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Each week I compile a gaming industry insights newsletter that I share with other Rioters, including Riot’s senior leadership. This edition is the public version that I publish broadly every week as well. Opinions are mine.
Hi, my name is Kenny Liu, and I work in Revenue Strategy at Riot Games. Each week I compile a gaming industry insights newsletter that I share with other Rioters, including Riot’s senior leadership. This edition is the public version that I publish broadly every week as well. Opinions are mine.
See more or subscribe at: https://tinyletter.com/kliuless
Kliu's Corner: A Quarter for Your Thoughts
Podcast: "A Long And Hopefully Interesting Conversation About Microtransactions"
"Are all microtransactions bad? I think my answer is actually maybe yes. I think the problem is the 'micro' part of it. People [who sell games] are always going to be looking for a middle ground. I think the people who make games will always be making some kind a compromise, and nobody will ever ever entirely happy with any decision they make, so they always have to decide, OK, what’s our threshold? Are people going to get so mad at us that we pull a Shadow of War, and completely rip out all the microtransactions to try to get players back? Or is it gonna be that they’re kinda mad, but it’s like Assassin’s Creed Odyssey, where the game is still successful?
I think my preference would be for there to be less anger, and I think for that to happen it’d have to move away from the 'micro' part of it and more towards just transactions. Bigger, more easily understandable transactions, and less of this atomized, systematized, designed commerce to encourage me to make all these purchases. That is exhausting and frustrating, and I don’t even have a huge stake in this. For people who really care, it must be infuriating, and that to me is a real problem. The overwhelming rage about this subject that I see tells me that something is off in the way [game companies] are doing it."
In the 1970s, video games were predominantly played in arcades. Arcade owners made expensive upfront fixed investments in unwieldy arcade cabinets, and effectively generated revenue by offering games as a service (GaaS). These were the gaming industry's first microtransactions: pay to play with quarters, pay for pizza, pay for soda, etc.
As technology evolved and video game hardware could be shrunk to the size of home consoles, the software followed suit as well. Games were sold as a product (GaaP), but even though the business model caught on fast, it took much longer for the game design to follow. The original Super Mario Bros. on NES was punishingly hard because game designers still could not break free from their arcade-anchored perspectives of high difficulty levels to extract maximum quarters from players. Compare that to Nintendo's much later Super Mario 64, which was lauded for its high accessibility and ease of completion
With the introduction of the Internet and online multiplayer, for the first time developers had to face a variable cost structure to pay for servers, game updates, etc. In the beginning, companies like Blizzard chose to recoup these costs the only way they knew how—by selling more boxes aka expansion packs. However, a GaaP revenue stream on top of a GaaS cost structure is suboptimal for business, so games once again were sold as a service: eventually we saw the adoption of subscriptions with WoW, and then later free-to-play and modern-day microtransactions
However, the hard truth is that, even though online multiplayer games have existed for more than two decades now, most developers have struggled to adapt their design to match the GaaS business model. The reason why is because the craft of monetization design is multi-disciplinary, precise, and most importantly bespoke on a per-game basis. Many developers have tried to copy and paste the formulas of top games like League's skins, Fortnite's battle pass, or Clash Royale's chests into their own model only to find failure on the other side
When I try new games these days rarely do I encounter anything inspiring anymore in monetization design, yet this is precisely what I think is required to evolve GaaS to the next level. One delightful exception to my recent disappointment though has been my experience with an indie mobile game, Super Starfish, which seamlessly marries core gameplay (0:00-0:15) with creative, clever, and above all fun gachapon design (0:16-1:12). Though the gameplay is not very deep, the pinball-inspired rewards experience alone was enough to entice me to throw another quarter into the game. Here's hoping more of you out there earn more of my quarters
Revenue Strategy / Insights
PC/Console
Mobile
Google Play’s Try Now demos are boosting retention and monetization by >29%
[KL: Beware of the clickbait headline. While I agree this feature is likely great for emerging markets, I think the jury is still out for everywhere else. Yes, these demos boost retention and monetization, but largely due to survivorship bias. Perhaps some players might actually stay in a game longer if they had fully downloaded and installed it first, experiencing the totality of onboarding, rather than just trying a shallow demo]
Facebook’s gaming hub Fb.gg launches into beta on Android
Sensor Tower: Global app revenue >$18bn last quarter, up 23% YoY
XR: AR/MR/VR
Asia
Niko Partners: Steam has >30m users in China
PUBG to permanently ban gaming devices if caught cheating
Huawei is launching a new >$1k gaming phone to rival the Nintendo Switch
China's state media: Smartphone games are ruining rural children (CCTV clip here)
Newzoo: South Korea Games Market 2018
Behaviour Interactive sold 20% stake to Chinese publisher Gaea, citing expansion in China as motivation
Overtime
Goldman Sachs: eSports infographics
Polygon: The 12 best indie metroidvania games
God of War devs share early level designs for #Blocktober
Skybound CEO aims to finish out The Walking Dead with '100%' former Telltalers
Why you should build a new PC right now — a fall 2018 guide
See more or subscribe at: https://tinyletter.com/kliuless
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