Loot boxes and Micro-transactions

gizmo wrote: »

No company in their right mind would operate like that though. They'd effectively have €50m left in the bank at that stage and would have no other source of income for over two years. What happens if the next game gets delayed as they so often do? What happens if the budget rises for other reasons? What happens if it's a commercial flop? Publisher goes tits up, developers are scrambling for someone else to step in. We've seen these kinds of problems countless times before, even so far as developers shutting after being left in the lurch to what were previously considered publishing giants fall due to bad decisions and under preforming games. 'member THQ?

Publishers usually publish more than game and at different times, so they have a constant stream of income. I think you are taking our simplification a bit too far?

gizmo wrote: »

To argue that games somehow aren't costing them more to make is just ludicrous, they've simply gotten better at making more money from them.

But they aren't costing them more to make. Look at the financials I post again, the "Costs of Goods Sold" come down every year for both EA and Activision. And their revenue goes up, all without micro-transactions.

gizmo wrote: »

Totally agree, as above. But you also need to factor in that development team sizes alone are, variably of course, around ten times the size of what they used to be. Those larger team sizes have their own considerably higher and on-going costs and that's before you even look at the increasing size of the publishers themselves as they expand into different countries to make, manage and their wares.

Again, look at the financials, their development costs have dropped yearly over the last 5 years. If you have other numbers, I'd like to see them.

gizmo wrote: »

Not really though. To be fair, the author of the piece also said...

You quoted back the same thing I quoted? And it supports my point, not yours. The government didn't understand that the current question (in-game gambling) is a different situation to the one address earlier in the year (third party gambling sites/apps).

That battlefield ad still gives me a shivers and I hated the poxy game when i bought it.

Look at the likes of the division that had huge hype, huge sales, then probably the quickest drop off player rate ever. Gotta sell it!

I've just used my U-Club points to by the Assassin's Creed outfit in South Park. Now I fell durrrty.

Mark Hamill wrote: »

And is (at least) equally offset by profit from previous projects. We can consider this in terms of one games budget/profit/sequel budget or we can consider this in terms of mutliple games budgets/profits/sequels budgets. Looking at one games budget/profit and then multiple games sequels budgets in terms of that is flawed thinking at best.

But that's how these companies have operated and specifically grown over the years. They become sustainable by generating enough profit per project so they can build up reserves and remove the need for ongoing external investment anytime they want to start a new one. In your initial example, which was akin to a publisher starting out, they had $100m sitting there, which would have been seed funding from some external source that would have needed to be paid back but in your further examples, you still refer to these as funds or a source which can be tapped into for future development and just refer to it as "publisher money". You essentially just magic'd a significant development budgets worth of non-repayable money into existence.

You've also ignored the other financial realities behind all of this which I raised in the previous post, what happens when projects aren't profitable, and the very real example we had of a large publisher going under due to a combination of all the things I've mentioned above.

Mark Hamill wrote: »

How are there less annual titles? If anything we have more, with Fifa, NFL, PGA Tour, NHL, NBA, UFC and other series all releasing yearly or nearly yearly.

Because there demonstrable are less titles, in the case of EA they've been slowly reducing them on an annual basis and moving away from yearly iterations of all their sports titles. They've even said this in statements made during the delivery of their various financial reports during that period. Take this year for example, by years end they'll only have released three core AAA titles, Star Wars Battlefront II, Need for Speed Payback and Mass Effect Andromeda, along with three of their sports titles, FIFA, NBA and Madden. Compare this to the years following the release of the last generation of consoles and you can see the difference clearly.

Mark Hamill wrote: »

Even if we accept what you are saying here with no evidence (more people working on a game doesn't imply it costs more to make, I doubt Horizon was outsourced to China despite it costing more, more like because it cost less), we still see profits increasing at a higher rate than costs drop. Even if we accept that games cost more to make (again, financials showing this please), they make more profits, so at best the cost of game production is irrelevant as they are more profitable anyway.

Hold on, this is getting a bit ridiculous. In terms of the actual development budget, the number of people working on a game and the duration those people work on it are the two primary factors to consider so of course costs will scale depending on team size.

Work on Horizon was outsourced to China despite it's already significant team in Amsterdam as per an interview with the Executive Producer on the project. Don't think outsourcing is prevalent? Check out the credits from The Last of Us here. The Naughty Dog team, who are already sizable, finish at 3:39 and for the next minute you have a list of external companies who worked on the game before going back into the Sony side of things where you have even more people listed who worked on the project both directly and indirectly. If you want further examples, the credits section of titles on Mobygames is generally a good place to start.

But can you not see the pattern here despite the various bits of information available? Development costs per title have grown, so publishers have reduced the number of titles in active development while devoting considerably more effort to generating more revenue per title than before. They've done this by pushing elements that have considerably higher margins than the initial game sale, DLC and Season Passes, while encouraging people to buy early while the game is full price, there's your pre-order bonuses, and trying to ensure that people hold onto their purchases rather than trading them in via various multiplayer and social elements, while they've now moved onto monetizing those people who do stick around. The last part, the shift to "games-as-a-service" has been fairly well bandied about by most publishers over the last while.

Mark Hamill wrote: »

When the question is why gambling that can't give you something with cash value isn't gambling, saying because it doesn't give you something with cash value is moot. What the governments, that twitter user and you fail to realise is that the monetary value of all gambling is ultimately always less than 0. Sure, individuals may sometimes win sometimes, but over time all gambling is always in favour of the house. Gamblers, as a whole, always lose money.

Then the law needs to be changed to specifically address these types of activities. Good luck to the person who has to differentiate between a loot box and a Kinder Surpise though.

Mark Hamill wrote: »

No I haven't. After making the first game a developer can go back to initial seeders (be they publishers/banks/investors) and ask for more investment from the same seeders to make more profits. They've paid back the first investment and the second game is coming on the back of the success of the first, so they can ask for a larger amount too.
Think about what you are saying, that if these companies only make 100% profit on what they make they wont have enough money to make more. But retailers don't make 100% profit. Even steam only 30% of the cost of a game, so they make 50% profit less their costs as profit. Physical retailers are the same. So how are they operating if are not making enough on any individual sale to fun purchasing another unit to sell? Could it be that you understanding of the workings of the industry is flawed?

I didn't say they won't have enough money, I said in response to your post regarding The Witcher 3 that the publisher will likely only allow for a similarly sized budget unless an increased profit is likely. You countered that by saying they could use the original investment plus a percentage of the profits made on the previous title to grow. I then pointed out that given publishers apparent desire for self-sustainability, they're unlikely to want to rely on external investment for future titles and instead aim to build these games off the back of actual profits. I also highlighted the other ongoing costs (and indeed risks) a publisher bears which aren't factored into the development budgets which I feel made it fairly clear why they're going to be very cagey about how much and where those profits are reinvested.

To use CD Projekt as an example, as part of their recent bad press regarding working conditions at the company, they announced their team size had almost doubled to nearly 400 for Cyberpunk. You can be damn sure that when the dust settles on that project, they're going to be expecting a hell of a lot more than the (potentially) $90m profit they earned from TW3.

Mark Hamill wrote: »

It's ridiculous that you can post so much without addressing the actual point keep avoiding half my points:
Even if we accept that games cost more to make (again, financials showing this please), they make more profits, so at best the cost of game production is irrelevant as they are more profitable anyway.
That so many games outsource so much shows they are keeping costs down. Even if overall the costs are still going up, the overall profits are up at a much higher rate, so games are more profitable. And more profitable before the introduction of micro-transactions and loot boxes.
The "games cost more to produce argument" is a red herring. Game companies save more money nowadays with far cheaper physical production costs, more and cheaper outsourcing, and they make more money on games with DLC and Season Passes. Their own reported financials show this.

Firstly, financials don't show individual development cost breakdowns. To back up my assertions, I've given you examples of individual projects from over the years and can probably dig out some more if required. What the financials do show, however, is the net result of what I've been talking about with regard to the balancing of rising development budgets and measures designed to reduce them.

Let me try to summarise this based on what I've said already; as development costs continue to rise so to do publishers desire to lower them directly and offset them by other sources of revenue. This covers pretty much everything we're discussing here I think. My position on this is that I understand the need for the later measures, even if they can result in increasing profits, but that definitely doesn't mean it gives them free reign to compromise the games in the process.

Now, how much loot boxes and micro-transactions compromise the title varies from game to game and even on this thread, person to person. I'm not really making a comment on that here but as others have said, if loot boxes are done away with, something else will probably take their place over time as those development costs continue to rise. Most likely we'd be back to some form of DLC and Season Passes but as is evident both here and online in general, these aren't too popular either. Throw in the people who think $60 is already "too expensive" for these kinds of games and it can make for a pretty confusing debate.

Mark Hamill wrote: »

So it's easy to differentiate between third party online gambling about loot boxes and first party online gambling in loot boxes, but differentiating between first party online gambling and sweets with a toy inside is going to be so hard?
You don't think the environment they are sold is different (online store built around selling loot boxes vs supermarket with a box of eggs)?
The way they are advertised and sold (heavy constant advertising with flashing lights, constant small supplies of free samples and every other Skinner box technique you can think of, vs a sweet with a toy treat)?

I haven't given my opinion on any of this. I've just stated that the reason they haven't been classed as gambling is because they appear to fail the litmus test for what the various bodies actually considered gambling. If they did, then their marketing would have to follow existing legislation and the Ratings Boards would probably have to rate accordingly too.

So, if you want this to change then the test needs to be adjusted to allow for the act of paying for an known quantity of unknown virtual items, items which in the absence of a means to resell or trade have no real world value. How they're marketed doesn't appear to be factored into this test, it's solely based on the core act and in light of that, I'm curious as to how people can differentiate the loot box from the Kinder Surprise.

This micro transaction nonsense will eventually lead to another video game crash, probably won't completely wipe out the industry like it did last time, but will probably take out a few companies if they keep up with this carry on.

BioWare will be next. In many respects, BioWare doesn't exist today anyway. Almost all of the staff who helped forge the great company it once was are now gone. Anthem will be the final nail in the coffin. It will review as a shallow Destiny look-a-like mired by micro-transactions and an absence of content. It has probably cost them 300m to develop and market. After Mass Effect Andromeda they are walking on thin ice, imo.

As long as the likes of Jim Sterling continue to highlight the tripe being put out by AAA developers, their seedy business practices, and the turgid monotony of like-for-like gameplay, other developers can offer something else, something fresh, and different. Its easy to create and make something decent when you have plenty of examples of how not to do something.

PrimeVinister wrote: »

I understand that AAA games cost a lot more to make while the price hasn't changed much in the last 30 years despite inflation driving the actual profit-per-unit down significantly.

But there is an easily discernible line between P2W vs. non-P2W loot boxes and DLC that is an add-on to vs. DLC that is carved out of a game.
There will always be rubes willing to pay a few bob to have a minor advantage but in the medium-to-long-term, being on the wrong side of either line is commercially damaging.

Whether its p2w or non-p2w, the point remains the same: the content should be in the game from the very beginning. I would much rather have a selection of skins to try on my character/gun from the outset than either pay to open boxes now, or grind those skins out of the game manually.

Make me pay for real content in the form of expansion packs, etc. A good game will make its fans buy future content, not skins and customisation garbage.

Falthyron wrote: »

Make me pay for real content in the form of expansion packs, etc. A good game will make its fans buy future content, not skins and customisation garbage.

Why would I want to pay for future content when it can be paid for by people who buy loot boxes? So because I'm not ar$ed about what pair of pants my character is wearing I get tons of free content, how could I not want that

My only problem with loots boxes is if they're required to progress in the game easier or give people an advantage in pvp. Let people decorate their characters to their hearts content, especially if it means everyone else gets free expansion packs etc.

Mickeroo wrote: »

Loot boxes are definitely preferable to the season pass model when it comes to multiplayer shooters imo.

Absolutely. No1 reason being it keeps the player base together, people who cant afford or dont want to pay for an expansion can continue to play.