B-school profs starting to take a hard look at games

[Cross-posted at MotivatePlay]

The video game industry has begun to attract significant attention from researchers in business schools and economics departments across the globe. New faculty in these fields grew up with video games, and they view the industry with a great deal of interest for its innovation of new technology, its business models, and its “cool” factor. Chris Ryan – a professor at the University of Chicago’s prestigious Booth School of Business - is one such scholar, and a big reason he’s attending GDC this year is to cultivate partnerships between the academy and the game industry.

Ryan is an operations researcher, meaning that he uses advanced mathematical methods to study production processes and markets in order to help businesses make better decisions. “Classical areas of application include managing inventory, planning workforces, scheduling production, and building algorithms for pricing,” says Ryan. The complex pricing structures used by airlines, for example, are largely the result of work done by operations researchers. Regular readers of Gamasutra have already operations research in practice: Ryan edited Paul Tozour’s series of articles about optimization in game design.

In a seminar Ryan gave at Indiana University three weeks ago, he cited several other applications that are game industry-specific, including pricing virtual goods, designing monetization mechanics, scheduling content release, and analyzing player population dynamics. With content release, for example, Ryan notes that developers have to make decisions about when to update or release new content in order to deal with the trade-off between acquiring new players and retaining old ones. Release too slow and veteran players may quit, so the company is leaving money on the table. Release too fast and the company creates too much complexity, limiting the influx of new players. So what’s the best content release rate to deal with this tradeoff? Ryan and his colleagues model this as an “optimal control problem”, in which both prices and the content release rate affect revenues, costs, churn, acquisition and, ultimately, profit.

But to actually test his models Ryan needs data, and getting access to it could be tough. Many academics have appealed to game companies for data to test their ideas and theories, and while one or two requests have led to fruitful results, most are met with trepidation and suspicion. This mistrust seems to be related in part to the fact that early games researchers were focused on looking for the (negative) effects that video games might have on behavior. Violent games, those researchers often concluded, promoted aggressive and anti-social behavior. Those researchers’ reports were instrumental in the efforts of politicians, plaintiffs, professional associations, and parent groups to restrict and regulate the sale and content of video games. The complaints lodged against the industry have cost states millions of dollars to prosecute and defend, and they have likely cost the industry equally large amounts in the form of lost revenue, expensive lobbying efforts, public relations campaigns, and legal fees. The cost to the reputation and respect for people who work in the industry is probably incalculable.

Ryan is sympathetic to this history, but he insists that he is not looking for any effect of games on human behavior. “We are still interested in player behavior,” says Ryan, “[but] it is for the purpose of better pricing, better content release scheduling, better design, and so on.” He hopes that his work will appeal to the intense curiosity and focus he saw on display at GDC last year. He marvels at the difference between that experience and the one that is typical of academic conferences. Academia encourages scholars to specialize, so at conferences there is little sense of “key issues” facing the field. In contrast, Ryan says that GDC “… had a degree of focus” that he was not used to. “There was a sense of collective fate and camaraderie that was exhilarating to be a part of.” He was also impressed by GDC conferees’ willingness to confess when they were wrong. “[In the academy], it’s pretty uncommon for someone to say ‘hey, we screwed up’,” says Ryan. “[But] I heard this numerous times in presentations and private conversations [at GDC].” He hopes this attitude of humility and desire to learn will help him prevail upon a few game companies to share some of their old data with him and his colleagues.

Ryan’s interest is part of a larger trend in economics and business research. Economists and business administration professors in South Korea, Hong Kong, and Cambridge have shown considerable interest in modeling the effects of the real money trade on demand for a game. Like Ryan, each of these researchers is trying to better understand a unique and remarkably under-studied industry.

Might his year be the watershed moment when game companies and business researchers can come together to solve important problems? Perhaps. There is the risk that this work might generate a new sort of backlash in the industry, though. Games have become the subject of intensely quantitative analyses from in-house and outside analytics groups, and this has left many developers understandably concerned about the artistic integrity of their work. Whence the room for intuition and feeling in design when games are extensively A/B tested? And won’t the entrance of operations researchers, marketers, and economists further subject games to a bottom-line that squelches artistic expression?

Ryan doesn’t thinks so, and he waxes philosophic on the connections between game design and mathematical modeling:

Making a decision when there is an obvious answer is not a truly profound act of creation. Likewise, if a decision has no tradeoffs to weigh then it is not interesting to model and understand mathematically. Mathematical modeling does not remove tension;  instead,it gives a lens by which to measure and balance opposing imperatives. I think such analysis sharpens the artist's ability to have confidence in the soundness of her design, it does not remove the creative act of decision-making that is both the burden and blessing of the designer.

[Cross-posted at MotivatePlay]