Why Virtual Currency Exists

A recent Twitter thread highlighted a popular Gamer™ belief:

Even within gaming studios, I encounter a similar sentiment. Proponents of this position claim “firms use virtual currency pricing as a behavioral trick!” With virtual currency, there’s a disconnect between the real-world price and the virtual currency (VC) price. While true, there’s no intentional trickery going on. Instead, the reasons for VC are quite straightforward:

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The Creator Economy is for Anyone but not Everyone

Ladies and gents. Israel Kirzner, the Avatar.

UGC platforms have hailed the rise of the Creator Economy™. Roblox, TikTok, and Youtube have democratized the creation of content, abstracting the costs of getting content to market. But we’ve assumed UGC cuts out content gatekeepers in favor of entrepreneurs. Everyone gets a warm glow when “the little guy wins”. And by all means, this appears to be true! Creators can single handily craft and distribute TikTok videos in seconds, not days or months. The barriers to Roblox creation are higher, but it’s a far cry from the rigamarole of traditional game publishing. The effects of UGC are profound: despite easing requirements with Early Access, Steam hosts 50,000 games to Roblox’s 40 million. It’s such a gap I made this handy chart to underscore the difference:

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Battle Pass Who? We’ve Got Direct Stores

One revelation of the Apple v. Epic case is that 67% of revenue is from the Item Shop.

I couldn’t directly source the claim from a primary source (the specific page). If someone can link to the page number, please do so in the comments.
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More on the Economics of Battle Pass: Resting Prices, Forecasted Level and Complete Pass

WoW made blue bar = good a heuristic by way of XP boosts

The previous model of battle pass (BP) focused on average daily monetization cap (ADMC) as the key lever in driving more monetization from BP. Special attention was paid to the role of tiers and we’ll continue to do so here.

One of the more interesting shortcomings of BP is the inner temporal nature of the pass. The pass is available not on demand but at fixed time intervals. If a player joins in the middle of a twelve week season they face radically different pass economics then someone who started at the beginning of the season.

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The Environmental Economics Approach to Liveops Content Management

I’m sure Candy Crush will put Hotelling over the line for a posthumous Nobel Prize.

In 1931, American economist Harold Hotelling published the seminal paper The Economics of Exhaustible Resources. Harold described a problem many firms face: how much of a non-renewable resource should they sell at any given time? This problem is more obvious when thinking about managing an oil supply, but just as relevant when considering how to manage match-3 levels.

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Ultimate Team, Fantasy Sports and the Sorare Thesis

“Something to aspire too”

Professional sports give us something to aspire too. Players are celebrated as heroes and children grow up wanting to become them. It’s no secret that the internet, and games in particular, have found even more ways to engross us in the world of sports. But the terms of that engrossment are not incidental, they’re crucial. NBA TopShot lets users “own” iconic moments. FIFA Ultimate Team (UT) has players collect star footballers. Fantasy sports gives betters big stakes based on outcomes. These platforms offer us an opportunity to insert ourselves closer to the action. French start-up Sorare fuses these aspects in a way we haven’t seen before; it’s the greatest challenger to UT and fantasy sports in years (sorry PES).

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The Economics of Battle Pass are Broken. Let’s Fix It.

To be fair “dippin dots” hangs around

Monetization’s modern paradigm is defined by a direct store and battle pass (BP). After years (and ongoing) criticism of loot boxes, Fortnite re-wrote the rulebook in a way that seems to make both developers and players happy. However, it’s important to consider that at sufficient scale any monetization scheme looks like a winner. It’s unclear if Fortnite is a winner because of the pass or despite it. For instance, the collapse of Clash Royale’s monetization can be partly traced to the introduction of its own pass.

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Why Do Game Genres Evolve? A Kuhnian Explanation

Yes RTS fans, Dawn of War was killed by popular 1960s academic

Modern live-service games have self-segmented in genres: match-3, 4x, collection RPG, battle royale etc. We know these genres evolve and start to incorporate new mechanics. And overtime, these mechanics become standard fare for the genre. For instance, invest-n-express titles like Gardenscapes are an outgrowth of the match-3 genre that adds collection mechanics on top. In HD, we’ve seen innovations like Apex Legends’ revive mechanic modified in Warzone’s Gulag. But how could we better understand why game genres change rather than observing they simply do? I argue that Thomas Kuhn can help.

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