CONSUMER VIEW ON VIDEO GAME PRICING

Arts Marketing Thesis

CONSUMER VIEW ON VIDEO GAME PRICING

Student: Alma Haltof Student number: S3001628 E-mail: a.haltof@student.rug.nl Supervisor: dr. J.A.C. Kolsteeg Secondary reader: drs. L. Nijenhof

TABLE OF CONTENTS

Introduction 3

1. Video Games as Market Goods 6

2. Video Game Pricing: The Tier System 22

3. Research Theory and Methodology 34

4. Study Results and Further Research Opportunities 44

INTRODUCTION

Video game pricing holds a unique position compared to other forms of entertainment or art. Regardless of the theme or genre, books, music albums and films tend to have a set, expected average price range; an experimental or niche novel will most likely share the price tag with the new best-selling thriller and a ticket cost for a Hollywood blockbuster will be the same as of an art house film. Positioned on the other side of the pricing spectrum, visual art has no unified range or menu, the price being subjective and fluctuating. Yet video games do not fall into these categories, as they neither have a uniform price, nor a manifestly free range. Instead, there are a few price tiers traditionally reflecting the size of the development studio.

Such tiers have an established role in the video game industry. Consumers rely on the price to navigate the market and find their preferred content, as price ranges have become shorthand for common genres or gameplay mechanics, taking over their attributes. As a consequence, the system is shaping consumer expectations, which is most apparent when a vocal part of the player community expresses outrage at a new release which, in their eyes, does not meet the standard they associate with a specific price. Games media often comment and further publicize these instances, but seldom discuss the pricing model on their own.

In the recent years, there has been a rise in small-scale, independent games which do not conform to the tier system: “indie” and art games. Since the tier system is so prevalent, it can have a

Despite the high online visibility of player outcry, it is not known how these outbursts relate to the general player populace: if they represent the majority, then pricing missteps could have severe repercussions for new game creators. The game industry is a high risk venture, where even the biggest international companies can face financial difficulties if one or two of their releases face online negativity accompanied by low sales numbers. For first-time developers or small teams such poor reception could prove fatal. The video game industry is a thoroughly commercial field, where developers cannot count on any safety net and rely on game sales to function, as government subsidies are not an industry standard, nor are they available everywhere.1 Without any real data on player perception of price, however, the real influence of price on the reception of independent games remains unknown.

The goal of this thesis is to fill this void and to ascertain to what extent does pricing factor into the players' perception of a video game or, in other words, to verify if the community in general is as sensitive to price as the vocal minority seems to imply, based on non-professional reviews. This is an exploratory study which was approached ethnographically, based on Robert Kozinets’ concept of netnography (2002; Kozinets, Dolbec and Earley, 2014). For the study, a variety of games from different price ranges was chosen from the Steam store: the exceedingly popular online game store and community platform. As a market dominating website, Steam offers a wealth of data on player interests and preferences which should provide a good player representation. A sizeable sample of user reviews of the chosen games was analyzed against a list of price related lexemes, while using open coding method. These reviews were examined using constant comparative analytical technique to determine how video game pricing affects the consumer opinion in non-professional reviews.

This thesis is structured to facilitate the understanding of the environment in which the player community functions and to explain the importance of the analysis and its results. The first

CHAPTER ONE

Video Game Platforms

Sixty years ago, the first computer games created were software imitations of simple pastimes like tic tac toe and checkers. Gradually, as the visuals became less and less schematic, game themes grew into more complex constructions, mixing stories with increasingly sophisticated game mechanics. New developments in information technology allowed game creators to work on achieving progressively more realistic representations with each new generation of computers and gaming consoles. The advent of 3D graphics made photorealism attainable, even if it took a couple of decades to reach it. At the same time, the ubiquity of computers and growing computer literacy lowered the threshold of video game creation, allowing more people to experiment with the medium without the need for technical degrees or teams of specialists. As a result of these decades of gestation, the medium now offers an unprecedented level of thematic and formal variations.

Even such a cursory glance at the history of the medium shows how video game development is tied to hardware: the physical computing machinery necessary to run the programmes, referred to as software. While the early games were created as side projects of computer programmers, the rising creative potential and popularity of the new medium led to its emancipation. As more people started to focus only on creating games in 1970s, development companies were established with the express purpose of creating hardware and software for games. The best example would be the story of Nolan Bushnell, whose name is synonymous with the commercial rise of video games, as the author of Pong – the first commercially successful game – and co-founder of Atari in 1972: the first “wildly successful video game company” (Heineman, 2015: 27).

they differ in a variety of ways from computers. Consoles have been designed to take advantage of television screens, but they also rely on different software technology. As a result, games have to be programmed for a specific platform (PC or console) in mind and they are then sold in physical formats matching these platforms. For example, old console games were sold on cartridges while nowadays they are available on discs, which are incompatible with discs for computers. Another big difference is the way input is gathered, as consoles are operated with game controllers like joystick or gamepad which allow for a different video game interaction than mouse and keyboard. Each input type has advantages when playing different game genres, as mouse is most precise at aiming, but gamepad offers more intuitive movement. With time, a new subtype of console was also created: a hand-held device. These, however, due to very small screens and lower computational strength, usually have only games made especially with these constraints in mind which are unavailable on computers or full-sized gaming consoles, as big displays would make them look outdated with their smaller amount of graphical detail. Since this market segment is distinct, it bears little relevance to the topic of the thesis and thus will not be part of the further overview.

Despite the ongoing popularity of consoles, computer gaming has never ceased, as there is a number of drawbacks to both types of platforms. Consoles may offer bigger screen diameter thanks to their reliance on household televisions, but they are closed systems: once bought, they cannot be upgraded in any significant way by their users. To keep up with IT developments, the consumers have to follow the so-called console cycle: the rotation of subsequent console generations. Those who do not want to be left with a device that is no longer supported by its producer and game developers, have no other choice but to purchase another machine from the next generation, which arrives after a several years of hardware development. What is more, the subsequent machines are almost never backwards compatible, meaning that none of their new releases would be playable on the older generation of consoles.

elements can be replaced with newer models; operating systems can also be chosen and programmes modified. However, the endless variety of configurations can render some games poorly running or incompatible, which has heavy implications for game sales. For that reason computer game releases provide minimum and recommended hardware and software requirements, otherwise consumers would not be able to judge if they could even boot up their purchase. The unveiling of these requirements in advance of release date is often a part of the marketing campaign, as it generates media coverage. It also keeps prospective buyers on edge, since some of the most anticipated, mainstream titles use state-of-the-art technologies which may be too advanced for many computers. Likely the most extreme example of high hardware and software prerequisites is the game series Crysis. Each game in the series is taxing on computers to such an extent that they become a benchmark for comparing PCs. The first instalment, released in 2007, quickly gained notoriety for having such advanced, demanding graphic effects that they surpassed the capabilities of most current computers and the phrase “but can it run Crysis?” became a running joke on the

internet forums;2 even a couple of years later, the game was used as a benchmark for testing processor performance in academic context (Issa and Figueira, 2010: 127).

In practice, the pre-defined system requirements for PC games give only a general idea, may cover only common configurations and can be difficult to decipher for less computer-literate consumers. The uncertainty is quite visible on the internet, where prospective buyers seek guidance on specialist forums or popular discussion sites like Reddit, posting their computer configurations in hope of receiving advice. Others use websites such as Can You Run it, which collect game requirements and offer to scan computers for comparison. Professional reviews often mention how smoothly a game runs to reassure or alert the readers; user reviews also play an important part in cautioning other consumers. In this context, consoles have the indisputable advantage: they can

2 For example use see Leather, 2009; due to its popularity, the catchphrase also appears on the crowd-sourced internet culture compendiums like Know Your Meme (2010) or the Urban Dictionary (2011). The phrase was even

offer the comfort of knowing that a game will simply start up.

Console and Computer Market differences

As a consequence of technical differences between consoles and computers, the video game market is not homogeneous, but rather divided into games for specific platforms. The biggest game developers usually make sure their releases are cross-platform: available on computers and consoles alike. For smaller teams or individual creators, the added costs of porting (modifying the source programme to run on different systems) may be prohibitive, so they are more likely to focus on a single platform. In such cases, computers are a popular choice as there is no single, gate keeping company to negotiate with in regards of the publishing. Consoles, on the other hand, are closed systems which function like monopolies. There are three companies – Microsoft, Sony and Nintendo – with three lines of consoles, respectively: Xbox, PlayStation and Wii. None of the games published for these consoles are compatible with one another, as they have to be ported. The three companies wield total curatorial control over what is going to be published for their hardware, so any game designer interested in these platforms would have to sign a deal with them. Microsoft, Sony and Nintendo also have their own, in-house game development studios which create exclusive content.

purpose.

From a market perspective, consoles and computers could be compared to regulated and open markets. Since console manufacturers are the gate keepers and vendor monopolists within their respective platforms, the game prices are also regulated. As a consequence, it is relatively easy to gain credible data on the user base (based on the number of sold through consoles) and the number of games sold. There are only two issues that need to be taken into account. Firstly, the changing of console generations, as the old consoles are phased out, so the customer base may shrink until the consumers buy new replacements or switch to the hardware of competitors. Secondly, some consumers may opt for more than one console to benefit from bigger pools of game exclusives.

The sales potential of the computer market, in contrast, cannot be simply estimated. The user base is not synonymous with the player base, since not every piece of hardware is necessarily used for playing games; nor is there a single vendor that could provide conclusive sales data. For smaller, independent releases, the only credible data comes from the game developers themselves. If they decide to publish a public post-mortem on their work – a developer's analysis of the game released – they may include detailed sales data. Most academic work has been conducted on console

markets, without much notice given to computers as historically, the latter generated smaller revenue in the USA. Even the most recent publications tend to work on older data which still shows console predominance, perpetuating the trend. For example, Randy Nichols' recent The Video Game

Business, a book from 2014, bases its overview of market data (44-48) on information mostly from

there are academic texts written on computer game market, they focus on monetisation in free titles or social games on sites like Facebook, both of which are discrete game markets with their own modes of digital distribution (cf. Luton, 2013, Lin and Sun, 2011 and Evans, 2015). However, the rapid increase of online computer game sales turns the academically overlooked market into an interesting, developing topic, especially since the already mentioned fundamental differences between the platforms make it problematic, at best, to apply the findings from one market to another.

Games as Market Goods

It may seem obvious that video games are sold as standalone pieces of medium, like books or films. However, this is not always the case. Sometimes games are sold in a bare bones state, when only the purchase of subsequent downloadable content (DLC) completes their narratives or provides content that may have been deliberately removed from the original game before its release to further monetise the Intellectual Property (IP). In such cases, player community tries to warn peers against unfair treatment, which also appears in user reviews analysed later in the thesis. DLC may also have less nefarious origins, as it may be the means of prolonging a game experience for eager fans at a relatively low cost to developers, since the world building and most game assets created for the core game is reused for DLCs.

A different game packaging model is episodic format, comparable to serialized fiction of the 19th century. The customers have a choice to either buy each episode separately, or to pay for the full series at a discounted price. For the purpose of this thesis, no episodic games will be included in review analysis, as often early user reviews pertain to only a segment of a larger whole.

As a result, there are thriving new economies combining in-game virtual currencies and actual money; scholarly research has already been conducted on these markets and the motivations of the participants.3 The second payment system is a monthly subscription payment common for massive online multi-player games, where the fees also cover the costs of running online servers. However, both the free-to-play and subscription models are not part of the price tier system for standalone, close-ended games, so they lie outside of the scope of this thesis.

Video Game Market in Numbers

The video game industry continues to expand. In 2014, the value of global market, with all platforms taken into consideration, was 83.6 billion US dollars, while the projection for 2015 amounts to 91.5 billion: a 9 percent rise compared to the previous year (Newzoo in Newman, 2015). The estimate for 2018 shows further growth with a potential to reach 113.3 billion global revenue (ibid). When it comes to the potential of PC as a gaming platform, the projections of the leading consultancy company PricewaterhouseCoopers (2015) in its media outlook show that overall, computer game revenue will continue to rise, with digital sales already eclipsing physical ones. The strong position of computers as a gaming platform is best seen in the annual industry-wide survey on game production compiled by the Game Developers Conference – the most important professional event – among its current and previous attendees. Its State of the Industry Report repeatedly shows that more than half of developers (52%) are working on a project for PCs, even though there is a slight decline in 2015 when compared to the previous year with 56 percent (Game Developers Conference, 2016: 3).

In terms of national markets, US and China top the charts and outpace the rest of the world in revenue: on estimate, each country had around 22 billion US dollars in revenue in 2015, while third-ranking Japan gained only 12.3 billion (Newzoo, 2015a). China placed in the top place for the

first time (Newzoo, 2015b). In terms of retail – non-digital – sales, it is estimated that five countries make up 70 percent of the sales: USA, the United Kingdom, Germany, France and Japan (VGChartz, n.d.). As this thesis is going to focus on English user reviews on an American online platform with a global outreach, it is worth looking at the data on English-speaking countries, as three of them are in the top ten markets based on revenue in 2015. While the United States are the undisputed leader, sitting at the second place just behind China, the United Kingdom occupies the sixth position and is very close to Germany in the fifth place, while Canada rounds up the tally in the eighth position (Newzoo, 2015a).

An insightful 2015 report compiled by the Entertainment Software Association (ESA) – a US organization focused on consumer research – supplies comprehensive data on US game consumers. Its key findings show that over half of US households own a console, 42 percent of Americans play regularly (at least three hours per week) and the average video game consumer is 35 (Entertainment Software Association, 2015: 2-3). The study also lists computers as most frequently used devices for playing, with 62 percent compared to dedicated game consoles with 56 percent (ibid: 5). Granted, the report casts a wide net with its definition of a “game,” which may distort the data, as it includes the broad category of social games. This means that the report does not only cover paid games which are the subject of this thesis, but also the free, casual ones available on social platforms like Facebook.

In the United Kingdom, the Internet Advertising Bureau in 2014 commissioned the research agency Populus to conduct a survey on the gaming habits of the British. Among its key findings was that 69 percent of the population in the 8-74 age brackets played games, for an average 6 hours per week (Internet Advertising Bureau UK, 2014). However, the definition of a “game” was as

single per cent (n.d.). In the 2014 survey, the gender ratio was almost equal, with the narrow majority belonging to women, at 52 percent (Internet Advertising Bureau UK, 2014). A similar result was achieved in the ESA survey among the US players, where the male players were slightly more numerous with a 56 percent share (2015: 2-3). It is clear that the data contradicts the common stereotype of gamers being adolescent boys, especially since in the US, “women age 18 or older

represent a significantly greater portion of the game-playing population (33%) than boys age 18 or younger (15%)” (ibid).

Although the Canadian market is much smaller than USA or the United Kingdom, it bears many similarities with the more prominent English speaking nations. The data collected by Entertainment Software Association of Canada for 2015 (14) shows that 54 percent of the population play, with the gender ratio of 48 percent of female gamers. The average gamer is 33 (ibid), so only slightly younger than the US average. In conclusion, information gathered in the three Anglo-Saxon states shows that video games are not a niche pastime, but a sizeable segment of the media market with predominantly adult audience.

Digital versus Physical Game Copies

good altogether” (Steirer, 2014: 91).

A video game bought in a physical format like a CD-ROM is owned by the consumer, who can then dispose of the product by reselling it at the secondary market. This, of course, does not sound surprising, as the right to put up an acquired commodity for sale is an important part of most markets, be it books or used home appliances. The legal basis for the second-hand market transactions, commonly known as the First Sale Doctrine, is a specific understanding of ownership, where subsequent sales do not have to be authorized by the copyright holder (ibid: 88). These rules do not extend to digital video games, as they are considered licensed software; the consumers do not become owners, because they only have the right to play the game through a license. Hence, players using digital games are not protected by the First Sale Doctrine. Upon downloading the game, the consumers have to agree to the terms in the licence, otherwise they will not be granted access to the piece of software they already paid for. This is almost universally used, mass-market license which offers the sales companies a legal means of avoiding the First Sale (Long, 2008: 1191).

The divide between physical and digital copies is most jarring when observing the current secondary games market. A digital key (a single use download code for a game) can be bought on grey area websites, where the key provenance is uncertain. In extreme cases, the keys may have been a result of theft.4 The same game in a physical copy can be bought at any legitimate, brick-and-mortar shop in the USA or Europe. For example, the world's largest game retail chain GameStop, which specialises in selling pre-owned games at great profit, has over 6,100 stores in the United States and beyond (GameStop, n.d.). It is even listed at the New York Stock Exchange, which means that the company is strictly regulated by the Securities Exchange Commission and its annual reports are freely available for everyone to consult, while the operations behind the unauthorised online key sellers still remain largely hidden from view.

The lack of possibilities to liquidate bought digital consumer goods or, in other terms, to “translate it into exchangeable capital” leads to higher risk in purchase (Steirer, 2014: 93). Once

bought and activated, a digital video game loses its market worth and can be only used for entertainment or other, aesthetic purposes by the buyer, as it cannot be passed on. Online game sales are even more problematic when considering the fact that until recently, there was little chance of returning the goods, even if faulty. While this may not be an issue in other digital entertainment forms like music of films, it bears repeating that for computer games, there is almost always a chance that a game will not run smoothly, or even at all, on certain computer set-ups, even if the prospective buyer reviewed in advance the minimal hardware and software specifications for the title. The biggest online PC games seller, Steam, only started offering refunds in 2015, for games within two weeks of purchase and within less than two hours of play. The online console game stores have yet to implement refunds in any form.

themselves on the digital market by providing DRM-free games. Once sold, the game is no longer tracked by distributors or publishers and the consumer can freely use or copy the programme.

While DRM and developers' control of their goods through licensing usually do not disrupt the consumers' enjoyment of their property, there is a small number of striking interventions that show how fragile the current situation is. The case of Grand Theft Auto: San Andreas is perhaps the most striking example. The game was developed by Rockstar North and released in late 2004; it is part of the extremely successful Grand Theft Auto (GTA) series which are open-world action titles, where the player can battle mobs for control over fictitious cities. A significant, fan-favourite aspect of the series is its own medley of radio stations which players can enjoy while driving the various vehicles around vast game worlds. The radio stations, with their focus on different genres, distinctive DJ banter and parodist advertisements create an immersive, evocative sound stage for every game instalment, each with its own historical setting. In San Andreas, the music is especially important, as the game heavily relies on hip-hop aesthetic.5 Yet, ten years after its release, Rockstar North removed 17 of the tracks from the digital version of the game due to expired licensing rights. These tracks were not only cut out of the game copies to be sold in the future, but also out of the ones already purchased, causing outrage in the player community, as the game still had a loyal following.

At this point, it is worth stressing that there is more to the digital video game market than the grim landscape of DRM and limited customer freedom. There are many positive aspects of online purchases; otherwise it would be hard to imagine why the PC player community would adopt the new means of goods distribution. Firstly, physical discs can break, or their surface may scratch and render the contents unreadable on any device and thus make the disc useless. Online platforms offer the convenience of easy access: consumers can download their goods to any computer, as long as it has internet connection, and technical support is also available. Secondly, many online distribution

platforms use cloud storage for added features like game streaming, where the consumer does not have to wait for the game to fully download6 to start playing. The most common use of cloud computing, however, is the saves backup system, when the player's progress is not only saved to the local hard drive, but also to the cloud, as it is on Steam. This way, the consumer can resume playing the game from the last check point even from a different computer or console, or regain old save files when installing the game again in the future. Lastly, some of the physical game copies have to be registered online during installation – even single player games which do not need internet to function – which means that DRM for many titles is unavoidable regardless of how were they purchased.

Digital Video Game Sales

Video game e-commerce is already sizeable, and yet it continues to develop: in 2015, global market totalled 61 billion US dollars, which is 8 percent higher than the previous year (van Dreunen, 2016). However, the number does not only include console and PC sales, but also mobile game applications; the PC gaming segment alone amounts to 32 billion dollars and has the biggest revenues out of all digital sales (ibid). The year 2016 has already shown further growth, although again the data encompasses all platforms: February 2016 digital sales were already 10 percent higher compared to the same period the year before (SuperData Research, 2016). It is clear that digital video game sales are growing, with PC as the leading platform in terms of revenue.

Most digital stores which offer computer games are owned by the biggest game developing companies, where they combine the DRM with sales. The French company Ubisoft Entertainment, which produces the unceasingly popular Assassin's Creed and Far Cry series, owns the content delivery platform Uplay, launched in 2009. Another major developer, the US based Electronic Arts which is most known for sports games like FIFA and other household names like The Sims or Mass

Effect, has a similar piece of desktop software called Origin, released in 2011. Both desktop clients

are compulsory with games developed by these companies: they are enforced when the customer installs the purchased goods, regardless where it was bought. Failure to accept these terms leads to inability to use the software. The biggest digital distribution channel, Steam, was launched much earlier, as it was introduced in 2003 by the game developer Valve. It was initially a DRM platform that would also serve as means of updating proprietary games, but has grown since into an online store offering third-party titles from across the whole industry.

Despite the popularity of Steam and the mandatory nature of Uplay and Origin, there are other systems of game distribution where the consumers do not have to adopt DRM. Many independent developers sell their games on their own websites, where players can download the goods without the need for any add-on desktop clients. However, such direct sales are hard to market, so that often the same games also appear on Steam for added visibility. In the recent years, new digital distributors have appeared on the market who offer games without added DRM. The most important is GOG (formerly known as Good Old Games) which started in 2008 as a publisher and distribution channel for older, classic titles without any previous online presence. It was also created by a game studio, as it is a subsidiary of the Polish developers CD Projekt, most known for

The Witcher series.

the data on distribution fees is confidential, Humble Store reportedly keeps the smallest cut on the price of game, at 5 percent, compared to the much bigger vendors like Steam and GOG, which take 30 percent (Senior, 2013).

Steam Store

Out of many PC game e-commerce portals, Steam is without a doubt the most popular digital distribution channel, as its online store and community platform has an estimated 75 percent global market share (Harding-Rolls, 2013). Its user numbers are continuously growing, with the latest record of concurrent active users sitting at over 12.5 million players on October 31 2015 (Makuch, 2015b), compared to February of the same year with 8.9 million players and 125 million active users in total (Saed, 2015). It is estimated that the worth of the overall Steam games market surpassed 3.5 billion US dollars in 2015 based on game sales alone7 (Galyonkin, 2016). Despite dominating the market, Steam seems not to leverage its position in terms of publishing deals with developers. On the contrary, when the head of a large studio raised claims in 2009 that the store preyed on small game creators, a number of independent developers voiced strong praise for the business side of Steam (Walker, 2009), permeating an image of Steam as a fair company in the player community.

Steam was launched in 2003 by privately held company Valve Software, commonly referred to as Valve, a game developer most known for critically acclaimed games like Half-Life and Portal, but also massively popular competitive multiplayer games like Defence of the Ancients 2 (usually known as DOTA 2). Initially, Steam was created as a tool for providing online updates and support for its games combined with a DRM protection. A couple of years later, when online game sales were still a niche within the then-niche of computer gaming, Steam began selling third-party games from the biggest developers. Gradually, the online store became a pioneering platform and a global

standard of customer service with a range of services like community forums and even forays into hardware. The community aspect will be described in detail later, in the next chapters.

CHAPTER TWO

Video Games Pricing

As with any other kind of medium that encompasses both art and entertainment, video games can range from lowbrow to more ambitious titles and can have a large reach-out. From an economic point of view, it is a market focused on a high number of sales and dominated by blockbusters, where the few most popular titles outsell significantly the competition (Cox, 2013: 190); a study by Clements and Ohashi showed that the top 5 percent of titles earned 50 percent of software revenue (in Cox, 2013: 190). In terms of technologies, this is an industry which heavily relies on IT breakthroughs and new technologies, with studios that can go into hundreds of employees. Without a doubt, there are blockbusters similar both in their lowbrow content and high revenue to mainstream Hollywood action films, such as the newest instalment in a very popular franchise – the

Call of Duty: Black Ops 3 – which grossed 550 million US dollars in just three days from its release

(Gaudiosi, 2015) and other major video game titles in the recent years have shown strong market position when compared to Hollywood hits (Chung, 2015: 469). There is also no sign of the increasing revenue losing its momentum (PricewaterhouseCoopers, 2015). Admittedly, comparisons to films and other forms of entertainment may be misleading, as the actual sources of revenue vary greatly across industries. Video games earn revenues almost only through direct sales to consumers, chiefly in the limited time period after release, whereas the film industry does not have to rely only on cinema tickets: it has a range of auxiliary streams like rentals, DVD sales, television broadcast rights. Nevertheless, direct revenue comparison shows the scope of current video game industry.

across the world than could be expected, as differences of value between major currencies do not factor in the price tag. For example, the premium, AAA games are sold at 60 US dollars in the USA and 60 Euro in the European Union, even though for example in April 2016, one US dollar was worth roughly 0.88 Euro (Bloomberg, 2016). The difference in worth is attributed to a difference in taxation between these regions. The first price point is usually set in US dollars, since the bulk of developers as well as publishers are located in USA, and it is the biggest and most lucrative games market. Sometimes, but rarely in the case of AAA titles, the US price is converted afterwards on slightly better terms to other currencies. Granted, there are countries where games are less expensive, like Russia, where low pricing does not only reflect the buying power, but also tries to stop the tide of piracy, as Russian gamers are most likely to use illegal downloading sites in the world.8 Yet, because of much lower pricing, many games are bought by enterprising consumers to be re-sold at profit on the Western grey area markets. The pricing, however, does not easily correlate to the average wage or local customer buying power, as for example historically, one of the highest game and console prices appear in Brazil (Tech in Brazil, 2015). Nonetheless, the price fluctuations in non-English markets will not be taken into consideration in further discussion of pricing, as they bear little relevance for English user reviews made by consumers from English-speaking countries.

The enduring rigidity of the 60 dollar price point may be surprising, considering the growth of new, digital distribution channels which should try to compete on the market with appealing pricing. After all, these vendors do not have to account for the physical storage or transport of their goods, which should give them more leeway for price adjustment or sales. The 60 dollar price tag is, however, the legacy of a more console-focused era, when the market was tightly controlled by the console producers which were also the gatekeepers for any games to be released on their proprietary hardware. Nowadays, when most top titles have multi-platform releases, computer

games have to match the console price as part of global publishing deals, so as not to undercut the console market goods. Later in the game life cycle, the PC games are subject to bigger discounts and tend to reach lower price range sooner than the much more centrally controlled console market.

The 60 USD price point is the strictest tier: if a game is made by a top developer, or aspires to this category, it will be sold for this amount, as part of the console legacy pricing. Every other tier discussed below represents more of a price range, with a specific price point as the most popular choice, as with the mid-range games where it is common for a game to sell at 40 USD, but there may be some titles priced slightly lower. Or, as is the case with the “indie” category, the 20 USD

price point can mark the highest point on a scale from as low as five dollars.

Price 60 USD/EUR 40 USD/EUR Under 20 USD varied

Type of game AAA Mid-tier Indie Art

Fig. 1: Overview of the price tiers.

AAA Games

The blockbuster, big budget games are commonly referred to as AAA games (read as “triple A”).

designers and illustrators, but also writers, sound designers, composers and (voice and motion capture) actors.9

AAA games have the biggest budget, with development costs routinely over 50 million US dollars. To date, among the most expensive games is Grand Theft Auto V (2013), with a 265 million USD spent on development and marketing which, when compared to the film industry, is more than the 237 million budget of the movie Avatar (Villapaz, 2013). The largest development companies have several studios across different countries, with each team working on a different project to meet the demand. Many companies are publicly traded on major stock exchanges. This results in a risk-averse game making strategy, where innovation is sought only in the form of eye-catching new visual technologies and consistently avoided in narrative themes, so as not to displease the shareholders with products of uncertain revenue potential. The customers buying these games expect high production values and little to no technical issues; they see the AAA label as a mark of (technical) quality.

Apart from technical aspect, the second player expectation towards AAA titles is the amount of play time: by paying the premium 60 EUR price, customers feel entitled to a certain length of gameplay, or replayability (the game's potential to offer different narrative experience on a second playthrough). The price to length ratio is a popular topic in the player community, but also a common theme found every so often in video game journalism. For example, it can be seen in the recent turmoil surrounding the release of The Order: 1886 (Ready at Dawn, 2015), a AAA action-adventure game which showed high production values in its cinematic vistas, but the actual play time was shorter than an average AAA game, as it reportedly could be completed in five to six hours (for press coverage examples see Carter, 2015, Tassi 2015, and Makuch, 2015a). Despite the uproar, there is no actual reference point for an appropriate game length, as its longevity can also depend on external factors like the quality of online communities surrounding online multiplayer

games.

Mid-tier Games

Although the AAA game classification is common and universally accepted in the game industry, there is no consensus for describing games developed by mid-sized companies. There is also no exact, cut-off size of the game budget that would divide the AAA and non-AAA games; while nobody would dispute the classification of the biggest game development companies, such as Activision or Electronic Arts, the categories become more fluid with less domineering organisations. The perception of studio size and its classification can also vary depending on the point of view. For instance, the Polish company Techland does not have a long market history like Activision, and its studio – while large – does not release as many titles as the highest grossing US or UK companies. Techland does see itself, however, as a AAA producer (Techland, n.d.) and adheres to the AAA pricing model, with its recent releases sitting at 60 EUR. Despite this optimistic outlook, the company is perceived by some foreign media journalists as more of a “budget” company (e.g. Sterling, 2011), as its Eastern European provenance and a less than pristine track record of game releases fit the budget stereotype. An older Techland title, Dead Island (2011), gained infamy due to many technical shortcomings; in spite of that, it became highly successful, which enabled the company to expand and compete with the biggest industry veterans. As a result, Techland producer Tymon Smektala repeatedly assured press that its latest release, called Dying

Light (2015), is of the highest standards, as the developers “really feel [they] need to prove to

people that [they] have made a AAA game” (Phillips, 2013). The developer's earnest tone also

shows how important and aspirational the AAA label can be to a production team.

considerably lower than the AAA products, sometimes the shelf is labelled “budget games.” As this

vague category can be viewed as inferior in quality to the top shelf, some game studios may wish to avoid the classification the way Techland did.

Regardless, most games in this price range are not riddled with technological errors, nor do they lack in craftsmanship. Admittedly, these games may lack a budget that could cover the cutting edge photo realistic graphics, but they usually do not aim for that aesthetic anyway. Instead, the smaller studios create their own stylised visual worlds which offer more variety and originality than most of the AAA undertakings. Mid-range games tend to be also shorter and may have a faster turn-over rate, which gives their creators more freedom to pursue new ideas without being controlled by lay shareholders.

“Euro Jank”

awareness of all the reasons why they can be less appealing to the players than their blockbuster predecessors. The price of these games ranges from 20 to 40 US dollars. They do not quite, however, belong to the independent games tier, as the aforementioned paucity of self-reflection makes some of these developers see themselves as creators of prime AAA content.

While Euro jank games enjoy support from a niche of aficionados, they are often perceived as an acquired taste by the mainstream audience and, thus, avoided by a large number of players. The label can be difficult to shed for less known studios which try to progress in their work, which further explains Techland's earnest admission that their title Dying Light aims to prove the studio's growth into a AAA company, since it is a Polish company with older releases showing many Euro jank issues.

Independent Games

The lowest tier offers a great variety of the so-called indie games, made by a diverse group of developers. Some games in this range are a labour of love of one or two authors, crafted in their free time and not related to their day-to-day occupations. With the proliferation of game making tools like GameMaker, RPG Maker or Unity, even those who know little about coding or are not proficient in drawing and digital imaging can try their hand at development. For example, the surprising indie hit Gunpoint (Suspicious Developments, 2013) was made by Tom Francis – a professional game journalist – in GameMaker. As his only development cost was a 30 US dollar copy of the software and the sales numbers of his game were so surprising that they enabled him to quit writing for magazines and to become a full-time developer (Francis, 2013).

distribution system, as opposed to the AAA studios. As the market structure shifted, the term lost this connotation. For instance, the already mentioned multi-national corporate giant, Ubisoft Entertainment, is independent in this sense, but in fact it is one of the market leaders. Nowadays, indie games do not have such a clear cut definition, but the term is very commonly used both by the game industry and the player community. In general terms, the “indie” label is understood in two

ways. Firstly, it can be used to refer to the size of the studio, in the way that has been applied here already: if the game has been made by a single person with a do-it-yourself attitude, or a group that could fit into a medium-size flat, then it can be seen as indie. The budget is much more limited and understandably limiting, at times supported by raising crowd-funding campaigns at sites like Kickstarer or Indiegogo (cf. Game Developers Conference, 2016: 6). The label is sometimes applied in much broader sense to anything that is not of AAA provenance, to most studios which do not have to explain their creative decisions to any lay shareholders.

The second meaning of the term indie in the video game context is more ambiguous, as it refers to a certain type of unconventional sensibility in visual and narrative design, sometimes paired with unique play mechanics. It is easier to describe the indies by what they are not: contrasting them, again, with AAA productions. While the big budget, mainstream games tend to showcase technical prowess in graphical verisimilitude, with gameplay often reusing the same tropes common to other big productions, the indie titles strive for more originality. As they are made by single developers or small, close-knit teams, they tend to have clearer aesthetic vision, with idiosyncratic approaches to level design. Thanks to independence from strict publishing or shareholder pressure and control, more risks are taken in development. There is also a variety of indie fairs and festivals aiming to promote this kind of game innovation, like the Independent Games Festival, which already runs its 18th edition in 2016.

time spent on development may also substantially differ. As a result, this diversity is reflected in varied pricing, with the most expensive goods at 20 US dollars, while some of the smallest projects are sold for as low as 3 or 5 dollars. The lack of consistency in pricing can be problematic, as there are voices heard in the player community which expect all indie productions to be sold at the lowest prices, as they see them as a uniform category, ignoring the varying amount of work and polish and used to being able to afford other indie games for a symbolic fee. This backlash towards a perceived high price is also visible in user reviews on Steam.

The low price point of indie games does not necessarily translate into low revenue. While most indie games are decidedly niche undertakings, there are a great number of indie productions, facilitated by the ease of game development and distribution for computers, so even with a small percentage becoming financial successes, the actual number of popular titles can be considerable. These games are marketed through the bundle web stores, but most importantly they have a significant presence on Steam, without the need to secure a publisher deal first. A good example of a successful release is The Binding of Isaac (2011), created as an experiment by a team of two: Edmund McMillen and Florian Himsl, built in Flash – a simple coding platform – and released without much publicity on Steam. The game sales slowly gained momentum thanks to word of mouth and growing number of YouTube “Let's play's” – videos showing a personal play session,

often with player commentary. While the game mechanics were addictive and with high replay values, the game's adult themes which touched on violence and Catholic religion turned the release into a high risk undertaking. Despite that, the title gained a cult following, with a multitude of Let's plays, forum posts, as well as a dedicated wiki compendium, and by 2013 exceeded 2 million copies sold (Matulef, 2013). However, without a doubt the biggest commercial indie hit is Minecraft. It has been a household name for a couple of years already, but its origins were humble. Created by a single developer, Markus “Notch” Persson, in his free time, it is an open-world survival game made

become one of most lucrative franchises, branching into other gaming platforms, books and physical merchandise worth 2.5 billion US dollars in 2014, when the rights were acquired by Microsoft (Microsoft, 2014). The cross-platform sales of the game in mid-2015 amounted to 70 million copies, out of which 20 million were bought for computers, making it one of the most successful games ever (Tyson, 2015).

Although it is true that the bulk of the low tier games are made by the small sized developer studios, within this space a niche of smaller, downloadable games made by the AAA companies can also be found. There is a tendency for the biggest game companies to consolidate: they buy out the smaller teams with their assets, which thus leaves them in control of a variety of studios, sometimes spread across different regions. Other times, the AAA studios themselves create smaller teams to experiment on a small scale and spread the risk. In both cases, the big studios then also commission shorter, more unconventional titles which are priced at 15 to 20 EUR; these games correspond in length and more indie (or simply less mainstream) sensibilities to the production of many of the medium or small sized studios.

A good example is the already mentioned French giant Ubisoft Entertainment: a global company listed on Euronext stock exchange, with 27 development studios across 19 countries (Ubisoft, n.d.). The company is most known for releasing many AAA titles with long development process and high budgets, like the Assassin's Creed series, which have already expanded into lucrative mainstream franchises – there is even a Hollywood film being shot within the Assassin's

Creed universe. Despite the heavy hitting money makers, the company diversifies its portfolio by

focus on low-key drama make it an indie game not in the corporate sense, but in its distinctive aesthetics and price tag. The same can be said of Valiant Hearts: The Great War, which is a heartfelt puzzle adventure game created by Ubisoft Montpellier and released later the same year.

Art Games

Art games form the most difficult category to define, not least because it overlaps in many ways with indie titles to an extent that it may be easier to see it as an indie niche. Again, the game may be completed by a single developer, or a small team, with a singular, unique vision that goes beyond what is traditional, so it may seem redundant to carve art games as a separate tier. However, art game category is used in this thesis because the indie spectrum is too wide and, ultimately, may not be descriptive enough because of its variety; the term art games will be used to differentiate the truly independent, creative endeavours from purely commercial undertakings by small developing teams that also belong to the indie tier.

The art world does not claim the niche, as it generally has a lukewarm approach to video games. The reluctance of many writers on art to accept the games' potential for becoming art is almost palpable, with many arguments sounding like backhanded compliments, saying that “significant videogames have been created even though none can be considered art” (Martin, 2014:

355). Statements like these may come, however, from ignorance of the most creative developer communities which exist on the fringes or outside the field and as such are known to a limited audience, considering that these opinions come with prescriptions of how to achieve artistic merit:

Producers of [video games] must take drastic and expensive measures to create games that leave past

mediums behind and create games that can independently be considered art, if that is what they truly

desire to achieve (ibid, 355).

experimented in the ludic, narrative and visual layers; they even have a small presence on the market, when they are shown on Steam. Because of their unconventional solutions, many players used to mainstream games use the designation of “art game” as a deriding term for games that are not “fun,” because they subvert their expectations of the medium as purely a form of entertainment,

or are perceived as elitist. This type of criticism does appear in player reviews, where the players sometimes complain that this type of game is not what they paid for. Similarly, alternative game developers tend to object to the “art” label, although usually it is justified with a different line of

reasoning: they may not appreciate the emergent dichotomy of art and enjoyment.

Market Instability

CHAPTER THREE

In the following chapter, theoretical groundwork for the Steam user review analysis will be briefly outlined, such as key information about video game player communities. Electronic word-of-mouth will also be discussed to explain the potential impact of non-professional reviews on sales and thus justify the review analysis.

Player Communities

As with any other pastime, video games have given rise to a dedicated, close-knit community, but the sense of belonging to a tribe of “gamers” – as the gaming zealots like to call themselves – is also

magnified by the specific qualities of the activity of play itself. As Johan Huizinga observed in his seminal work Homo Ludens (1949), the creation of inter-personal bond is one of the characteristics of play, which “absorb[s] the player intensely and utterly” and “promotes the formation of social

groupings which tend to surround themselves with secrecy and to stress their difference from the common world by disguise or other means” (13). As it now stands, the video game community may

not be secretive in a literal sense. With its millions of devout players participating in massive online multi-player games and elaborate tournaments it has clearly dwarfed its humble geek subculture roots. The secrecy and elitism has a different form. The bond between players, which starts in common engagement, is cemented by a formidable jargon: an esoteric lexical maze which encodes online communication.

The bonds between video game enthusiasts are not only strengthened by common play and language, since the mechanisms behind online communities are also working in their favour. As Ray et al. have succinctly stated in their summary of previous research on online communities: the members “share a sense of collective belonging and mutual responsibility […], and they have a sense of obligation toward fellow members and toward community as a whole” (2014: 529). This

or in the already mentioned YouTube Let's Plays. Hence, the natural propensity of play – building bonds between players – not only applies in-game (i.e. while being immersed in a specific game), but also is easily reinforced outside of play by mirroring bonding mechanisms inherent to online communities.

Work and Play

The video game industry has already spotted the cohesion and agency of player communities and has been working on ways to leverage the potential. As Burger-Helmchen and Cohendet (2011) point out, the players do not accept a passive role, but increasingly become active and creative, as they contribute online content, spearhead interactions and fuel social gaming to such an extent that game companies try to interact and influence them. The scholars also offer a continuum of player engagement and outline the influence of players on game developers and publishers. With this in mind, it becomes more obvious why Valve developed Steam store beyond a simple e-commerce portal and into a bustling community hub: Steam forums and the review system are outlets for the hyperactive gamer community which keep the clientèle within a link's reach from games to buy.

Player communities are characteristically more proactive than an average fan community. Their creative output is not limited to just peer-to-peer discussions or building crowd-sourced knowledge databases; their interaction with game developers often goes beyond expressing enjoyment or disappointment with their games. For example, some players create their own game modifications, called “mods,” which provide game expansions ranging from cosmetic corrections to

player communities.10 Steam offers developers Early Access programme, which allows them sell games in unfinished state, while finalizing the game based on the customers' feedback. Julian Kücklich calls attention to the exploitative nature of such practice when used by industry giants to

save on research and development costs, calling it playbour, as “leisure is being commodified by the games industry” (2005: n.p.).

Steam Community

Steam platform offers a smorgasbord of community tools to engage players and thus build a devoted customer base. There is a social network of users with highly modifiable profile pages with game achievements; there are friend networks, forums and a chat system. There is even a gamification meta element: a digital card trading system with its own real currency market. Digital communications scholar Christopher Moore describes how Steam differs from conventional social networks:

Unlike social networks, like Facebook, which converts the informational data of user profiles and actions

into intellectual property monetized by the sale of accumulated data, Steam uses gamers’ practices, social

relationships and goodwill to directly convert play activity and investment of time into further acts of

consumption. (2011: n.p.)

Steam user reviews are no exception. While they provide inarguably useful crowd-sourced commentaries on games, the positive and negative reviews are grouped and labelled as “recommended” and “not recommended,” presumably for purchase.

Electronic Word-of-mouth

From a marketing perspective, player community which engages in writing user reviews is

spreading electronic word-of-mouth (EWOM), which is especially important since video games can be categorized as experience goods. As opposed to search goods, which can be fully characterised by their attributes before purchase, experience goods have attributes that are unknown or hard to obtain until purchase (Park and Lee, 2009: 62). As has been described in the first chapter, players cannot be fully sure both of the content and the level of technical polish or smooth work of the software before buying. The resulting high risk of purchase leads to higher interest in professional and user reviews. Accordingly, it has been demonstrated that the impact of electronic word-of-mouth is greater in case of experience goods than search goods (ibid: 66), but also that the effect of the website's reputation is bigger in case of experience goods (ibid: 65-66) Furthermore, “experience goods, compared with search goods, sustain greater damage in the EWOM effect due to negative EWOM information” (ibid 65).These findings mean that firstly, in case of video games,

word-of-mouth is more important than for search goods, and secondly, that the well-established reputation of Steam store further magnifies the significance of the user reviews it contains. Lastly, any negative comments, like Steam users' dissatisfaction with the price-quality ratio will have an even stronger impact.

the 2015 report compiled by the Entertainment Software Association, which provides the rationale behind game purchase in the USA (see fig.1). As can be seen, word of mouth is one of the three key factors influencing consumers, outpaced only by the game's premise and price.

Fig. 1. Factors influencing purchase (Entertainment Software Association, 2015)

Negativity Effect

Steam as an EWOM Platform

The relationship between players writing user reviews and Steam is beneficial to both parties. The dominant position of the Steam store on the online market lends added weight to the user-generated comments and reviews which could have been otherwise mistrusted or ignored, as academic literature has shown that website reputation matters to consumers. Specifically, a study conducted by Shamdasani et al. (2001) shows that in the unmoderated expanse of the Web, well-known and established websites are generally more trusted. Confidence placed in a reputable website influences and shapes the perception of user-generated content found within these websites: as has been said, it has been demonstrated by Park and Lee (2009) that the effect of the electronic word-of-mouth is greater for established websites.

Methodology of the Study

The subject matter of this thesis has been approached ethnographically as an exploratory study, based on Robert Kozinets’ concept of netnography, which is a “research methodology that adapts

ethnographic research techniques to study the cultures and communities that are emerging through computer-mediated communications” (2002: 62). The problematic existence of game tiers, as described in chapter two, was first noticed while “lurking” (being a non-commenting member of a

forum) in 2015 during an experimental, informal observation of the player community. At that time, the author of this thesis was a member of the Steam platform to participate in its social aspects. Simultaneously, other fan platforms and comment sections below articles on popular video game websites11 were read and saved as screen captures, in order to acclimatize to the community idiom and to glimpse some of its general concerns. With this initial information at hand, the tier system was described based on apparent pricing strategies and professional media outlets, as no academic literature existed which would analyse the pricing structure at large, beyond the AAA games.

With the marketing research question about the place of price discussion among the player community in mind, it was then necessary to define the field. In case of netnography, it is a specific online collective of a website, since traditional geographic limitations do not apply. Kozinets advises to choose an active, research-relevant assembly with a larger amount of users who interact and produce “detailed or descriptively rich data” (ibid: 63). The Steam reviews section meets all of

the criteria, as it is a work of a thriving community and – unlike the general forum boards – it is centred on games openly treated as a consumer good.

As the means of narrowing the amount of data, twelve games representing all tiers were selected as base points for reviews; the rationale behind the choice is explained in the next chapter. The study was based on archival data – asynchronous review posts – which was recorded in text spreadsheets and observations were collected as field notes. As to privacy concerns, all of the reviews were public: no account was needed to read them, although Steam offers a privacy option where reviews are visible only to the friends of the poster. The collected information was analysed using the open coding method. As the aim of the study was to fathom the importance of money to players, it was important to extract relevant texts out of the sum total of reviews. Firstly, this stage began with drafting a tentative list of key lexical units associated with worth, but only including terms which conveyed monetary value, money and pecuniary transactions. The list was tested and revised while collecting new review data by going through the player texts, which also helped with recording reviews which had various spelling mistakes in the key words. As a result, a sizeable amount of reviews concerning pricing was singled out and analysed using constant comparative method (e.g. Thornberg and Charmaz, 2014 and Roulston, 2014: 303). The resulting grounded theory is presented the next chapter.

verified to avoid non-market meanings. While many of the words inevitably appear together in common phrases, such as “for five bucks it's a bargain,” the list is long to include any odd phrasings

that could have otherwise been missed.

 price

 money

 bargain

The first two words have straightforward pecuniary meanings, but in case of “bargain,” any metaphorical use like the phrase “to get more than you bargained for” was discarded. The word “money” was also repeated in reviews in repetitions of the internet meme “shut up and take my money,” which is a way of saying that the commenter is already completely enthralled with the idea

or product and eager to make a purchase, or to “throw money at the screen.”

 cheap

Again, any reviews with non-financial use like “cheap shot” were not added to the analysed data.

 expense

 expensive

 worth (something)

Worth was the most difficult word on the list in terms of discerning price relation. After all, it does show market value, but ambiguous phrases like “it was worth it” proved to be difficult to judge during data collection. In these cases, whole paragraphs of reviews were taken into consideration to ascertain the nature of each usage. Additionally, any throwaway appearance of “it was worth it” was

dismissed; as a consequence, if anyone were to follow up with a strictly quantitative analysis without case-by-case approach, they will have a much larger number of flagged reviews.

 too much

 pay/ paid

 cost

 refund

Steam started offering refunds in 2015, which is not a common occurrence in digital game retailer.

 buy/bought

 sale

 purchase

 value

 buck

This was another common lexeme which more frequently appeared out of its colloquial monetary meaning, in phrases such as “to buck the trend.”

 dollar  Euro  pound  charge  steal  spend/spent  sell/sold  discount (-ed)  cash

Naturally, there is little use for the literal meaning of the word in an online-only retailer, but it did appear in phrases like “cash grab.”

 half off

 profit

 $ / £

Upon reviewing some of the collected user reviews which did not contain price-related lexemes, but were mentioning price, it became clear that it is necessary to expand the list of key words by adding dollar and pound signs in order to flag otherwise difficult to trace phrases like “a 10$ game.”

Although the above word list was reviewed during text analysis, the list cannot be seen as exhaustive; there may be other expressions left out when they did not appear in the analysed sample. Additionally, the list would have been longer if a more general scope of market related terms was taken into consideration. For example, lexemes concerning time and duration of the game and its worth would have to be added, to account for opinions like “worth the time,” and factor in