Shovelware 2.0: a cautionary tale for Steam

21

October

2018

5/5 (1)

In 1983, the home video game console market crashed, dropping from 3.2 billion US$ in revenue in 1982 to 100 million US$ in 1985.

The cause?

Due to the rising popularity of gaming and a lack of publisher control, the market became oversaturated with Shovelware: competing home consoles, video games, blatant low quality cash grabs and knock-offs of both. Customers could no longer find good games, and developers struggled to provide those good games when competing with the flood of shovelware. Now, slowly but surely, Steam is poised to undergo the same as the gaming industry in 1983, if only to a lesser degree.

The Steam platform is the current industry leader in providing video game digital distribution, with many pundits, critics and Valve, the developer of Steam, calling it a monopoly (Lockley, 2013). It boasts the biggest user-base and selection of games. However, the most important thing to note is that of Steam’s 19,000 available games in 2017 about 40% of them were released in 2017 (McAloon, 2018). Steam Greenlight, and its successor Steam Direct were designed by Valve to allow small developers to sell their games on the platform with little interference from their part, as they do not wish to be the gatekeepers of PC gaming due to their monopoly (Grubb, 2017). The result, however, is a flood of low-effort and sometimes fraudulent games: shovelware 2.0

These games are often barely functional, illegally resell pre-purchased assets and/or meet requirements for entry by bribing users to rate them favourably. The Steam storefront is a mess when not looking specifically at top sellers or most popular categories, leading many smaller independent developers to move over to other platforms or even other markets. The game Blossom Tales moved away from Steam to the Nintendo Switch which led to a twenty fold increase of lifetime sales for the game (Khan, 2018).

While Valve has taken some steps to remedy this, such as leveraging Steam’s more active community members to curate these games, the problem still remains and threatens to pull Steam into its own video game crisis in the future.

I’m just glad that I have a GOG.com and Green Man Gaming account waiting in the wings…

 

Please rate this

How introducing an electronic market helped make FIFA one of the most profitable video games franchises?

20

October

2017

5/5 (2)

For those who don’t play a lot of video games, EA Sports’s FIFA is long-running football simulation video game franchise. It is developed and released annually by the video game company Electronic Arts (EA).  Each year it is amongst the top selling video games. In fact, last year’s edition (FIFA 17) of the game was ’the best-selling console title in the world in 2016’ according to EA themselves. Even if you think such a statement might be a bit of a grand standing on EA’s part since they don’t release official sales numbers (industry analysts put it around 11 million copies sold), no one can doubt the game’s popularity. What will most certainly surprise you is the fact that game sales is not FIFA’s most profitable revenue stream. In actuality, what EA makes the most profit on is one games playing modes – FIFA Ultimate Team (FUT).

FUT was first introduced in 2009 (FIFA 09) and it is fairly simple at it is basic concept. The users put together clubs with virtual trading cards of football players and attempt to maximize their team’s attributes by maintaining team chemistry based on the players’ nationality, formation and position. Afterwards, they play with the team they build online or versus the computer in various leagues and cups. However, what is most interesting the in-game electronic market that the developers implemented to facilitate card trading.

It works in the following way. Every user can place the virtual cards he wants to sell on the market (via a timed auction) by setting an initial minimal bidding price and “Buy Now” price which can be paid at any time and the user who pays it gets the card. If nobody triggers the “Buy Now” the user with the highest bid will get the card at the end of the auction. Moreover, the only other way to acquire a player card is to draw it from a “randomized” card pack, which will cost you a certain amount of the in-game curency FIFA coins. As you probably have already guessed the chances of getting enough valuable cards to make back your investment or make a profit is pretty low. You probably have also guessed that you can buy card packs with real-life money. One card pack costs around 1,50 euros.

But what is the most important part of FUT’s electronic market is that you cannot buy individual player card from the market place with real money, you can only use FIFA coins. Therefore, the only quick way to build your dream team is to spend a ton of money by buying hundreds of packs in the hopes that you draw enough valuable cards that you can trade in the marketplace for the cards you really want. Of course, you can always play games to earn FIFA coins, but you will probably need to win hundreds of games to afford one Messi.  You can spend hundreds of hours trading by identifying inefficiencies the market and slowly accumulating the amount needed for one Ronaldo. EA will certainly not help you in this quest as it will charge 5% brokerage tax for every transaction.

At this point you might say that this electronic market is totally fixed and biased, and question how many are going to be dumb enough to participate in it. The answer is millions (myself included) as FUT is the most popular game mode in FIFA. Of course, you don’t have to spend any real money to enjoy the mode. In fact, most people (luckily, myself included) have never spend a euro on buying packs and are happy to play with “cheaper players”, but those people who are willing to spend money more than make up for it. FIFA’s Ultimate Team is now estimated to contributes $800 million in net revenue annually, up more than 20% year-on-year. It is such a jougernaut that the Ultimate Team concept has been replicated in EA’s other sports franchises (Madden, NBA, NHL) and the company is looking for ways to incorporate in its other big franchises Battlefield and Star Wars Battlefront according to their CFO.

What do you think about introducing such types of electronic markets in video games? Is the future of video games and would you be interested in playing such a game mode?

References:

https://www.polygon.com/2014/3/19/5525710/fifa-ultimate-team-fifth-anniversary-ea-sports-interview

http://www.gamesindustry.biz/articles/2017-03-01-eas-ultimate-team-now-worth-USD800-million-annually

http://www.vgchartz.com/game/117272/fifa-17/Global/

https://venturebeat.com/2017/01/31/ea-fifa-17-was-the-best-selling-console-title-in-the-world-in-2016/

Please rate this

Technology of the week: Industry Disruption of PC Video-game Retailers (Group 4)

3

October

2016

4.67/5 (3)

This week we focussed on Industry Disruption, specifically in the field of PC gaming. To demonstrate the shift from buying your games in brick-and-mortar stores to online platforms we made a short video.

 

New business model

Thanks to the rise of internet, the purchase of videogames has largely shifted from offline to online. From 2009 to 2012 the physical distribution of video games decreased at an annual rate of 13.1%, while digital distribution grew at 12.6% over the same time period worldwide. This industry disruption was led by several new companies, one of them called Steam.

 

To buy a video game you download the Steam software onto your computer and create an account. This enables you access to the platform where gamers and developers interact with each other. The moment you buy a game Steam receives 30% of your purchase.

 

The loooong-tail of Steam

The long-tail theorem allows us to understand why Steam has become so popular. Its digital nature allows Steam to take advantage of the long tail strategy, by providing not only block buster games but also less popular games from unknown developers. These so-called “indie developers” are the ones providing the majority of games.

 

Indie developers helped Steam benefit from another theorem, the newly vulnerable market. By allowing indie developers and corporations to equally compete in its platform, Steam transformed video-game selling dynamics. Lowering entry barriers, the standards of videogame production have risen.

 

Security problems

However, it is not all roses. Steam is facing privacy and security issues. Steam has tried to reduce the risk of account theft by releasing Steam Guard, an additional security measure in the form of a mobile authenticator.

 

The competition
There are other companies trying to attack this new market or trying to protect their previously strong presence. This latter group are not succeeding because they are holding on to their traditional business model and only selling their own games. This includes big, well-known publishers such as EA and Ubisoft.

 

Kinguin

Kinguin is a marketplace where buyers and sellers meet to trade their game keys. Like Steam, Kinguin takes a certain percentage of these sales. But there is already a lot of discussion considering the ethics as not all of the revenue goes to the developers.

 

Humble Bundle

Humble Bundles’ business model is based on a pay-what-you-want system. It provides bundles of games, while helping you on making an educated decision on how much you should pay. Also, the gamer can allocate how much money goes to the publisher, charity and Humble Bundle itself. On the downside Humble Bundle does not provide a community feature or an active gameplay platform. Hence, gamers usually return to Steam.

 

The game player is largely benefited by using online digital game sellers. Lower costs, a larger selection, a strong community, improved gameplay, a user-to-user marketplace and goodwill from directly helping indie developers and charities. Its save to say that we’re experiencing a total industry disruption and the end of an era of brick-and-mortar PC game retailers.

1http://store.steampowered.com/

2https://www.humblebundle.com/gamemaker-bundle

3https://www.kinguin.net/

4https://www.accenture.com/t20150709T093434__w__/us-en/_acnmedia/Accenture/Conversion-Assets/LandingPage/Documents/3/Accenture-3-LT-10-Pulse-Gaming-Disruption.pdf

5https://www.washingtonpost.com/news/the-switch/wp/2014/04/16/this-is-why-valves-business-model-is-so-totally-brilliant/

6https://openforum.hbs.org/challenge/understand-digital-transformation-of-business/business-model/humble-bundle-turning-computer-games-and-charity-into-good-business

7http://www.polygon.com/2015/2/9/8006693/the-truth-behind-those-mysteriously-cheap-gray-market-game-codes

Please rate this