Are Micro-Transactions Really Necessary to Fund AAA Development?

Lately companies have been insisting that they cannot afford to keep making AAA games without adding in micro-transactions of some sort.

[FallenAngel1984]

Of course not. Look how successful Horizon: Zero Dawn, Super Mario Odyssey, The Legend of Zelda: Breath of the Wild & Monster Hunter: World are without microtransactions.

[Brian7655492]

Of course they are not necessessary but not all games are as successful as the ones you mentioned. This business is very competitive and why many often fail, some studios even get shut down. Would microtransactions have helped them? No but they use it as an excuse to release games as a service now instead.

This ends up meaning less games being released by the big publishers because those games costs more to make, take longer to develop and now they want you the gamer to stay engaged longer. This is where microtranactions come in.

[bloop]

It's solely down to greed and nothing got to do with development costs or time. Many studios/publishers turn a very nice profit releasing games without mt's, like CDPR with TW3. I'm pretty sure even SW:BFII has already covered production costs without mt's turned on and made some profit, but it's just not enough for the likes of EA and their only goal is to make as much money as possible.

[Godmars290]

"This business is very competitive"

Thing is that competitiveness shouldn't be based on the market being sold to. A company that offers a product that's going to make or break them doesn't have the right to build safeguards into that assures that they more than make money from it. Especially when those safeguards compromise the quality of that product.

Are companies entitled to a fair profit for offered products? Of course. But what we're seeing with SW Battlefront 2 the Destiny series and something like MG Survive aren't attempts at "fair" profit. They're exploitation. That other games like Team Frotress and Overwatch are good examples of MTs, of manufactured excessive profit, is besides the point.

[rainslacker]

If a game isn't successful, having a MT implementation isn't likely to make them more successful. Just means the loss wouldn't be as great....and even then, that's a maybe as it still may be a significant loss. Games fail. Doesn't matter if they're SP or MP. Being MP doesn't insure success anymore than being SP does. In fact, a MP game that fails at the start is likely to never be successful, whereas a SP game has more chance to eventually recoup investment through other means such as sales or inclusion through PS+/GWG/Humble Bundles. SP games aren't reliant on a user base to continue on, so if a MP game goes on one of those services, it still may not have enough users to make it successful for the long run.

The only MP games which get the big AAA budgets are those that are proven successful, or have really strong backing from proven developers with good ideas to make something great. But there is far less risk taken when making new AAA MP games, compared to their SP counterparts.

A SP or MP game take about the same time to develop overall. MP games require more post release support though.

Many SP games released nowadays actually have a lot of time that can be put into them. A side effect of the open world trend. I just put 100 hours into ME:A...although I have no idea why since I didn't enjoy it much. I put about 70 hours into Horizon. I could easily put 20-30 hours into any given Naughty Dog game while attempting to get the platinum. I put in about 20 hours into R&C. So on and so forth. While a lot of those games have MT or even MP, I didn't use any of them, and outside ME:A, they were all pretty successful.

The issue of MP or MT is not as black and white as a lot of people make it out to be.

[opinionated]

“A company that offers a product that's going to make or break them doesn't have the right to build safeguards into that assures that they more than make money from it.”
Why not? Of course they have the right to do so. Even if it compromises quality.

[DJStotty]

i disagree. A game is successful, if its good. For a game not to be successful, means its not great to begin with.

Games sell on their own merit and NO game by any publisher needs micro-transactions to fund it. The only exception to this case is FTP games.

Micro-transactions in a game you have already paid for, is nothing but publisher greed. Paid for expansions/DLC in a game you have paid for is the way to generate extra revenue.

Lehmans terms :

Paid game - DLC/Expansions
FTP - Micro-transactions (in which you will find are completely optional and DLC is normally free)

I game by these rules, i dont fund micro-t's in a game i have already paid for, but i buy DLC. FTP games, i support the developers if i like the game.

@Godmars i agree, i think some developers have gotten lazy, and have no passion for the games they create, they just copy and paste, do a bit of polishing, then attach micro-transactions and call it a new game.

[Timesplitter14]

Honestly, I think they are necessary. Or at least important enough that not having them is a huge financial risk. Games like HZD and Zelda have it easy because they were guaranteed successes. And Monster Hunter World is not AAA

But what's unnecessary is AAA games themselves. All the best games have been sub-AAA for at least the last 5 years

[rainslacker]

HZD wasn't guaranteed success. Sony has had big new IP AAA games which failed in the past. The Order being a fairly recent example, although I'd wager they still made their investment back based on initial sales. No game, regardless of budget or production quality is gauranteed success. Mass Effect Andromeda should have sold gang busters being in the ME franchise. but it flopped pretty hard. So much so the chances of the trilogy being completed are pretty slim.

New MP games with MT aren't gauranteed success either. Lawbreakers, despite having CliffyB's name behind it, and tons of exposure through the media, flopped. Titanfall which could have been a huge new IP this gen did well, but it isn't likely to ever hit the big MP list because they went exclusive to MS with the first game. MHW is probably in the AAA realm. It's a big game with a ton of content. Its production quality isn't in the same line as most big budget AAA games this day, but I'm sure that the game was still up in the 30 million dollar range in terms of budget.

Otherwise, I do agree that a game doesn't have to be AAA to be successful. Just that a AAA game that flops tends to be a bigger hit to the bottom line than a mid-tier game that also flops, and return on investment is much more likely on a lower budget game due to sheer install base of systems nowadays.

[Hardiman]

Wow I'm in awe of your comment! HZD was a HUGE gamble, hell there were "doomsday" articles on here saying it wouldn't be successful!

Your right that games don't have to be AAA though as Hellblade is a great example of this!

[MasterCornholio]

HZD wasn't a guaranteed success. It was a pretty big risk for Sony and I'm glad it paid off for them.

[Brian7655492]

Horizon was setup for success. They had great marketing and they also have Sony and the PS4 success to help build that momentum. The same thing will happen with Detroit. If Detroit was a pc game it would have a tougher time selling to the masses because it would not get the marketing budget or the notoriety of being linked with the PS4 and its exclusive status, which also helps its future success. PS4 owners are more likely to focus on exclusives than pc gamers in comparison. This is why Horizon had more help in its success even though it was a new ip. Guerilla also has some status to help as well. If this was an unknown developer and a new ip then it makes it harder.

The Order failed because it was a dud and reviews were not as kind as they were for Horizon. Horizon was and is a great title but some great games do not have great success (Titanfall 2 for example). In comparison Horizon had all the ingredients to succeed, whereas Titanfall 2 did not. However The Order still sold fairly well which again supports my claims that exclusives on the PS4 have an easier path and marketing also helps which Sony did.

Zelda is another title that was destined to succeed and adding microtransactions to any of these games would be easy to do. Nintendo was also called out for a hard mode in the form of paid dlc but they got away with it because they added it to dlc. A game like Uncharted gets away with microtransactions because it still retains its single player mode. All developers will push where they can and see how the public reacts.

[InTheZoneAC]

never speak about something you don't understand, it's ok to have an opinion, but at least be aware of what you're talking about

[Reibooi]

The thing that often gets me about this is the games that use Microtransations are often the ones who were always going to sell enough to not need them. Battlefront 2 for example was going to make bank because it was Star Wars it didn't need the greedy MT's to be profitable.

Shadow of War had a massive fan base from the first game and was also almost certain to make back it's money quite easily without MT's

Often times it is the more mid tier games that could use MT's to supplement sales that are not as high as the AAA space but none of those devs do that because of how negative the idea of MT's are to most people.

[abstractel]

I think what a lot of you are missing is that not all games make a profit or even break even. Micro transactions are an insurance, as it makes the losses more bearable.

With that said, of course there are greedy companies that go above and beyond to make as much money as possible on the expense of players. It's just, like most things in life, not a black or white issues but rather a grey one.

[XiNatsuDragnel]

Of course not BS

[UCForce]

No, it’s not. It’s just pure greed.

[ccgr]

For sure, gaming has been way longer than Microtransactions

[Enturax]

You people probably didn't read any articles about that each year creating video games costs more and more? Seriously, because microtransactions are bad for us, consumers (in a SHORT run, that is), it'll obviously make many of us hate it do a degree of making excuses for developers explanation around the concept. We may think they're greedy, but the truth is, while, sure, some of them obviously are, but some of them actually NEED it to survive in the gaming market.

[Sgt_Slaughter]

If a game is good enough, it'll sell millions and millions of copies without the help of MTs.

Plus, the market is growing each year as development costs go up, so they even out. Like I have said in almost a dozen articles now, the gaming industry is one of if not the highest grossing form of media today. Games are making billions of dollars in a few days where it takes weeks to a month plus for a movie to break even $1B, and that's with generally a $200-250M budget PLUS marketing. That's not even factoring how much money one single copy generates versus a ticket or a CD/MP3 download.

Games do not, never have, never need MT's/Loot Boxes. Pure and simple. $60 is all I should have to pay for a game and should have all the content on the disc, and nothing more. Want to add to it after development is all said and done? Fantastic. Don't take away from the main game to do that. All these "cosmetics" were free just a few short years ago and I didn't hear anybody screaming for additional money needed.

[Rachel_Alucard]

@Enturax

Are you getting that info from them or an actual investor site? Just take a look at this ycharts report from EA and you can see they are spending much less then they were in 2008. https://puu.sh/zAFzi/c9fbe2...

They like to lie to protect their reputation, don't fall for their lines. Though I should clarify the data varies across the board. Companies like Take 2 spent a measly 49.9 million last quarter compared to 2011's 19 million, but that cost is in no way hindering their development to the point of NEEDING MTs. Their potential earnings are hit instead but they like to use fallacies to imply it's needed when it's "We'll make a few million less because we spent more." It doesn't matter tho they have GTAV and RDR2 so there's no excuses.

[AmstradAmiga]

Sony and MS have been incredibly quiet on the issue of microtransactions. I wonder what their percentage is per purchase?

As for if they are necessary or not. I believe they are until developers find another way to drive revenue up or at least have more revenue coming in during the months/years they are not releasing another game.

Companies set sales targets every year which are normally higher than the previous year. If a company is not able to sell more copies then how else do you increase profits other than downsizing, selling off assets or increasing the base price of the game? You also have to consider the size of the gaming consumer base, is it growing, shrinking or staying the same? If the consumer base is not growing then companies need to find new and innovative ways of extracting more cash from the same number of people.

[jhoward585]

My educated guess: Every game produced is a risk. That said, there's a 50% to 50% change a game will fail. Another point is, some games may or may not meet the Devs expectations. For example, the Devs might make a game with long-term investments in mind. But unfortunately, the games don't last very long. That being said, most games lose it's value and fun factor rather quickly. Remember, games are very expensive to make especially when a Devs start to think outside the box to make their games. Anything they add new to their games normally cost money. So Micro traction is used in their games just in case a game doesn't make the money back or enough profits.

Forgot to mention, Games development is no different from movies making. A lot of stuff gets cut out or edited. That normally results in losing money.

[TheDriz]

I would love to see some real journalism done on this. I bet the angry mob would go all Trump fake news when these sites are fake news.

[rainslacker]

It's not talked about anymore by the publishers, because I think if they keep talking about it, eventually people are going to start demanding numbers. So far, the few reports on budget vs sales we've seen have all been the success cases....usually citing that the budget of the game is nowhere near what I think a lot of people expect them to be....like $40 million for Horizon: Zero Dawn.

A journalist could certainly attempt to try and get these numbers to do a study on them, but the publishers aren't likely to be very forthcoming, and any big dev or pub that does interviews has a set of questions they agree to answer....and that kind of thing is rarely agreed upon.

As of right now, about all we can do is look at the publicly traded companies investor reports, and as of right now, it shows these publisher making a lot of money without much relative investment. But if you look at Activision recently, half their revenue was from MT or service related revenue....with a significant portion from their mobile branches. That still leaves a huge profit vs. investment in the rest of their revenue streams, which just pretty much proves that MT aren't actually necessary to turn a profit on the games themselves.

That's kind of the thing most people miss on this topic. They focus on the profit made from MT, but the other numbers are right there for them to see....and those numbers prove that MT aren't necessary.

[TheDriz]

Where do I find these numbers?

[rainslacker]

annual investor reports.

[Tankbusta40]

Probably not necessary for every development, but why wouldn't devs add them? Everyone complains about these but there are still millions of people who will purchase them.

[Cobra951]

Short answer: No.

Long answer: MTs are not about funding anything. The successful big publishers have known how to stay in the black since long before "Horse Armor" became a topic of conversation. MTs are about making massive extra profits for very little investment. Once companies are publicly held, their only real duty is to grow the profits as much as possible. That's unbridled capitalism. If they can line up enough suckers to dump big bucks into a game on a regular basis, they maximize profits and minimize expenditures. Their quarterly reports look stellar to their investors, and management gets fat bonus checks and shinier golden parachutes.

[Gaming_1st]

@cobra951

Ding*Ding* We have a winner. Well said.

And as a side note. I honestly don't have a problem with MT's. As long as i can acquire whatever it is in-game, im ok with it.

[rainslacker]

Looking at Activision 2017 reports. Rounded for brevity and removing the biggest single source of revenue from the equation(King Mobile MT for a single game)

Total revenue: ~5 billion
Total cost: ~2.5 billion(development/operations /marketing/etc)
Total profit: ~2.5 billion

Total reported numbers for the amount of revenue brought in through MT and services(including WOW subs)

~2 billion

This leaves a total profit for the year of around 500 million.

Not sure what the development budget was for things like WOW or Destiny, but both those games return that on initial sales based on the numbers. Honestly, the numbers for profit seem skewed considering how many copies of WOW or COD they sell. their initial report would have left the 2.5 billion in revenue without MT/Services. Considering COD alone rakes in about 1 billion in revenue for initial game sales, and Destiny and WOW is no slouch....it makes me wonder if any of their other games sell at all.

Maybe they had other costs though, which were put into that fiscal year, and they actually had more real profit from their development and releases, but it doesn't show because of how these reports are made.

[Tru_Blu]

Of course, EA has to fund the 10 million dollar advertising budget somehow. Cut back on the ads and costs will come down. If it's a good game it will sell, word of mouth is the best salesman you can have.

[rainslacker]

10 million? For SW:BF?

That budget was likely more in the range of 30-50 million.

They funded it by giving marketing rights to Sony. Sony footed the bill to minimize the risk to EA, and give Sony a way to help promote PS4.

It's these kinds of deals that make it disingenuous when publishers or developers act like they're struggling to make a profit on these games, and the only way they can make a return on investment is by adding in MT.

[EverydayGuy]

All I know is, I won't buy your game if it has MT for a full $60. I don't like forking over more money after the initial purchase.

[slappy508]

Of course, developers gots to feed their families 😂
/s

[Fist4achin]

Sounds like a bunch of shiz to me...

[Godmars290]

Is open unlimited profit sources needed to fund a high budgeted productions post release?

What?

[rainslacker]

Dunno. We could ask GT: Sport. The Witcher 3 had post release content and no MT. I'm sure there are other games that do this as well. COD could survive it's 1-2 year content update shelf life without MT or paid map packs on initial sales of the game alone. Same with Destiny, Overwatch, etc. Overwatch and Destiny....or GaaS type games as they've come to be known....however, wouldn't have a shelf life as long without some form of paid content system such as new maps or MT of some sort. both those games in particular are taking different secondary revenue stream approaches.

It's not to say that I'm against reasonable MT in games, just that they aren't actually needed in many cases where we see them.

[Godmars290]

But we're talking about multi-million dollar companies that have already spent the money to make a game to then set up conditions to make upwards to a billion if not more on it. How such a mentally came about from betting on the profitability of one big game to fund 3-4 similar if not smaller ones.

Examples of GT and Witcher are more about studios, and even companies, rewarding or paying back their audience for the success of their game. They're less amoral, profit for sake of profit, examples.

[Mr-Dude]

No not at all... Free to play games I can understand, but not fully priced games. And those overpriced seasonpasses like Ubisoft likes to do need to go also. They don't give you something good in return, not like the Witcher DLC anyway.

That is why I skip or wait for good sales nowadays.

[Ittoittosai]

Nope

[Legacy212]

Rather have cosmetic MTs over a season pass anyway for my multiplayer games that way we don't fracture the user base and I get all the new maps and game modes for free because I don't buy them

[Enturax]

Microtransactions, just like EVERY other world concept, got eventually destroyed by greedy and stupid people to a degree where players hate everything about it and don't even care whether some developers actually need it to survive on the market, or not.

[Hardiman]

No

[Enjoigamin]

Double no

[ImNotGoingAnywhere]

Not at all. That's a lie perpetuated by greedy developers like EA.

Making AAA games is expensive. It's not THAT expensive.

[DialgaMarine]

Necessary? No, but I don’t mind them as long as they’re not necessary to get the full experience of a game that charges a premium fee out the gate. In other words, if it’s gonna help developers with future projects, I’m all for it, but no EA or Konami crap.

[TheOttomatic91]

No no it’s not

[inxine]

I dunno.
if theres demand, why not. CoD players know, those maps are ridiculously expensive. but alot of them buy them. pay to win is wrong tho

[opinionated]

It’s an insurance policy. If your game tanks commercially you have another source of revenue.

[WelkinCole]

No but it is required for CEO's/exces bonus

[chuckyj1]

I think it does to some extent it helps keep game prices down as it is another source of revenue for the developers/publishers... A lot of gamers apparently don't understand it's not cheap to run a big company, upgrading the hardware and software and maintaining top-level coders and designers... Then to have games with upwards of $100+ Million dollar budgets... That's why I don't hate on MTs too much as long as there isn't play-to-win MTs they don't bother me... Especially if it helps keep game costs down.

It's not cut and dry as most claim it is... and if they say it is... They are only looking at one side of the issue and not factoring in everything... the pro's and cons...

[HyperMouse]

Just look at the Witcher 3, incredible huge successful game with no MT's and quality substantial paid DLC, so to me the answer is no, its simply greed

[HyperMouse]

I see a lot of people saying if you game isnt successful then MT's are a way to help make the money back, but, If your game tanks and no one is playing it who is buying the MT's then.

[Xenophon_York]

A lot of AAA games—especially ones with vampire-transactions—make the creative directors upwards of one hundred and fifty thousand US dollars, with some much higher. And that could not be counting milestone bonuses, completion bonuses or other rewards.

So, the fact that there are so many bloated salaries makes me rather frustrated those same developers and/or publishers manipulate the consumer into thinking it's necessary to recoup rising development costs. Only thing being developed is a cold sense of greed.

This is all not to state there aren't some game makers out there who genuinely need this type of supplementation to realize a vision of completion. But those aren't AAA tentpole titles like Destiny, Star Wars and Call of Duty.

[wonderfulmonkeyman]

No, of course not.
They don't need to inflate budgets by focusing so much on graphical fidelity, either.

[Artemidorus]

No they don't, look how many games get sold at a top/new price and times it by that ammount.

Truth is, dumb millennials buy into this pay to play to beat others or fast forward to the top and end up paying half way towards a console in some cases just in one game alone, if it's a yearly game then you repeat the process.

Look at Mass Effect 3, sold good but made more money in DLC with certain players paying over $10,000.

You also have streamers encouraging such behaviour, asking for funding or paying out right.

[DONTB]

No, this should be really obvious. It is a business, if your product does not make its money back then you are the one with the issue. You spent too much money on meaningless systems, you didn't advertise your product well enough, or you just made a shitty product.

If McDonalds is failing in a certain city they don't offer "special gold trays" to serve food on, they don't have extra rare special toys you can only get by opening a more expensive Happy Meal, and they don't offer prioritization in the drive through depending on how much money you spend. They make their service more consumer friendly, either with better service or better quality.

It is a business, if you can't succeed, then fail, and stop making games. Akklaim: dead, THQ: dead, Sega: dead. Deal with your inability to be successful.