Gaming has come a long way since it’s early days. From blocky, 2D images moving up and down or left and right to now where whole worlds are created in stunning HD with players having free reign to do as they please.
But that isn’t what this blog is about. I am writing about the behind the scenes changes in gaming. The dark, seedy underbelly of the industry. This blog is about the business of games.
Imagine if you will (or for those of you of a certain age, remember) walking into a games arcade in the late seventies or early 80’s. Weighed down by a pocket full of coins ready to play Pong or Space Invaders or Street Fighter. The bright Neon lights, row after row of big rectangular blocks the size of vending machines with small, 15 inch screens set into them. The sounds and music emanating from every direction becoming a swirling mess of incoherent noise. This was the beginning of gaming.
This is the arcade or pay per play business model. The idea is that people will come to the arcade, pay a small amount of money, and play a game with no ending until they lose. It was phenomenally successful. The 3 highest grossing games of all time (figures from 2015 so it might be a little different now) were games from the “Golden Age of arcade games”. For those of you interested they were Street fighter ($10.6 billion adjusted to 2015 US Dollars), Pacman ($12.8 billion adjusted to 2015 US Dollars) and Space Invaders ($13.9 billion adjusted to 2015 US Dollars). Then this model was obliterated by the next innovation, Home Consoles.
I may be being a little hyperbolic but home consoles did change everything. Eventually.
See, the first generation of consoles were too expensive and too… crap to reach the mass market following needed to make them worth while. The second generation was a little better with the Atari 2600 released in 1977 being the highlight selling 30 million units but, that wasn’t enough to change gaming for good. Not with the success arcades were having at the same time. The real kick in home console gaming came with the release of the third and fifth generation consoles (the fourth being handheld devices which I think is a slightly different market) with 80 million 3rd generation and 150 million fifth generation consoles sold.
We are now on the eighth generation of consoles which there are no reliable numbers for but seventh generation consoles sold over 270 million units so we can see the ever growing demand for these systems.
So what is the model with these consoles. Well, the machines themselves are sold at a loss to try to gain as many users as possible, especially if you are battling out with a rival like Nintendo and Sega or Sony and Microsoft. The money is then made in selling the games themselves to these customers at around £40/£50 per title. If the average person buys 6 games, that’s £250/ £300 plus the £350 spent on the console for around £500 per person with there being 270 million of these people. At least, this was the model.
Now console games, proper AAA titles like Call of Duty or Grand Theft Auto cost so much to make, that they cannot possibly sell enough copies to meet the cost of production. This is where Micro-transactions and DLC come in.
DLC is basically, getting players to pay for additional levels of the game or some other large addition to the game, like Creative Assembly selling new factions for their Total War series. It is adding something new to a game you have already bought.
Micro transactions are different in that they don’t add anything new to the game but rather, give the player something that is already in the game that they don’t have access to. Like a new weapon or piece of Armour that they could find in the game or earn if they played long enough but instead pay cash for. These micro-transactions are how Free to play games like Fortnite and Clash Royale make their money. And they don’t half rake it in.
Clash Royale made revenue of $156 million in it’s first 90 days. This for a game you don’t have to pay for at all. Fortnite made $100m in it’s first 90 days on iOS but can be played on PC and console too, for free. It was estimated by Forbes that Fortnite made $126m in February 2018. 1 month. That’s almost movie territory. For something you don’t HAVE to pay for.
So with the ever spiraling cost of making games and the huge sums to be made if you get it right, will we see a shift to free to play for console, like Fortnite, or will publishers continue to charge us for the console, the game, additions to the game and stuff in the game we can’t be bothered to work for or, will they find new and interesting ways to take money right out of our pockets?
“The trick is to stop thinking of it as ‘your’ money” – The Taxman
Blog written by Joshua Wright email@example.com