Microtransactions: greed or necessity?

There’s no denying that EA dropped the ball when it came to incorporating microtransactions into Star Wars Battlefront 2. The very fact that the publisher felt the need to pull them from the game just before launch in the wake of player outrage is testament to that.

But why were microtransactions in the game at all? Is it purely greed? Or are microtransactions the only way that publishers can hope to turn a profit as development costs skyrocket with every new generation of console? This isn’t just EA’s problem either – practically every AAA game has additional paid-for content of some kind, whether it’s story-based DLC or simply a new hat for your character.

I took a deep dive into the numbers behind microtransactions for GamesRadar. And when you take a look at the figures, it’s clear to see that publishers are going to be increasingly dependent on microtransactions and other additional content in the future:

Microtransactions and loot boxes in video games – are they pure greed or a modern necessity?

So what’s the answer? Would you be happy to pay more for full-price games? And is there a better way than microtransactions to increase revenue? I’d love to hear your thoughts!

7 Comments

  1. Math, eh? Well, let’s see. Watch Dogs had a budget of $70,800,000 you say, divide that by $60 and you’d need to sell 1,180,000 copies to recover the budget. The game sold around 9,700,000 copies altogether, leaving them 8,520,000 copies worth of profit, which translates to roughly $511,200,000 and this isn’t even including all the DLC for the game. Even if you factor in reduced sale costs over time and retail cuts and etc and cut that figure in half or even a quarter, that’s still several hundred million dollars in pre-DLC profit…and you say these AAA guys need MORE money to make it worth their while? There’s only one way to interpret that.

    1. Hmm, slightly suspect sums there. The $70 million is just the development cost – you need to add in marketing costs as well, which are probably the same again. Then there are server fees and ongoing payments for community support. Plus the game would only have been at full price for a short while, and subsequent copies would have been discounted heavily. Plus the publisher will only get a percentage of that $60 – around 70% if the game was sold digitally through PSN and much, much less if it was sold through physical retail, maybe even just 30%, depending on the deal with the retailer.

      1. Maybe even less than a quarter. Let’s do maths!

        So, initial outlay for dev and marketing is $70 million times 2, so $140 million. Server fees are probably between $1 and $4 per person playing online – let’s say roughly half of the people who bought the game played online at $1 per player – that’s $4.5 million in server fees, to make $144.5 million in total.

        Watch Dogs sold 380,000 copies in its first week, presumably at full price. So let’s take a rough guess and say that a third of the total 9 million sales were at full price – $60 – and that Ubisoft made 60% of that (there’s a good breakdown of who gets what from the price of a game here: http://www.kotaku.co.uk/2015/09/30/why-you-pay-what-you-pay-for-video-games). That makes $108,000,000.

        Then let’s assume that the remaining 6 million copies were sold at a discounted price – let’s say $30, or half price – and Ubisoft made 60% of that. That’s another $108 million.

        So that’s revenue of $216 million minus costs of $144.5 million, which makes $71.5 million in profit.

        That’s not a bad sum – but let’s not forget that Watch Dogs was a smash hit, and most games won’t get near 9 million sales. Watch Dogs 2 in fact sold a lot less than the first one – it’s first week sales were just 80,000, and VGChartz reckons it sold 3.16 million in total. If the dev and marketing costs were the same as for the prequel, it could well have made a loss of tens of millions of dollars (excluding micro transactions).

      2. True, but most games also aren’t going to have anywhere near as high costs for development or marketing either because they can’t afford all that.

        I see your point though. If this is all accurate and the budget costs are just going to continue to rise over time then I guess that extra money will have to come from somewhere.

        It seems that this time you have made me do some rethinking of my beliefs!

      3. I mean I can see how this could potentially be a problem for smaller developers, yet oddly enough, they’re not the ones you see doubling down on microtransactions and pay walls on their already billion dollar franchises.

      4. I think the rising dev costs have pretty much put paid to all of the middle-tier developers Rebellion is one of the few mid-tier devs still going. But at the really low end of the scale indie devs don’t have to worry about cutting-edge tech and server fees, plus they sell digitally and get a far higher cut of the profits.

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