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Comment by patio11 | Hacker News Reader

Gamers have voted with their wallets for this outcome. (Dungeon Keeper retailed for $60, not $6, at launch. I couldn't afford it so I checked back weekly, and then found the best deal of my life six months later: $9.99 with a $20 manufacturers rebate.)

Minus the rebate thing this is the traditional curve for IP price discrimination: you pay more to get faster access.

Gamers thought both $60 or waiting one day, to say nothing of 6 months, were monstrously unfair, so they pirated the games. So the industry did a rethink, and figured out a way to give them what they want. Enter Free To Play.

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> Gamers have voted with their wallets for this outcome.

This is a popular shared delusion. It is such a great intuitive and false truth, that when George Akerlof informed us about this about 50 years ago he got an Nobel price for his effort.

"The Market for Lemons: Quality Uncertainty and the Market Mechanism" inform us how the bad drives out the good when there is an information asymmetry between the buyer and the seller. It uses the market for used cars as an example of the problem of quality uncertainty, but software (games) is several order worse in this aspect. Even a game software developer can not assess the value of a product through examination before purchase, so the only hint available to customers are reviews (such as those provided in this HN linked article). Sadly, reviews are not enough to reverse the information asymmetry, as proven by the article point, so the lemon games are driving out the good games from the market.

However, contrary to the article I do think we can escape. Strong reputation systems can combat it if used correctly, but for-profit gatekeepers like Nintendo, Steam, and Apple has shown to be affected by short-term thinking and corruption. Thus, we need better reputation systems that the customer can trust long-term for the lemon market to reverse. That or better customer protection laws to increase the risk of selling a lemon game vs the scam of "free to bleed money to play".

I strongly disagree with the assertion that gaming is a lemon market. The information asymmetry doesn't exist and I think the analogy is flawed in this case.

The key part of Akerlof's used-car market is the information asymmetry that exists for every instance of a car. Two caryards may have the exact same year/model/colour of Toyota camry. One has no serious flaws and is priced at $1000. The other is priced at $500 but has lots of hidden problems and is a real lemon. To the consumer they look the same, and the logical choice is the $500 car. The $1000 car never gets sold. This is the lemon market in action.

Software is different because when you sell 100k units of software, its a reasonable assumption to believe that all of these 100k units are the same piece of software[1]. A game being reviewed, or upvoted on reddit, or aggregated on metacritic - this is the same software I will recieve if I choose to purchase it. Thus there is no information asymmetry.

If anything, the market has become better in this regard. It is easier now to choose a high quality game. When I was a kid, and lucky enough to have enough dollars in my hand to purchase a video game - I had to make my decision based on the cover art of the SEGA cartridge. Perhaps if I was lucky I would have some entirely objective (cough) information from the Official SEGA Magazine.

[1] Yes, some people will experience the game differently because of device compatibility issues, but that information is also shared (ie Google Play filters reviews by people with the same device as you).

The argument you put forth has already been done against the case of used car salesmen/saleswomen. The argument is that those people rely on reputation to sell successfully, and thus reviews from previous buyers will fill in the gap of information asymmetry to new buyers.

If the customer collects the critical information about the product from other buyers before purchase, information asymmetry can always (even with used cars) be removed. However, the buyer must also in practice be able to assess the value of a product through examination before purchase. If consumers in the general case do not inform themselves by reviews and shared customer experience, information asymmetry will happen.

So when a game is released with horrible user reviews or below working condition, they still tend to sell perfectly well. Even in cases where the developers themselves has admitted the poor state and given refunds, the games sell perfectly well. In a world with information asymmetry in games, Simcity and Rome 2 can be commercial successes, and even Ride to hell sells copies.

If you believe that there is no information asymmetry in games, how do you explain the discrepancy between reality and theory?

The media-as-a-product model is breaking down for games the way it has or will for everything else (journalism, music, movies) because in a competitive market, marginal price trends toward marginal cost, and the marginal cost of digital is nothing. More than that though, is that in a connected world, basically anyone is able to become a competitor selling low-quality junk for basically nothing, or a pirate giving away your stuff. Being able to publish is no longer a gate that can hold prices high. We are in the twilight of this short-lived infinite marginal price to marginal cost ratio of digital publishing, and the games publishers are scrambling for the last rays of light by selling non-scarce product inside the games instead of the games themselves. This too will end as they eventually alienate enough of the customer base that they have to adjust their strategies to something economically sound.

If it turns out for games (as it did for journalism) that people just aren't willing to pay as much as they used to for good content then we'll see a smaller market. Whatever audience there is of folks that are willing to pay up-front for a good game (sans manipulative bullshit) and the developers able and willing to make those games seem likely to find that crowd-funding is their best option - publishers not required. Game-as-a-service (MMOs) have shown that they work well, and will need publishers if they're to have high budgets and quality that players expect but players demand there to be some amount of service (you can't pull a SimCity without pissing them off). There will always be some amount of this IAP model, but it'll have to become tasteful enough to be sustainable in a world where the available audience of fresh unalienated suckers is exhausted (Valve's use of IAP is a good example of what this is likely to look like). I think (or at least hope) there's not enough gamers willing to be repeatedly abused to sustain a whole market of abusive IAP games forever.

I think that "We give you the client for free. We control the thing of value on our servers. We will rent you access to it." is both a) sustainable and b) almost completely robust against any attempt to "compete" with the company by pirating the product.

With regards to the sustainability of IAP: As I've told people for a few years now, take a look at China/Korea to see where the American companies will be in ten years. They were doing IAP and free-clients-with-content-controlled-by-server back in the late 90s. They're still doing it.

So many people forget this. I've spent a lot of time in South Korea a few years ago (nearly 12 months altogether). This is normal there, and most people are okay with it. Yeah, some publishers and developers take it a bit far, but a lot of others don't. Combat Arms/Warrock sort of had a pay-to-win setup -- you bought weapons with in game cash, or could buy them outright. But, play a few games, get some cash and suddenly you have the same weapons those who have no patience did, and more importantly it was a twich based skill FPS -- even if you had the best weapon, I'd still headshot you with the base M4 before you knew what was happening. And then I'd gloat, cause I'd be playing with 16 other guys in the games cafe at 2am... Sorry, reminiscing is fun :)

Anyway, truly, it may seem like the end of the world, but I don't think it will be. It'll just be the new normal, and you'll always have those devs that don't take advantage of pay-to-win, and everyone has fun, and developers make money. Seems like a good trade off to me.

Bullshit. Free to Play was not prompted by piracy. It took over the industry via the Apple App Store which supposedly has the best piracy protection for game developers yet! Free to Play got a foothold due to the race-to-the-bottom pricing for moving up the charts of the App Store.

Free to Play is also the business model for the largest PC games (by playerbase), like League of Legends. It is being adopted in fits-and-spurts by the largest and most prestigious game developer, Blizzard. It hasn't totally monopolized the console games business yet, because they still care about their relationships with retailers, but I'd put money on it doing so within 5 years.

The dynamics of App Store discovery exacerbates FTP, but it clearly didn't uniquely create the viability.

Should be noted that it's not impossible to create a game with an FTP+Subscription+IAP pricing model where IAP has a strictly limited effect on actual gameplay and most of the core game is accessible either at the free tier or a modest subscription.

Usually, such games are still lower quality than the equivalent game with a shrink-wrap or subscription model, but the IAP infection is more like a festering sore than the terminal cancer described in the OP.

I prefer the narrative in which sales on Steam are the popular response to high pricing (and DRM), and where Free To Play is something that bad guys do to exploit people's psychology (tapping into the same mecanics as casino do).

You are framing it in a way that makes Free To Play the only valid response to piracy.

This seems backwards or insufficient to me. It seems to me that what's happened with the wallet-votes is that IAP is a way to maximize exposure among people unwilling to pay and maximize revenue from people willing to pay a lot, while mostly ignoring everyone in the middle who want a quality game at a reasonable price (the traditional core videogame audience).

It's not really price discrimination because PD is usually about getting people to pay more for the same product. In this case, "free-to-play" is not getting the same product as the users spending yachtloads of money.

It's not a lemon market, it's a cleverly-disguised luxury market.

iunno, i fancy myself a "gamer" and i don't play any game on mobile. i keep trying them from time to time. i paid a few - never paid one based on microtransactions.

Heck even paid some that THEN required microtransactions, that sucked... in these cases i mailed the authors to tell them to go to hell.

I play a few recent games on pc/consoles, and quite a few old games which seems to still be fun. DungeonKeeper actually is one of those good games ;-)

The last game i enjoyed on mobile was carmageedon, which happens to be the exact same game as on PC (which i also bought a long, long time ago). It was fun and i completed it in a couple of days, having fun. Probably my best mobile game ever, and i fear, the only one too.

Because of the nature of IAP-based game design, I don't believe this is really about the revealed preferences of gamers. There's widespread hate for IAP among gamers. Zynga or whoever was first discovered a way to exploit players. There's a level of deliberate manipulation in the design of these games that just can't be paralleled with charging up front. Companies even update the game in response to the telemetry they're collecting, trying to find ways get players to spend more. The dynamics can't really be compared to the honest exchange of a product for money. I think that's why it engenders such hate. I realize people weren't too happy with $60 games, but as far as I could see, great games always did very well.

What people hate is paying money. Full stop. Oh sure, there's always the "I'd pay for that if..." or the "I don't mind supporting stuff I like" (as though this were charity), but this is talk and talk - like bullshit - is cheap.

In reality, the vast majority of people won't pay unless they absolutely have to, with "absolutely have to" meaning "you'll go to jail on criminal charges if you don't." So assuming you're in a situation where people really must pay, the question becomes "How seamlessly can you integrate payment extraction into your providence of value?" In the case of airline tickets, groceries, and auto repairs, the answer is "Pretty easily, actually". As a result, payment extraction is a solved problem.

With the non-negotiable inevitability of payment accepted, and the means to pay made as frictionless as possible, people don't think twice about handing over their credit cards the moment a demand is made. When people expect to pay, producers can expect to get paid. It's just that simple. Businesses compete for the custom of those who accept the system and it call the cops on the tiny minority who don't.

The problem with IP is that the legal system that protects every other viable business has imploded. And it's not about "just inventing another business model" since the unsolved problem of human nature means having to produce a new law enforcement structure to back that model up. Devolving to private enforcement (e.g. the Mafia) is an obviously unacceptable outcome, so instead of telling IP producers that it's up to them to "just invent new models" it's really time for people to recognize that law and law enforcement are the responsibility of citizens, not corporations.

If you want a smooth and efficient market then come up with the laws and enforcement mechanisms that (a) this kind of market requires and (b) you can live with as a society. In the meantime, expect suboptimal solutions from producers who have been left to squeeze whatever cash they can from the teeming hordes of assholes who think payment is debatable.

paying 3-4000 USD for playing a game.. yeah.. yeah people hate paying that. I doubt ANYONE finished dungeonkeeper on mobile, for example..

This looks like a bunch of baseless assertions. Good games sell. I'll just pull one example out of the air - Portal 2. Relatively recent. PC version sold over 2 million copies. And iOS games are harder to pirate than that. As far as that goes, mobile Minecraft has sold more than 15 million copies, and it's priced at $7, a price point I bet a lot of people would think is high for a mobile game. I think what a lot of people see as gamers not forking over money is really game developers with delusional expectations of pushing a lot of uninspiring shit games.

Times change. Converting demos into premium purchases used to be a viable business model, but it's not anymore. Selling premium games on the app store used to be viable. It's not anymore. You've got access to balance sheets - would you disagree?

Re: "widespread hate for IAP among gamers", that only applies to gamers, who compose a negligible part of the overall population. Any company that's trying to target the wider market ("people" instead of "gamers") is right to ignore what gamers think, because gamers are not the ones playing Candy Crush, Bejeweled, Farmville, etc.

IAP can be done well, IMO, but it requires game designers to accept and embrace the model. If they view their target market as exploitable simpletons, they'll neither make a good game nor make much money, and this happens too often (as I'm sure you're aware). This doesn't need to be the case, though it does require some care to do it well and make sure that the free experience is valuable to players while still providing compelling opportunities for people willing to pay to do so.

Re: updating games in response to telemetry, why is that any worse than when a website A/B tests different calls to action? Or do you think games should not optimize to be the most profitable businesses that they can be?

I'm almost out of energy for repeating myself on this point. Every good game that I can think of offhand made plenty of money. Right up to the present day. Selling a game for money is still a plenty viable business model. Now, ok, yes these freemium Skinner box things are not games in the same sense I and other gamers are used to. Just like slot machines have nothing to do with Grand Theft Auto, this new breed of F2P 'games' have nothing to do with Portal. What's unfortunate is that companies that used to make good games are selling out, in the very essence of the phrase. In my opinion, it's not because what they were doing before isn't viable, it's because their management is that admirable combination of greedy and risk-averse.

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