Tag Archives: Rambling Detected

Quote of the Day – How to get Your Industry Regulated

A Kinder Surprise Egg does not collect your data. The Kinder Egg does not learn more about the person buying and opening the Egg, such as his or her preferences for its contents. The Kinder Egg does not adjust its contents according to an algorithm based on population data. People do not link their credit cards to Kinder Egg vendors. Kinder Eggs are physical and can be given away or traded, unlike virtual items.

-Dr Daniel King, quoted at GameIndustry.biz

I like this quote because it gets to something I think people miss when it comes to the lockbox debate.  I often see people go straight for the idea that randomness equals gambling and therefore lockboxes should be banned.

Not gambling

And, while randomness is an element of gambling, it is not the sole defining factor.  That something like Kinder Surprise Eggs exist and are sold legally in many countries tends to indicate that randomness is not the only thing we should be considering.

Randomness is not necessarily bad.  And while I tend to discount when devs tell us people enjoy opening up lockboxes… I am sure the payday loan industry would tells us that people like getting money from them as well… you can find players who enjoy the randomness of loot drops and such.  Bhagpuss, one of the sources that pointed this quote towards me, is on that team.

This makes the gambling argument feels like a dead end to me.  You either have to change the laws to widen the definition of gambling (wait for the push back on that) or go the Belgium route and make a special exception for a specific set of circumstances, which leaves people with the question about why this one outlier is special.

Fortunately, the quote nicely brings up how randomness isn’t the sole factor that makes lockboxes odious to so many people.  There is the virtual nature of any prizes, the persistent reminders and offers from the cash shop, the fact that you have to pay to for a random chance to get things otherwise not obtainable in game, the manipulative practices, and the suspicion that the whole thing is rigged just to get you to spend more money.  Another quote:

“The ‘not forcing anyone’ argument is undermined by the fact that many of these games appear to employ systems that are designed to present constant in-game purchasing opportunities,” says Dr King. “The promotions and solicitations are unavoidable in some cases, and the game may have design elements that make it very frustrating to players unless they spend money.

“Our review suggests that there are some emerging designs that aim to capitalise on player data to present individualised offers that the system ‘knows’ the player is more likely to accept. So it’s not about being ‘forced’ — it’s about the game anticipating or making the best judgement about what the player is likely to accept.”

And while some people would be on board with the suspicion that things are rigged no matter what, the game companies have helped feed that paranoia themselves.  Further down in the article there are some patents game companies have filed for mechanics designed to get people to spend more.

Activision had an especially good filing back in 2017 for a system that would deliberately match players with people have superior gear from lockboxes to make you feel you need the same gear in order to compete.

Randomness is not bad in and of itself and we appear, as a society, to be okay with gambling, but when you start targeting people based on their behavior and rigging the system against them on the fly, all algorithmically and invisibly behind the scenes, we have strayed into what some might label as predatory practices that strikes against a basic sense of fairness.

Going down that path in pursuit of the most effective lockbox scheme is how you end up with legislators and regulators taking a close and person interest in your industry.  It has all been rather haphazard up to now, but momentum is building.

So it was probably no coincidence that there was a press release from the ESA about how various companies are now committed to displaying the odds of obtaining items from lockboxes on the very day that the US Federal Trade Commission was holding a workshop about industry practices around lockboxes.

The ESA isn’t dumb.  They know they need to do something as any regulation is going to hurt them.  They know they need to get in front of this issue and make some concessions before laws or regulations force them to back off their lucrative lockbox schemes.   And so they have a grand announcement.

And posting the odds somewhere would be a big step forward.

Of course, the ESA isn’t saying where the odds have to be posted, if they have to be in-game, or even linked to in game.  Posting them on some dead end path on their web site might be what they have in mind.  And how often do the odds have to be brought up to date?

This is the problem with something as empty as a “commitment” to something like the ESA has announced.  They want to sound like they are doing something good for the consumer without actually being bound to follow through in any reasonable fashion.  With no laws or regulations in place, what are you going to do if half of those committed platforms fail to follow through while the other half does so in the least helpful way possible?

Companies don’t go out of their way unless it is in their best interest.  Right now I am sure the ESA sees their problem as a few loudmouths that need to be appeased so they can go back to business as usual.  There will need to be a lot more government scrutiny before the ESA follows through.  But follow through they will, if the pressure gets high enough.  I remain convinced that the ESA will do the minimum amount needed… pinkie swear promises and strategic campaign contributions… to stave off regulation at least in the US.

And, in a final twist to the comparison in the initial quote, Kinder Surprise Eggs are not allowed in the US.  It has nothing to do with gambling or manipulation and everything to do with the FDA not allowing you to sell candy with toys embedded inside.  So we only get the Kinder Joy eggs, sans surprise… and given how rare they are here, few seem to buy them just to eat.

That EVE Online Starter Pack Controversy

So as not to bury the lede (one of my favorite things) the title refers to the updated Starter Pack which you can get from CCP’s EVE Online DLC page.  It includes one million skill points and runs just $4.99 currently.

There are, and have been for ages, some reasonably priced packs you can buy to give yourself a leg up on the game.  They have come in assorted flavors.  In the past they were sometimes related to professions like mining or exploring or even combat.  Now they are more generic.

The reasonably priced packs

And then, of course, there is the Galaxy Pack, for the more whale-ish of customers.

The Galaxy Pack!

The theme of these packs has been pretty consistent over the years since Alpha clones showed up.  You get some Omega time, to get you a taste of being a subscriber, you get some PLEX so you can buy something in the cash shop, and you get a some cosmetics, something nice to wear and/or a ship SKIN.  Maybe there is an implant or a multiple character training cert, but that was about it.

Even the Starter Pack used to be mostly that.  It’s previous payload was:

  • 7 days of Omega, ensuring Double Training and many more benefits
  • 250,000 Skill Points, giving you a head start in skill training
  • Skill and Damage Booster (Cerebral Accelerator)
  • A stunning bundle of starter ship SKINs
  • Blood Raider apparel

For no doubt emotional reasons, 250K SP as part of the bundle wasn’t viewed as a betrayal by CCP.  That much was available via a friend referral.

However, CCP changed the Starter Pack so, as the screen shot above indicates, it includes:

  • 1,000,000 Skill Points
  • Skill and Damage Booster
  • A stunning bundle of starter ship SKINs
  • Blood Raider apparel

No more Omega time and 4x the skill points now.

And some people are quite angry about that change; specifically the move to handing out a million skill points.  That crossed an emotional barrier.  And I can see why.

In the three years since what I called the Mardi Gras Release in February of 2016, which brought Skill Extractors and Skill Injectors into the game, the whole skill point market has put a lot of players on edge as they have expected CCP to step over the line and start injecting skill points into the game for cash.

Skill Injectors have also been blamed, and not without merit, for ruining the game already, for specific definitions of “ruin.”

The intentions were, if not pure, at least not straight up evil as presented.  With a then 13 year old game based on the skill training queue, there was a large negative perception that new players could never “catch up,” could never be on an equal footing with those who started before them.

The long held vet opinion that this meant players had to learn the game and that newbies have a place in fleets in things tackle frigates and should work their way up the ladder the same way we did back in the day fell on deaf ears.  Nobody wants to be told to do it the hard way, they want to fly a titan today.

And with PLEX able to turn real world money into ISK and then with ISK able to buy Skill Injectors, anybody with enough cash could fly a titan today.  New players could catch up.  Problem solved.

Well, sort of.  The more likely scenario was this.

Iron Bank buys ALL THE SKILLS

More so than new player, old hands ended up buying Skill Injectors to boost up titan alts and now we have more titan pilots in the game than CCP ever imagined would be possible.

But this did not lead to a wide player revolt like Incarna for a couple of mitigating reasons.

First, you had always been able to buy characters in EVE Online, so technically you could buy your way into a titan pilot before, though getting the ISK was for it was a challenge.

Second, this was not introducing new skill points into the game.  All of the skill points would be extracted from the current player base.  In fact, because of the diminishing returns of Skill Injectors… somebody like me only gets 150K or the 500K skill points an injector contains… it was actually removing skill points from the game.

350K SP go to waste for me…

But most important was what the dev blog about Skill Injectors stated:

It’s very important to note here that this means all the skillpoints available to buy on the market in EVE will have originated on other characters where they were trained at the normal rate.  Player driven economies are key to EVE design and we want you to decide the value of traded skillpoints while we make sure there is one single mechanism that brings new skillpoints in to the system – training.

The mob was mollified, if still wary.

And then CCP started straight up selling skill points they injected into the game.

The daily Alpha Clone injector

This was the daily Alpha Clone injector, which came into the game back in November of 2017.  I thought surely this would be the breaking point, that the mob would come unglued and that there would be rioting in Jita and so forth.

But there wasn’t.  The Alpha Clone injector had just enough limitations to be mostly palatable, or at least not worth an insurrection.   Those limitations were:

  • Only one Daily Alpha Injector may be used per day, per character [not account] (resets at downtime)
  • May only be used by characters in the Alpha Clone State
  • Can be purchased in the NES for PLEX or purchased for your regions real money currency via secure.eveonline.com
  • Can be activated to immediately to add 50,000 skill points to your character’s unallocated skill pool (roughly one day worth of Omega training)
  • Can be traded on the in-game market
  • Does not award Omega Status

Still, the seal was broken, CCP was just injecting skill points into the game for cash.

I guess CCP had been generating them on occasion before, giving out skill points as compensation for game problems.  But the lid was well and truly off last November when they added in the login reward mechanism, and gave us some skill points just to test it out.

And then came the 16th anniversary where any Omega logging in for 16 days got ONE MILLION skill points.  At that point you could argue that CCP was just printing skill points for cash… cash via Omega subscriptions, but cash none the less.  CCP created skill points were now the norm.

Which brings us to today and the Starter Pack and the straight up “give me five dollars and I’ll give you a million skill points” deal.

Things have moved along incrementally.  If you have accepted everything CCP has done up to this point it is a tough be taken seriously if you argue that this is the breaking point, that CCP has gone beyond the pale, that CCP has broken faith with players, that the Pearl Abyss cash shop gold ammo power selling apocalypse is upon us, because we were practically there already.  Why didn’t you say something before?

And, Jin’taan’s unlikely work-around aside, you can only apply one Starter Pack per accoun., (Along with some other fresh restrictions, threw in only after people began to object loudly.)  So what is the big deal?

The flip side of that is how the incremental changes have continued on, which means that they will likely continue on going forward.

Today is it just the Starter Pack, which you can only use once per account.  But if that is okay, if we accept that, then how soon until skill points are part of the Meteor Pack or the Star Pack?  How soon until that $99 Galaxy Pack comes with a Skill Injector or three filled up with skill points CCP created just for that purpose?

That is not at all a stretch.  CCP has been close to this in the past.  They used to sell industry packs that came with Aurum, the old cash shop currency.  At one point Green Man Gaming was selling those for a dollar each (they were normally $10) and there was no limited per account.  So seeing that happen with skill points is very easy to imagine.  After all, CCP didn’t add them to the Starter Pack by accident.  Somebody thought that was a good idea, and nobody objected to it.  Somebody within CCP will always be looking for ways to boost revenue, and skill points are always going to be there as a temptation.  CCP edged back some when it got push back, but the company is certainly looking for that next step forward.

It is hard to stand up to any incremental change because it can be argued away as not being radically different from what you had accepted before.  But in the face of an ongoing march of incremental changes that set a pattern that appears to lead to an unhappy conclusion, it doesn’t seem exactly radical to reach a point where you can see the pattern and feel the need to push back on it.  At some point the frog realizes that boiling is in its future.

So I get why somebody like Manic Velocity, a passionate member of the community, has found his breaking point with this move. (I wonder what would have happened had he made it onto the CSM.)  It isn’t that the move is so radical, it is that it appears to be yet another step on the path towards a game we won’t like.  Sometimes you reach a point where you just can’t go along with it any more.

Most people won’t mind though.  Some people will complain.  On Reddit there will be threads about betrayal, predictions about the next steps, and calls for protest that will be ignored by the vast majority of the community.

I’m aware of the situation, but I am unlikely to walk away from the game.  I see the path being trod, but I am of a fatalist bent and cannot see CCP deviating far from that path as time goes forward.  We can perhaps slow their pace, but in the end they will get there.  CCP will continue on down this trail.  They pretty much have to.  The game isn’t growing, they have no other products, past attempts at other products have failed, so what is left?  Monetize harder!

Meanwhile, the retention rate of new players will remain weak.  I don’t think CCP is capable of addressing that, and I am skeptical that there is anything they could do in any case.  And as time goes forward the older player base will erode… from tiring of the game or from whatever outrage comes along… which will also hurt new player retention… until the population hits a tipping point and the economy starts to collapse.

Then there will be huge inflation as the endless ISK from NPC bounties chases the dwindling PLEX supply while the Jita market deflates otherwise as fewer and fewer players buy ships and modules and ammo and what not.

CCP will step into try and stabilize things.  They’ll hit NPC bounties hard, but that will just drive more players away by then.  They will setup NPCs to sell things again, putting an effective floor on the price of minerals the way shuttles used to, but driving out miners and industrialists.  Pockets of null sec that can maintain self-sufficiency will keep fighting, throwing excess titans at each other and dropping low power Keepstars with abandon as the PCU dwindles.  It will be hilarity, a Mad Max post-apocalyptic spaceship demolition derby, in the midst of tragedy.

The last gasp will be CCP putting out a fresh server so people can start anew.  That will be fun for a bit, but it will kill TQ and signal the beginning of the end.  CCP won’t change their ways and all the old problems will crop up, in weeks or months this time rather than years.  We have seen that in every retro server.  The go back in time only accelerate it.

Eventually a few old players will be sitting around chatting in local about what a great game it was.  What other online game let you do even half of what EVE Online did?  What a wild ride it was while it lasted. And then Sadus will remind us that WoW was the first MMO.

Or maybe it will all work out.  We’ll see.  Either way, CCP has a PLEX sale going, because of course they do.  It is the end of the fiscal quarter and CCP has to make Pearl Abyss happy with their numbers.

The Triglavian’s only known weakness: PLEX

Because if they don’t make Pearl Abyss happy… well… buy some PLEX today or we’ll be buying skill injectors and gold ammo tomorrow.

Other coverage:

Quote of the Day – We are Just Alluvial Accretion

It [EVE Online] has existed for 16 years and people think it’s in stagnation. But that’s the story with a lot of these long running franchises; it’s like a river that flows through, and there’s a bottom layer of people that stick, and over time there are layers of generations of EVE players that keep on being added every single year.

-Hilmar Petursson, Gamesindustry.biz interview

I think he is saying that New Eden is a wretched hive of river bottom scum and villainy .

Anyway, Hilmar has been out again selling the strange beast that is EVE Online.  A lot of the interview focuses on challenge of updating the game to keep up with the push to support ever larger battles out in null sec, which ends up in the Aether Wars demo from GDC last month.

EVE Online Forever

But as the article goes on it starts to delve into player numbers and the ongoing survival of the game.  The numbers are a bit dubious to me.

The article states that the game has 300K monthly active users, but that isn’t in quotes so may not be represented as it came out of Hilmar’s mouth.  We do have a quote from Hilmar in a Venture Beat interview back in September, when the Pearl Abyss merger was the focus, saying “The MAU fluctuates a bit, but it’s 200,000 to 300,000 people.”  That helped narrow down the answer the the question of how many people play the game, but it is a range not just the highest number.

But then there is another number that came straight from him in a quote:

“Contrary to what some people think, a lot of new people join EVE Online every week,” he said. “Every week we have about 10,000 people that log into EVE Online for the first time.

This plays to the stagnation question that came up.  The answer was that things are not stagnate if so many new people are showing up, leading to the river metaphor that I quoted at the top.  A river isn’t stagnate with that much water flowing through it.  But EVE Online isn’t a river, and players that “flow through it” are not adding the collective story of the game or to the bottom line of the company.

At first I questioned the idea that 10K players… okay, let’s be honest, 10K new accounts… are created every week. (The 10K number also came up during his AMA earlier this month.)  On the Tranquility page over at EVE Offline the new born player graphs hardly support that notion.  Of course, with the API apocalypse of last year, one cannot be sure of external numbers.  However, over at EVE Board, the character tracking site (run by Chribba, who also does EVE Offline) the birth distribution chart down the statistics page seems to have numbers that support at 10K a week number, at least for character creation.  In fact, it seems to indicate that 10K would be a low number, as it records 74K new character creations so far this month, with a week left to run.  That would be something like 25K characters a week.

But a new character is not necessarily a new account and a new account is not necessarily a new player.  In the age of alpha clones new account creation isn’t the measure it once was.  That birth distribution chart shows a big spike with the introduction of alpha clones in November of 2016, but that settles down fairly quickly, dropping below the peak period for the game around 2011 to 2013.  So I cannot discount that 10K number, though I did choke a bit on the next one.

Last year, I think about a million people came into our systems in one way or another for the first time.

I suppose there is some ambiguity in that phrase, but even if it is true I am not sure it is a number to be proud of give the peak monthly active users quoted.  You start to wonder how many long term active players there really are.

The obvious point to all those fresh accounts flowing through the game while the MAU numbers stays the same and the peak concurrent number slowly declines is that player retention, especially new player retention, sucks.  That isn’t a new problem.  I’ve been over some of the issues I think the game has, but you can’t fix most of them.  EVE Online is a strange and complex game that no other titles really prepare you for.

Of course, just last week Hilmar was being quoted about Asia being the future for EVE Online.  But there has been a server in China, Serenity, for more than a decade and, while the company they partnered with ran it into the ground, even at its peak moment in 2012 it barely hit numbers that would mark the daily low point on Tranquility.  More recently there has been an exodus of hardcore players from China to Tranquility, a trend that continues.  While getting us all on the same server makes for a better game, these were already players, fellow members of the scum forming on the bottom of the metaphorical river.

It seems like less flow and more stagnation… player retention… might be a good thing.

And so we’re back to the same old issue.  How do you get somebody engaged with a game that seems bent on driving people away with complexity?

What is a Niche MMORPG?

A Massively Overthinking topic came up at Massively OP last week that struck me as… well… a bit silly.  Not that every post has to be razor sharp intellectually, but this one was almost the straw man fallacy illustrated, as the staff was asked whether they would prefer a niche MMORPG that focused just on on a couple of strengths or an all-in-one MMORPG that covered all the bases.  Somehow, that became a measure of features as everybody weighed in.

Unsurprisingly, the entire staff decided that they would prefer an MMORPG that had it all.  It was like asking somebody if they preferred a lover who only satisfied some of their needs or one who satisfied them all.  Absent any other details, why wouldn’t you choose the latter.

Left completely out of the post, except in the minds of those opining on the topic (something I wouldn’t swear to even that in court given some of the responses), was any sort of attempt to define what niche vs. all-in-one comparison even looks like.  You know, some details that might serve as illustration.

It is very easy to say that you’d prefer an MMORPG that did 10 things pretty well than one that did 2 things better than anybody else, or that you’d trade graphical fidelity for features (Is graphical fidelity even something niche MMORPGs offer as a comparative feature?), but what does that look like in the real world?  Where is the comparison?  Show me that niche MMORPG that does 2 things so well and compare and contrast it to you favored jack of all trades.

Sure, World of Warcraft, the one live MMORPG that gets a mention,  can stand in for the “does everything” title I suppose.  But what about the niche side of things?  Where is that?

My first thought went to Project: Gorgon.  That is as niche as it gets in the MMORPG world, right?

But I would be hard pressed to declare that Project: Gorgon has focused on doing anything “better” than the rest of the genre, unless you count being weird and quirky.  I mean, graphic fidelity certainly isn’t on the list.  And it does a whole bunch of things… whether they are better or worse than you want seems to be pretty much up to you.

Basically, its niche status is set more by its low production values and departure from the beaten path than anything the MOP staff was railing against.  Maybe of its 10 things, some are you wouldn’t suspect, but it does them.

Then there is Pantheon: Shadows of the Past.  But that hasn’t shipped yet, so while it has been declared niche, we cannot really be sure what that means.  Given Brad McQuaid’s enthusiasm in embracing any feature that gets brought up, I wouldn’t bet on the focus aspect.  And, in any case, I think its niche status is less about features and more about being old school, for whatever value you care to assign to that.  Is walking to school uphill, in the snow, both ways a feature?

Likewise, Camelot Unchained is still under wraps.  It could be the chosen niche game, being focused on RvR and crafting… and building… and housing… and a few other things I think.  Can it be more than 2 but less than 10 features?  Anyway, it isn’t an option yet, so it doesn’t count to my mind.

Shroud of the Avatar came to mind as well, but that doesn’t fit the bill either.  It is niche in its approach I suppose, but it does many things… many of them badly… does being bad make you niche?

Anyway, as I trotted down the list I started to suspect that you couldn’t really be an MMORPG… and my definition of such means worldly online games like EverQuest or World of Warcraft or EVE Online or Star Wars Galaxies, and not instanced lobby games like Diablo III or World of Tanks or whatever… without focusing on more than a couple of features.  Being a two feature MMORPG is like being a two legged tripod, something that just doesn’t work out well in the real world.

In the end, I couldn’t really come up with a live niche MMORPG that met the seeming criteria of the post.  I could, however, come up with examples of MMORPGs that went too far with features, to the detriment of the game.

So I am left with some questions.

What is a niche MMORPG?  Is it something defined only by features?

What defines an all-in-one MMORPG?  I mean, WoW is the easy answer.  But is it?  I suspect that people on that panel would argue against it because it lacks some feature they feel a “real” MMORPG needs, like player housing.

When does an MMORPG have to have all those features?  The response “at launch,” or even “on a detailed roadmap at launch,” seems unrealistic.  EverQuest, which I dare anybody to tell me isn’t as full features as they come, shipped with a feature set that would probably be considered inadequate in the context of “all-in-one.”  But it grew with expansions.  Then again, it also came from an era where MMORPGs didn’t peak on launch day and fall off after that.

Finally, what counts as a feature in any case?  Seriously, how granular can one go before things count or do not count?

In the end I remain unconvinced that features are the defining benchmark that post suggests.  There are plenty of MMORPGs out there with a lot of features that do nothing for me.  I certainly go back to WoW time and again in part because of the feature set it offers.  But there is more to my affinity for the game than that.

Of course, we could dial this back another step and start in on what an MMORPG really is.  I may be defining that more narrowly than others.  But, then again, I am not sure comparing and contrasting World of Warcraft against something like Occupy White Walls leads us anywhere fruitful either.

Quote of the Day – Possible Side Effects

Further, there can be no assurance that our business will be more efficient or effective than prior to implementation of the plan…

Activision Blizzard – SEC Filing about the impact of laying off 8% of staff

Activision Blizzard caught more than a bit of heat last month when it announced record revenue and layoffs in the same investor call when going over its 2018 financial reports.

But, you know, Activision Blizzard is a publicly held business and so cannot rest on its laurels.  It has to set expectations for the next period, which it said would see a decrease in revenue.  To show they were addressing that up front they opted to give the axe to 8% of the company.  It was their fiduciary responsibility.

I do wonder how fiduciary responsibility plays out when CEO Bobby Kotick is asked to explain the $33 million in compensation he received last year.  Is he really worth the 100+ senior developers that kind of money could hire?  That number was enough to earn him the #2 spot on the Top 100 Most Overpayed CEOs list, which ranked CEOs on the financial performance of their company relative to their compensation.  He is ranked worse than Virginia Rometty, the latest charlatan trying to keep the corpse of IBM shambling down the road just long enough to cash in.  Not a good look.

Anyway, people got the axe because the company needed to trim sails for 2019.  It was required.

And then this past week came the SEC filing that covered the planned staff reduction, which said this about it:

In February 2019, we announced a restructuring plan under which we plan to refocus our resources on our largest opportunities and to remove unnecessary levels of complexity and duplication from certain parts of our business. While we believe this restructuring plan will enable us to provide better opportunities for talent, and greater expertise and scale on behalf of our business units, our ability to achieve the desired and anticipated benefits from the restructuring plan within our desired and expected time frame is subject to many estimates and assumptions, and the actual savings and timing for those savings may vary materially based on factors such as local labor regulations, negotiations with third parties, and operational requirements. These estimates and assumptions are also subject to significant economic, competitive and other uncertainties, some of which are beyond our control. Further, there can be no assurance that our business will be more efficient or effective than prior to implementation of the plan,or that additional restructuring plans will not be required or implemented in the future. The implementation of this restructuring plan may also be costly and disruptive to our business or have other negative consequences, such as attrition beyond our planned reduction in workforce or negative impacts one employee morale and productivity, or on our ability to attract and retain highly skilled employees. Any of these consequences could negatively impact our business.

Basically, this planned layoff might not change anything and could possibly make things worse.

Now, I know that in the litigious world in which we live a public company has to cover its ass lest their publicly announced plans not go as expected, leading to lawsuits.  It is pretty much the same way that drug companies have to list all possible side effects… and I love when “death” gets its own spot on those lists… so that they can later claim that they warned you that you might end up with eczema, high blood pressure, sleeplessness, or death.

But it still undermines the confidence shown on the call that laying off almost 800 people from the company was necessary to see it through 2019.  And it further exposes the assumption that a CEO like Bobby Kotick is paid so much because he knows what to do, that his expertise is somehow worth all that money.  The ATVI stock price, the all important absolute measurement of a company’s value for Wall Streets, seems to indicate that over the last he wasn’t all that.

Meanwhile, as a side note, buried in that filing, is a statement about the top franchises of Activision Blizzard:

For the year ended December 31, 2018, our top three franchises—Call of Duty, Candy Crush, and World of Warcraft—collectively accounted for 58% of our net revenues.

So if you’ve been gloomy about WoW, or worried that something else might be taking over the main focus at Blizzard, you can feel a bit better.  If you’re an Overwatch fan though… well… Overwatch made the “top franchise” cut in 2016 and 2017, but appears to have fallen below the line for 2018.  The line is apparently set at the 10% or more of total revenues mark.

Activision Blizzard – Famine in the Midst of Plenty

I already had a post queued up for today, one about EverQuest and the anniversary progression servers they just announced. But events have overtaken that, so it has been pushed off until tomorrow.  It can wait.  Instead there is a fresh turd in the punch bowl calling attention to itself and which I can’t seem to ignore.

Let’s talk about Activision Blizzard for a moment.

There are few things that can raise the ire against capitalism than a company declaring record revenue and announcing layoffs on the same day.  And yet that was yesterday for Activision Blizzard.

Unless this blog is literally the only video game site you read… in which case I am sorry… you have probably seen the news of yesterday’s earnings call spread around.

Bobby Kotick led the investor call yesterday and was able to declare that Activision Blizzard had its best year ever, earning $2.38 billion in revenue.  However, it wasn’t as good as he had previously promised.  Wall Street was led to believe that the numbers would be closer to $3 billion.  Furthermore, there was expected to be some decline from this earnings summit, with 2019 being described as a “transition year.”

To appease Wall Street for this it was announced that the company would be laying off 8% of its staff, adding up to roughly 800 people.  In my mind I see the scene from The Fifth Element where Jean-Baptiste Emmanuel Zorg callously approves a layoff, though that probably flatters the Activision.

The company was quick to follow that with a statement that these layoffs would not be hitting the actual game developers and that “in aggregate” it was expected that game development staffing across the company and its many titles was expected to grow 20% over the course of the year.  What “in aggregate” means is left to the imagination, since I doubt that we’ll every see any follow on indicating if or how this came to pass.  In aggregate some more developers at NetEase working on mobile games for Blizzard might count.

But this ritual sacrifice apparently worked for the moment as ACTI stock has been up a bit today, though the share price is still almost half of what it was back in October before BlizzCon.  I’m not saying that BlizzCon tanked the stock completely.  The price was already down to 65 before then.  But the week following BlizzCon it was down to 50, after which it fell into the 40s during the tough December for the market, finally dropping to its recent nadir in anticipation of the overall company not meeting its estimates.

And so it goes with public companies, where stock price and margins are everything.

When I was younger, back in college, there used to be concern about the dividends that stocks paid.  That was a key factor in their valuation.  It was, you know, an actual investment.  There were programs from companies like Coca-Cola that would allow you to buy some of their stock and then use the regular dividends to buy more so that over time you might have an investment that provided a decent income, something to help you later on in life.

That changed, largely because of Silicon Valley, with the trend in the late 80s that companies would deliver value in the form of growing stock prices.  Companies like Apple and Microsoft pay dividends rarely and very reluctantly. [Edit: Okay, those two do now, but they fought doing that for ages, and a lot of tech companies do not.]  Thus the stock market became became much more about speculation.  What was important was not how consistent a company had been in paying dividends in the past but how much the stock would be worth in the future.  You didn’t buy stock to hold but to sell.

So stock price became all important, and margins became the key measure by which Wall Street valued stock.  Margins, the ratio of expenses to revenue, as the Wall Street obsession has its own distorting effect.  You can boost margins easily by laying people off, or at least look like you’re attempt to boost margins.  You can also boost margins by buying other companies for their products rather than building your own.  Activision spending $5.9 billion to develop a mobile games library?  A huge hit to margins.  Activision buying King for $5.9 billion?  No hit to margins at all since it is assumed in all such transactions that what you bought was worth what you paid for it.  Want to know why EA buys so many studios?  That’s why.

Anyway, that is all based on my experience over the last 30 years in Silicon Valley, where the CEO, the board of directors, and the major investors all care primarily about stock prices if your company is public, and about setting up an optimum structure for going public if you are not already.  I don’t like it.  But if I attempted to avoid companies that behaved that way, which is almost every publicly held company and most larger privately held companies looking to go public, I’m not sure how I would get by.  Go read this series about what it takes to avoid the big five tech giants.

More interesting I suppose is what all this will mean for Blizzard, the one part of the company I actually care about.

On that front things do not look good.  On slide six from the investor call presentation the Blizzard portion stands out in its tepidness.

Activision Blizzard Q4 2018 Financial Results Presentation – Slide 6

You may have to click on that to view it full size for it to be legible.

Both Q4 and in 2018 overall Blizzard was third place in margins and second place in revenue, with King running close behind on that front.

Meanwhile the highlights listed are pretty stark.  Activision had a huge Q4 because that is when the release the latest Call of Duty every year, so you expect that to be huge for them.  But this year it set records.

King also showed quarter over quarter and year over year growth and was recognized for having a leading entry in the mobile games market.

And Blizzard?  I don’t think “sequential stability” is a winning phrase on Wall Street.  Signing a renewal with NetEase is nice, but I don’t think that was a surprise after BlizzCon, where we found out that they were building Diablo Immortal.

And World of Warcraft seeing “expected declines” post expansion already is downright depressing.  That used to be what happen at least a year after an expansion launched, then maybe something that was referenced six to nine months down the road.  But Battle for Azeroth launched in August, in the middle of Q3, and we’re being told that the “expected declines” hit in Q4?  That’s not good, not good at all.  I’m tempted to double down on my “early launch for WoW Classic” prediction from the beginning of the year.

I’ve already seen somebody suggest that this means that Blizzard will abandon WoW, which is ludicrous.  It doesn’t track logically at all because Blizzard doesn’t have anything else to fall back on.  Heroes of the Storm getting set aside was easy, it wasn’t a key revenue generator.  WoW is practically the company’s right leg, and the left leg, Overwatch, hasn’t been doing so well recently either.

And, on top of all of that, it has come out that Blizzard has no major “frontline” releases slated for 2019.   I am assuming that WoW Classic doesn’t count towards that and, as I have said, I expect it will do well.  But reviving the WoW subscriber base for the months that WoW Classic with be hot doesn’t sound like it will be enough.  A remaster Warcraft III isn’t going to be a big enough draw either.  And you can only have so many Hearthstone expansions in a single year.  That doesn’t leave much.

So I expect 2019 will become the year that is marked as the one that Blizzard became something else.  The departure of Mike Morhaime, the Diablo Immortal fiasco at BlizzCon, the rumors and leaks that Activision is getting more and more into the daily operation of the division to make it more like the rest of the company… a company run by a man who said he wanted to take the fun out of game development… and less like the Blizzard that could take the time to hone and polish a product before launch.

Anyway, we shall see what happens.  But I do not think it bodes well.

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Challenging Steam

I suppose the real questions are how Steam got to be so popular in the first place and why it hasn’t really felt much in the way of heat from challengers up until now?

In hindsight it seems like some sort of crazy accident. A little over 15 years ago, in September 2003, Valve launched a replacement for World Opponent Network, the Sierra Online created platform and which Valve ended up owning, because they wanted something that would do software updates, DRM, anti-cheat, and online matchmaking in one package.

And thus Steam was born.  First it was for Counter-Strike, but the real test came with the launch of Half-Life 2, the first game that made it mandatory to register with Steam.  Problems with that, including inadvertent suspending of a lot of people whose only mistake was buying the retail box (myself included) did not seem like an auspicious moment for the fledgling platform.

That’s me being beaten by the metro cop

Me being me, that soured me on Steam and all things Valve for a good five years.  I burned my account and walked away.  The arbitrary nature of my experience and the whole “I have the physical disk why can’t I just play the damn game?” question kept me away.  But it was an era where the physical disk was still king, so one could do that.  I walked by the Orange Box on the shelf at Fry’s with my nose in the air, knowing it was another Steam scam.  I wasn’t going to play Portal because I felt Steam was the lie.

But things changed over time.

The coming of Civilization V was the turning point for me.

Up until then I had purchased every new version in the Civilization series at the first possible opportunity.  The fact that the game required you to register it and use it with Steam gave me pause for a couple of days, but eventually I caved.  I created a new Steam account, which is the one I still use today, so I could get in on that traditional day one Civ fun.

Same as it ever was

I remained wary of the service.  Again, the idea that one company could basically remove my ability to play video games I had purchased… not MMORPGs, but single player games… kept me from getting comfortable with Steam for a long stretch.

But then we entered the era of the Steam sale.  I think that, more than anything, made people get on board with Steam.

The concept, as initially explained, was quite simple.  Any game that launches… and we’re talking about games from big studios with marketing budgets, not indies… will have a certain amount of demand for it at the list price.  Once that market has been exhausted one can stimulate further sales by lowering the price.  That gets people who weren’t going to give you any money to buy in.  You get less money, but it is better than no money.

This was the price/demand curve from Economics 1A of my freshman year of college.  This was supposed to make developers more money.

What it really did was train a lot of people to wait for the inevitable Steam sale, or at least that is one of the complaints you hear from devs now and again.  Steam ruined the concept of list price.

Along the way Steam went from being a service for Valve games to being the DRM and matchmaking for certain third party games, to being the sales platform for just about anybody.  At the same time Valve went from being the company that make good games (that inevitably arrived late) to the company that runs Steam.  Being an online retailer turns out to be a pretty profitable business compared to video game development.

The problems of success are the best problems to have, but they are still problems.  Over time Valve removed just about every barrier to entry that kept any dev from getting on to Steam.  And every dev wanted to be on Steam because, during a short period of time, being on Steam was the key to success.  That was the visibility you craved as an indie dev.  But the mad rush towards success and Valve simply letting everybody in got us to the pile of garbage that is most of the games on the service today.  Getting on Steam is no guarantee to sales or even visibility anymore.

Meanwhile, competitors lurked.

Sure, a lot of people were happy to sell through Steam.  Buying a discounted Steam code for a title at Amazon or Green Man Games is a pretty normal thing.

Others were unwilling to cut Steam in on their action.  You don’t find any Blizzard games on Steam.  They don’t need to sell there, they are big enough on their own.

For some reason Activision was okay putting Call of Duty on Steam for ages.  I suspect that, in a world where a lot of CoD sales are on consoles where the retail channel and the platform owner take their cut off the top, Steam taking their due didn’t seem like a bad deal.   But with the coming of digital distribution that seems to have changed finally.

There were small players who tried to get into the Steam-like sales platform business.  I remember the late Trion Worlds trying to turn their Glyph launcher into a third party storefront.

Then there was EA, who wanted to take on Steam by being, in their words, the Nordstrom to Steam’s Target.  That didn’t work out for them as well as they had hoped.  EA’s reputation, hardly akin to anything like Nordstrom, kept them from being a overall competitor to Steam. But with their Origin storefront they were able to opt out of Steam with SimCity and The Sims 4, depriving Steam of some revenue.

Which brings us to the situation as it stands now.  Steam is a mess.  New titles get lost in the morass of new titles that spring up every day.  Steam wavers on how to deal with its problems on that front.  Meanwhile, Steam’s cut of sales, once tolerable in the age of physical media, is now starting to be a drag on margins, a concern to any dev who is publicly held.  So things are running against it.

Big devs like Activision are more than happy to sell Call of Duty to you directly (or via the Blizzard launcher).  Fallout 76 also chose to give Steam a miss, a first for the franchise in a long time.  And it seems like that plan is going to become more common.  To counter that Valve has announced a new revenue sharing plan, so if you make more money Steam will take less of a cut.

And then there was Epic Games’ announcement earlier this week that they plan to offer their own platform and only take 12% off the top compared to Steam’s default 30%, even waving the fees for using their Unreal Engine if you go with them.  They even have a nice revenue split chart with their announcement.

Look how much more Steam takes

And if that were not enough, both Discord and Twitch have been backing their way into becoming game selling platforms.  Amazon, which owns Twitch, has been priming the pump with free games available via the Twitch client (the one time Curse client that a lot of us had already installed to manage WoW addons) for Prime members.  And you can just bet that will be the platform used to sell their upcoming games.  And Discord has had its own storefront going since August.

What is Steam going to do?

Well, they do have all the advantages of the incumbent, including a lot of players with large investments in their Steam libraries.  I’ve said in the past that this is a huge barrier to any competing service showing up.  I certainly do not want to have to keep track of which game I have on which service.  I have problems enough remembering which show or movie I want to watch is on Netflix, Hulu, Amazon, or Comcast.

And then there is all of the community stuff like mods that Steam has accumulated over the years.  You can’t make that sort of thing happen overnight.

So how do you assail an incumbent?  Be better, be cheaper, or be different.

There are certainly ways to be better than Steam.  I do wonder what Epic’s plan on that front is.  By lowering their take so dramatically compared to Steam they are going to see a lot of interest from smaller devs who will feel like they are getting the shaft from Steam and the announcement that big players pay less.  Epic just has to figure out how to curate so they get quality rather than quantity.

Being different is hard to assess, so I’d have to see more from any Steam competitor.  I don’t like the Steam storefront interface, but I dislike it less than most competitors.

And then there is being cheaper, which Epic went for in a big way.  Not cheaper for you and I, but cheaper for the developers using their platform.  At the percentage they are talking, and with the muscle they have developed pushing Fortnite, they might be able to woo some bigger titles their way.

We shall see.  The path of Steam over the years has been a strange one from time to time.  I doubt it will be over any time soon, but Valve’s dominance does seem to be under an actual threat for the first time.

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