The Padlocked Pocketbook

The videogame industry has an increasingly significant problem, and as a consumer you may not be happy about what game publishers have to do to solve it. In business speak, publishers need to expand their revenue streams and explore new avenues for monetizing their properties. In short, they need to find new ways to get money out of your pockets.

Before accusing the entire establishment of unmitigated greed, consider first the different ways that other major media markets are able to generate multi-dimensional strategies for making money. The oft compared film industry not only takes your money at the theater, but through sales of DVDs, tie-in media, action figures, t-shirts, the sale of films to premium and network television channels, rentals and so on. Even the recording industry, which is widely seen to be in a financial-crisis, retains licensing fees for use in television, movies and commercials, not to mention concert ticket sales, revenue from terrestrial and internet radio play and, of course, penalties awarded for copyright violations.

By comparison, the single-shot retail channel for generating money is a problem that the videogame industry can’t shake. The vast majority of the money that most games make happens in one lump sum over the first week or two of a title’s release, followed by a slow, almost inconsequential trickle from an anemic rental market and the vastly diminished value for the game’s shelf life. In short, publishers must put all their eggs in one basket to recoup expenses within a very short timeframe.

The results of this are evident throughout the norms we now associate with gaming. Publishers are incredibly hesitant to take chances with the games they greenlight. Games are disproportionately released during the heavy retail season, such that the majority of big games hit the shelves within weeks of each other to take advantage of increased traffic. Developers must disproportionately focus on style over substance to draw the attention of as many buyers as possible, as quickly as possible. Retail outlets must try and generate as many pre-orders as possible to maximize the impact of those crucial first five days of release. And in the long term, publishers rely on sequels to previously successful titles rather than experiment with new properties.

That’s not to say that these are traditions that would evaporate if the industry could suddenly find a half-dozen new channels for sales, but that the disproportionate nature of these issues might ease. A few more opportunities to broaden the base of revenue for most games would perhaps mitigate the current, overwhelming necessity of creating an instant hit.

Unfortunately, the games consumer base is unusually resistant to new ventures. Obviously, no one is interested in suddenly paying for things they’ve already perceived as free, which is why attempts to broaden the revenue opportunities for games are frequently couched in the gaming blogosphere as unabashed greed. The idea of consumers having to pay extra for a demo, patches and support or full access to a game is understandably anathema to gamers, but it’s exactly the kind of options that game companies are exploring.

We’ve seen this recently with Electronic Arts’ decision to release a free demo of Spore‘s Creature Editor as well as a premium retail version of the demo, which, despite offering the traditional free online model, has been met with skepticism and slippery-slope concerns from gamers. A similar outcry erupted in 2007 when the company released a pay-per-view sneak peek of Madden. The need for a company like EA to maximize its ability to generate revenue from its largest franchises, like Spore, The Sims or Madden, and the leverage that doing so gives the publisher to take chances with more creative projects seems lost in the often heated discussions about the evils of companies that try to make more money.

With the release of Gran Turismo 5 Prologue, we see an even more aggressive attempt to expand a key brand by Sony, which had already explored and been rebuffed by gamers for revenue diversification with its plans to slowly update GT4 to HD through microtransactions. Prologue, which has been described as a $30 glorified demo, represents Sony’s attempt to mitigate what has been an expensive and rocky generational transition by broadening the revenue potential of a key franchise. It’s a risky venture for a company already struggling with an image problem, but also the kind of action of which we can expect to see more from larger publishing houses that are struggling to cope with the rising costs of development and what may be their biggest hurdle, sharp resistance from gamers.

Game consumers are understandably resistant to spending more money on gaming, but they are equally resistant to the efforts of game companies to generate creative alternatives. This is not a market known for its levelheaded reaction to corporate maneuverings, and attempts such as in-game advertising, episodic content and paying for unlockable content have been met with outcry from a community that remembers fondly days when games were packaged in Ziploc bags and could be created by four guys in a basement.

The industry wants to meet the demands of gamers. It could work to their advantage to have more new franchises in the pipeline, a broader release schedule, less reliance on a retail market that is now cutting into the publishers’ long term profits, more digital distribution and fewer sequels. Across the spectrum of the industry, the makers of video games are also consumers of games, and they share our desires for a better industry; but they cannot bear the sole burden of concession. Unpopular though the concept may be, we need to be a little less hysterical in our reactions to the ways that companies try to make legitimate money.

That’s not to say that we should rush out and buy every premium demo or even play games with in-game ads if that’s the line we draw. In most of the scenarios offered so far, the consumer has enjoyed options of consumption and, frankly, that’s far better treatment than most other major media. We’ve been fortunate to enjoy relatively open lines of communication between the makers of games and the consumers of games, and the effort to improve the industry has been an unusually shared experience. But if we remain completely resistant to change and don’t curb our too often enraged tone, those lines will close and the decisions that seem such an affront now will become far more draconian and unilateral.

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