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Why new business models are killing great games

In the spring of 1902, The French colonial governors of Hanoi found they had a vermin problem. The smart, modern system of sewers they had installed to provide the white denizens of the quartier européen with flushing toilets was teeming with rats. Their solution? Introduce a city-wide bounty on rat tails: one cent for every tail brought to a municipal office.

At first, the system was a great success: thousands of tails were brought in. But city officials soon began to notice some problems. Tailless but otherwise healthy rats could be seen all over Hanoi, left alive to breed and thus produce more tails. Particularly resourceful natives even started their own rat farms in the suburbs, cultivating as many tails as they could to exchange for the bounty.

The Hanoi Rat Massacre has become a famous parable of the perils of creating perverse incentives with poorly-thought-out financial reward schemes. We may chuckle at the French colonials' unwitting incentivisation of rapid rat-tail production, but the lesson is still applicable today in the world of selling videogames; a world that's currently in turmoil.

Changing Your Ways
The old way of selling games - all at once, for a single purchase - isn't proving profitable enough, but newer business models like free-to-play - giving the game away for free, but making money from the sale of virtual items - are proving very lucrative. While GAME is on its last legs, Zynga, the company behind Farmville, is worth almost twice as much as EA. Even Steam has started pushing virtual items for freemium games.

Why new business models are potentially killing great games Why New Business Models Are Killing Great Games (Page 1)
Farmville. With farms.

It's tempting to see the success of new revenue models as evidence that the old ways were flawed and that those who still rely on them are dinosaurs.

That's not the case, however. In fact, as we rush toward the brave new world of microtransactions, crowdfunding, pay-what-you-want bundles and in-game ads, there is a danger that these new revenue models are introducing perverse incentives to game designers. The process of designing games to be profitable is no longer aligned with designing games to be fun or creative. In short, the games industry has started rat farming.

The old monolithic retail model was a simple transaction: you paid your money, you got your game. If the game was awful, maybe you traded it in hurriedly and avoided that developer thereafter. And if it turned out to be great, maybe you looked out for games from the same folks in future. In that sense, a developer looking to make money had a straightforward mission, aligned with the interests of their fans: make games that players will love.

Enter The MMO
The trouble began with the rise of the subscription-funded MMO. Running servers and a maintenance team is expensive, so the logical thing to do is to charge your users a monthly fee to keep the game running. But subscriptions are only valuable if you can keep players renewing month after month, and content is expensive and difficult to produce. So, without some other mechanism obstructing them, players will dash through all the content on offer in a few weeks, then move on to other games.

The solution: introduce grind. Guard the way forward with powerful mobs that require players to spend days running around the same areas again and again until they level up enough to leave. By imprisoning players in this way, the developers can carefully measure out a drip-feed of content that lets players move on just before they get bored, hooking them in for the maximum subscription duration without actually having to craft more compelling mechanics that they might stick around for of their own accord.