Saturday, May 19, 2012

What Will You Pay To Play?

Last week, Kill Screen published “Will Work For Fun,” in which Mike Thomsen argues that the free-to-play model has changed the way we assign value to games. I don’t think anyone can dispute that. But Mike’s essay also contains a number of other assertions I’m not sure hold water, particularly around the nature of play. For the purposes of this post, though, I’m going to focus on his assumptions about value.

On Depreciation
In discussing how the value of games changes, Mike presents the following example:

You might have waited in line at a midnight launch to get Madden NFL 06 a few years ago and today find it in a bargain bin for $1. The game is unchanged, and its inherent value as an experience is identical to what it was then. What has changed is the perception of its value, driven by corporations whose business model relied on there constantly being a new game every year, one which necessarily obviated last year's model. We were not simply buying games in the days of brontosaurus-sized publishers like EA, we were paying for the privilege of participating in a zeitgeist that was largely created by corporate branding.

I think there’s a misrepresentation of the concept of depreciation here. I do some (very basic) accounting in my day job, so I’ll do my best to explain as I understand it.

The classic example of depreciation is a car. It’s often said that a new car loses a big chunk of its value as soon as it’s driven off the lot. The “inherent value” of the car is unchanged, but since when it leaves the lot it becomes a “used car,” its market value immediately decreases. So Mike has a salient point that market value is strongly tied to people’s perception of value. Ask a collector: an item is worth only as much as what someone is willing to pay for it.

It’s easy to understand depreciation with the example of a car. (For the moment, let’s assume value judgments about the car’s style or brand are irrelevant.) Over time, the car wears down due to normal usage. It’s naturally not worth as much as a new car when it’s got several thousand miles on it, because its functionality has decreased. The car’s decreased value is attributable to its decreased utility. To be sure, people’s perception of the car’s decreased utility also contributes to its decreased value, but there is also physical, tangible evidence of its degradation.

It’s trickier to apply that reasoning to videogames, where physical degradation is not the contributing factor. As Mike points out, the copy of Madden NFL 06 in the bargain bin is not $1 because the disc is scratched, but because the market’s perception of its value has decreased. But he also makes a few assertions here that I think are flawed.

First, Mike claims that the “inherent value” the game “is unchanged.” Is NFL 06 the same game in 2012 as it was six years ago? To some extent, yes. But it is also fundamentally different in ways that compromise its utility. The multiplayer servers, for example, are almost certainly shut down by this point, removing a major feature. Even if the servers weren’t shut down, very few people would be playing this game; its value is partly dependent on how many people are playing it, not necessarily in the sense of the “zeitgeist” Mike mentions, but in practical terms of finding opponents. The game’s value would have also plummeted had a new Xbox been released; technological advances are a driving force in depreciation. Similarly, as new standards for game design and performance become more prevalent, games designed with older paradigms become less attractive. In other words, the game disc itself is not the entire product; it’s also the support services associated with it, along with its player base. Games do lose value over time, just not because of physical use.

Second, Mike attributes the decreased value of the game to the publisher’s business model, which pushes out a new version every year. I think Mike might be implying that the changes to gameplay between Madden games of one year and the next are too incremental to justify their cost. If so, I’d tend to agree. But he’s ignoring here that one of the key drivers for producing a new NFL game (or any sports game) every year is that the sport itself has changed. In the case of football, changing rosters (particularly in the age of free agency) can completely alter the landscape of the league, and thus the sport. My own Buffalo Bills, for example, are suddenly a contender with the few big player acquisitions they’ve made this offseason. The Madden games are designed and billed as simulations (or at least reflections) of the sport; if the sport changes, the videogames must change, or they lose their value very quickly. The experience is certainly not “identical” to what it was years ago.

Finally, in his last two sentences above, Mike seems to be implying that EA intentionally contributes to the depreciation of its own games by releasing a new one every year. It’s possible that’s the case, since it certainly can’t be argued EA is not prioritizing new game sales. (So is every publisher, in case you haven’t noticed.) But I suspect that if this is true, it’s infrequent. No company, even EA, wants to be perceived as a purveyor of easily disposable products that lose their value quickly. Think of how many car commercials emphasize the car’s durability. Sure, a videogame is not a car, but if the game doesn’t retain a significant portion of its value over time, the publisher loses out on profits. Hence the popularity of trends designed to ensure games retain value over time, like DLC.

Some games depreciate in value simply because they suck. Once word gets out that a game is awful, its price often suffers a sharp decline. You could find a copy of Rogue Warrior in the bargain bin a scant month after release because it was a terrible game that received negative reviews. Retailers couldn’t get away with charging $60 because nobody would pay that much for such a lousy product. Yet great games that have been out for months, and even years, today retain a significant portion of their value because consumers agree they do. This is the case for both heavily-marketed AAA releases and smaller cult favorites. Branding absolutely plays a big part in market value. But I think Mike assumes consumers, and thus prices, are more susceptible to marketing than they are. If they were, Homefront and Red Faction: Armageddon would still be selling for $34.95 instead of $14.95.

What Will You Pay To Play?
I’m wary of conflating “price” with “value,” since as as the rise of fantastic free and cheap games has made abundantly clear, the two concepts are not identical. I’m equally wary of coming off like some kind of free-market nut by emphasizing the market’s role in determining value. But I do find Mike’s claim that corporate business practices, including marketing, are the key drivers of value hard to swallow.

I do think there’s a related point to be made, though, about pricing. I’m not alone in thinking that the default $60 price point for new releases smacks uncomfortably of record companies’ collusion to fix CD prices in the 1990s. I’ve long thought that more flexibility in pricing could help alleviate the industry’s woes, including piracy and the dreaded “used game problem.” (For an interesting discussion on “middle ground” pricing, check out this episode of the GWJ Conference Call.)

The free-to-play model is undeniably burgeoning, but it’s still experiencing growing pains. Mike’s point that free-to-play games lay bare the explicitly capitalist underpinnings of videogames is well-taken. I have a few games on my iPad that contain no less than three different types of in-game currency, all of which can be bypassed by spending real-world currency. There is something indelibly icky about this kind of design, the kind that makes every interaction feel like a transaction. It’s also often implemented in clumsy, inelegant ways that distract from the play experience.

But free-to-play is not going away anytime soon. I do believe it has to innovate or else suffer a slow, painful death. Eventually a critical mass of consumers will tire of its crasser tactics, or some new technology will render these types of games obsolete, and the model will prove unsustainable. Advertising revenue will undoubtedly keep it afloat for longer than it would otherwise be; one of the reasons console games can’t as easily exploit the free-to-play model is that it’s much less complex to push ads to mobile platforms. For now, we’ll have to get used to it.

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