and how to stop it.
Look into the gaming crash of 1983 and you’ll find many internal and external pressures that lead to the demise of the industry. The crash of 2023 will have the same amount of confusion around it but ultimately the same cause.
Profit over Quality.
The fundamental flaw with a publicly owned company is that it has to continue to turn over and create profit for investors.
Stock has two inherit values
It’s dividend: what percentage of return a shareholder receives every quarter.
It’s trading price.
A stocks trading price is based on the expectation of it’s future dividends.
Now understand this is extremely simplified and is not the case with all stocks.
So when a company starts making a profit and dividing it among it’s shareholders if investors at large think that company will make profit in the future they will buy the shares at a higher price. When a company doesn’t live up to it’s projections investors will fear that the company will not make good on their return in investment as such they will sell their shares for a lower price.
Seems simple right a company should always do what makes the shareholders money.
Here is the flaw.
What is the highest profitable action in the short term is not always in line with the best possible action for the consumer.
Consumers buy AAA games because they are suppose to be the best. They have the highest amount of resources poured into them. The longest development cycles. They are marketed to create a place of social standing among gamers. If you’re a fan then you must have planned all fifteen variations in the franchise and bonus points for playing spin-offs and tie-ins.
These games do take a lot of time, energy, and money to come to market but they have to sell. Well, now that revenues are expected to be generated past initial sales via in-game transactions. The dividends provide to share holders have become quite high. Driving up the price of each share.
The customer base has been largely OK with upgrades and in-game micro-transations that are optional and do not affect the underlying mechanics or experience of playing the game.
Push back occurs when in-game transactions are necessary for progress to occur in-game.
Pay to win.
Pay to win games have high profits from the players that can afford to compete but these games have a short life cycle. When the prestige of being top 10 out of 10 million becomes being 1st out of ten players. That revenue which has now been passed onto the shareholders must be replaced.
With every passing generation of these games the PAYER base decreases and each new entry must work harder to capture that base.
Or they begin to cut costs and focus on striking the PAYER base before another company.
This philosophy does not care for the quality of the finished product and in fact being faster to a shrinking market is more important than being of quality after the market has already become established.
These cycles of trying to capture PAYERS leaving on game and hooking them on yours. Leads to shorter development cycles, a reduction in spending. All to satisfy shareholder demands of dividends from profit.
The false solution.
Just take your time and make great games. If the games are good you’ll keep your audience. The longer you can keep people invested and engaged with a game, the higher your retention and the longer you’ll retain PAYERS and turn PLAYERS into PAYERS.
Simply just make great games.
This is false because developers are trying to make great games and maximize profits for shareholders. Because while the consumer is concerned with the former, the share holder is consumed with the latter.
The real solution.
For the price of a new AAA title you, dear sir/zer/ma’am/miss/ziss, can one a share of the company that you are most invested in. Become a shareholder and allow the company to shift more revenue inside itself. Because you don’t really care about how much money the company makes you. You care about the franchise you grew up with and have grown to love not being destroyed to satisfy demands for profits.
Lets be honest you are not going to buy the next AAA and a share of company stock. But if you have found yourself not buying a game in a franchise you’ve enjoyed because of the companies practices then you should.
For the game developers
You are already in the practice of selling pre-order bundles. Consider adding stock in your company to that pre-order. Eventually the majority of outstanding shares will not be with investment managers and with your consumers themselves. Your consumers have the best long term interest in the company.
I’m not aware if such a thing is possible under SEC law. But if given the option I’m certain your fans would soon have majority over the company. And the two of you can go back to the good old days. You make the games they buy the games and fund your endeavor to make something new.
With love,
hngyhngyhppo
hngyhngyhppo 