Saturday, December 1, 2012

Mass Risk and the Consumer Effect

Having completed my second run-through of the recently released Mass Effect 3 and seeking a bit more clarification on the ending I took to the online community to see what people at to say. What I found was a mostly one-sided war with consumers vehemently criticizing the developer (Bioware) and publisher (Electronic Arts) for a variety of issues with the game. Below is my point-counterpoint of one of the issues that has lit up the gaming community, namely that Electronic Arts has been unscrupulous in its business tactics in the marketing and sale of the game.

Mass Risk - Game Publisher's gamble that a game will succeed and are thus entitled to maximize returns on that gamble.

Games get made in a manner similar to films. Some independent filmmakers work on a shoestring budget, sacrificing countless personal hours to realize their vision. Often, independent filmmakers work out of passion for their craft with full knowledge that their work will likely never be shown at the multiplex down the street. The chances of a financial winfall for an independent film are slim mainly because independent films lack many of the characteristics that appeal to a broad audience; superstar actors, special effects, quality scripts, and a general high level of polish bring in audiences and all cost a lot of money. Multimillion dollar  grossing blockbusters are typically the result of careful selection by a studio who provides financial backing with the hopes of creating a hefty profit if the movie is popular/successful. In many respects, a film being greenlit for financial backing is a literal gamble. Games are no different. While a slew of independent developers build generally niche games, major publishing companies such as Electronic Arts hear pitches from developers like Bioware to produce big budget, wide appeal games (albeit a bit different in this case as EA owns Bioware). As such, Electronic Arts is gambling that Bioware will produce a game that will sell big.

Of course, as most ought to know, gambling is a pretty dangerous practice. Few people can consistently make a living through gambling, and even fewer can make a good living. While some gamblers might be the luckiest people on the planet, most find ways of improving their odds. Movie studios improve their odds by choosing well known actors, directors, writers, and stories that they feel will resonate with audiences. Game publishers do the same by picking developers with a proven track record and genres (ie role-playing, shooter) that have a wide appeal. Further to this, both movie studios and game publishers improve their odds by sticking with an established franchise or name. Star Wars and James Cameron are safe bets in the movie business just as Call of Duty and Blizzard are in the games business. This all said, the allure of developing a new intellectual property is great. Backing the next phenomenon not only means likely financial success for the current production but also another source of safe bets for the future. Mass effect is one such developed intellectual property.

Electronic Arts undertook a gamble to publish Mass Effect. Although this gamble was mitigated by employing a well known and respected developer, it was a gamble nonetheless. As such, Electronic Arts is entitled to reap what they sew and maximize the gains on their risk.

The Consumer Effect - Consumers have to right to not pay and in some cases ought not to.
 While it would be futile to argue that Electronic Arts is entitled to make as much money as they can from consumers (profit is their mandate after all), I would suggest that some practices employed by EA to extract money from the Mass Effect franchise ought to be voted down stiffly by consumers through their voting dollar (or whatever currency you prefer). As such, this isn't such a condemnation of Electronic Arts (if people pay, you have succeeded in your mandate) as it is of the gaming consumer public who sometimes act like the loud tourist at the foreign market oblivious to the fact that the sticker price is highly negotiable. I intend to highlight a few choice instances and explain why the consumer should just say 'no'.

Day One Downloadable Content (DLC)
For the uninitiated, DLC (downloadable content) is where a piece of additional substance or content is added to a game for a fraction of the full game price. DLC usually takes the form of additional missions, weapons, or arenas for players to explore and seems to have found a pricepoint of between 5 and 15 percent of the full retail price of a game. While DLC is already controversial in that it generally offers significantly less value for money (usually adding less then 15 percent extra to a game), I feel that, in general, DLC has been accepted by the gaming community as the alternatives (long waits for full fledged expansions or no additional content whatsoever) are unpalatable to many gamers. DLC is an accepted way for gamers to squeeze a bit more life out of a game once they are nearing the end of their playtime. This is a win-win situation, consumers can pay less then a full game to enhance their experience with a product they have enjoyed playing and publishers can make some relatively low risk bets for reasonable returns.

Day one DLC refers to additional fee content which is available on the same day that the full game is released. In many cases, the DLC is developed in tandem with the full game is actually stored on the disc waiting to be unlocked. For some, this feels like they are being charged extra for something that should be available from the start anyways. I find this argument lacks weight as developers will often have unused assets on a disc as relics from early milestones in the games creation. Just because something is on the disc doesn't mean the consumer has a right to it (especially if that content is intentionally locked away). What ought to upset consumers is that day one DLC is essentially a free-roll bet for the publisher. In theory, publishers should have to provide more financial backing to a project in order to develop the extra locked content. In practice, development costs remain the same with the publisher recouping risk based on the retail game sales. A consumer purchasing the full retail game has also paid for the risk involved in producing the day one DLC. Thus, profit margins for day one DLC are unfairly high.

From a point of view, the consumer is being charged for something they have already paid for and should say 'no' to day one DLC. Further, by continuing to support this practice, consumers are setting the stage for content that is meant for the standalone product to be slowly chipped away into incremental purchases. In an extreme case, one can envision having to purchase the ending seperately, or perhaps have to purchase the ability to play through a second time. I doubt anyone would buy a DVD if it didn't include the ending or could only be watched once (yes a weak analogy but it sticks with the movie parallel I have built).
Preordering and Special Editions
About ten years ago, there was only one or two stores that carried games and digital distrubution was not established. Sometimes, stock would be limited and you would show up disappointed to find that you would have to wait (gasp!) two more weeks for the next delivery. As such, pre-ordering was a way to reserve your copy in store to pick up on the day it was released. For the luxury, consumers were charged a deposit (usually five dollars) and could exercise the right to not buy the product when it came in (in this case the store would just release the product for general sale and be happy with the free cash you just gave them). Now, finding a copy on release date in stores is a trivial task and anyone can download a copy from the comfort of their own home. Strangely, while the need for preordering has disappeared, the trend has actually increased in popularity and become a much worse deal for the consumer; now a preorder carries a higher deposit and sometimes requires payment for the game up front with some forms of online distribution. The most reasonable explanation I can find for this trend with preorders is that many games confer minor bonuses for purchasing in advance (usually taking form as an extremely tiny addition such as a unique weapon to use in game).

Exacerbating the trend of preorders is the prevalence of tiered packages. One now has the option of purchasing a 'Collector' or 'Special' edition of a game for prices ranging from ten to hundreds of dollars more then the basic game. Naturally, these fancy editions come with some less then quality additions like a fold-out map of the game world, or a metallic box, or t-shirt (maybe the most practical if it actually game in fatty sizes) which even the publishers admit cost significantly less to manufacture and ship then the mark-up indicates (coincidentally, do you really think it costs Apple hundreds more to put 16 instead of 8gbs in your iPad?). It should be clear that on economics alone preordering is not a good idea for the consumer.

Beyond bad economics, the problem with continuing to support the preorder system is that it is giving the publishers a free pass to make whatever they want. If EA knows that half a million people are going to buy what they are selling sight unseen (ie before the consumer can make a fully informed decision based on reviews and word of mouth), then it creates little incentive for EA to ensure a high quality product (which is overtly the case with all the bonus junk thrown in for special editions). I understand that many gamers will feel like they are missing out if they don't get the small incentive being offered for preording, but if everyone just said 'no' to preording (as their really isn't a need for it anymore) then I think that those tiny incentives would disappear. In the case of special editions, I can only suggest that if their is a genuine market for this stuff (it is one I definitely don't understand) then the market should demand higher quality goods then what they are receiving.

Forced Choice of Retailer
For gamers located in Europe, one of the most prevalent retailers (GAME) did not carry stock of Mass Effect 3 due to a failure to reach a crediting agreement for stock. While this is certainly due in part to GAME's shaky financial standing, I find it suspect that only EA has failed to reach terms while other publishers are finding a way to get their titles on shelves (although reports indicate that GAME did not have an easy time of getting those other publishers on board). However it went down, consumers had one less retailer to choose from. I will take it as a given that it is better for the consumer to have more choices in where to buy a product.

 For PC gamers, consumers had even less choice. EA has required all digital distribution to be done through their propriety online service (Origin). Further, all brick and mortar PC copies require authentication through Origin (and thus an install of this software) before playing. While this isn't quite as egregious as the whole Microsoft antitrust case in the late 90's, it has a similar whiff in that consumers are being forced to utilize the EA service should they wish to use a product they have paid for. What needs to be clear is that users are not simply having to register the product with EA or are being merely locked into purchasing the product from the EA website, they are being forced to download, install, and accept a license agreement for software which is independent and additional to the product they purchased. While I am firmly in support of EA exercising their right to be the exclusive digital distribution source for their PC software, I feel that this support only goes as far as the sale of the product I am purchasing.

The reasoning for saying 'no' to EA's forced use of Origin are twofold. First, as elaborated above, the consumer should not have to install additional software in order to play the game they have purchased. Second, Origin's license agreement embodies precisely the clauses people don't want to sign when they install software. Among these clauses are loose descriptions related to privacy which have been interpreted to allowing Origin to collect data on one's computer usage beyond the use of the Origin software itself. Further, EA reserves the right to sell this data without consulting the end user. Finally, Origin provides no guarantee of functionality or continued access to downloaded software (ie if EA decides to shut down the Origin servers the consumer won't be able to play the game s/he paid for). All of this adds up to what should be a big 'no' from the consumer.

Final Thoughts - Too Long, Didn't Read
 In the end I think that EA has a mandate from investors to make money using whatever legal tactics available. That said, consumers really need to be more discerning and say 'no' to some of those tactics (namely day one DLC, preording/special editions, and forced methods of distribution).

Wow this blog entry became a lot longer and more structured then I initially intended. Hopefully most of the stuff I presented can be easily googled to find references where applicable (this isn't a scholarly essay and I am not going to cite it, take my word or don't). Also, this is a draft at best in terms of editing, please forgive the mistakes or gaps in logic (which I am too lazy to find).