The design and business of gaming from the perspective of an experienced developer

Category: Industry Musings (Page 1 of 7)

The Epic/Steam War is Here And Game Devs are All For It

It is possible to both think that Steam has been a remarkable and amazing part of the gaming ecosphere, and still be excited that they’re no longer getting a free ride.
I’m not kidding.  Steam is great.  It’s the first thing I install on any new computer I acquire. It’s intuitive at what it does, full featured, and run by a generally responsible organization.  It probably single-handedly saved PC gaming, definitely has been the engine that drives indie gaming for the last decade, and will be a pillar of the industry for years to come.

That being said, I’m super excited by the Epic Store as a developer, and I hope they get more exclusives.  I summarized my theories in this thread – this blogpost expands that thread.

Let’s back up.  This week, it was announced that Gearbox and their publisher would release the PC version of Borderlands 3 on the Epic Store as a six month exclusive.  This prompted the easily excited outrage monkey portion of the video games audience to lose their shit — I mean, really stupid shit.  So let’s break this down a bit.

The economics of the games industry are dumb.  AAA games have cost $60 bucks for a long time.  It’s a weird purgatory – the price hasn’t increased with inflation, largely because the beancounters think that if you go higher than $60, a game is more expensive that something that Grandma will want to buy little Timmy for Christmas.   On the flip side, and I swear this is true, gamers are so used to $60 price tags for games that they immediately suspect that any game with a lower price tag is automatically lower quality.  So AAA games have stuck at $60 as the default price for a while.

You ever wonder, when you spend $60 bucks for a AAA game, where it goes?  Here’s one breakdown.  If you buy the game at Best Buy, less than half of that ($27) goes to the developer/publisher. If the developer and the publisher aren’t the same entity, the developer gets a small portion of that – 20% maybe.  So call it $5 bucks, and the developer doesn’t see a cent until the development costs of the game are recouped.

Eagle eye observers will note that a lot of these costs just don’t APPLY to Steam.  Steam games (and all box PC games) don’t pay platform royalties.  They don’t have to print CDs.  The costs of handling unsold inventory are unnecessary.   So while Steam demands a slightly higher percentage (30%) than Best Buy (25%), the lack of other costs meant that Steam was a better deal for developers.  Put another way, Activision makes about $27 selling a Playstation Call of Duty at GameStop, and about $42 selling a PC CoD to you on Steam.  That’s… pretty awesome!  Developers vastly preferred it if you bought their games on Steam, because we like paying our mortgages. Yay Steam!

In late 2018, Steam improved that number dramatically for AAA developers (because screw indies, amirite?) so that once you sell more than $10M, their cut drops to 25%.  Sell more than $50M, their cut drops to 20%. Suddenly a megahit like Call of Duty is earning $48 per copy (once they sell a few hundred thousand copies).  Outstanding!  And you also get Steam features like Cloud Saving.

But then Epic upset the apple cart.

The Epic Store deal is really good. Epic is undercutting this deal significantly, taking only 12% of a cut. Suddenly, devs/publishers are splitting nearly $53 per box.  You don’t have to meet any kind of minimum threshold to get this.  This is really good.  REALLY good.  Yay Epic!

But it’s more than that.  Sales on the Epic Store also wave the licensing cost of the Unreal engine if that’s your engine of choice.  I believe that Borderlands 3 is using the Unreal engine. If that’s the case, that’s another 5% in their pocket that they don’t lose if you buy on steam.  Put another way, Take 2/Gearbox puts $52.80 cents in their pocket for every copy they sell on the Epic Store, and only $39-$45 for every copy you buy on Steam. 

According to Steamspy, Borderlands 2 sold 5-10 million copies on Steam.  Now then, not all of those copies were actually sold on Steam and certainly some of those copies were sold at discount prices during Steam Sales and the like.  Still let’s do some back of the envelope math here and pretend that B3 ‘fails’ by only reaching the lowest number there (5 million)

  • If 5M people bought the game on Steam, Gearbox/2K would enjoy a royalty rate of 30-20%, and they’d have to pay a 5% engine licensing fee to Epic anyway.  They’d get $222 Million, or $44.4 bucks per copy
  • If 5M people bought the game on Epic, no engine licensing fees, and a 12% cut, gets them $264 Million, or $52.8 bucks per copy.  

So in the worst case scenario, Borderlands stands to make $42 Million more dollars for 2k/Gearbox.  That’s a LOT of enchiladas.  I don’t know if Epic paid Gearbox/2K for the right to exclusively launch on the Epic store but they didn’t really NEED to – If Epic launched on both, they’d lose about 9 bucks per copy of Borderlands 3 sold on Steam.

The very nature of the Steam Revenue split encourages exclusives. Look at the revenue split for AAA again.  You only get the GOOD revenue split if you hit $50M in revenue.  My back of the napkin math means that you need to sell 834K copies before you start getting that number — on all copies AFTER that.  What this means is that, if you’re on Steam, every copy you sell on Epic Games or Discord or whatever is a copy that’s not pushing you to that threshold.  

The guys who came up with it probably thought they were encouraging developers to choose between one platform or the other.  They were probably right.  They’re probably just surprised as to which direction developers (especially those around the Metro-Borderlands size) are going to decide is the logical direction to go.

Exclusives are how platforms are sold. People keep saying ‘Epic should compete on its own merits, and not have to depend on exclusive content’ but, um, exclusive content has always sold new platforms – and that’s definitely what this is.  It’s a cornerstone of console gaming, for example, with great exclusives like God of War, Horizon Dawn and Spiderman being a cornerstone of why Playstation is kicking XBox’s butt this generation.  Console developers do this by buying studios entirely usually. But yeah, paying for the privilege of exclusive content is NORMAL.

And unlike exclusives for PC, there is a $400 price tag on the console if you want to play Horizon on top of the cost of the disc.

It’s not just games.  Exclusive content is the cornerstone of the business model of HBO and Netflix for example.  And let’s face it, Steam has thousands of de facto exclusive games, because that’s the only place those games can be played. 

In the absence of exclusive content, players will typically choose the platform that has the most inertia.  And to repeat, every copy of Borderlands 3 that is sold on Steam costs Gearbox/2K about 9 dollars.

Gamers should want more of the money they DO spend to go to game developers and publishers.  Games are expensive to make, and they get more expensive every year, as salaries rise, technical complexity increases and the costs of making content go up.  And yet, the box price of games has stayed constant. 

If more of this box price goes to the people who design, art, engineer and market these games, it reduces the need for us to have to resort to sell sparkle ponies and loot boxes or to increase the costs of the games in order to cover those increased costs. 

 People who think that the Epic Store means significantly fewer sales than Steam are probably deluding themselves.  First off, Borderlands is a huge, well-respected and beloved IP.  People will seek it out.  Selling your small, funky indie title on the Epic Storefront may not be a great idea because the store doesn’t yet have a critical mass – it’s not a place people go to shop for games yet.  But if you have a big, well-anticipated game like Borderlands (Borderlands 2 is still in the top 10 for daily plays on Steam), players will go and seek it out.  Being a seperate launcher didn’t hurt Starcraft, or Destiny, or the Sims.  Players will find Borderlands 3, wherever it lives.

And where it lives is pretty good.  Epic has the ability to drop an ad for Borderlands 3 in front of 250 Million Fortnite players with over 78 Million Monthly Active Users.  This is actually greater than Steam’s 67 MAU, although Steam still has a higher daily concurrency and everyone who opens steam is coming to shop, not play Fortnite.  Still, the people who think Devs selling on the Epic store think it will have a much smaller reach are probably in for a disappointment.

But still, the proof is in the pudding. And we have one test case so far, where Epic’s first exclusive (Metro Exodus) did 2.5 better on the Epic store than its predecessor did on Steam. And to some extent, you have to wonder if the relative sparseness of the Epic Store is helping.  Epic’s store is currently a highly curated experience of high quality titles.  In Steam, Metro was competing against dozens of similar titles, some years old.

Yes, this is capitalism — and the audiences are what’s being sold.  A lot of gamers are saying things like Epic is trying to be ‘monopolistic’ or that this isn’t capitalistic.  That’s because they’re mistaken about which customers are what are being fought over here.  

This is an EXTREMELY capitalistic, EXTREMELY competitive dance happening. But the customers being courted are developers/publishers like Gearbox/2K and 4A Games. What is being sold is the playerbases. YOU’RE the product.

Steam’s sales pitch is a 30%-20% revenue split, with the strongest PC customer base in the world and a robust, full featured back end and well-integrated payment systems that work with almost any payment system on planet earth.

Epic’s sales pitch is a 12% revenue split, with an audience that is as large (but unproven spenders), a free engine license and a much more curated store. And did I mention just a 12% revenue split? Did I mention that Borderlands is looking at somewhere around 40 MILLION DOLLARS in additional revenue that goes to game creators and publishers instead of the store?

Valve could end this quickly if they REALLY wanted to.  Their install base is hugely attractive.  If their revenue split were suddenly match Epic’s – or even get close – choosing Epic would be a very hard choice.  But doing so would mean losing a HUGE amount of revenue.  Valve is, I believe, taking a ‘wait and see’ approach to see if Epic congeals into a serious threat to their bottom line.

Anyway, if Red Dead Redemption also goes the Epic route, things are going to get heated very quickly.

I don’t want Epic to ‘win’ this war.  That would be just as bad as Steam keeping a monopoly on the marketplace.  I don’t want any one store to have a monopoly everything.  I want competition.  I want these guys competing for games to publish.  I want these guys to compete for customer eyeballs. 

Competition is GOOD. I’m happy that we may end up in a situation where there are two stores competing to make lives easier for game devs. I’m happy that Steam will be forced to clean up it’s act, and that Epic is hungry to offer innovations. And I’m disappointed that gamers are pissed off about it, and that some observers are milking this outrage for clicks and views.

Smedley vs. Lizard Squad

Speaking of unspeakable and horrific harassment, this week the member of Lizard Squad that authorities managed to get their hands on got sentenced for his part of their activities, which included that Christmas where none of us could play on XBox Live.

For whatever reason, this group has decided in particular to target John Smedley, former president of SOE (now Daybreak studios), which is responsible for Everquest, Planetside and H1Z1.  The shitstorm he’s endured is probably the most significant gaming shitstorm this side of Zoe Quinn.

“[The arrested kid] was the guy that brought down my flight with a bomb threat,” wrote Smedley, who was onboard an American Airlines flight last August that was forced to make an emergency landing due to a security threat. “I’ve heard the entire recording where he convinced an airline customer service agent there was a bomb on the plane. He also in conjunction with others has sent me pictures of my father’s grave with nasty stuff on it. I’ve had my entire credit history put out on the internet including my SSN and my families [sic] info. We’ve had multiple social networks and other things hacked and had my family members called.”

Smedley also said he has been ‘swatted’ multiple times—when police are fooled into thinking there’s an emergency at a victim’s house, and often activate their swat teams—and has been the victim of serious financial fraud from hackers, presumably Lizard Squad.

“I’ve … had over 50 false credit applications submitted in my name and had to deal with the ramifications of what happens to your credit when this kind of thing happens. It’s not good,” he said. “And to top it all off they decided to submit false tax returns.”

The kid caught participating in all of this was charged with 50,000 counts of cybercrime in his home in Finland.  For this, the kid recieved 2 years of a suspended sentence.  That’s right, no jail time, at least not yet. 51000th time is the charm?

For John’s part, he’s looking at potentially seeking other remedies, mostly suing the little scamp’s parents into bankruptcy.

Unfortunately, these instances of targetting devs are just getting more common, as evidenced by  the Bungie exec that got swatted last year.  The anonymity, and lack of seriousness that people take these crimes, is at this time truly disheartening, and that won’t change until both laws and technology catch up.  Still, I have a feeling that 10-15 years from now, we’ll look back at the Wild West of today’s internet in total awe of it’s barbaric nature.

No, Virginia, Gamergate isn’t Going To Destroy Christmas

I like Oliver Campbell.  As far as #GamerGaters go, he’s a moderate, reasonable guy, and he comes at the topic of ethics in games journalism with relative experience and logic for a consumer movement that frequently has no idea what ethical journalism looks like.  That being said, every now and then, he says something extremely silly.

Killing Christmas is kind of a favorite fever dream  for the far end of GamerGate, with some treating it as some sort of End Boss like event (GamerGaters like game analogies, unsurprisingly).  A similar sentiment was echoed by the short-lived Operation Krampus, a cause they abandoned  around the time that they realized they’d declared so many media outlets boycotted that Krampus would effectively mean that Game Publishers could only give review copies to Return of Kings.

Anyway, this is just me talking here, but I find Oliver’s future pretty far-fetched.  Why?

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Little Green Footballs Has Something To Say About GamerGate

I think Little Green Footballs was exploring what Milo is up to nowadays.

Reclaiming ‘Gamer’ and Defending Our Tribe

In the movie Office Space (a film that should be required viewing for anyone who work in games), the unfortunately-named Michael Bolton is asked why he doesn’t go by ‘Mike’ if he resents sharing the name with the famous grammy-award winning singer. His response was simple and eloquent. “Why should I change? He’s the one who sucks.”

This comes to mind after reading last week’s flood of people attempting to disavow themselves from the ‘gamer’ identity or declare it dead.  Screw that.  Most gamers don’t suck.  Most gamers are pretty awesome.  A tiny handful of gamers suck.  Why should we be the ones who change?

I am a gamer. I am a proud gamer. I have been for years of my life. So much so that I’ve dedicated my life to making games, writing about games, and speaking about making better games. And I love gamers. I love going to SWTOR Cantina events, to Magic Gamedays, to ArmadilloCon, BoardGameGeek.con, to E3, and to PAX, and seeing all sorts of gamers of all shapes, sizes, colors and creeds come together because we love games. And good games are social. So you see people talking, teaching and sharing with each other, because it makes the games better, and it makes the communities that play them better.

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How UO Changed The Culture of MMOs

There are those who think that perhaps Zoe Quinn and Anita Sarkeesian are lying about the campaigns of terror, hacking, and bullying that they are currently encountering (and thanks to Tadhg Kelly for inventing the term Gamergate Truthers to describe them – it’s easier to say in polite company than fuckwads).  I daresay that anybody who has ever set foot in the Customer Service department of a major MMO for more than five minutes has pretty much no doubts whatsoever.  Because those guys see it all.  Every day.

It used to be worse.  Much worse.  My first MUD, CarnageMUD, had to ban several players for attempting to hack, bully or keylog other players.  Meridian 59 was worse, but it wasn’t until Ultima Online that we really saw how dark things could be.

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Our Growing Fuckwad Culture Problem

I am not a perfect ally of the progressive/feminist forces inside the game community.  I started to list out examples at the start of this post, and then realized I had a wall of text that would undoubtedly derail the conversation that needs to happen (on the bright side, I apparently have quite a backlog of good blog material).  However, there are some clear examples.

First, I think that Penny Arcade and PAX have generally gotten a raw deal.  Second, I think that costumes and armor in comic books and video games are not meant to protect the character or be functional or realistic, but to create a strong, unique, marketable character and aspirational fantasy, and I love Bayonetta equally as much as the new Batgirl.  Third, I think that describing our video game culture as a ‘rape culture’ is incendiary, inaccurate, and ultimately counterproductive.  There is scant evidence that our mass media and video games cause more real life sexual violence towards women – in fact, sexual assault rates have decreased steadily since 1993 (you know, the year Doom came out) and are currently at 20 year lows.

Now that we’ve established that I’m not your typical social justice warrior, I feel nevertheless compelled to point out that our Fuckwad Culture is currently off the rails.

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What’s Wrong with Game Journalism?

Here’s a good example:  SimCity launched with technical problems, to be sure, but what offended many people was that the game was designed to be online-only, not just technically but also for some game features to work. It was a clear case where the game design didn’t match player expectations, which is always unfortunate, and in this case, that design was instrumental to the overall architecture of the game. Last March, the SimCity team announced that fixing this would be difficult to do.  They now have announced that they are finally wrapping up this change to allow for single-player mode.

Which prompted this headline: “EA continues race to the bottom with unexplained SimCity offline reversal.”  Yes, that’s the headline for Maxis COURSE CORRECTING THEMSELVES AND GIVING THE PLAYERS WHAT THEY WANT. Continue reading

Free 2 Play is Not a Cancer (Unless It Is)

Sometime ago, someone sent me this article, in which a Free-to-Play designer described how he is not a ‘cancer’ on the games industry.  I read it, but I didn’t fully agree with it, but it took me a little while to figure out what’s wrong with it.

This is it:

You see, game development is a business and businesses in a capitalist society are ruled by market forces….But games like those published by Electronic Arts are paid for by the people who own stock in the company. At the end of the day, these investors do not care about artistic integrity, Metacritic score or DRM solutions, they only care about stock price and return on investment

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Penny Arcade is Still Mostly A Force For Good

Let’s get one thing out of the way first: it’s pretty much criminally stupid to put out a t-shirt of what effectively has become the spirit animal of the worst mouthbreathing misogynistic trolls on the Internet, and then act surprised when it becomes a thing.  That’s not nearly as stupid as publically saying you regret taking it down.  So there’s that, and I won’t defend it.

That being said, I love PAX.  It is currently the best game show available, largely because it was organized by gamers, for gamers, and the event therefore feels like a real and genuine love affair with gaming, completely unlike the publisher-driven plastic-coated circle-jerk that is E3. The gaming is great, the independent games portion is a feast for people like me, and the convention has a hundred little subcommunities that are all welcoming and affirm your love for gaming.  I will continue to love PAX.  Despite the fact that it no longer is cool to do so. Continue reading

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