NEWS GAME: Free-to-play shutdowns risk a consumer backlash in 2019 | Opinion

As the gold rush mentality gripped the mobile games market in this first half of this decade, countless businesses rushed to plant their flags in this space. From brand new entrants to long-time stalwarts of the industry, everyone was keen to own a piece of this rapidly growing new market.

The result was the appearance of a vast array of free-to-play mobile titles in a pretty short space of time, and the market quickly picked winners and losers. For every Clash of Clans or Candy Crush that became a cultural phenomenon and grossed tens of millions in monthly revenue, there were a hundred failures; games that never found an audience at all, or couldn’t keep (or monetise) the audience they did find.

Most of those failed games are already gone, long since shut down by their creators, or simply abandoned and neglected such that the march of progress on iOS and Android rendered them unusable and deprecated from the app stores. Having failed to garner a devoted audience, these games departed without fanfare; they avoided tricky questions over how to manage an audience through the shutdown of their game simply by dubious merit of not having much of an audience at all.

“How do consumers actually feel about the items they ‘own’ in the game, and how will they react to serious instances of those items disappearing?”

As such, they didn’t ever have to ask the question that has quietly loomed in the background of the free-to-play model from the outset: how do consumers actually feel about the items they “own” in the game, and how will they react to serious instances of those items disappearing with the game itself?

This is not, to be clear, a legal question. In most jurisdictions the question of ownership of virtual items in game worlds is fairly settled and very much in favour of the game operator. Rather, it is a question of reputation and expectation management, both for individual companies and for the industry as a whole.

Game shutdowns are nothing new, of course. Every game that depends on the operation of servers will inevitably disappear when those servers go offline (unless of course the server source code is made public, which is rare). This is a problem for several reasons, not least of which is the cultural loss of important milestones in the gaming medium, but it’s never really caused a problem in terms of consumers feeling like they’d lost their property in the shutdown. People may have accumulated all kinds of high-level items in an MMORPG, but the business model was clear; you were paying for time in the game, not for the items themselves.

Free-to-play games turn that on its head in a way that’s proved to be very effective and clearly very attractive to some consumers, but which creates an attachment to in-game items that may yet transpire to be a double-edged sword. In-game spend on items and currency creates a virtuous circle for developers in some regards; players who spend money in the game are easier to retain as customers, because the items they’ve bought trigger a sunk-cost reaction and make it much more psychologically difficult to quit the game.

“Why raise this now? Because 2019 could well be the year when this issue starts to break the surface”

On the other hand, if you’re the developer of an underperforming game that you want to close, you now have the challenge of an audience that feels like they own items, purchased for real money, in your game — items which you’re now proposing to unilaterally delete.

Why raise this now? Because 2019 could well be the year when this issue starts to break the surface. Underperforming free-to-play games have been shut down for many years without serious issue, but the industry’s standards for what counts as “underperforming” are unquestionably getting higher. There’s a whole middle ground in the mobile space between hit titles and hard flops, an area in which several tiers of free-to-play game have been getting on reasonably well — never making headlines, but quietly and consistently making some money.

This week, Robot Entertainment announced the closure of Orcs Must Die! Unchained, Hero Academy, and Hero Academy 2

A few different types of game fall into this little-discussed zone; those with small but dedicated audiences, often based on a licensed property of some kind and thus attracting more than the usual share of high-paying customers; those with large but very casual player bases, which are popular but don’t monetise well for various reasons (this includes a pretty decent segment of the kids free-to-play market, which is understandably more circumspect in its monetisation approach); and finally, the big hit titles of yesteryear, games that did very well for some amount of time and then, for various reasons, descended the download and revenue charts to end up rubbing shoulder with the mid-tier titles.

If you’re a small company operating a few games like this, you can probably make a decent living out of it. You’ll never have Supercell’s billions or Niantic’s headlines, but you can keep the lights on and the salaries paid. However, if you’re a bigger player and you’ve got games like this, their days are numbered, and that’s the situation that seems to be coming to a head.

“Mid-tier mobile titles are about to run into the cold logic of major companies’ opportunity cost calculations”

Consolidation is inevitable after any gold rush. Some degree of that has already happened, but there’s likely to be an acceleration in 2019 as a lot of larger players (publishers and license holders alike) give the thumbs down to mid-tier titles that have thus far survived the chop by virtue of keeping their heads down and not filling balance sheets with red ink. Just like the fate faced by mid-tier console titles over a decade ago, mid-tier mobile titles are about to run into the cold logic of major companies’ opportunity cost calculations. These games may not be losing money, but they’ll also never make serious money, so the resources behind them could be better employed trying out new things that might actually be hits.

If this hypothesis is correct, and certainly it seems to be the way the wind is blowing, then it’s going to have a powerful impact on the discussion, or lack of discussion, around players’ perceived ownership of in-game items. Think about it in purely empirical terms; a larger, more popular game shutting down, even if it’s still only a mid-tier title, will naturally result in the “destruction” of a vastly larger amount (both in terms of simple counting and in terms of dollar value) of virtual property than the shutting down of failed games ever would. While, as previously mentioned, there’s no serious debate over the legality of that action, there’s also little clarity over how consumers will react. Previous instances have all been on a much smaller scale and had no opportunity to boil over into a large-scale response.

The severity of that response could be one of the toughest tests the free-to-play model has yet faced, because if developers are forced to consider their responsibility for “looking after” the in-game items they sell, that changes the entire calculus around the business model itself. The problem is exacerbated by timing; the loot boxes controversy is far from over, and has drawn a huge amount of media, public and regulatory attention to how the industry sells virtual items and currencies to its customers.

While that baleful eye continues to sweep across the industry, it would be best not to incite further consumer outrage by drawing attention to what happens at the other end of the conveyor belt, where all those expensive items are summarily deleted by the game operator once the game overall is no longer sufficiently profitable. Legal and above board it may be, but this has never really been debated or discussed in public, instead being swept away in boilerplate legal disclaimers and click-through EULAs — and the headlines practically write themselves.

How to better handle these situations is a tricky problem. No operator can be expected to keep running an unprofitable game just to maintain consumers’ in-game items, after all. But in the absence of public acknowledgement and consent for that, the outcry over the destruction of virtual property is a new industry headache just waiting around the corner this year.

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