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EA exec claims company doesn’t want to ‘nickel-and-dime players’ with microtransactions

One of the biggest shifts in gaming over the past decade has been the rise of DLC and the increasing use of microtransactions, and one of the companies that’s driven the worst aspects of these trends the farthest is EA. It was therefore somewhat surprising to see the company’s CFO, Blake Jorgenson, declaring that EA wants to “avoid nickel and diming gamers.”

According to Jorgensen via GameSpot, the microtransaction and subscription-based services the company offers are monetized only after they’ve been designed. “Our game teams are all thinking through, ‘What’s the engagement model to keep the consumer, to really entertain the consumer for a long period of time?’” he said. “When you think about that, it’s not really the economics; the economics come afterward. There might be multiple models of ways to engage people.”

When it comes to pioneering economic models, EA has been right there in the thick of things. The company was lambasted for shipping major Mass Effect 3 content as Day 1 DLC, including micro-transactions in Dead Space 3, forcing players to pay for gas in Need for Speed: No Limits and utterly destroying its remake of Dungeon Keeper with crippling microtransaction requirements to complete even trivial tasks. In this last case, the company attempted to prevent users from offering anything but a five-star review of the game. Ads that characterized the game as free were banned by the Advertising Standards Authority.

Frank Gibeau, president of EA Mobile, responded to the critical and commercial backlash by saying “Dungeon Keeper suffered from a few things, I think we might have innovated too much or tried some different things that people just weren’t ready for.” If you live in EA-land, launching a crippled title in which workers take hours, even days, to execute the simplest tasks is “innovation.”

In 2013, Jorgenson told the Morgan Stanley Technology, Media & Telecom Conference that microtransactions were a core component of EA’s business model, stating: “We’re building into all of our games the ability to pay for things along the way, either to get to a higher level to buy a new character, to buy a truck, a gun, whatever it might be. “Consumers are enjoying and embracing that way of the business.”

The numbers prove that whether consumers like this brave new world of video game financing or not, it’s making companies like EA scads of money. This chart shows the company’s digital revenue, broken out by segment.

 

EA digital revenue

EA’s digital revenue

EA now makes more than twice as much net revenue on additional content as it does on full game downloads, and while full downloads have grown faster than net content sales (probably reflecting the increased shift to digital distribution across the industry), extra content sales still dwarf full titles.

Economics and DLC

One reason why so many companies have jumped on the extra content bandwagon is simple economics: The retail price of a typical game has been $ 60 since 2006. If game prices had kept up with inflation, the modern price should be at least $ 70. This wouldn’t account for the explosion in AAA development costs over the past 15 years, but it would at least guarantee the same amount of money.

The problem is one of scale. If game developers can’t raise prices, they have to sell more units. This works in a boom market, but it doesn’t work forever. Eventually, every game needs to be the best-selling title of the year in order to turn a profit. We’ve delved into why developers like Konami have walked away from consoles and AAA titles and explored the economics and technical difficulties of console ports if you’re looking for more background on the topic.

Price increases don’t work particularly well because demand for many franchises is elastic. If you have to choose between Battlefield 5 and Call of Shooty 7 and both are $ 60 titles, you pick the one you like more. If Call of Shooty is $ 90 and BF5 is $ 60, you’ll pick BF5 — assuming its netcode works. Scaling out works for a while, but eventually becomes unsustainable. The alternative is to find a model that encourages people to spend small amounts of money after they’ve purchased a title, and to give them enough content that they don’t feel screwed in the process. Done properly, this cycle benefits everyone. Fans of a series get more content with cherished characters, fans of various cosmetic changes have access to them for minimal cost, and the publisher and studio earn a steady stream of revenue that encourages further investment in the IP.

Done improperly — which is to say, done EA’s way in virtually every instance — microtransactions and DLC come across as cash grabs. Some of the work EA has done has bucked this trend; Mass Effect 3’s Citadel was excellent, for example. But its expertise should be treated as a cautionary tale, not a model to duplicate. There are ways to create DLC that your players feel adds value without destroying classic franchises or ruining the survival horror atmosphere that the Dead Space series unique. In the past I’ve defended the DLC model, and I still think it can work for everyone involved — just not the way that EA traditionally implements the concept.

That said, maybe we should be glad EA doesn’t want to nickel and dime us. If the company doesn’t think its done so yet, I’m terrified to find out what they think abusive systems actually look like.

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