Free-to-Play Could Crash the Gaming Industry

This post is part of my Where Games Are Going series in which I talk about the future of one of my favorite industries: video gaming.

At the same time that digital distribution is poised to level the playing field more than ever before for independent developers, another trend has the potential to cause a crash the likes of which hasn’t been seen since 1983. And it’s all Zynga’s fault.

These days you can’t throw a rock in the gaming community without hitting someone who is talking about the brave new world of Free To Play. Everyone is taking a look at the hand-over-fist cash generated by the addiction engines pumped out by Zynga (no, I won’t call them games) and wants their piece of the pie. From the expected ranks of big publishers like EA to some of gaming’s most respected brands like Blizzard and Valve, everyone is exploring “alternative monetization” for games.

But, you might say, won’t these alternative monetization strategies just lead to more people playing games and more games being made? If games are cheaper (or even free) isn’t that better for everyone? The answer is no.

Free-to-play and in-game purchase models break the incentives associated with game development. Sure, it can be done in a tactful manner and, in some cases, may even lead to a bigger audience for a great game. I haven’t played it, but I hear that League of Legends handles free vs. paid players in a very fair way. The problem is that once your money comes not from an up-front or monthly fee but from in-game purchases, you are no longer incentivized as a developer to make the game as fun as possible. Instead, you are incentivized to make players make as many in-game purchases as possible.

We don’t have to make up a worst case scenario for how this could end up, it already exists. Games like FarmVille are, quite literally, addiction engines. They are fine-tuned to draw a player in and build an obligation to continue playing and then an obligation to continue purchasing. The problem is that there isn’t really a game underneath all the addiction; it’s just a psychologically tuned profit machine.

In-game purchases might actually be more profitable in the short term. If you can convince people that they aren’t spending as much when they actually end up spending more, you’re going to make money. The problem is that in the long term people will come to realize that they are “playing” these games but not actually having, you know, fun. If the industry focuses on this model as much as I fear it is gearing up to do, the realization that games aren’t fun anymore could have sweepingly negative impact on the industry as a whole.

The video game crash of 1982 was precipitated by a glut of mediocre-to-bad titles and little information to know which ones were good and which were bad. The gaming crash of 2015 might happen after developers have stopped making games fun in the quest to make them microtransactionally profitable. Casual and hardcore gamers alike could end up feeling jaded and alienated by an industry that treats them like marks instead of players, and if that happens gaming as a whole will suffer greatly.

Personally I loathe the idea of in-game purchases. I don’t want my experience playing a game to be marred by thinking about the price of my fun. “Gee, would I have $2.99 more fun if I bought this Vorpal Sword right now?” It’s not that I’m price-sensitive, it’s that I explicitly play games to escape the pocket-conscious decision-making of the rest of my daily life and now I’m being slapped in the face with it every five minutes.

I care deeply about the gaming industry. I believe that video games helped to shape my logical thinking and problem-solving, and I know that my interest in them precipitated my interest in computers and technology as a whole which has become a passionate and fulfilling career for me. So when I talk about this problem, it’s not because I think that there is something seriously wrong with games now. I just think that many in the industry are being fooled by this mirage of a free-to-play future, and I implore these people to think twice before signing up to willfully misalign their incentive to simply make a great game.

Where Games Are Going: Consoles as App Platforms

I’ve been an avid gamer since, well, ever. Like many developers, an interest in video games (and creating them) is what first lured me to the world of programming. While I’m not a part of the game industry I follow it closely and have greatly enjoyed discovering such online video series as All Your History Are Belong To Us and Extra Credits this year. “Where Games Are Going” posts simply represent my observations and predictions about gaming and its future. This time, we’re going to talk about the next generation of consoles.

The current generation of consoles (Xbox 360, PS3, Wii) is going to be the last generation in which physical media (discs, carts, what-have-you) are the primary way in which new games are acquired. This is a large trend that can be seen especially in Microsoft’s full downloadable games which include AAA titles from this year, not just the older/smaller titles to which downloadable games have traditionally been relegated.

The company that wins the next generation console war will be the one who most wholeheartedly adopts the App Store model, specifically meaning a simple distribution system open to any and all developers with a constant revenue share model. I believe that Microsoft is currently best positioned to make this happen: Xbox Live is still far and away the most comprehensive console gaming community, they’ve shown that they’re willing to pull in this model with Xbox Live Indie Games, and they have Windows Phone 7 and Windows App Stores either here or on the way. That’s not to say that there aren’t a few kinks left to figure out:

1. Big Publishers Will Resist. The next generation of consoles is going to see content created by a single guy pitted directly against content created by a seasoned team of 100. Big established publishers will fight hard to keep themselves separate to avoid competition from smaller developers but, ultimately, they will lose. They’ve already had to accept this on iOS and Android devices, they will eventually accept it on consoles as well.
2. Price Will Be A Problem. A recent post on Signal vs. Noise called the physical disc/digital content price gap the Lazy Tax, but in reality the problem is monolithic price control. Microsoft and publishers alike are going to have to radically alter the game price structure to work in the new market. Games will either have to drastically lower in price at the outset or aggressively discount after the first few months. Otherwise, there will be a big swell of frustration from the gamers who are accustomed to the used and on-sale markets for getting their games. One way to get around this (but it isn’t pretty) would be to have unique unlock codes that can be purchased for games and sold by retailers. This would allow Amazon et al to discount games more like they do currently.
3. Non-Games Will Be Huge. The next generation of gaming consoles aren’t just going to be for games. This is already obvious with the huge push for video that Microsoft has done on the Xbox 360 but it will become even more so as the consoles from all major players will open their doors to non-game content. Even Nintendo, traditionally focused exclusively on gaming, is rumored to be jumping on the app train.
4. Google and Apple Will Enter the Fray. The interesting side effect of consoles becoming app platforms is that they will suddenly face competition from the existing app platforms of Apple and Google. Each platform will have to work hard to differentiate itself from the pack.

I think the next generation of consoles will be very interesting and there’s a lot that remains to be seen. Perhaps even more interesting, I think the next next gen will come from disruptive game streaming services like OnLive. As actually fast connectivity gets cheaper and more available it will make a lot more sense to stream games from big gaming rigs in the sky than to outlay a pile of cash on a home console. Once this happens, game platforms will go ubiquitous, no longer tied to any one device. Expect to be able to play full Xbox 1080 games on your Windows Phone and (maybe) even your iOS or Android device.