When will players get what they pay for?
You do not own what’s inside that loot box — you are paying to open it.
Have you heard of a little game called Fortnite?
Fortnite, one of today’s most popular video games, is generating hundreds of millions of dollars each month and boasts 78.3M monthly players, according to Epic Games, the game’s developer.
As a “free-to-play” game, Fortnite’s business model is, ironically, one of the industry’s most profitable. In this model, revenue is generated through the sale of cosmetic items, like skins and emotes, and downloadable content (DLC) that appends to the core experience. DLC often adds new in-game areas or missions.
In 2017, the games industry generated over $108bn in revenue. About $82bn was generated by the free-to-play business model — which is to say, from the sale of virtual items and content across 2.5-billion players.
Players do not own the virtual items they are buying
Fortnite’s business model is centralized, which means that a single entity, Epic Games, has complete control over the sale, distribution, and use of the virtual items they sell. Items are non-transferable to other players or accounts, players cannot sell their items, Epic Games determines when an item is and is not for sale, and the supply is controlled by Epic Games, so a previously rare item can become commonplace. If a player is suspected of engaging in a secondary market, they can have their account locked.
This model and this control are the foundation of Epic Games’s business model, and they primarily serve Epic Games’s interests. It is a virtual monopoly — one where the centralized party has an infinite supply.
As a way of asserting this control and getting around gambling laws with the free-to-play model’s favourite revenue-generating tactic, the loot box system (wherein a player spends money for a relatively random collection of in-game items), the terms and conditions in today’s games clarify that players do not own the items they’re paying for.
Aspects of this model pervade almost every modern video game, free-to-play or not.
A $60 “AAA” game almost always ships with a premium edition (or two, or three…), and that premium edition is almost always differentiated by an in-game item that gives players an exclusive item or an in-game edge. Similar tactics are used to drive pre-sales of yet-to-be-released games. And in the most frustrating cases, a player can gain a “pay-to-play” edge, trading money for an in-game advantage less wealthy players simply can’t compete with.
Why do players accept this centralized model?
There’s plenty of grumbling from gamers about loot boxes, tacked-on DLC, and unfair “pay-to-play” tactics, but the model does have some benefits.
As a result of in-game sales, a video game’s price tag can be reduced or negated entirely (thus the “free-to-play” moniker), leading to games like Fortnite enjoying a monthly player base in the tens of millions.
In-game sales and DLC can also support the ongoing development of the core experience. New maps, modes of play, and events can be added and funded through these sales after the game launches.
And, as much as the model creates a virtual monopoly for Epic Games, it is technically voluntary to participate. I have personally justified buying loot boxes and cosmetic items in games like Rocket League because I wanted to support the developers and how they’re developing their game. Likewise, I have stopped buying virtual content in games like Payday because they stopped meeting my expectations.
In the best cases, a game will sell items that do not give unfair advantages, like skins or emotes, and create DLC that is both substantive and optional. As a result, the game is regularly updated and improved.
In the worst cases, free-to-play becomes pay-to-win. Players willing to spend the most in these “free” games win the most, experiences are gated, and the revenue development is prioritized over game development.
And, unfortunately, the worst cases far outnumber the best ones. And players don’t demand better because they don’t expect better.
But let’s be clear: Fortnite is the best case in more ways than one
Epic Games meets all the criteria outlined as a best-case scenario. And they’ve even used their position of power to deliver something gamers have always wanted, something that’s been routinely blocked by the need for developers and platform owners to centralize control: cross-platform play.
Fortnite can be played on every major console, on both Android and iOS, and on PC as one shared experience across those platforms.
For Epic Games to pull that off, they had to accomplish ambitious tasks. To bypass the Google Play Store’s 30% store tax, Epic Games distributed an Android app installer directly on their website. Google “lost” an estimated $50M as a result and a number of interested Fortnite fans were duped by scams and malicious apps posing as the popular game. Fortunately, the fanbase was large and rabid enough to jump through these hoops, regardless of the risks.
In the case of iOS, this wasn’t an option — Apple asserts more control than Google over their mobile ecosystem and doesn’t allow installers like this on iPhones — so they had to eat Apple’s 30% in-app purchase tax. Still, Epic Games managed to make $15M within three weeks of their iOS launch, with Apple collecting $54M within three months due to their in-app tax.
When Sony blocked cross-platform play, Microsoft players, Nintendo players, mobile players, and PC players were already enjoying it. Once the expectation was set in the majority of Fortnite’s players, there was immense pressure on Sony to meet that expectation too.
Eventually, Sony relented on their policy and Fortnite became a truly cross-platform game.
The cross-platform play was good for players, but it wasn’t altruism that motivated it
Epic Games’s experiences helping Fortnite become a cross-platform game are an excellent example of the tensions between centralized control and business interests causing friction with one another.
Arguably, if Fortnite only had the players’ best interests in mind, they would have eaten the Google Play Store’s 30% tax to ensure that players could access the game safely and easily. But they had tens of millions of dollars worth of reasons not to, so they didn’t. This option simply didn’t exist with with Apple, because the iOS ecosystem is more centralized than the Android ecosystem — thus, Epic Games had to play by Apple’s rules.
“Epic Games wants to have a direct relationship with our customers on all platforms where that’s possible.”
— Epic Games CEO Tim Sweeney on why they avoided the Google Play Store.
And when Sony released some of their control to allow cross-platform play, it was because their primary competitors, Microsoft and Nintendo, had already done so. If Sony didn’t, they would be sacrificing a competitive edge.
The virtual item model is evolving in some interesting ways
Every game that has a community has a grey market for in-game assets. Typically, these markets involve dodgy, virus-laden sites and scams. There are entire businesses and industries based on this — and one notable first-party example.
Similar to how Epic Games managed cross-platform play due to Fortnite’s scale, one of the biggest gaming platforms, Steam, created a Community Market that allows Steam players to trade and sell applicable game-related assets. Steam has also produced badges and trading cards that players are incentivized to trade and collect. Not every game on Steam allows this, and not every game or item is applicable, but since 2012, Steam has been quietly collecting about 5–15% of each sale conducted on the Community Market.
Anecdotally, the Community Market has helped some of the people I play video games with subsidize the cost of their hobby. More than a few friends have made back the price tag by selling the items they were awarded in the game.
How much Valve, the company behind Steam, has made via the Community Market is unclear. As a private company, they do not need to disclose this information. However, in 2017, the company made an estimated $4.3bn in revenue from game sales alone.
That $4.3bn figure does not include in-app purchases and other revenue from free-to-play titles, which make up the majority of revenue in the games industry. Nor does that figure include the revenue from the tax Steam collects from Community Market sales.
The issue is player choice — or lack thereof.
Steam’s Community Market is great, but it’s still a centralized model. You can either use it and pay Steam’s tax — or you don’t get to exercise any ownership rights for the items tied to your steam account.
Android players went around the Play Store to play Fortnite because it was the only way it was possible. And the only reason it was possible to go around the Play Store in the first place is that the Android ecosystem was designed to have a degree of decentralization. In order to compete with iOS, a distinctly closed ecosystem, Google ceded some control to third-party developers — like the ability to install apps outside of the Play Store.
Decades of examples prove that players will go out of their way to exercise choice. Fortnite proved that today’s mainstream players will still go around central providers like the Play Store if they have to, regardless of the risks. And they proved that legacy companies like Sony will change centralized policies if they have no other choice.
The main reason cross-platform play occurred for Fortnite wasn’t that it was in the best interests of players. It’s because it became in the best interests of the people monopolizing those players and their control over them.
The problem is that centralized control rarely has the customer’s best interests in mind.
With Fortnite and its ongoing development, Epic Games managed to align their business interests with their customer’s interests. That’s applaudable, and a credit to Epic Games’ team.
But Epic Games is the exception.
Most free-to-play games are predatory. Most loot box revenue mechanisms are little more than glorified slot machines and dopamine drips. And with some incredibly rare exceptions, the video game industries handling of virtual items doesn’t just favour the developer, it stipulates that the consumer has literally no right to actually own or use anything they are buying.
When will players get what they pay for?
Throughout the games industry’s evolution, we’ve seen player make noise when their expectations aren’t met. EA’s response to player complaints about Star Wars Battlefront II’s loot box mechanics is one of the most downvoted comments in Reddit history, and the outcry lead to EA modifying the loot box mechanic for the game as a whole.
Players will demand respect when they expect it — but the expectation needs to be set first.
“The great thing about the Internet and the digital revolution is… that physical storefronts and middlemen distributors are no longer required.”
— Sweeney, in his email to The Verge
Central providers are less and less necessary, and the benefits of their control are increasingly offset by negatives. Players have proven they can change how the industry functions time and time again, and though they shouldn’t expect a digital revolution today, they will soon.
All it requires is someone to set that expectation.
