Stop Killing Games: A Pricing thought Experiment
The gaming industry is facing a significant challenge as companies like Ubisoft are killing games that consumers have purchased, leaving players with no option but to abandon their investments. Ross Scott’s “Stop Killing Games” initiative aims to address this issue by requiring publishers to clearly disclose whether a game relies on a server and what will happen when they end support. This initiative has sparked a thought-provoking discussion about the future of game pricing and ownership.
The Current State of Game Ownership
The current model of game ownership is often compared to leasing rather than owning. AAA companies want to control what players can do with the games they purchase, and this control can lead to the death of games when servers are shut down. This is called selling a license to a game or piece of software. Just like how you cannot buy digital movies or music, you instead license it for the duration of your lifetime or lifetime of the account. See Apple, Apple TV, Apple Music, YouTube Music, Netflix, Steam, Amazon Music, Amazon Kindle, Prime Video, and Spotify. All of these platforms do not sell you a digital product, they sell you a license to use/consume the software or digital goods product in compliance with their licensing agreement and platform terms of service.
What consumers don’t realize.
Consumers do not realize that fundamentally this model is a license not a purchase. There is no right to repair or right to own. You fundamentally have different kind of product that does not fall under traditional consumer protections acts. The licensing model limits traditional consumer rights associated with physical ownership, such as the right to resell, lend, or bequeath digital content.
A New Monetization Model: Transforming Game Sales into Lucrative Subscriptions
The gaming industry is on the brink of a potential transformation in its monetization strategies, driven by the challenges posed by initiatives like #StopKillingGames. Industry professionals suggest a shift from a one-time purchase model to a subscription-based model, which could prove significantly more lucrative. This new model not only aligns with the demands of such initiatives but also offers a sustainable financial framework for publishers and studios. In this post, I will explore how this model could work, its financial implications, and why it might be a sound business practice. Though at the outset I should be clear; I abhor this model and its implications on consumers, but offer it as Occam’s Razor solution to the game industries ever growing greed.
The Subscription Model, plus the right to purchase.
Just like with a car or any other licensed good it would logically come to pass that the consumer should have the right to purchase in it’s entirety the game and all needed software, modifications, licenses, server binaries and in an ideal world; proper documentation to run it. Make no mistake this is the direction publishers will go as it is the same as any other leasing agreement. The option to purchase is and always has been a key part of most leasing agreements for products (housing is a different story). Great, lets look at this in a simplified use case.
The Current Model
As it stands a AAA game’s base price is $80, for the most part this is an MMORPG which at that price includes the license to use and play the game for as long as the game exists and is supported; given that you the player does not violate the terms of service. This is a license to play the game, not a purchase of the game. That means based on historical examples like the Crew, we can expect a game to last a decade. That is a decade of gameplay for a one time purchase of base functionality for $80. Note, I am not making comment about ongoing monetization strategies like micro-transactions or battle passes or expansions etc.
The new model would mean that the company would need to decide, develop and then build a version of the game capable of running independently of the publisher. That is fundamentally what you are asking. Wether that means that the game must be rewritten to function in single player mode or that their server binaries be released or they offer a license to lease private docker container images or something. They have to go through both the business and development costs of these solutions.
The New Model
What was proposed to me by bankers and business professionals was this. Let’s sell the license for $80 a year or $7 a month ($84 a year) this means for the lifetime of the game we, the publishers, get to make $7 dollars off you, the gamer, for however long you play. Now, the game is published and in 4 years this initiative succeeds and a law is passed to the effect of “Require video games sold to remain in a working state when support ends.” The publisher of this game goes, fire sale. We will comply with this law and we spent $20 million USD over the last 4 years since release, developing this functionality and we are the only ones providing this game. So if you want to own this game and not just pay the license fee it will cost $800, right now, today only. But, hey you are a loyal customer who has been playing these 4 years since release so here’s what I will do for you my extra special gamer. I will finance half of it for you. Pay me $400 today and continue paying the liscense fee to play on our provided infrastructure, but half that $7 a month for the next 5 years will go to pay off your financing. Ta-Da, game publishers can cover the cost of complying with the letter of the law endorsed by this misguided initative and increase their profits. Win-Win for them. Loose-Loose for you. Because guess what, you financed this purchase with your subscription. So say something happens the game dies out in year 6. There is no more online play the server and support are shut down. No big deal you have an official offline copy… that is still costing you $7 a month for next 3 years (the rest of the 5 year financing term), regardless of the state of the game or publisher. You will literally be paying a subscription while having to host games on your own infra and the publisher will continue to make money off.
Financial Breakdown
To illustrate the financial impact, consider a game with an initial player base of 1 million. Here’s a comparison of revenue generated under different scenarios:
| Scenario | Initial Sale | Total Subscription Revenue Over 10 Years | Revenue from 1% Conversion to Purchase | Revenue from 10% Conversion to Purchase | Total Revenue |
|---|---|---|---|---|---|
| Current Model | $80 million | N/A | N/A | N/A | $80 million + Other methods |
| Subscription Only | $80 million | $840 million | N/A | N/A | $920 million |
| 1% Convert to Purchase at Year 4 | $80 million | $840 million | $8 million | N/A | $928 million |
| 10% Convert to Purchase at Year 4 | $80 million | $840 million | N/A | $80 million | $1.008 Billion |
- Current Model: Generates $80 million, plus whatever micro-transactions or other current methods are available now over ten years.
- Subscription Only: Generates $840 million over ten years.
- 1% Conversion: Adds $8 million from 1% of players purchasing at $800.
- 10% Conversion: Adds $80 million from 10% of players purchasing at $800.
Player Base Decay and Conversion
Based on historical data, MMORPGs experience a sharp decline in active players shortly after launch, followed by a more gradual decrease over time. Assuming an average monthly decay rate of 5% after accounting for returning players, the player base stabilizes over time. By year 4, only a fraction of the original player base remains active, yet this model capitalizes on the loyalty of these dedicated players.
Player Base Over Time
| Year | Active Players | 10% Conversion to Purchase |
|---|---|---|
| 1 | 1,000,000 | N/A |
| 2 | 600,000 | N/A |
| 3 | 360,000 | N/A |
| 4 | 216,000 | 21,600 |
| 5-10 | Stabilizes | Continuous Revenue |
So maybe $800 seems steep to you… lets check the numbers it costs $20,000,000 USD extra to get the game into compliance and by year 4 for this fire sale 10% of the active player base is 21,600. So they would actually need to sell it for $925.93 just to break even.
Conclusion: Navigating the Future of Game Monetization
At the end of the day, the gaming industry’s shift towards a subscription-based model, as a response to initiatives like #StopKillingGames, highlights the complex interplay between consumer demands, legislative pressures, and business sustainability. While the traditional model of game ownership provides a decade of gameplay for a one-time purchase, the proposed subscription model offers a continuous revenue stream, aligning with the initiative’s requirements to maintain games in a functional state.
The financial analysis reveals that a subscription model, coupled with the option for players to purchase the game outright, can significantly increase revenue for publishers. This approach not only complies with the letter of potential laws but also capitalizes on the loyalty of dedicated players. However, it raises ethical concerns about consumer behaviour, as well as publisher pricing and the true cost of game ownership.
The potential for abuse, as highlighted by industry professionals, underscores the need for careful consideration of the implications of such initiatives. The risk of malicious actors exploiting these laws to force developers to release server binaries, thereby monetizing their work, presents a significant challenge.
Ultimately, the gaming industry must strike a balance between innovation, profitability, and consumer protection. Transparent communication about the nature of game licenses, combined with fair and sustainable monetization strategies, will be crucial in navigating this evolving landscape. By fostering open dialogue between developers, players, and policymakers, the industry can ensure a vibrant and equitable future for all stakeholders, all of which #StopKillingGames fails to do.