Raiding the Piggy Bank
A deep-dive into the nature of recurring payments, loot boxes and microtransactions, and how they have become more exploitative over time
Discussing the impact of a recent shift towards recurring payments is hardly novel, and the concept has been around long enough for most people to understand that, back in the day, we generally had to pay for something once and then we owned it.
You need only look at the games industry to understand where most of the innovation in exploitative business models takes place. The last decade has seen a substantial change in how the larger game studios deliver their content, and how the narrative driving those decisions has not changed at all. In short, these companies are still battling piracy and increased development costs while failing to admit they are probably more successful than they have ever been.
With that in mind, please join me on a trip down memory lane, all the way back to the mid-90s.
Those of you around my age, you may have grown up around the same time the first PlayStation was released. It may have been your first console, or you might have enjoyed the Sega MegaDrive (Sega Genesis), or the SNES (Super Famicom). Maybe you got the N64 for Christmas instead. This was years before Microsoft joined the fray with the Xbox, and when most of what you knew about games came from magazines, columns in tabloid newspapers, and cheesy TV shows like Gamezville.
The reason I’m taking you on this nostalgic trip is because the PlayStation was, to my mind, the first majorly successful console to use the Compact Disc as the delivery mechanism. Nintendo and Sega both used proprietary cartridges and this made it really difficult to create counterfeit copies (not that it was impossible). You might remember that those PlayStation games were CDs that were black in colour on the readable side, a bit like vinyl records. This, along with some other hardware measures, was Sony’s own attempt at preventing piracy with a medium that was dramatically simpler to duplicate.
Console mods
It didn’t take long for a cottage industry of console chippers to appear. You’d know a guy who knows a guy who could disassemble your console, modify the hardware, and attach a little switch that you could toggle when you were swapping between legit games and ones you’d copied. They’d have a catalogue of games that you could buy from them at a fraction of the cost of the genuine version, and there was often a much greater selection than you could find in your local Electronics Boutique, including bizarre US and Japanese imports. Being a fairly poor family made this a really attractive option of course, because experimentation with obscure titles was much safer when you were paying £5 and not £35.
DIY piracy
Technology advanced quickly enough that it became an option to buy a PC that came with a CD drive that could burn discs as well as read from them, which made piracy even easier because you could rent whatever games you liked from the local Blockies for just £2 or £3, burn them to your own CDs, and then send the rental copy back. For a child with barely any pocket money this was like heaven, and there was little consideration for the ethical consequences that were likely responsible for leading us to where we are today.
Pre-owned sales and Trade-ins
In those ten or twenty years the industry responded to the increasing accessibility of piracy in various ways, both from the retail side and the development side. Understandably, the threat of losing sales to piracy is quite threatening when the only way you can produce and sell a game is to sell an easy-duplicable physical copy inside a shop. No amount of DRM has ever helped that.
Retailers like Game tackled the issue by promoting pre-owned games over brand new ones, which encouraged gamers to buy new releases from them and then return them for other new releases at a substantial discount later on. The studios making the games didn’t like this because they didn’t get a cut on those repeated sales of the same game, and it was hard at the time to justify why they should.
If you’re still with me, let’s take this thing online.
Online multiplayer
If you had your own PC and a decent internet connection (256k ADSL was all the rage back then, just as broadband was beginning to enter our collective vocabulary), you probably cut your teeth on games like Quake, Counter Strike 1.6 and Unreal Tournament. Even older consoles supported the option of local LAN play, often through features called ‘system link’ or similar that required a special serial cable in order to work.
Both the Sega Dreamcast and the Xbox shipped with an ethernet port that allowed you to connect the console to the internet. For an extra cost you could play Phantasy Star Online with other players on your Dreamcast or, more notably, you could buy a subscription to Xbox Live. This was all the way back in 2002 and there is a whole community of 12–15 year olds who may never have seen what it was like back then.
Why is this history important? Well, it was Xbox Live that successfully validated the idea that gamers really wanted to play online just like you could on a PC. The PS2 was re-released with an integrated network adapter in order to compete, although it had no official service for many years and was free to participate in (this eventually became subscription based with PS Plus). And practically every console since then has had an online service, an online store, and a way for fellow owners of the same console to connect and play together.
This presented a fantastic opening for game developers who, in order to claim a greater slice of the revenue pie, could take advantage of these online capabilities to keep their players engaged. The Xbox marked the point where more and more games transitioned from pure single-player experiences to being mainly multiplayer with single-player game tacked on. Split-screen soon vanished in favour of online play with headsets and microphones, and even games that never really suited the multiplayer format found themselves shipping with some kind of deathmatch mode. This at least meant players would keep hold of the game longer, rather than trading it in immediately after finishing the 6–8 hour long story.
Downloadable Content
Once you’ve got your players hooked on your game you can start to build extra content to stop them from getting bored. You could notoriously buy horse armour in The Elder Scrolls: Oblivion, for example, or even buy entire game add-ons that considerably extended the available content. For the most part, the extra content was quite thorough and therefore could cost as much as £15-£20, and it was the console equivalent of the expansion packs you were able to get on PC for many years. Things haven’t really changed much with that kind of DLC and you could consider it a welcome addition to the console experience.
It was not, however, without controversy. Game studios were accused of shipping the DLC itself with the main game, as if it was originally part of that game but was later locked away. In other cases the DLC was offered in such close proximity to the main release that people suspected that too was original content spliced away for extra profit. Whether or not that happened, it was difficult to argue that the industry was operating solely with impure intentions.
Annual releases
I would argue that one major antecedent of today’s monthly subscription model is the concept of the annual release. While the idea of a subscription was not at all new, it laid the groundwork for making repeat payments for a single game more acceptable. The annual release is different to a series in the sense that it is often only a minor iteration over what came out the previous year, and it is often hyped to release at the same time (often November or December, just in time for Christmas). If you were invested enough in the multiplayer component of Call of Duty: Modern Warfare 2, for example, it’s highly likely that you would buy the next release and follow all of the other players into the new cookie-cutter multiplayer experience. If you didn’t, there would be fewer players to join you and the pressure to get the new game would eventually convince you to make the switch.
Other games soon followed suit, seeing the potential of hyping a new iteration every Christmas and securing that much-wanted recurring revenue. Of course, the problem for the studios was that they could only get that payment once every year. What if it could be more frequent?
Freemium content
Enter the App Store. One of the unintended consequences of Apple’s walled garden was the birth of a new kind of game, which was a variant of the Skinner Box. In this context, such a game is one that understands how to condition a user into paying money by manipulating their sense of success. The difference between this kind of game and an iterative one like Cookie Clicker or Candy Box is the financial transaction, and the way the game is tailored to trick you into spending.
It was incredibly difficult to market mobile games to users at the same prices that were charged for PC and console games, and the overwhelming expectation for many was that they would only play the game if it was free or cost no more than a dollar or so. The idea of delivering a triple A title for £30 or more would not fly at all.
Smartphones, just like handheld consoles, are great for mobile gaming but they present some limitations of their own. There are few situations where the game will receive undivided attention from the player (basically anywhere with no signal), and plenty where Facebook or Twitter or Instagram will be vying for that same resource. So the game has to be simple enough to work in short bursts and feel rewarding, but it also has to have enough in there to prevent it from being boring for slightly longer periods of time.
One such way to approach this was to offer the game itself for free, but hide most of the other content behind micro-transactions. The free game might not have a whole bunch to offer, but you can spend £1 or so to buy another bunch of levels, or a special ability that changes the nature of the gameplay.
Super Mario Run is a perfect example of a freemium game that is not exploitative. You get five levels for free, and plenty enough to have fun with without investing in the full game. For a one-time payment you can unlock the rest of the game and the substantial amount of content it has to offer.
These examples are few and far between and the natural evolution of this business model leads us to where we are today, where every company is engaged in this battle to siphon money from our accounts slowly and steadily over time.
One of many egregious examples of freemium abuse came from (believe it or not) Electronic Arts after they released a reboot of Dungeon Keeper on mobile in 2014. In order to understand just how disastrous this was as a release, we need to explore the reasons why freemium became abusive in the first place.
Manipulating addictive tendencies
How many stories have you read about children wasting thousands on a game because of unrestricted access to In-App Purchases? Most freemium games of this ilk put rate-limits on every interactive aspect of the game, while offering a trickle of rewards to keep you hooked. If you pay a bit of money you can speed that up and get the rewards more quickly, but if you don’t then the game will become annoyingly tedious or even completely unplayable. The player can spend £5 or £10 on a fake currency that allows them to purchase extra in-game resources or super powers (often with time limits of their own) and then they go back to the rate-limited experience.
This might mean that you can place two or three blocks on the screen and then have to wait 60 seconds to place another. And then you place another few and that timer bumps up to three minutes. The more and more you progress, the longer those limits become. This is often difficult to notice because the game is already manipulating you into believing you are still being rewarded.
You might accept that this is fine on some level, because if done in a reasonable way you can still jump into the game for a few minutes a day and enjoy it without having to pay. This is a difficult position to maintain once greed sets in and both the player and the developer want to maximise that reward, and it is very easy to cross an ethical boundary when it comes to influencing the behaviour of a child or a gambling addict. At this point, the game does not exist to entertain, but to abuse the vulnerable for profit.
This brings us to the latest evolution of the concept: the loot box.
Loot boxes
It’s hard to call those free-to-play games gambling because you know what you’re getting when you spend the money. There’s usually no chance involved unless you’re playing an actual gambling game.
This isn’t necessarily the case with the loot box, depending on how it is integrated into the game. My understanding is that two games occupy two opposite ends of the spectrum: Overwatch and, as you might guess, Star Wars Battlefront 2.
Blizzard’s Overwatch has a loot box system that plays an optional role in the game, and you do not lose value from the vanilla Overwatch experience by choosing to ignore them. The rewards don’t offer any advantage to a player and they are entirely cosmetic, allowing more dedicated fans to customise the sound and appearance of their character. The rewards are random so there is a risk that if you spend money on these boxes you won’t always get what you want. I don’t know where I stand with this, because it’s not so different from buying Pokemon cards as a kid: part of the fun is not knowing what you’ll get, and you’re not forced into the purchasing funnel by having gameplay taken away from you. This, to me, makes the presence of that feature less onerous.
Battlefront 2, by EA, is the obvious contender and if you had a keen eye you’ll realise they were responsible for the same kind of shitshow with Dungeon Keeper. The vanilla gameplay experience is limited and the role of the loot boxes plays a critical role in unlocking the full value of the game. You cannot play as certain characters without investing a comical amount of time and effort, or without spending an even more comical amount of money on loot boxes with no guarantee you will actually unlock the full game. It’s hard to look at this and not see it as a malicious cash grab, particularly because it is not the first example of EA taking greed to a ridiculous extreme. This is totally unacceptable when you are already paying £50-£60 for the game itself.
In principle, however, loot boxes are an experiment in taking micro-transactions (where the item you receive is guaranteed) and seeing what happens when you take that guarantee away. There is no argument that this system is anything but consumer-friendly and is, more likely than not, a product of unrestricted and impossibly high expectations for companies to maximise profit at whatever cost, to both users and to society.
I’ve used games as an example because the progression from how we used to buy games and how we are now continually paying for them is utterly remarkable, but this is not isolated only to games.
Many tech startups are switching to Software as a Service (SaaS) models because subscribed users are far more valuable to investors. This means that even your password manager is run with a subscription model, as is your development environment if you’re a programmer, and your monthly statement is likely filled with $5-$6 dollar payments to various online services for various things. Over the course of a few years these subscriptions work out to be much more expensive than they would be if you could pay all at once.
It is no longer enough for a company to survive on one-time payments for games or software. There always has to be some mechanism to extract more money from users, or offer increasingly restricted free products essentially as a gateway drug. In balance this is not necessarily a bad thing, as a company does require income in order to continue to support the products you enjoy, and you can have a much better outlook when you’ve got that constant flow of income in order to continually iterate instead of planning huge new versions.
People need to be paid, after all, and users want more features.
There is, however, a fine line between setting yourself up to sustain the business and support those employees you rely on to become successful, and treating your user as a bottomless moneybag who exists only to line your pockets.
Overall, I think it’s worth keeping an eye on developments in video games to see just where tech startups might go to generate new revenue. While it might be seriously unlikely to see loot box style business models in software, it may still influence new ideas, and that temptation to keep dipping into your piggy bank will only grow stronger.
