ARE GAMES BECOMING TOO EXPENSIVE TO MAKE?
Debunking the argument that publishers need microtransactions to break even.
Ever since microtransactions (MTX from this point on) started to be included in AAA games where they don’t belong, there’s been a debate on whether or not games have become too expensive to make that necessitates the presence of MTX in premium games. While the answer is about as obvious as being smashed in the face with a rusty morning star, there are – unsurprisingly – plenty of apologists who, against all evidence, think that MTX in such games is justified. So let’s take a look at a number of facts that disprove the notion that games are too expensive to make, requiring MTX to break even. This will also, obviously, include loot boxes, since they are basically MTX on ’roids. You keep using the word ‘too’, I don’t think it means what you think it means First, let’s get to the semantics of the argument. “Games are too expensive to make.” Emphasis on the word ‘too’, which implies that without MTX, publishers will not be able to even break, err… even. While the cost of making games have definitely been on the rise to keep up with the visual fidelity and mechanical complexity that gamers demand these days, has it really come to a point that no number of sales will be able to turn a profit?
Trends will be the next thing that we’ll have to look at to debunk the myth that games are too expensive to make. And to start, think of all other forms of media or entertainment that you can commonly consume, like music and movies. And then, compare them to video games. For as far as the past decade and a half, the price of your standard CD album or single would be between RM39 and RM49. This is still true today and, sometimes for an additional RM20 (and other times for no additional cost), you get a supplementary DVD for bonus content in the form of music videos or behind-the-scenes look at the recording process.
The same goes for movies – 15 years ago, DVDs were priced between RM60 to RM80, and that’s the cost of your average movie on Blu-ray today. If you choose to go digital, then you can get nearly all the music and movies you want, for RM14.90 a month on Spotify and RM51 a month on Netflix. The music and movie industries have kept prices relatively constant, while often ‘rewarding’ customers with bonus content when it comes to certain purchases. Opt for digital distribution, and prices get slashed even more significantly.
Catching up by going the wrong way For video games, it’s been sitting in the US$60 seat, with local prices fluctuating according to exchange rates. It has been this way pretty much since the beginning of video games, and it still is today, most of the time without any meaningful extra content – things like artbooks and OST – thrown in for free. To get them, you’ll have to partake in the nearly equally vile practice of pre-ordering, or getting deluxe editions of said games. And even with digital distribution, a PlayStation Plus subscription of RM21 a month only gets you a few ‘free’ games, and there’s no PC equivalent. The prices of games on the digital stores are typically RM20 less than the physical copy (as well as forgoing a box, a cover and a manual). And even then, you’re rarely getting the complete package, as parts of the game are not even there yet. These missing parts you’ll have to pay for separately in the future, as DLC (or sets of DLC) preorders called season passes. So instead of getting equal amounts of – if not more – content for the same amount of money like the music and movie industries, gamers pay the same amount for less content, with the missing bits being sold as DLCs.
The argument that games are charging more for less, while other forms of entertainment charged less for more instead, isn’t new. In fact, it’s been made back in 2012 by Consumerist when it awarded EA with the Golden Poo for being the reader-voted Worst Company in America for the very first time. And unfortunately, it remains one that’s relevant to this day as, if anything has changed since then, things have only gotten worse.
Of course, it’s possible to argue that the costs involved in the music and movie industries have not climbed as much as that of the gaming industry. And you may or may not have a point – we don’t have figures to prove or disprove this. But the set of numbers that we do have are that of money spent on making, marketing, and selling games, as well as number of games made and net revenue, compiled very well by YouTube content creator Tarmack. The link to his hard work is at the end of the article, and that’s what we’ll be using to debunk this myth.
When it’s too expensive to profit, more profit becomes necessary
To start, based on the publishers’ financial reports, we can say that since 2010, three of the big publishers – EA, Activision, and Ubisoft – have had mild growth in revenue. There has also been a very mild rise in marketing costs, but the costs of game development itself has stayed stagnant, with the exception of EA, which gradually spent less in game R&D. Then, there’s Cost of Goods Sold (COGS, a fitting acronym actually) – that is, the cost of the box and covers, cost of shipping to retail stores, the cut that digital platforms take per sale – have dropped steadily. That can be attributed to the rising trend of digital distribution.
So, to put things together, what do you get when you get growth in revenue and drop in costs? That’s right: rising profit. That said, game development costs have indeed gone up. The number of multiplatform games developed by these three companies has also dropped pretty dramatically, despite stagnant development costs. But this also means that, while the average costs of making games are on the rise and each year sees fewer games made, each of them makes more money on average than multiple games of yesteryears. To use an EA analogy (because it’s the industry’s shooting range target now), Battlefield 1 may have been more expensive to develop, but it may have very well also made the company about as much money last year as Battlefield:
“So, to put things together, what do you get when you get growth in revenue and drop in costs? That’s right: rising profit.”
Bad Company 2, Dante’s Inferno, Need for Speed: Hot Pursuit, and Rock Band 3 combined back in 2010. The notion that they are too expensive to make without MTX, then, remains ludicrous at best, and still contrary to the facts.
Often, MTX apologists forget or ignore the fact that consumers often play second fiddle to another group of people – shareholders. That is, after all, where the big money is, and if the stock market watchdogs like something, that something is consistency. With MTX, this is achieved more easily, as instead of having to wait for that one holiday blockbuster to spike up the profit figures of a slow year, MTX keeps that flow steady all year round. It makes for a nicer, more stable looking graph that doesn’t put investors in constant anxiety all year round, wondering if that gambit game will work out as expected, and so that they don’t lose their minds when it doesn’t.
That brings us to why Rockstar Games can get away with not making a single game after Grand Theft Auto V, all the way until this year’s Red Dead Redemption 2. That’s five years of no games, and yet money keeps flowing in, because people are constantly buying Shark Cards for GTA Online. Was GTA V expensive to make? No doubt. With the heavily publicized figure of US$265 million of development and marketing cost combined, it was also the most expensive game to date. But it is also the best selling AAA game of all time, with 85 million units sold. Assuming each was sold at the unlikely full retail price of US$60, the game would have made Rockstar Games US$5.1 billion – almost 20 times the cost. And that’s before taking into account the Shark Cards that made triple-digit millions of U.S. dollars in digital net revenue every quarter. Yes, you read that right – over US$100 million every three months.
Greed is, in fact, not good
It’s one thing to make money, but it’s another thing entirely to nickel and dime the customers to make all the money, and thinking that anything less than that is a financial failure. There is no need for MTX here, just a lot of want for a lot more money. Proof of this is Ninja Theory’s Hellblade: Senua’s Sacrifice. It’s a visually stunning game with a meaningful plot, and it’s priced at US$30, half the usual price for games. And yet, the game made profits three months in the market, ahead of its initial estimates of breaking even after six to nine months. And it achieved all this with pretty much no marketing budget, relying entirely on media coverage and word of mouth.
The bottom line is this – you will never hear anyone argue in favor of MTX. No one will ever say to you “Oh wow, I got to pay US$60 for the game, and now I can pay even more, with no limit in sight.” Instead, any argument that you’ll hear about MTX are all about the supposed necessity of it in games development, and the way publishers will all go bankrupt and close shop without them, when that’s clearly not the case. While each individual game is getting more expensive to make, companies are spending the same amount of money making fewer games, and raking in record profits because people would literally buy anything, just as the mobile market has shown. So until publishers stop profiting, can we all stop it with the overuse and abuse of the word ‘too’ and stop justifying unethical – even if still legal – business practices? Publishers don’t need us to defend them; the ones that need our defending are our wallet and our dignity as gamers.
Here’s the link to Tarmack’s YouTube video, where you can find the spreadsheet of data gleamed from publishers’ financial reports: http://youtu.be/0qq6HcKj59Q
Here’s Senua, fighting psychosis – her own, that of greedy publishers, and those of the mad people who defend their practices.
Where there were still things to do in GTA Online besides earning in-game dollars and general progression, there’s literally nothing else to do in Star Wars Battlefront II besides earn credits and lootboxes, both of which are tied to microtransactions.
GTA Online alone kept Rockstar Games profitable for five years, even if they were five years without any new games.
Then there’s Ubisoft, a publisher that should really tone down their marketing and trailers specifically, if the games are not going to be as visually stunning.