games are becoming hugely profitable for the gaming industry but are
they encouraging addiction? There are lessons to be learned from the gambling
Social and free-to-play
games are the future of the video games industry. Long gone are the days where
you have to pay £50 upfront in the hope that the product won't suck.
Today you can start playing a game, for free, and only if you like it can you
decide to spend a bit of money on it you can improve gameplay, buy some
clothes for your avatar, furniture for your digital house or acquire extra
weapons for your digital hero.
Free-to-play is the dominant business
model for most games on social networks, and increasingly so for mobile games
and online games in general. Research firm Flurry found that over 65% of the
top grossing game apps in Apple's AppStore are free to play. Only 6 months
earlier, in January 2011, this figure stood at 39%.
So all is good in
this new world of video games; users can play for free and only pay when they
like the product. The industry is growing like never before.
are some dark clouds over the industry. One is its dependency on "whales":
super-users who are spending enormous amounts of money on these games and who
make up for the many non-spending users. It's very hard to find reliable data
on this subject because the industry is still young and not many companies are
publicly listed or willing to share data. But a recent report from an analyst
at investment firm Macquarie estimated that the 20% biggest spenders of leading
social games developer Zynga are spending over $1,100 (£708) on its
Facebook and mobile games. And this is a conservative estimate.
There are even rumours of some players spending
tens of thousands of pounds per month on their favourite games. Two months ago
Nicholas Lovell, a games consultant, reported that German online games studio
BigPoint was selling virtual drones in its Dark Orbit game, for 1,000 a
pop. Over 2,000 were sold in just four days. Another example is mobile game
developer Glu, who added a virtual gun priced at $500 to their iPhone game Gun
Bros last summer, apparently sold to great success.
There are two
problems with this. Firstly, investors don't like the idea these firms are so
reliant on a very small group of heavy spenders; out of Zynga's 150 million
active users, only 0.4% (680,000) account for 80% of its $1bn revenue.
A second problem is an ethical one, but one with a business dimension
as well. It's a problem other businesses have dealt with before, most recently
the online gambling industry: the problem of addiction and users over-spending.
Despite some innocent themes and the family-friendly character of most games,
there is a real and growing problem with a portion of their players spending
more than they should or can afford.
Of course, it's impossible for a
game studio to know whether a user is a rich Premier League footballer who can
easily afford spending thousands of pounds to entertain themselves, or if
they're a single mum of three, living on benefits. Most will argue that nobody
is forcing these players to fork out such amounts for a virtual drone or gun,
and the same can also be said about (online) gambling services.
interesting to look at what happened with the online gambling industry. When it
became clear after the explosive growth of digital gambling a decade ago
that a lot of users were struggling to control their spending behaviour,
government regulators and the industry, with some healthy pressure from public
opinion, started looking at solutions. A lot of money, time and energy was
spent on research.
Perhaps surprisingly it became clear that it was in
the gambling industry's best interest to deal with this problem: it is far more
profitable to have long-term customers who only spend what they can afford to
lose, than to have a handful of customers overspending massively and burning
out in a couple of months.
The gambling industry responded by
introducing a host of measures to encourage "responsible gambling"
ranging from self-assessment tests, the possibility to set weekly or monthly
spend limits, giving users visibility to their losses and offering problem
users and their relatives the chance to completely exclude themselves from
gambling. In some cases gambling operators will proactively contact users who
show signs of risky behaviour, like chasing losses.
measures haven't wiped out the problem of problem gambling, at the very minimum
they have stabilised the situation. Recent studies have shown that problem
gambling and gambling addiction are not increasing, despite the fact that
online gambling is still a growing industry.
So while the video games
industry typically thinks of itself as a more "noble" business area compared to
gambling, it might consider taking a leaf out of its book to help tackle its
growing, unhealthy reliance on overspending whales. Self-regulation of the
free-to-play industry and clear guidelines are urgently needed before vide
games becomes the black sheep of the entertainment industry.