality. Not really people to be taken seriously or listened to.
Activision|Blizzard claim they do it, because they have no good uses for the money. Absurd.

That only sounds absurd to you because you don't consider their definition of "no good use". If you have an existing product in which you spent a certain amount of investment, and that investment gives you a certain rate of return, it would be "no good use" to lets say double that investment if you wouldn't keep the same rate of return and also double the profit.

I would be very much interested in hearing how you would double the investment in World of Warcraft in a way which is guaranteed to also double the number of subscribers. I think Blizzard is more realistic in saying that this is a lost cause, WoW is past its prime, and any huge investment into it would just lower their profit margin.
I think Blizzard is more realistic in saying that this is a lost cause, WoW is past its prime, and any huge investment into it would just lower their profit margin.

First, this is terrible, terrible publicity. To let it happen is a first direct consequence of their actions.

Second, if Sam Walton had only ever invested in something when this would increase the immeadiate return on investment, he wouldn't be as rich today; if rich at all.

If I were a shareholder of Activision|Blizzard, I'd say thank you for the repurchase program and sell the stock right now.

My favourite anecdotal evidence is this:

For most of the 20th century, ICI was Britain’s largest and most successful manufacturing company. In 1987, ICI described its business purpose thus: “ICI aims to be the world’s leading chemical company, serving customers internationally through the innovative and responsible application of chemistry and related science. Through achievement of our aim, we will enhance the wealth and well-being of our shareholders, our employees, our customers and the communities which we serve and in which we operate.”

ICI’s corporate portfolio had evolved over the decades – the company’s traditional strengths had been dyes and explosives, but its chemical expertise had taken it into other industrial feedstocks and agricultural fertilisers. After the second world war, the management of ICI concluded that in future “the responsible application of chemistry” was most likely to be found in pharmaceuticals. ICI recruited a team of able, young, academic scientists but the team was slow to bring returns.

The pharmaceutical division was a drain of ICI resources until, in the 1960s, the discovery of beta-blockers gave the company the first effective drug for controlling hypertension. More discoveries followed and, by the 1980s, pharmaceuticals had become the growth engine of the company.

In 1991, Hanson, the predatory UK conglomerate that had successfully acquired and reorganised sluggish British manufacturing businesses such as Ever Ready and Imperial Tobacco, bought a modest stake in ICI. While the threat to the company’s independence did not last long, the effects were galvanising. ICI restructured its operations and floated the pharmaceutical division as a separate business, Zeneca. The rump business of ICI declared a new mission statement: “Our objective is to maximise value for our shareholders by focusing on businesses where we have market leadership, a technological edge and a world competitive cost base.”

While the National Parks Service had moved from a narrow, focused objective to a broader holistic view of forest management. ICI made the opposite shift – from a grand vision of the responsible application of chemistry to a narrow concentration on established, successful activities. The aim of bringing benefit to a wide range of stakeholders was replaced by the specific objective of creating shareholder value from narrowly focused operations. The company translated this into an operational strategy by disposing of the company’s interests in bulk chemicals to acquire a niche group of speciality businesses: ICI, once the main supplier of chemical products to one third of the world, was reinvented as a smells company.”

The outcome was not successful in any terms, including those of creating shareholder value. The share price peaked in 1998, soon after the new strategy was announced. The decline since then has been relentless. After two successive dividend cuts the company was ejected in early 2003 from the FTSE 100 index, the transition from industrial giant to mid-cap corporation had taken only 12 years.”

Ouch, I just bumped my head against a wall of text. Copy & paste text to make it worse. Probably in an attempt to disguise the fact that you didn't address my challenge at all: How could you possibly still double the number of subscribers to WoW with any investment?

I don't think you can compare the chemicals business with the games business. 6 years from release to peak for a game is an eternity. I'd rather have Blizzard investing money into Diablo 3 and Titan than to keep WoW on expensive artificial respiration.
How could you possibly still double the number of subscribers to WoW with any investment?

Yeah, I'm sorry. Reading long texts ..

Anyway, Blizzard shouldn't spend money on WoW to make it grow, but to keep it where it is! Loosing 5% of the player base during a few months, although WotLK just launched in China and Cataclysm just launched in NA/Europe, looks like a problem to me ...

I'd rather have Blizzard investing money into Diablo 3 and Titan than to keep WoW on expensive artificial respiration.

I agree. Unfortunately, the 2.2 billions are not available to do this anymore...

Look, the games business is growing rapidly! To claim to be unable to find good use for money is ridiculous. They could found 5 subsidiaries and task them with producing 5 very(!) well founded MMORPGs, to cover the entire market.

A company that gives money to shareholders should always be treated carefully. It's ok if an oil company does it, because there are only so many ways to spend money on producing oil in the future.

But if a company in a rapidly growing market does it, it means that they have no visions, no long term plans. That's not a good sign for any company - or shareholder.
Game publishers used to sell you a box with the game. You owned the game. Now you get a license to use the software in a digital download.

The game companies are greedy. The game company board members are sucking this industry dry.

Don't try to pin any of this on the consumer.
I think F2P is a very fair model for everyone. You get to experience the game. If you like it, you spend on it. If you don't, you didn't get screwed by buying a $60 box that is worthless to you.

Sure, you might end up paying quite a bit more for one particular game that you really like, but you avoid paying anything (or at least much) for, say, Allods online, a game I just sort of wandered away from.

It also solves the piracy issue quite nicely. So I'm seeing a lot more games like WoT; it's really an exciting business model for a company that can't afford to make Triple A games, but can make games good enough to suck people in if they get the first taste for free. F2P is the indie dream model!
One last comment, then I'll probably make an own post on it :)

Google, for example, has never payed a dividend and never bought back shares. They sit on over 30 billion now and rather look for ways to invest it, then pay it back.

That's not uncommon. Many very large corporations don't pay dividends (let alone buy back shares).
Loosing 5% of the player base during a few months, although WotLK just launched in China and Cataclysm just launched in NA/Europe, looks like a problem to me

It looks like a problem to me too. But I'm not at all convinced that it is a problem caused by not enough investment. If they had invested more and launched Cataclysm with 3 more and even harder raid dungeons, the expansion would still have lost the same 5% of subscribers. If they had invested exactly the same as they did, but made different design decisions, they would have done much better.

They could found 5 subsidiaries and task them with producing 5 very(!) well founded MMORPGs, to cover the entire market.

Would you consider the $300 million EA Bioware spent on SWTOR to be well spent? What would make you think the game would have looked any better if it had been made by Activision Bioware?
When declaring a last comment I should add that this only applies if you don't ask me something ;)

Would you consider the $300 million EA Bioware spent on SWTOR to be well spent?

First, the sum was officially denied. But I agree that it might have cost that much.

Second, this might be a good investment. It really depends. If WoW looses another 5% every few months now and if SWTOR is really a good game, 300 million would be a very good investment. WoW makes 300 million profit about every three months right now ..

Third, I suggested subsidiaries for a reason. To pour a billion or more into one giantic project would be a mistake.

Finally, I disagree that more content wouldn't have made a difference in Cataclysm. Now, three more ultra hardcore raids wouldn't have changed anything. Sure.

But to add one Naxx/Karazhan-like raid and a few more zones and much more quests and maybe even something new and innovative .. that would have changed a lot.

In fact, they could have finished the old-world revamp. It not finished at all right now. Read the forums if you want a detailed analysis of what old remaining quests don't make any sense anymore and which zones are mostly untouched.

They could have done something about level 60-80, by the way. This is a big problem when leveling right now.
@Nils on stock. In the US dividends are trendy now; Income from bonds and savings accounts are taxed but personal income from dividends are not. So some companies that did not pay a dividend in the past are at least paying a modest one.

It is a reaction to the dot com bubble where many writers pointed out that pro forma earnings or even GAAP numbers can be fudged almost forever, but real hard cash payments to the business' owners, stockholders, less so.

Each business has their "cost of capital": a utility company spending $100m to make $12m a year would really help their stock. It would hurt Google because high-growth, high-P/E need to earn more from each dollar.

I am uncomfortable defending A-B management, who seem relatively inept. But the usual scenario is for companies to spend vast sums of $ to "diversify." A while later, a new round of MBAs look at the businesses and say that they are not as profitable as the cash cow (duh!) and so they "need to focus on the core businesses" ( Cisco is the latest to spring to mind; spend half billon dollars for a great company Flip and then shut it down a couple of years later.)

Theoretically, you are correct. My opinion is that in the real world, giving money back to shareholders is a better decision that the vast majority of managements do. Besides, as my finance professor said, for large profitable companies, capital is usually not the limiting factor. They can get money. the shortage is of great ideas and great people. And the most important thing for A-B in 5 years is how well Titan does. Any diversification just diverts management attention.
Before there were MMORPG there were MUD, and in a MUD certain approved players could create their own content, including locations, items and quests. I agree there are many possible problems with this approach, but it could be a good source of additional content that other players could enjoy.

Another option would be to randomly create content (dungeon generators) or to do away with completely preprogrammed "dance" fights, and have the boss change each time it is killed, making it sometimes much easier, and sometimes much harder.
Hagu, you guys don't pay taxes on dividends? No wonder your government goes bankrupt. Nice wiki article about it, by the way.

From a shareholder's point of view, especially if you don't own a lot of shares and are flexible, dividends and repurchase programs makes a lot of sense. Always.

But, fortunately, most big companies are not guided by the short-sighted interests of short-term shareholders. Take General Electric as an example of a company that diversified (like mad). I think it is a success story.

Imagine what might have been if Blizzard had had the ambition to creâte the greatest and most innovative MMORPGs (plural!), instead of making money in the short term.

The MMORPG market stagnates for two years now. Maybe that's because the big players aren't investing?
I mean, let's see what Titan turns out to be. But something tells me that Dust514 does more to push the genre forwards. I hope I am wrong.
I suggest that you should make the "Tobold Fairness Test" rival the Bartle test. It would consist of an Excel spider/radar graph of the axes of unfairness - a nice colorful polygon incorporating a more nuanced view of "fair."

When I read people say that they don't like $ for gear, everyone should be equal, that strikes me as reasonable. But when they say but of course people who did heroic T11 will start T12 with better gear than people who did regular T11 who will have better gear than new players, I go "hang on, this isn't about fairness at all; this is about you wanting gains distributed based upon a metric favorable to you."

So a reviewer or potential customer would evaluate the fairness of a game along several dimensions:

How much of an advantage/disadvantage would a player have:

1) spent RL$
2) subscribed for 2 years (e.g. EVE training, Mine Things mining)
3) grinding ( does someone who plays 80 hours a week get ahead of someone who plays 4?)
4) gear - what chance of victory does a person of equivalent human skill with gear at about 1 percentile of the population have against someone at 99th percentile
5) gear reset/took a break ( someone who played 18 months, took 9 off is relatively much better off in EVE than WoW )
6) network/synapse performance - how much disadvantage would adding 500ms latency have? A somewhat related case is bandwith.
7) Computer - How big of an advantage is playing on the latest Alienware SLI desktop versus the median laptop from 4 years ago?
8) Schedule - how much of a disadvantage is it for people whose job/family prevent them from truly committing in advance to an uninterruptible block of time?
9) patience - can someone who wants constant stimulation succeed?
10) business - is someone without the skills/interest to do auction house and arbitrage at a disadvantage
11) number of times on - is someone who plays once for 8 hours straight on Saturday at a disadvantage to someone who does their dailies seven times a week? Or someone who checks and re-undercuts their auctions twenty times a day (e.g. glyphs or Jita)
12) Intelligence - Is a thirteen year old with an 80 IQ at a disadvantage to an adult a standard deviation above 100?

I would point out that most all pre-MMO games, e.g. chess, are fair on all axes except to-a-degree intelligence. I am not bothered as much about #1 as most, but think "fairness" is more complicated than that. i am also cynical enough to believe that people who complain, even about #1, are perfectly happy for games to be unfair in an axis that favors them. Axes I am substandard in are "unfair"; axes I excel at are "good design."
I forgot Tobold's bete noire - OOG requirements.

13) how much of a disadvantage is it to only play the game as opposed to out of game resources - e.g. elitist jerks/Battleclinic, WoW/EVE forums, Chess books

14) non-game software: what is the disadvantage of only using the game software? E.g. you can not really do EVE manufacturing without a spreadsheet and a pricing website. In WoW you are expected to have DBM or TSM addons if you compete in those areas and TUJ website is invaluable.
I was going to type something constructive for once, but Hagu covered it. Great comment on the reasons for paying a dividend there!

Besides, I think that one comment that it's not really a money issue at all is the crucial one here. Thinking that WoW would be a better game today just by pouring another couple of hundred million dollars on it strikes me as a bit optimistic (or pessimistic, depending on whose world view you subscribe to!).

+1 for Hagu today!
But something tells me that Dust514 does more to push the genre forwards.

You do know that Dust 514 is PS3 only? It not being on the PC turns it from a genre-changer to a gimmick in my eyes.
Yeah, I know, Tobold. And it is the reason I am not going to buy it. It still moves the genre forward.
I was not going to keep the Nils financial discussion derailment going but I took Oscar as encouragement.

Conglomerates were really hot in the 60s with ITT being one of the premier examples. You can't judge that much about a company by its stock price but google shows the 5 year performance of Activision as a gain of 87.90% and GE as a loss of 45.96%. It's been quite a while since GE has been considered a success. And it is dramatically underperforming AB.

I believe the consensus of opinion disagrees with
"most big companies are not guided by the short-sighted interests of short-term shareholders." CEOS without a significant financial stake in the company tend to manage to the time frame of their stock options so corporate governance is trying to force CEOs to have some long-term financial stake.

Another problem is many investors, especially institutional investors, are quite short term. And quarterly performance is much too important. A few months ago A-B Blizzard stock lost a billion dollars in value in a few hours after the quarterly announcement.

The argument is that the company has already paid taxes on their profits; taxing the dividend when it is distributed to shareholders is double taxation.
I really think this is derailing the post a bit too much now, Hagu. But thanks for your interest.
Nils: Imagine what might have been if Blizzard had had the ambition to creâte the greatest and most innovative MMORPGs (plural!), instead of making money in the short term.

Then it would be no where near the successful company it is today. Blizzard (like Apple) is not an innovator. They've never been an innovator. They just take existing ideas and try to implement it well.
"But for most players $15 a month is nothing."

I'd debate that, but even taking that as a given, that's not the problem. The problem isn't with the people who happily pay your set price. The problem is finding how to get others to do so or how to get current players to to spend more. That's why breaking up the demand curve is such a useful strategy, why we see things like the sparklepony, and why F2P models have a metric crapton of things to buy. Those break up the curve and capture a lot more money because they let players make more decisions.
Dividends on stock are taxed in the US. Where did you get the idea they weren't?

Certain *bonds* are tax exempt, however.
Blizzard don't want to throw the kitchen sink at WoW in desperation. They want to keep or get back to what they have or recently had, a market leader that they design carefully. They'll move slowly rather than make massive changes. Wongly or rightly, they still feel in control. And in truth, they appeal to so many differemt constituencies that, like Rome, they cannot fall in a day...
Doubling investment may not double paper profit, but it could certainly generate more player goodwill, brand loyalty, etc., that have just as much value and meaning to the company.

Wish I had a source, but I remember in one of the dev interviews how Blizzard's WoW art department is actually just a handful of people. They justified this by saying it was important to them that the WoW art style remain consistent, "like it was all designed by a single person instead of a team of different people." Such a colossal waste of potential, especially since a lot of zones look like garbage compared to others anyway.
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