Why I’m a Supply-Side Game Economist

Robert Mundell often remarked getting to tier 100 in the Battle Pass is harder than getting a Nobel Prize

Game monetization discussions tend to focus on what to monetize broadly (gameplay or cosmetics) as well as how to price it. As someone might imagine, these are crucial and foundational discussions to have. So naturally, therefore, it makes sense to invest a lot of human capital into optimizing them. Increasingly, however, I’ve become convinced that just making lots of stuff trumps all other optimizations. Instead of being an afterthought, supply-side considerations deserve to be front and center.

Game analysts are too focused on analyzing player data which is readily accessible and has a pre-established process for collection. Rarely do analysts venture to understand cost over revenue. Yet, it’s impossible to do cost-benefit analysts without cost. Instead, we relegate finance departments to the task. But, of course, these departments, just like analysts, only look at one side of the equation. I’ve yet to see a dashboard showcase return on spending: how much revenue did we make, on, say, cosmetic hats, relative to what we spent on them. These sorts of metrics can have a profound impact on production given that labor is fairly substitutable. It’s doesn’t cost much to have artists produce more banners than profile pictures or shift from 30 common rarity items to 10 epic rarity items. But to understand these trade-offs and make optimal decisions, cost data is crucial. Not only does this benefit ongoing games, but cost data can play a pivotal role in the initial design of the game economy.

Developers pay a lot of lip service to quality over quantity, but this isn’t a meaningful or detailed position. For example, consider if King were able to release one great Candy Crush level a month or ten far worse levels. Should King choose the one with quality over the ten quantity? Our usual model dictates the decision that maximizes net-present game LTV, and in this case, it’s the 30 worse levels a month. We should all be intimately familiar with this logic: after Game of Thrones ended, did we churn from HBO or Netflix? Which one are we still subscribed to today? Netflix makes a lot of B-grade stuff, HBO makes a few A-grade things. It’s not a mystery to which one is winning. The posturing of quality over quantity without critical examination is driven by social desirability bias. Demanding only the best, at the cost of all else, signals high status. We commonly see this in restaurant advertising and medical care discussions. 

I’ve suggested the battle pass + item shop paradigm is lackluster at monetizing effectively. Despite this, Fortnite continues to rake in billions every year despite this. The simplest explanation for its sustainability is the incredible pace of content releases. There’s always something new going on, from Marvel heroes to Marshmallow concerts, on top of a steady stream of battle passes and map/weapon updates. Building and optimizing the live-service supply chain is just as important as the demand one!

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