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[Essay] Why a cynic like me is okay with Overwatch skin sales: examining current micro-transaction practice

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[Warning] This will be a long post. Longer than my usual post, which is not many, so please stay with me til the end if you find this interesting. This might be something Arch have discussed in his recent stream; I sadly cannot verify it, but I am sharing my opinion on them. Also, there will have some strong languages.

There was a scuffle in the internet recently over Overwatch's exclusive Summer Games skin. Popular Youtubers like Jim Sterling condemning the practice, even dedicating one of his Jimqusition episodes. Watching groups of people coming out with pitchfork and torch to burn Blizzard, and other groups of Blizzard champions defending the practice by bending over backwards was both amusing and frustrating experience. To state outright, both extremes of these attitudes are stupid, so I do not generally mixed in with hot topic issues; however, I have recently gotten into a long argument over the Jimqusition episode in Jim Sterling's blog, and I have found that experience to be interesting. I had to share insight I gained from that experience, and examine current micro-transaction practice in the industry.

Initially, the person I have gotten into argument was more upset with general gaming industry bullshit rather than the Overwatch situation itself. He claimed that the story made him upset because Blizzard is well-known for their consumer friendly practices, and even they were not immune to corruption of greed. To him, this was just another example of corporate greed infecting gaming industry. Another bullshit money grabbing practice like EA, Ubisoft, Konami, and SquEnix do in regular bases.

I first had to dispel the notion that Blizzard is "consumer-friendly" company. I honestly do not know what construed as consumer-friendly nowadays since there are so many opinions regarding the topic. However, if he thought selling exclusive skins inside loot boxes and essentially lock it away behind pay wall was not consumer friendly practice, then Blizzard was not such company since World of Warcraft launched. Just to point out the practice done by Blizzard over the years. The company sold Tyreal's Charger by locking it behind WoW Annual Pass (essentially $180 pay wall). It also locked away exclusive mounts behind their WoW TCG Card game; thus, making certain mounts cost hundreds to a thousand dollars such as Spectral Tiger. The company releases packs of cards every few months in Hearthstone that inevitably shakes up the meta, encouraging players who care about their ranked games to purchase packs. Not to mention, it changed Arena rewards to give out random cards from any expansion instead of most recent expansion; thus, again, encouraging active players to grind the gold/dust or buy the pack. The company releases exclusive mounts/skins/pets for their Blizzcon events; the event that cost $199 plus taxes. Not to mention, they have a in-game store in World of Warcraft that sells mounts/pets unobtainable via other method. This is just talking about skin sales practice that Blizzard did over the years. How about Starcraft 2 launching with Always-Online connection even though Starcraft 1 did not? What about Blizzard games tied to Battlenet App that is essentially form of always online DRM? And what about big fat elephant in the room, the Diablo 3 Auction House? If anyone thinks the recent Overwatch exclusive skin was none consumer-friendly practice, then I cannot see how they ever saw Blizzard as consumer-friendly company.

Frankly, you really can't defend what Overwatch is doing as "consumer friendly practice" either despite I have seen some Blizzard fans tried. Overwatch has 84 unique items per character plus 4 currency drops, if we include the Olympic loot, that is about 1852 potential loot items. If you are looking for a specific drop, there is 0.05% chance it will be a drop in your loot box. Not to mention, getting the loot does not eliminate the duplicate drop, so this drop percent do not change. This means, you have unweighted chance of 0.2% that the summer skin you want might drop in your loot box. This is rough probability calculation, of course, not considering permutation or individual item's drop rate. Even so, however, you can see how rare that is. If they were actually "consumer friendly," then the skin would be available for purchase in game directly, or unlockable by game credit, but they are not. Because, of course, Blizzard wants more people buying the crates. The practice is definitely not consumer friendly, but frankly, it is not out of bound for Blizzard's regular practice.

Blizzard is not really consumer friendly company under standard definition, and dispelling that is something I find myself do from time to time. However, one crucial difference that Blizzard has to other sleazy developers such as EA and Ubisoft is they do not let their greedy practice affect their core game play. (One exception was Diablo 3 Auction House, which they removed post-launch to sell thier upcoming expansion.) They sell skins in WoW, but they do not sell powers and raid gears. The in-game store mounts are functionally same to any other mounts in WoW. They sell packs in Hearthstone, but you can get all the cards in game with gold. Their practice is simple: "we will sell cosmetic items for money, but we won't sell powers." This is same for current Olympic skins for Overwatch as well. Now, this is why I still have certain respect for Blizzard as a company because time after time the other companies like EA and Ubisoft have shown that they are willing to break their games to make a buck. This might be why Blizzard has that illusion of their consumer friendliness; I guess in the world where robbery is common practice, thieving is acceptable.

After I have dispelled notion of Blizzard is doing something out of character, he told me that he is angry with the gaming industry for its practice of putting micro-transactions in premium games. To quote him, he said, "We don't need in-game purchases. You can't have your cake and eat it too, publishers. Pick a business model and adhere to it instead of creating a Frankenstein's Monster of nebulous bullshit."

Before I address his comment, I have to talk about why some people dislike micro-transactions in premium games. Popularized and advocated by Jim Sterling, some people are very adamant about premium games having micro-transactions. Everytime this topic is brought up, I see defenders of micro-transaction stating "its just costume, why does that matter? it's not affecting anyone" This statement is only partially true. Cosmetic items in game does not affect game balance, but it certainly does affect players. The cosmetic items are design to affect the psychology of players by creating have-and-have-not environment where have-not would envy the have and tempted to spend money. This design is engraved into the most games that has some kind of cosmetic upgrade system. For example, WoW's mount and transmog system is not just for players to express themselves, but also for lower level players to envy the cool mounts and transmogs, so they would play the game more and longer. Now, micro-transactions selling skins are aimed to generate money instead of player retention, but the principle is the same. It is designed to manipulate you into paying money.

Regardless, that's how any advertisement and marketing works in practice. Even packaged goods you buy in local grocery is manipulating the target audience. Do you think Lucky Charms has cartoon characters drawn on their boxes because they don't want to attract kids? What Blizzard is doing with loot box is as egregious as you make it out to be. You might think that psychological manipulation is unacceptable, or you might think it's just standard practice for any company trying to sell product. Either way, that judgment is up to you, frankly. Nevertheless, I had to address this particular subject since I've seen too many dismissal from pro micro-transaction camp saying it does not matter. To some people, it does.

To back to the topic at hand, I find myself explaining often why post-launch revenue generation is necessary for current gaming. Now, I will make this VERY clear before I start with this explanation. Corporate greed definitely is part of the reason why we have micro-transactions in premium games. The fact that they can potentially make unlimited amount of money with relatively low cost makes corporate executives drooling in excitement. However, every company bullshit starts with a grain of truth, and I am about to explain that grain of truth rather than focus on their greed. Also, post-launch revenue generation is necessary ONLY IF the game produces regular meaningful post-launch content update, and only in the case of online games. Micro-transaction in single-player games like Deadspace 3 or AC:Unity can fuck right off, especially when they sell DLC later down the line as well.  

"It's just damn too expensive to run server" is the PR line we often hear from the game executives. As someone who has spoken extensively about this topic to a friend who managed server farm, I can attest that its bullshit. According to him, the server maintenance cost is expansive, but its nothing compare to their annual revenue. However, what they do not say is "keeping unpopular game alive is costing them opportunity to make more money."

Apparently, it's the company's bandwidth that often causes the server issues along with US's shitty ISP and Net infrastructure. This means companies spend large amount of their operation cost on maintaining that available bandwidth. People often say "why don't they just increase the server size then," problem is that it's not the size of their tank that causes problem, it's their nozzle, and it's not even just their nozzle, but also its ISP's nozzle. So, max bandwidth speed is set by how much ISP allows; thus, companies do not feel the necessity to expand their infrastructure beyond ISP's limit. This is a technical detail Arch once explained to me as well as the friend. This means that the companies have to find a way to save their bandwidth capacity. Since they often cannot increase the maximum capacity, they need to cut the ones that currently uses that bandwidth. It inevitably leads to cutting away games that are not generating revenue. Those game will either be permanently shut down, or just left out to die because they need to make a room for new one.

This is one of the causes why there is no content update for games that does not have revenue generation post-launch. Making content not only cost money, but also maintains gamer population. Ironically, if the game is no longer making money, the company would rather see it die than to keep it healthy because it actively cost them money (not just in maintaining servers, but also in losing opportunity to make more money). No person who manages budget for any company can justify spending not insignificant amount of money on maintenance when its not making any. Only reason why anyone (not just a company) would provide something beneficial to their consumers at a loss is to generate consumer good will.

The topic of consumer good will seemed to be closer to his heart in our discussion. To quote him, he said, "...Blizzard is coasting on the coat-tails of bygone years and that's what I meant when I said sales will be hurt [them] eventually. The goodwill is not infinite." I agree with him on the good will not being infinite. The gaming industry is built upon the consumer trust and good will, and it has been eroding for years due to greedy practices. It is something many gamers, including Arch, have been fearing since it might lead to the next Atari shock. Almost every company do value consumer good will; however, they just do not value enough, and each companies seem to value consumer good will in varying degrees from likes of CD Project Red valuing them high to Konami valuing them less than dirt. Nevertheless, consumer good will is not quantifiable measure, and it's as valuable as a company thinks it is, and they cannot show it to the stockholders.  

To address this particular issue, I need to dig further into the problems of gaming industry in specific, and corporation in general. First, let's talk about gaming industry specifically. Problem with the gaming industry is that their sales depends heavily upon first week of the sale. For example, Skyrim sold 23 million copies total, yet they sold 7 million in its first week. That's 30%. Even that is due to Steam providing relatively constant stream of new players during each sales period, if steam sales are removed, then it is closer to 50%. What this means is that providing free content updates does not generate enough extra sales to justify the cost. Again, we have to go back to the idea that "only reason for a company to provide free content update is to generate good will."

If you generate good will in this game, however, the consumers might come back to purchase your next game. This is true. We know there's many brand loyal fans out there who buys any game a developer pushes out, and Blizzard fans are notorious for such action. Generating good will essentially benefits the company in the long run since there will be more brand loyal consumers purchasing their next game, which generates stable sales figure that is essential for budgeting; however, it costs them in the short-term since it's not actively making them money. That leads to our second problem. The problem of corporate America in general.

Despite many people thinking corporation is made up by few evil fat cats twirling their mustaches under the Dr. Strange-love-like boardroom, fact is less sinister, and much more problematic. Most corporations are owned by other corporations, specifically, financial groups. Financial groups purchase corporations as investment for themselves, of course, but also for clients such as myself. For example, I have a financial portfolio managed by an adviser. Most of this money is tied up in low cost index fund, but there is small amount that moves around the stock market. This part of the money is the risk factor of the portfolio that can lose or make money above expectation. When I see this money moving around, I see that I have once owned a rubber factory stock. Now, I don't know anything about this factory, and I frankly do not give a crap about this factory. What I care is if this stock price will be higher than the amount I paid, and how soon should I sell. Which means, I do not care at all if this rubber company exist in next 10 years, 5 years, or even a year. I only care if I can sell the stock next quarter for profit, and if the company goes bankruptcy afterwards? Why would I give a crap when my money is in elsewhere?

Multiply this apathetic attitude by millions, then you see the picture of what formulates the backbone of corporate economy. As much shit we give to Bobby Kotick, he cares more about long terms survivability of Activision Blizzard than an average shareholder like I do. However, even with his vast sums of money, he and his fund group owns less than 10% of the Activision shares. Rest is owned by other financial groups who has thousands of fund advisers that will get a phone call from clients demanding explanation why he/she still has Activision stock when its going down. Like I said, who gives a crap if the rubber company loses consumer good will and goes out of business next 10 years, what matter is now while my money is here, not 10 years later when my money is not. This generates infamous attitude of corporation only caring about next upcoming quarter, not long term survivability.

I wish this attitude and short-slightness can be easily fixed by removing some heads and few individuals being less greedy. Although I think that might certainly help, the fundamental problem comes from the system itself. Corporations has to be keep greedy because if they don't, apathetic stock holders like me will dump their shares and move onto better one, so they take their pound of flesh elsewhere aka suckers who bought the game already and dip into their consumer good will stockpile.

This comes back to the issue "why premium games like Overwatch have micro-transactions." Talking to him, I realized that he was nostalgic about good old days of PS2 era games where even online features of games were updated for free. To quote "Capcom in the PS2 era is my gold standard of treating a community right. The online games were few, but they were in a literal sense free-to-play after you bought the disc. You just needed a modem... I didn't hear any bitching about server costs or anything like the other apologies we let publishers spout out of their asses."

That era is gone. In PS2 era games, online gaming community was manageable. If they launched a game, most online part of the game was extra feature, and the meat was on the single-player. So, bandwidth was less crowded, and maintaining server was cheaper. It was easy to justify their cost of operation by saying they are generating consumer good will. Now, the online experience is the meat, and the user number is ten to twenty times larger. It's also across three platforms and more if they go into mobile devices. The industry has gotten too big. We did not ask for it to go that big, but it did, and now we have to deal with that reality.

In current state of industry, expecting any company like Blizzard to keep making extra content post-launch for free is realistically not possible. Which means, the gaming industry have two basic options as acceptable business practice for their online games: 1) Have a complete package when the game comes out and do not have a content update outside of server maintenance and bug fixes. 2) Have a post-launch revenue stream built into the game such as micro-transactions, in-game shops, subscription fees, and Auction House (the shittiest of them all).

Now, it is generally accepted attitude that first type of business practice should not have micro-transaction since they will provide the content later via expansion and DLC. The second type of business practice should be free-to-play. It seems that when the company mixes these two practices together, people seem to get angry. If a person only wanted from what Overwatch has initially offered (21 heroes, 12 Maps, 3 game modes, and 4 game types) and nothing more, then it is justified to be upset about micro-transaction in game. Even though Blizzard never hid that micro-transaction was in the game at launch, he/she got to deal with the psychological manipulation that they did not ask for. They've got a dog in the fight they did not want.

Blizzard has this type of game called Diablo 3. The problem with Diablo 3 is that content update is very slow. They do season updates with new legendaries and cosmetic gears to unlock, but game changing updates like Kunai's Cube is very sparse (like once-every-few-years sparse). This inevitably kills the active player base. Not many people stick around for same bits of gameplay, and why would they? As of time I am writing this, there are about 300 people in NA server who are playing D3:RoS. Compare that to few thousands to ten thousand concurrent players right after RoS came out, it is very dead. This is not what many users want out of Overwatch, of course.

Blizzard also has second type of game called Heroes of the Storm. This is typical Free-to-Play model game where you buy new heroes and skins with money, but you can unlock heroes with in-game currency. The model popularized by League of Legends and standard practice for Free-to-Play games. However, problem is Heroes did not have enough heroes to sustain the fiancial model at launch. With few dozen heroes with couple skins to support the whole system, they priced each skins higher than that of LoL. For comparison, recolor skins in Heroes cost $8 and recolor skins in LoL cost less than $4. Old under-powered heroes in Heroes cost $4, and under-powered champions in LoL cost $2. You get the picture. LoL got away with low cost model because it has dizzying array of champions. Over 100 champions who each has three to four skins can sustain the economy, yet Heroes did not have such luxury. With too high price point, what resulted was the lack of skin sales in Heroes. We do not know how much Blizzard specifically made in Heroes and continues to make. But, clear absence of Heroes was noticeable in their 2016 First Quarterly report. Compare that to their previous report where it boasted Heroes has growing community of 9 million players, and how it will generate substantial future revenues for the company. This is stark contrast to how they keep emphasizes about how much Hearthstone is making in the same report. Considering the Quarterly report is where corporation cannot shut up about their successes, the sign is clear. Heroes did not make enough money.

Overwarch shared same problem as the Heroes. Lack of heroes meant its skin sales would not make enough money for their liking, so this resulted in the amalgamation of both models. Initial sales would cover the cost of production and then some, and micro-transaction model would cover the post content update while making the game as next reliable source of revenue aka the money cow. Inspired by their success in card pack model from HS, they even made the purchase of skins harder for the consumers, so they would buy more boxes. As financial solutions go, this is brilliant. Having each type of monetization models of game under their belt, Blizzard made informed decision backed by their internal data to maximize profit. What they did not fully estimate, though, was the amount of backlash. This have-your-cake-and-eat-it-too game model has been thoroughly corrupted by more reckless and stupid implementations spearheaded by EA, Ubisoft, and SquEnix. The key point of implementing in-game store without backlash is to maintain the facade that the micro-transactions are for the benefit of players. They want players saying, "Thank you for letting us buy these stuff; here, take our money." Instead of them saying, "go fuck right off, you greedy scums." The line between these two are very slim, and essentially this comes down to the player conception rather than the act itself. Over the years that the facade was broken by other companies, and Blizzard is now paying that price with consumer good will. This is like a smart drug runner who has been selling drugs under the cop's radar posing as a upstanding business person for years getting caught because some dumb teenagers selling drugs triggered massive cop investigation.

The point of all this explanation is the following: consumers have to pick a compromised solution. For the reasons I have stated, expecting a developers to provide free content update post-launch is not feasible. For single-players such as Witcher 3, they can get away with this since it does not require bandwidth maintenance. For online games, this is more and more unlikely occurrence, and only recent exception is Splatoon, but the game is Nitendo exclusive with less user base than that of one launching in three platforms, and the game sales directly affects the value of Ninendo's Wii U system. If this is the practice a consumer wants out of developers, it is unlikely to happen, and those days are sadly gone.

Again, going back to the point, the online games have two realistic monetization model. The first model has its own problem. Even outside of problems I have mentioned about Diablo 3, the games such as Call of Duty that releases regular content pack also have problems. Each entry of CoD releases series of map pack to the point where the map pack ends up costing about the same as the base game. This obviously has problem of dividing community where people without map pack won't be able to find enough players in the match making; thus, they are coerced into buying the map pack or quitting the game.

The second model has its problem of inability to sustain itself if the game is not designed such way. This, of course, can be fixed if the company is willing to value consumer good will higher than they currently do. Even if they make less money and take some losses in short-term, they can certainly subsidize free-to-play game while adding more heroes/champions into the game later. However, this is also unlikely because of reasons I stated regarding corporate America. This cannot be simply fixed by few corporate executives being less greedy; of course, that will most certainly help, but core fix requires numerous faceless shareholders being less apathetic and less greedy. That systemic change is not happening; at least, it is not happening now and anytime soon.

This goes back to problem of premium games having micro-transaction. I believe that is something we have to live with now, and accept it as third valid economic model. However, the following must be also true for this type of monetization model to be accepted. 1) the game needs to have meaningful content updates that affect game play, and the content needs to be free of charge. Releasing more skins to sell is not valid update, that mostly benefits the developers not the players. 2) the game should seem that it cannot support the free-to-play model. This is hardest one to judge since we do not know behind the scene. In cases of Heroes at launch, it did not have enough heroes, resulting in too high price point for skins to generate efficient revenue. In case of Evolve, it just simply did not have enough player base. The Evolve is interesting case since it turned from premium game into free-to-play recently, and it does not have monetization model in place. The Turtle Rock is subsidizing the game while the game builds stable player base, probably from their initial capital earned while Evolve was premium game. Let's see how they monetize the game later (most likely, they will sell the silver keys). 3) It cannot sell game play affecting items. This is most obvious and also common practice done by shitty free-to-play games. Selling power is not acceptable in any condition. We cannot trust you, developers, enough not to fuck with the game balance and design just to make a buck. We want gaming experience; if we paid $60, we need good one that does not bent itself to fit your shitty monetization model.

Having that said, whether Overwatch qualifies these criteria is up to you to judge frankly. It might had game design enough to sustain itself as free-to-play, and most certainly loot box game design is not consumer friendly. They also could have gone with premium model with micro-transaction, but be less greedy and let people buy the skins they want instead of locking them behind exclusive event. In my honest opinion, these are valid criticism of the game, and dismissing them as "few entitled gamers whining because they didn't get the skin they wanted" is a mistake. Although jealousy definitely factors into people's reaction, but that essentially comes from the game's have-and-have-not environment design. The game promoted that jealousy, so it also have to take the blame. On the other hand, people saying "give us our free skins because we paid $60, and update the game indefinitely like you used to 10 years ago" are being unrealistic. That is already hard to do, and it will be even harder to do as time goes since gaming industry is growing larger and larger while infrastructure remains the same.

Having a opinion is great, voicing that opinion is even better, but let's have reasoned discussion not emotionally charged fist fights. One might lead to a solution, the other just makes your face hurt. I am a cynic. I have always been. I look at the world as it is, not as it should be, and the world I see sucks. Problem is that the solutions seems even more hopeless, and it makes me helpless. What can I do as one voice in the crowd against systemic problem? I guess only thing I can do is to spread the word. I'll talk to you later, and thank you for reading.

Last edited by Hylisk on Fri Aug 12, 2016 7:32 pm; edited 3 times in total

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Nice read but I would add there is exceptions, well not sure I would call them exceptions but some games are going to sell well and turn a massive profit these games do not need these sort of microtransactions to turn a profit to run the servers and provide content updates. As an example GTA5 made billions off game sales alone well more then enough to cover production of the game and every update that the online portion has been released to date as well as cover the server costs(bandwidth if you perfer) but they still felt the need to sell shark cards which have doubled that profit, that alone would not bother me but they release content at a rate that makes you more or less required to pay for these shark cards if you want to play said content. Using the cars as an example last month they released a car it was then the fastest car in the game so everyone bought it then as a 2nd part of the same update they released another car that was even faster and the price was even more expensive so everyone would need that car...... and it continued with the more recent stunts update with even more expensive cars that go even faster, not to mention the stunts update is all about racing these cars. I haven't bought these shark cards but I have more or less been forced to quit the game because I cannot compete and because I cannot compete I cannot afford to buy the better cars. Yet RockStar gets all sorts of praise I do not understand that... I don't really have any issues with the shark cards in GTA5, but that would assume their content was designed so people did not have to buy them to enjoy the content they release it has become pay to win and one of the worst offenders I have ever seen.

**edit Another example would of been Battlefield 4 for it was a sure thing they had the sales yet they come out with the season pass which split the community and this is a game where servers are payed by people outside of EA(its like $70us a month for a 64 player server) so the extra income was just that for EA it wasn't to pay for the extra content or keep servers running it was just to make a quick buck.

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Hey, ZeroCool. Thanks for sharing your experience.

To me, it seems GTAV Online has problem of "selling power." The definition of selling power varies from people to people, and it is certainly over used in some places, but selling in game currency directly when that currency is tied to the game's progression system is very dangerous. As you implied, it is almost impossible to know if Rockstar intentionally released new and better expansive cars just to promote the sales of Shark Cards, or they released cars as next stage of progression for end game users. It is hard to tell. Which is why, I believe this case goes into my criteria (3). The micro-transaction should not sell items that affect game play. If Rockstar sold only cars that were functionally same in game, yet having only cosmetic differences. I believe this would be same situation as Overwatch's. Essentially, Rockstar is selling skins, and I have discussed why I think that is something acceptable in current age of gaming. However, the way Rockstar designed it's micro-transaction is utterly unfit to do this. To provide continuous end game content, the game needs to provide next progression unlockables. In GTA 5 Online cases, new goodies people can use for their heist. This, however, is tied to their progression directly since they are selling in-game currency for real cash, so adding more powerful stuff is both necessary, yet it becomes selling powers in game. Regardless, Rockstar decided to do this anyway because they choose "selling power" over "consumer goodwill." Your criticism is valid, in my opinion, and I agree that Rockstar should be criticized in their stupidity in designing the micro-transaction system and greed not resisting urge to sell power in game for cash.

In the case of Battlefield 4, that is practice should be known as have-a-cake-eat-it-too-and-get-more- cake practice. They essentially combined first monetization model to sell map packs and second monetization model to have post-launch revenue stream via subscription fee. This is not EA using third monetization model of premium games with micro-transaction. As I stated, I believe the third monetization model can only be acceptable practice if and only if they meet all three criteria, and EA in this case fails first criteria miserably. The future content should be free of charge for every players if they are implementing subscription fee, yet they are selling season passes and map packs. If they are selling map packs, then there should not be any subscription fees. Like I said, this is EA trying to have a cake, eat it, and then generate more cake all at the same time. As you mentioned, this is practice that should be criticized without question.

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