As I watch from my armchair, it bodes to say that gaming is undergoing yet another transformation.  Ubisoft’s recent news that PC overtook PS4 in terms of profits is a pretty solid indicator.  So let’s posit a few things first.

• Building games takes resources.  The more complicated the game, the more resources.  AAA games = LOTS of resources
• Always-online games cost resources to maintain (mostly people costs, but there’s some tech to it as well)
• There’s still an abundance of “cut and paste” / budget games.  Feel free to browse Steam or either mobile app store.  Recycled content makes money (see Tasty on YouTube for an example).
• The purchase price of games has been relatively stable for 30+ years, which makes them cheaper today than prior.  (e.g. FF3 was $60 in 1990, and plenty of games today are $60.  It should cost ~$105.)
• Per item resource costs are much higher today.  Salary, benefits, tech.
• Sum: It costs a TON of money to make games and traditional revenue models are not growing.

Many game developers are publicly traded companies, or they are owned by investment firms.  They are not bound by the concept of making good games, they need to make money.  So where’s the money?  Micro-transactions (MTX) of course.

The most profitable games on the planet are practically all $0 up front and entirely supported by MTX.  Mechanically, this is a superior method of draining wallets since there’s no ceiling to the amount of money someone will pay.  FF3 in 1990 cost $60 and only $60.  FF15 had 5 story DLC, 16 items, 4 item packs, and some extra bells and whistles.  Even Nintendo’s foray into mobile games has moved from the rather innocuous 1-time purchase of Super Mario Run to the gacha-model of Fire Emblem, or pay-per-turn of Dr Mario.

I am not a fan of MTX.  I understand why it exists – development of AAA games would simply not be possible without them.  They (or something similar) are here to stay.  The transformation in the game industry is not so much on game design (which the last 10 years has shown) but in the methods that allow for maximum monetization without being considered unethical.

Unethical monetization has a single outcome – regulation.  Oh, it doesn’t all of a sudden become ethical…it simply becomes both restricted and taxed.  The taxes bit… that’s where it gets fun.

Large cruise ships primarily serve the US.  None of them are actually based in the US, instead they are based in countries with low taxation.  Google and Apple may have massive offices in the US, but their financial headquarters are in Europe (which may change now that tax laws are taking effect).  The EU is changing the game, where the location of the transaction is where the tax gets applied and where restriction are applied.  Loot boxes are all but gone in Brussels for that reason.

Moving back to EA/Activision… they are sweating bullets that regulation doesn’t start hitting them on the transaction basis.  It is unlikely to take place in the US, as the lobbying and political system is much too intertwined.  But it will happen in other countries.  Considering how much money FIFA makes EA… and FIFA is 90% in the EU… doesn’t take a psychic to see where that is going.

This makes it an interesting time to watch the development scene.  The massive cash cow of loot boxes has an expiry date.  The monthly pass model seems more popular (ironic how subscriptions are back), and it’s a package with an expiry date.  I’m quite curious what other monetization tools will come to pass in the next few years.