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The Money Game

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By Nelson Schneider - 06/10/18 at 02:42 PM CT

Recently, I was surprised by something said by rotund gaming pundit, Jim Sterling. While usually, I’m very impressed with Sterling’s ability to keep his thumb on the pulse of the modern games industry, this video, in which he reversed a previously held opinion about platform exclusive titles completely threw me for a loop.

I used to love exclusive games, but that was when the competing platforms were all significantly different. When the 7th Generation homogenized all of gaming into a big blob of Gray Goo and all non-first-party exclusives evaporated like so much dry ice, both Sterling and I saw the writing on the wall and decided to embrace the homogenization.

Sony’s release of the latest ‘God of War’ game, simply entitled “God of War,” caused Sterling to backpedal, but it seems he’s missing the bigger picture here. The argument goes that only first parties, like Sony or Nintendo, who are deeply invested in the success of their hardware, will sink the necessarily-huge budget into a “AAA” exclusive title for their own platform. The ultimate end goal being, apparently, that the platform holder will make up the lost investment with money gained from somewhere else.

But where?!

Back in the early days of the reborn console ecosystem, Nintendo did a very good job of making their hardware profitable, so they could and would sink money into making exclusive games people wanted to play, courting third-parties to make more exclusive games people wanted to play, then roll around atop the huge pile of money they made selling the hardware to play those very desirable games, those very desirable games, and the licensing fees from third-parties’ desirable games. The new “God of War” may be desirable to some extent (I’m not all that interested and neither is resident Sony fanboy, Chris), but even if Sony sells a billion more PS4 units to people who suddenly decided they NEEDED to play “God of War,” the profit margins on modern hardware just aren’t there.

Last gen was something of a disaster, as both Sony and Microsoft sold their hardware for a significant loss, with only the Wii making money on each unit sold. Thus the more units Sony and Microsoft sold, the more money they lost. Microsoft’s motives seem to be entirely monopolistic, as the non-gaming tech giant expended huge sums of cash in an attempt to break into a segment of the tech industry where it was largely a non-entity (and STILL IS). Sony, on the other hand, seems to have been using its position as Top Console Dawg as of the end of the PlayStation 2 era to Trojan Horse the Blu-Ray Disc format into living rooms across the world. Sure, a decade-plus later, Blu-Ray is still hanging on while HD-DVD is little more than a footnote on Wikipedia, but was it actually worth it for Sony in the long run, especially now that optical media is left more and more by the wayside?

The worst part of the 7th Generation’s irresponsible budgeting and negative profit margins on console hardware is that unprofitable hardware has followed the console makers into the present 8th Generation. The PlayStation 4 has no profit margins, the XBONE has no profit margins, the late WiiU sold at a loss, and even the 8th/9th Gen straddling Switch has razor-thin profit margins.

So if big exclusive games cause companies to lose money, and if the companies are losing money on every hardware unit sold… WHERE IS THE MONEY? As much as I wish it were the case, these megacorporations never do anything gratis pro bono.

Actually, I have a pretty good idea of where the profit is supposed to come from: Networks. The tech industry is currently in love with the concept of Software as a Service and perpetual subscription fees… but just a few years ago the original gaming-centric subscription model – the Massively-Multiplayer Online Game – began to see subscriptions rapidly decline, which should have been taken as a sign that perpetually charging customers to rent something doesn’t work quite as well as simply selling them something that they can own. Regardless, after Adobe did it and Microsoft did it with their non-gaming sector, and created Live as one of the keystones of the Xbox line from Day 1, the rest of this uncreative industry of lazy copycats was guaranteed to follow, much like the success of Netflix saw the sudden spawning of dozens of competing streaming subscriptions, each of which features content that used to be on Netflix, but was ripped away by greedy rightsholders who decided that rolling their own service and losing customers who don’t want to subscribe to half-a-dozen different streaming apps was better than letting Netflix make money off their content.

With the lack of profit in big exclusive “AAA” games and the lack of profit in console hardware in mind, it seems inevitable that every console maker would decide to charge a subscription for their online services, as raking in free money each year from every user of a given platform in exchange for such trivial features that even companies in poor Eastern European countries can offer them for free is just too good to pass-up. These subscription fees shore-up the razor-thin profit margins on hardware, easily doubling the cost of ownership over the platform’s lifetime.

If someone as eagle-eyed, when it comes to catching the videogame industry misbehaving with its pants down, as Jim Sterling can miss this huge and overwhelming bit of customer disservice, then the average, common, Mainstream gamer – many of whom are still naïve and inexperienced kids and teens – haven’t a prayer of opening their eyes, seeing the industry’s horrible, unsustainable behavior, and voting with their wallets. These subscription fees are, at best, welfare, at worst, a publicly-funded bail-out for irresponsible corporate entities that have seemingly forgotten how to balance inputs and profits.

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