Games as a service has "tripled the industry's value"

Digital River report finds consumers prefer games with a steady stream of content over a $60 boxed title

By Haydn Taylor.Published Tuesday 10th October 2017, 2:44pm GMT

A study from monetisation service company Digital River found that games as a service has tripled the industry's value.

The report, Defend Your Kingdom: What Game Publishers Need to Know About Monetization & Fraud, noted that developers of all sizes are benefiting from the "steady stream of in-game content that both serves player expectations and increases their revenue per user."

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The report continued: "This does not just apply to free-to-play titles: In 2016, a quarter of all digital revenue from PC games with an upfront cost came from additional content."

Digitalisation has forever changed the economics of the videogame industry, the report says. Consumers are expecting more for less from game developers, an issue which has also plagued indie game developers for some time.

These shifting notions of value in the videogame world have irrevocably altered players' spending habits, the report found.

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"Consumers are less willing to pay $60 for a boxed game and instead choose titles with a steady stream of new content," the report said. "Publishers seek to meet these expectations and have adopted a 'games as a service' model, releasing fewer titles over time while keeping players engaged longer with regular updates and add-ons."

According to Digital River, this change from up-front costs to protracted spending means that revenue per user is expected to grow twice as fast than the rest of the market. This is backed up by findings that, on average, PC players in the US wait 21 days after they decide they want content before buying in the hopes they can take advantage of a sale.

As a result, Digital River concluded that "gamers are gaming the games market." This, in turn, leads to creating a space for third-party distributors to meet the growing demand for discounts.

These digital key resellers are prone to fraud, and Digital River noted that third-party sellers buy game keys from publishers using stolen credit card information, then offload the keys onto grey market sites - a practice which is harmful to publishers and players alike.

"When the fraud is detected, publishers who sold the keys are hit with chargeback fees," the report reads. "Game makers can deactivate illegitimate keys, but the players who bought them do not usually know they are part of a scam. Gamers may believe their keys have been deactivated for no reason, and this can cause a negative backlash."

Grey markets have long been the subject of controversy, with digital code marketplace G2A in particular finding itself banned from sponsoring League of Legends tournaments, and TinyBuild Games saying the company "facilitates a black market economy."

The inevitability of an increasingly digital marketplace means that publishers and developers must invest in proper payment safeguards, the report argues.

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"This way, they can stop fraud at the point of sale and deprive markets of illegitimate game keys. Publishers should also clearly state which third-party sites are authorized to sell their products, since hardcore gamers are becoming aware of the issues with grey market fraud."

The grey market is especially problematic for publishers, according to the report. Digital River said: "Previously, publishers simply lost revenue from a pirated boxed game. Now, many developers prefer piracy over credit card fraud so they don't end up with negative revenue."

Digital River also offered up some means in which publishers could tackle these issues. It suggested adding safeguards like trade-waiting periods and restrictions on new accounts; investing in proper payment safety measures; being transparent about which third-party sites are authorised to sell their products; and providing safer, more streamlined storefronts.

The full report can be read online here.

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