Game economies are a delicate thing. It doesn’t take much to break them. If players perceive a greedy cash grab by developers, as has happened with controversies around loot boxes, they may boycott the game. But if developers don’t price the items in a free-to-play game correctly, they may be stuck with escalating costs and insufficient revenue.
How can developers spread the monetization of game economies across larger numbers of players? Are subscriptions the answer? Or can blockchain help? And what role does account and credential fraud play in further disrupting game economies? Akamai recently sponsored a GamesBeat breakfast that we held in Anaheim, California, to address these questions.
I moderated the session, and our panel of experts included Nelson Rodriguez, Akamai; Spencer Tucker, senior vice president of Scopely; and John Linden, CEO of Mythical. We had a couple dozen game industry CEOs and executives in the audience.
Here’s an edited transcript of our panel.
GamesBeat: I think everyone knows that building game economies is important. The times when you notice it are usually when something goes horribly wrong. There are a lot of lessons that come out of that, and that’s what we’re going to try to convey today. [Former Blizzard developer], I guess you know about Diablo III’s auction house [laughter]. The original disaster of game economies. But there have been plenty of others, like Battlefront II. All kinds of things related to loot boxes these days. We’re going to talk about the future as well, things like blockchain games.
When we proposed this topic, did you guys have some things in mind that you wanted to bring up about what balanced game economies are?
Spencer Tucker: One thing that I think is going to become more important over time is the concept of personalized economic experiences. Looking at various behaviors on a segmented basis—how much does a player engage in a particular part of the game economy or part of the game? Then, determining a personalized experience relative to the amount of time or investment a player has made, not just an expected value system. I think that’s a good jumping-off point for conversation. Historically, if you’re familiar with things like mystery boxes or mob drop systems, those are the typical expected value systems; for example—this particular sword is worth X amount of time or investment. There aren’t a lot of companies with durable in-game goods though that also look at the actual player behavior on an ongoing basis. Delivering an enjoyable game experience that is tailored to behaviors—such as how many in-game activities someone participated in this month or how much they’ve invested—is important, and we want to use both in-game goods and behavior segmentation to deliver content to each type of player, while also allowing those many segments to interact. The goal is to encourage compelling gameplay engagement between segments over time.
GamesBeat: Does this become like pricing airline seats, meaning different prices for each player?
Tucker: While you could offer the same good across segments at different prices like airlines do, there are other ways to make a personalized experience that puts players first. You have a lot of people having conversations about how much something costs. If you sell a sword for $100 to one person, and another for $20, then those two people meet online and ask, “Why am I paying this much while you’re paying that much?” The key is to attack a price point on a relative basis that motivates players, but the number of times they have to make the purchase to ultimately acquire that good could be variable based on the level of total engagement.
Audience: So you’re talking about shifting the odds?
Tucker: The key is to shift the experience for a player as it’s not just about drops in combat or money spent, it’s about tailoring the full experience to an individual’s willingness to engage vs. a gameplay path or spend requirement that is the same for everyone. The idea is to optimize around engaging people more deeply. You want them to become more engaged over time versus being out-priced from the top spectrum of engagement—which is more typically what the industry does. We want to deliver the best and most relevant experiences in gaming with more customized gameplay based on how people have personally played historically.
Audience: Is there any grinding in this model you describe?
Tucker: These are distribution methods of content. When you think about the distribution of payers and general population of players, it’s like 95 percent, possibly even more. Players who invest in games are actually a very small group.
One example that’s interesting, I was talking to some of you about this earlier, was back when I was working on PC games—people were packet sniffing and injecting gold and selling gold. That was very common. The economy inflated out of control. The secondary market, because this did have an aftermarket, was basically destroyed by the devaluation of that currency. The players organically determined that gold wasn’t worth anything anymore.
What we ended up doing was building a secondary auction house system with a tertiary currency, and that currency had intrinsic value in that it could be used to purchase items from a store that was exclusive to that content. That was also the only place where you could buy the aftermarket currency, these consumable hammers that helped you make gear. That’s how we started making money and players loved that they had control and could even sell grind only content, so we all won in that sense.
GamesBeat: Some of the things you’ve talked about–you covered a lot of ground already. But it reminds me of the past. You’re focused on Star Trek and other mobile games. [Former Blizzard developer] used to work at Blizzard and was there during the Diablo III auction house days. I don’t know if there are some things that Spencer just said that brought back memories for you. Generally people know that something went wrong with Diablo III and Blizzard had to shut it down.
Audience: I can talk about that story. A lot of people get fixated on the fact that we did a real money auction house for Diablo III. But I don’t think that was the real issue, adding any sort of auction house to the Diablo system of rewards. The real problem was we didn’t beta test the game in the way we should have to figure out how the economy was going to shake out.
In Diablo II, we only did a stress test beta test. We were really worried about giving away all the single-player content. So since that worked for Diablo II, that was what we were going to do for Diablo III. That was our mindset. Our mindset should have been that we were living in a post-World of Warcraft world, and people were going to play Diablo III like an MMO, even though it didn’t have an MMO model to it. We ended up putting in the auction house. We knew it was going to have a big effect on the game. We didn’t know entirely how. But we only stress-tested the game as a beta test. We didn’t play long enough for the game to turn into a true MMO-style economy.
The problem with the loot-reward-incentive loop with Diablo is that so much of what makes that game fun is finding upgrades to your gear through killing monsters in the game. What happened with the auction house is that people would go there, even if they weren’t spending real money — because you could also use virtual currency in the game — and use the virtual currency to upgrade all their gear. Then the loot-reward loop in the game–people would never find upgrades. The game just felt terrible. It felt broken. There was a lot of rage. From a community standpoint they fixated on the real money part of the auction house, but it was really just the auction house itself that was a problem.
I think we could have fixed it and made it interesting in the same way we did in World of Warcraft. In World of Warcraft we had a lot of the loot in the game cordoned off. We called it prestige loot. You could only get yourself if you killed a certain monster. It made it so people wanted to do the raids and high-end content. Then there was a subset of loot that we made freely tradeable, and that turned into the auction house economy.
We could have figured something like that out for Diablo, but the problem was, since we didn’t have a really long beta test like we did with World of Warcraft, we didn’t figure out all those designs. By the time we figured it out, we already had a horrible launch. We had a lot of player rage and the community pointing out a variety of different things that happened with our launch, one of which was the real money auction house. We didn’t feel like it was worth keeping in the game.
We’d rather get rid of it and get some community trust back, rather than mess around with the live version and try to correct it.
Linden: I was trying to figure out how to transition from what you were saying to what we’re doing, because it’s kind of the opposite. At Mythical we’re focused around some of these issues. The last game I did was Marvel Strike Force, a free-to-play game, and as he said, it was 95 percent unpaid. The other five percent spent hundreds of millions of dollars last year, which is great.
I started finding it really fascinating, looking at that 95 percent. How does that group of users grind and make money? They can sell something. It’s not that we’re making gamer millionaires out of this. That’s not the goal. But what happens if they put their effort into it, sell something, and make $10 or $20 or $50? What happens to that segment? These are the challenges I think are fascinating. Do they take the money and run? Probably not. Some of them will. But the others will put it back in, again and again. Almost creating gamer entrepreneurs. That’s fascinating.
What we’re looking at now is primary and secondary markets. We are using blockchain. We get called a blockchain company quite a bit, but we’re really not. We’re using blockchain tech behind the scenes to do real-world currency transactions. What we love is, if you give game developers tools that have primary and secondary combinations, there’s some really cool stuff that can come out of that.
One thing we’ve been looking at a lot–we’re not looking at loot boxes at all. We’re almost adopting the sneakerhead model, the Supreme, Bathing Ape, all these brands coming up with the new generation of consumers. They look at everything in terms of rarity, in terms of time-based. We have our first game coming out on our engine, and we’re going to sell everything time-based. We’ll tell you the rarity once it’s gone. That becomes fascinating if there’s a secondary component.
If you sell a Marvel branded item and have a million sales, your secondary transaction volume is going to be low. The value is not going to go up a lot. But if you sell a small item from Supreme and it only sells on a Saturday for two hours, and you only sell 5,000, the secondary market could skyrocket. That’s what I think is really fascinating about where we can start slowly shifting. That’s one combination we’re doing.
We’re also kind of using this blockchain thing out there–we’re not doing cryptocurrencies, but we use blockchain tech to enable that secondary market. You mentioned, how do you have secondary transactions and have liquidity for players anywhere? Whether it’s in the game economy itself, in an auction house in the game, or if it’s on eBay or a crypto exchange, how do you do that and still get your transaction fee? How do you represent the game asset outside your game?
That’s the other concept we’ve been really focused on, a concept called “D-goods,” which stands for digital goods. That’s the other piece. If you can ensure that there is a fee for that transaction, no matter where it sells, whether it’s player-to-player, in the game, out of the game, you can use blockchain to ensure that transaction fee is collected, and it’s recorded and transmitted. You can do some cool stuff.
That’s the big piece we love. We also love the idea around bringing content into the game. We talked about that. Everybody goes immediately to UGC. Nobody likes UGC in their game. But it’s not really UGC. We’ve talked to a lot of big groups. It could be esports teams. For our former employer, it could be these $20 million franchises. If they spent $20 million on a franchise, maybe that’s who the audience is. Let them bring their content. Maybe it’s part of that franchise fee for a game. They have the exclusive rights to bring in content of their own design to a game. It could be a lot of different things in terms of bringing content in, whether it’s brands or influencers.
Allowing influencers to give away items to their top followers–even though they don’t get money from that primary sale, they get a cut of every secondary transaction that comes off that. That’s suddenly going to create really amazing marketing opportunities. It’s going to create loyalty between fans and influencers. It’s going to create loyalty between influencers and the game, because now they’re able to profit from the games they’re promoting.
These are the things we love, and I think it’s a whole different style of economy. We hear a lot of this, “Blockchain will be revolutionary for gaming!” Eh, bullshit. It’s going to be evolutionary for gaming. It’s going to allow us to do some things with a new set of tools to design the game the way we want to design it. That’s what we’re excited about, what we’re up to. It’s a bit different, but I think we’ve all seen a lot of these principles.
Audience: I love this concept of managing scarcity by being in the know. What makes the sneakerhead thing work, you’re in the know. You know where to go to a specific shop when a specific model comes out at 2AM. I’m curious how you think about that aspect of feeding the economy through communication. How much do you do?
Linden: This is where the blockchain stuff becomes interesting. You can now have a limited set of items that are individually numbered. If you think about physical collectibles, they have these certificates of authenticity. That little hologram that says you have number 14 of 62. Sometimes that has value in and of itself. My favorite number is 22. I want number 22 of everything. There’s more value in that particular item. You can almost let your partners determine the time.
The first game we’re looking at, we can bring in brands. They can sell into our economy. They get a cut of primary and secondary. The brand can help decide some of that, which is really interesting. We’ve talked to a lot of brands, and they’re really tied into that time. You might have some brands where all they want to do is maximize primary sales. Warner Bros. could say, “We have a new movie coming out, so we want to push as much as we can.” But other brands will look at rarity, or even a combination.
What if you had a Batman-branded item that’s a primary sale — it’s on sale for the entire season, three months — but then you have a limited edition, one of a thousand, that’s fixed and on sale for one day? Then you have another one that’s on sale for two hours and you sell as many as you sell. You can start mixing these economies together with the same brands and the same game economics.
I think it’ll start shifting our game economies into how retail thinks about their businesses. We saw that a bit with Call of Duty. I was a studio head at Activision for a while. At one point there was a Marvel deal. They were trying to get the Winter Soldier or somebody like that in the game. It’s tough to get Activision to do those kinds of deals. They might be less tough these days on this stuff. But there was a lot of discrepancy on pricing. Marvel thought the value of their character was greater than a traditional soldier.
What if you could have the toolset to let them take the risk? With this type of model, charge a wholesale price and split the upside. If they want to take a risk and say that a Call of Duty character costs $9.99, we collect the $9.99 and you price it at whatever you want. You take the risk. It turns it into almost manufacturing. We get paid no matter what, and if the brand thinks they can make more money, you give them the upside. So many new sets of tools come out of this transition. I think it’s going to be awesome.
Audience: It’s an interesting evolution of the license model. What you’re proposing has a lot more in-between.
Linden: You have a lot of options. The other one we’ve seen–we saw this with Marvel again, oddly. We did this last game with them, and again, they want to push the value. They say, “If we’re going to push this type of asset, we think it’s going to be the most valuable in the game two years from now.” They think through some of that stuff. And again, you can do that. Go ahead and sell how you want. If it skyrockets in the secondary market, if it becomes worth $1,000 apiece on eBay, Marvel gets a cut of that. There’s a lot of cool options you can start playing with.