Digital River, if you’ve never heard of them before, is a monetisation service company. They are experts at figuring out what you can make people pay for. In addition to consulting services for companies like videogame publishers, they also operate some of the world’s biggest payment portals, offering online transaction services worldwide. The company recently released a report that claims that games as a service (GAAS) have increased the industry’s value by up to three times what it was a decade ago. But that’s not all the report says.
“Defend Your Kingdom: What Game Publishers Need to Know About Monetization & Fraud” is a short study that essentially goes into how Digital River’s offerings make sense for game publishers to adopt. It deals less with the value of the game industry itself (a headline for most articles that talked about this report) and goes more into how they can protect game sales, and potentially increase revenue for their clients.
According to the study, a quarter of all digital revenue from PC games in 2016 that had an upfront cost came from DLC sales. That’s probably true. In fact, I’d be surprised if that wasn’t the case, given how many games last year were advertised with DLC packs and expansions already planned and primed for release alongside the game. This model of having extra content for players to buy at the game’s launch came alongside the launch of game bundles and pre-order incentives for digital games, and it was one of the key factors that resulted in the death of Turtle Rock Studios’ Evolve.
But nowhere else in the study is the threefold increase in revenue mentioned. It’s one line in the executive summary, while the word “revenue” appears seventeen times. I’m not sure how they arrived at that number, or whether their assumption is correct. Is Digital River simply taking the value of DLC attached to games, and claiming that because the total amount of all DLC add-ons on Steam is worth three times as much as the base games, that GAAS increases the value of the games industry by the same amount? Maybe they are. The use of the words “relatively new” to describe GAAS seems to imply this, in my mind. But if that’s the case, this study does not point it out.
To be clearer, I’m not doubting that it’s correct, I’d just like to know where this figure comes from. It’s a nice-sounding number, and makes for great headlines, but we need to see evidence of it first.
So what does the report say? Well, it goes into detail on how game developers and publishers are being caught up in chargeback fraud and outright theft because people are realising how valuable digital items can be. Chargeback fraud is what allows the grey market key resellers to flourish thanks to stolen credit card data, and there used to be rife theft of valuable items in games with online economies like Counter-Strike Global Offensive. Digital River suggests that publishers need to have a more hands-on approach to working with distributors, and should pick better partners who they can trust to handle online sales and financial transactions (nudge nudge, wink wink).
It also mentions that better plans need to be made by developers when they are implementing an in-game economy with tradeable items. Valuable once-off items need to have some protections to prevent someone from trying to steal them, and they list the model used by Overwatch as an example of how valuable items are not tradeable.
The report also goes into how consumers are reacting to game prices. “Consumers are less willing to pay $60 for a boxed game,” it says, “and instead choose titles with a steady stream of content.” Digital River says that publishers adopted GAAS in reaction to this, but the reality is that the reverse is true. More publishers tested out GAAS before widespread adoption in the early 2010s, and everyone tried to replicate Valve’s hat-based economy before realising that they needed to have something different to make it work. As it happens, that thing is loot boxes and gambling.
Some publishers don’t even want to have anything to do with the model anymore after trying their hand at it. Rockstar Games once said that it only sees GTA Online as a once-off project, because the effort of maintaining the community is more work than they had expected, despite the increase in revenue.
The study goes on to say that the average revenue per user is expected to double compared to market growth, as game publishers rely more on microtransactions and additional content sales to increase their revenue. “Player satisfaction” is one of the things touted as a benefit to adopting GAAS. Psychologically, people like buying new things and there’s a sense of achievement from the little “ping” we hear from an achievement earned. Instant gratification is something we train our brains to crave.
There’s a great comic by The Awkward Yeti about this exact thing. Retail therapy isn’t just limited to buying things in a physical store, it works for online purchases as well. Once the excitement wears off, you begin to get the itch to have that feeling of having achieved something again.
The report also mentions, and discusses some reasons why gamers on average hold off on purchasing new games for about 21 days from launch, looking to rather pick it up in a bundle deal or a flash sale.
Since that’s a new trend, as the report notes, perhaps they’re ignoring the impact of online campaigns to not pre-order games, and just implying that gamers are stingy? The /r/PCMasterRace subreddit has had two years of daily campaigns with memes and official moderator announcements that pre-ordering digital games is bad for the industry. The largest active subreddit on Reddit probably had something to do with this.
Perhaps the delay-to-buy is also thanks to the abundance of people streaming games these days. If you want to pick up Battlefield 1, for example, but don’t know much about the game or how it plays, you can simply go to Twitch or Youtube and find someone playing it to inform yourself. Some people do this to learn more about a game’s multiplayer as well.
To their credit, Digital River does strongly urge that publishers with storefronts or in-game microtransactions move to increase their security to protect their customers. Fraud is a big problem with online games these days, and it got so bad that Sony eventually relented and installed two-factor authentication schemes across their online accounts, all to combat the scourge of social engineering attacks to gain access to Final Fantasy Online and FIFA 2016 player accounts.
The study also encourages game publishers to invest in their own storefronts and sell their games directly to the consumer, instead of through a third party. It notes that publishers can combat lower prices in grey market websites by bundling their content together to create more value, and that they should sell Steam keys directly on their own website instead of the Steam Store itself.
If you have nothing else to do while you sip your coffee or tea for the next fifteen minutes, read through the study and think about what it’s saying and what it’s trying to say. It sounds encouraging when you start reading it, but it’s the opposite of that when you dive into it.