The Big F2P Correction

Big props to Eph for bringing my attention to a recent Gamasutra article entitled “How the Data Implosion will trigger the Great Game Dev Correction.” In it, the author put his “100% predictive accuracy” record on the line to portend the coming (Date: TBA) collapse of the F2P market.

If you want the short version of the 3100-word article, here it is: erosion of Consumer Surplus.

Really though, the author points to two primary trends that have entangled with one another in a negative feedback loop. The principle one is that the User Acquisition Cost, e.g. how much money spent on advertising/etc, continues to increase. One of the main drivers of that is the simple fact that there are thousands of competing titles on the market, with more arriving all the time. While we like to imagine that more options are better, the truth is that nobody really goes past the first two pages of Google results, much less browsing all 21,000 new games that came out in the last month. By “mathematical certainty,” costs go up trying to find new customers, revenue goes down as a result, and studios close their doors.

…but not before engaging in some Consumer Surplus shenanigans.

See, the second part of the feedback loop is how most F2P game companies are engaging in their data-driven quest to extract the maximum amount of Consumer Surplus from each user. Think lockboxes and timers and “special, one-time deals” that are psychologically honed to trick you into believing them to be worthwhile purchases. The very real problem though is that consumers have finite money. Shocking, I know. Since all of these F2P titles are trying to extract the same pool of dollars, all that happens is that each individual app only receives a smaller share of them.

And even worse than that is what we as gamers come to understand intuitively: these games just have less value as a result. In every sense of the term. Studios are spending more time and development dollars on ever more novel ways of tricking you to part with your cash, than they are with creating content worth purchasing in the first place. But even when those two points intersect, we’re left with little to no Consumer Surplus. At a certain point, you are better off watching Netflix than having to spend precisely the amount of money as enjoyment received from a game.

Now, the author is predicting a Correction at some point, with the Creative forces – as opposed to Big Data – rising up from the ashes of a devastated (F2P) game market and commanding a higher salary since we all suddenly realize we want better content again. I’m… not so sure.

For one thing, the F2P genie is out of the Cash Shop bottle. There is zero reason to believe that the surviving games of a post-Correction world will leave that extracted Consumer Surplus money on the table. Secondly, the game industry itself has proven rather resistant to the notion that content creators should be paid practically anything. Undoubtedly part of that is due to the fact that everyone wants to be a (armchair) game designer and thus there is no market pressure to improve working conditions/pay. Hell, I wanted that job so much that I spent two years of college studying programming and Japanese so I could try to break into the industry back in the early 2000s.

Finally, there’s Minecraft. You know, that little indie game that was sold to Microsoft for $2.5 billion three years ago? While an excellent case study in why Creatives are better than Big Data, the fact remains that this “simple” game won the lottery in a way that will inspire decades of copycats and dreamers, just as WoW convinced everyone that MMOs were the next big thing. The MMO fever has mostly died down, but that’s because it costs $60 million a pop to roll the dice. Meanwhile, there are hundreds of thousands of people creating apps in their basements for free, let alone the corporate code monkeys churning out thousands of Flappy Bird derivatives. The cost of each attempt is so low, and the payout is potentially so high, that there is no reason to believe investors wouldn’t keep some pocket change flowing into basically purchasing Powerball tickets each week.

So, while I do agree there will be a Correction of some sort in the game industry, it’s ultimately not going to fix the flooding of garbage games. What I expect to see is a return to Curation: a sifting through the river of shit for those few nuggets of value. People will find the voices that they trust, and those voices will end up picking the winners and the losers. At least, up until the Curators become corrupted by studios throwing money at them, and the great cycle repeats.

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Posted on September 6, 2017, in Commentary, Philosophy and tagged , , , , . Bookmark the permalink. 4 Comments.

  1. I think we are seeing some of that already. Take PUBG for example. $30 up front cost, 10m sold. They have lockboxes and keys (as well as enabling the Steam marketplace), but it’s all fluff, and I don’t expect that to change anytime soon. LoL has never sold power (unless you believe Tobold/Gevlon of course), and while that game is F2P, it’s also a major market factor in recent years. In fact, what are some recent successful titles (non-moble games) that do sell power? I honestly can’t think of one, but that might also be because I naturally avoid them.

    What won’t change however is the total volume of games. It’s just too easy to make and sell one now, but I still think the truly great games rise to the top, or high enough anyway to reward the makers.

    And hey, perhaps one of the results in all this is a return to gaming blogs being popular, with more people seeking the opinion of others to find good games (of course Twitch does this somewhat already).

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  2. From the author comment : “The prediction is specific to the F2P mobile games space.”

    When looking carefully at the article, he discuss the “player acquisition cost” = the cost the dev has to pay to acquire one more customer. He explain this cost is becoming higher due to a huge number of competiting game for the same market.

    On PC, I do not see a huge number of F2P games competiting for user attention. This could be true for Indie game, but they are not F2P and explicitly out of his analysis – same comment.

    On the PC market I see 3 different market :
    – the classic Retail type ( B2P: monthly pay) market on solo/multi games still alive (Overwatch, PUBG, etc…)
    – the F2P market, with less than 50 games
    – the indie market, with a looooot of competition

    I do not believe one of this market is fitting his analysis. The F2P market is too small for now to have an issue reaching the customer, so the 2nd part of the equation is not rising quickly, so predicting doom is less certain.

    He is also using big player as a lag trending, and we see on the PC market that they have not yet switch to F2P absolutely.

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    • Where in the world are you getting the idea that there are fewer than 50 F2P games on PC? Steam alone has nearly a thousand of them listed, and obviously there are even more that aren’t on there…

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  3. The main corrective force is that an F2P game necessarily destroys itself, while a subscription (or properly cheap-to-develop buy-to-play) can live forever. I see no reason why there wouldn’t be WoW around for the rest of our lives. There ARE people playing Counterstrike who weren’t born when it was first released and that was essentially the same game as today (for them, it’s forever). But a F2P game only lives while the players don’t realize that they are being ripped off and they are content being sold to whales, even if they pay. Some games are pretty good at hiding it (LoL which I need to revisit some time), but it’s rather an exception. Most of them get bad word of mouth after some time and die.

    So the choice of the studio is this, assuming that the first game becomes successful:
    – I make quick buck robbing players for a year and might never have another chance because my next game will simply get lost among the 21K new games per month.
    – I make decent money serving players for the rest of my life.

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