Tech News: Ubisoft Moving Toward Free to Play

point of view on the news. And earlier this week, the head of finance at game developer and publisher Ubisoft said on a call with investors that producing three to four premium triple A game titles per year is quote no longer a proper indication of our value creation dynamics. In the quote, Um, that's not easy to parse language, ain't it. I mean, it's got all sorts of corporate

speak in there. But what's actually being said here is that the old classic model where a company produces a premium title and then relies exclusively on sales of that title, is more or less a thing of the past, and it's important we walk through this now. I did some episodes about the history of Ubisoft last year, I think, and this is kind of an addendum to that in a way, because it's a a look at how the

company is viewing its future. I should also point out that a lot of folks have actually covered this story pretty thoroughly, a lot of Pierce, who works at Sony Santa Monica, did a fantastic breakdown explanation of what's going on from an industry for Inspective. I highly recommend you go to YouTube and check out her video. It's titled Let's talk about Ubisoft Going free Play. I'm gonna be going over some of the same ground that she does, but she's super good at this, and if you're not

familiar with her work, you should check it out. She does all sorts of stuff um with her channel, mostly to kind of relate to the video games industry, not exclusively, but frequently, and she's got some really good insight on this um having worked both as a games journalist and now working to write video games. So let's consider for a moment the business of making video and computer games, because it has changed dramatically, and keep in mind this

is still a relatively young industry, so forty years ago. Okay, maybe not that young man, I'm old. Anyway, forty years ago, it wasn't unusual for a single person to make a game. That person would program the game from start to finish, they design everything. But then getting that game out so that people can you know, buy a copy was still a big hurdle. There was no Internet that the average

person could access back in those days. So some early programmers, like say Richard Garriott, who was the creator of The Ultimate series, they got their start making games and copying their code to diske kets, you know, like five and a quarter inch discs, and then packaging those up in ziplock bags with maybe a page of instructions, and they would then go to their local hobby stores, which would sell them for you know, X amount of money per copy.

You would even find bulletin boards where these bags would just be hanging from a thumbtack and you could take one down and go up to the cash register and purchase a computer game this way. But obviously that approach net you have a very limited number of customers. It's not scalable. It's not like you could do this nationwide. You could maybe do three or four hobby stores in your general area. Then you're kind of done. But then

you've got your video game publishers. These are companies that, at least in the old days, would form relationships with various retailers and the publishers would pay developers for a game title. Uh, sometimes you would have a developer and a publisher be the same entity, but a lot of times you're talking about, you know, one group is developing the games and then the publishers are taking it from there.

Then the publishers would distribute that game title to various retail establishments, So the publishers would get money from retailers who turned around and then sold copies of the game for a profit. So everyone along this chain got paid. The retail stores were getting paid by the customers, the publisher was being paid by the retail stores, and the

developer was being paid by the publisher. So you had to cover your costs obviously every step of this chain, right, The developer needed to make enough money to cover the time and effort that went into creating the game. The publisher needed to make the money back that was sent to the developer, and the retailer needed to make up the money that was spent on getting inventory. These relationships

came in a variety of forms and agreements. Uh sometimes there were royalties involved, which was great news for the developer with royalties, if the title sold really well, the developer would benefit from that with royalty payments, but this wasn't a guarantee, especially in the old days of game design. One thing that was pretty darn firm, however, was that the purchase of a game was the end of the transaction.

So if I walked into a computer store and I purchased a copy of Ultima, well that was one unit sold and the transaction pretty much marked the end of that. Right, I bought my copy, I handed over my cash. Done, so you generate revenue at the point of sale, and that's it. Flashboard a few years, and then you get some new models that start to pop up. One was expansion packs, so companies would create expansions to previous titles

that already had an established fan base. So if someone makes a game and it sells really well, often that means that the players are really eager to get more of whatever it was that they liked, so you can create additional material, and expansion packs frequently leaned heavily on using the assets that already existed for the original title, which meant that the developers didn't have to reinvent everything, they didn't have to build a game from the ground up.

They could repurpose assets for this new content. That streamlined the development cycle, and it brought development costs down, and now companies could continue to make money off of US Civic title. Though this approach does require that the developer put some resources into making the expansion, and you know, it's not as simple as just making more money off the same thing you sold. You have to convince people, hey, this expansion back is going to give you more of

whatever it was you enjoyed of the original game. A little bit later, you also saw an approach called sharewear, which was incredibly clever. Now, typically a shareware title would give players access to a part of a game, but not the full title. So, for example, in a first person shooter game, it might include the first third of the game for free, and you could get a copy

of this. Back in the old days, it was still on diskette and you could install the game on your computer and play right up to the point where the you know that sharewear part ends and upon reaching the end of the free section, you would encounter a message that would encourage you to purchase the full game, you know, maybe through mail order or whatever, and then developer would send you the full game on disc and you could

play it. And a lot of games were distributed this way, like Wolfenstein three D. Brilliant approach, because what Wolfenstein three D did was it encouraged people to make copies of that shareware version and to give those copies out to their friends. You you, you know, you had players doing the marketing for the company. They were distributing this shareware version of the game, and every single shareware version ended with that message saying, hey, I hope you enjoyed this.

If you want the full game, you know, here's how you can buy it. And so players were effectively doing a lot of the marketing and distributing for the company at the ground level. It was an effective way to get a game awareness out there, and several titles found

success through that method. By this time, games were getting more sophisticated, and now you usually had teams working on a title with people, you know, specializing in particular skills like art or music or programming, and the costs of developing a game. We're going up because you had more folks spending more time putting together each title, but generally speaking, you still had that same revenue model where someone would purchase a title that was that that was the end

of the transaction. Then we get up to the era of downloadable content or d l C. Games that have DLC allow you to augment an existing title by downloading additional content, and DLC can come in lots of different forms, some of which provide at least arguably more value than others. So you might offer up additional levels or experiences within a game as DLC, or you might give players the chance to use special items in a game, like weapons

or vehicles, but only if you get the DLC. There's no way to get them through regular game same play. Or you might allow players to play through the same game but as a totally different character. So in some cases it might just be as simple as subbing one character model out for another, but in others it might involve shifting the entire storyline so it actually reflects the perspective of this other character, and it creates an all

new game using the same basic mechanics. Some DLC was purely cosmetic, and it gives players a chance to make a game look different in some way, either they're player character or level design, or whatever it might be. DLC comes in all shapes, sizes, flavors, and price points. You've got some DLC that ends up being practically as expensive as a full game. You have other DLC that it's a micro transaction. You're just paying a small amount of money for some tiny element of that game. And there

have been some pretty incredible examples. Occasionally you get DLC that eclipse is the popularity of the original title. But there are also examples of really really bad DLC, and they're hard to frame as anything other than a cash grab and a waste of money for the player. DLC really opened up a new revenue stream for video game developers and publishers. Now companies could continue to offer additional content and features to an existing game and charge players

to access it. They could keep making money off of a title after they sold it. So rather than having a person just plunged down their fifty or sixty or today seventy bucks to purchase the title and then walk away forever, they could see that that person plunged down the cash to purchase the title, and then occasionally offer up some more cash when they saw some DLC they wanted to own, or a micro transaction that they didn't mind paying for. And that's when we get to loot crates.

Loot crates. Now, if you're not familiar with loot rates and games, these are things that typically players can earn through in game activities, but it can take a lot of time for them to earn them that way, or they can earn them very quickly by purchasing them with real world money, and again this tends to be in the micro transaction range. The loot crate represents the potential to unlock something interesting in the game. It might be

an outfit or some other cosmetic effect. Those are the types of loot crates that, in my experience, are generally viewed as being the least offensive, because if you don't care about aesthetics, then you don't feel pressured to engage in it. But for other players who just really like making the look of their character unique or at least unusual,

then it's really appealing. Some games, however, will include items and loot crates that have an actual in game effect, like better weapons or other types of items, and that tends to rub players the wrong way. It gets into a pay to win kind of classification. Now, there's no guarantee with a loot crate that you're gonna get anything you want when you open it. It might be something that you don't want, it might be a copy of

something you already have. The distribution of items is at least in theory, randomized, with rarer items having a lower percentage chance of spawning when you open the loot crate. Um Though you don't necessarily have a guarantee that this is all random anyway, but in theory it's randomized, and it is the The chances of you getting any particular item are based upon some percentage of that reflects how

rare or common that item is within the game. Um. Some real world regions have classified the loot crate system as being akin to gambling, because again, you don't know what you're gonna get. There's a chance you'll get something really rare in the game, there's a chance you'll get something incredibly common, and thus these regions have kind of

cracked down on the practice of loot crates. And there's definitely something to be said for that psychological payoff that you get when you open a loot crate and you get something neat inside it that does tend to encourage people to make more purchases, and that obviously can get really harmful if left unchecked. It can feed into sort of an addictive cycle. Then we get to the free

to play model. With free to play games, players get access to the base game for free, as the name implies, but then the game typically offers lots of ways that players can enhance their experience through making purchases somewhere inside the game that can include unlocking new content. So maybe there's certain parts of the game that are inaccessible unless you pay for them. Uh. It might remove level caps so that you know you no longer are stuck at maxing out at a lower level. Uh. It might give

you access to special equipment or cosmetic items. And there are games that do this really well, like games like Fortnite. The Battle Royal mode, which is arguably more famous than the original version of Fortnite, is free to play, and players can purchase stuff like character skins and emotes and

dances and that kind of stuff. So all those viral memes you see of like Fortnite dances, Well, those represent streams of revenue, because if you're playing the game and you want to feel like you're part of the cool club, you're gonna need to shell out some cash so that you're not just stuck with the default options that come standard with the game. All Right, we've laid up the basics. I'm gonna go into more detail, but before I do that, let's take a quick break. Okay, So free to play

games are free to play, as the name implies. Sure, but unlike a Triple A title that's a one and done from a transaction point of view, these games typically have hundreds of different ways that people might spend money on it over time, and they tend to be titles that get long term support. They encourage players to stick with playing that game indefinitely. So with the traditional Triple A title, you would make a purchase, you would play through the game, maybe you'd play through it a couple

of times, but then you would move on. You wouldn't just keep playing that same game over and over because there's a limited amount of content and entertainment value there and eventually you would exhaust it. Um. For a lot of the traditional Triple a titles. I mean, now, a lot of these free to play titles aim to keep

players active on them for years if possible. So what stuff like DLC and Luke Crates and free to play really did in the industry is start to shift the thinking and the perception around what games mean from the industry side. From the business side. Producers began to look at video games in terms of how much entertainment players were getting per dollar spent, like what's the what's the

value of entertainment of a game? And then they compared that to other forms of entertainment like movies, and that I think is kind of apples to oranges. It's not a real fair comparison, but it is something that's happened. Alana appears in her video that I mentioned earlier, the one about let's talk about Ubisoft going to free play. She points out a piece that was done at Activision that really shed light on this line of thinking. Let's

take a movie as an example. So if we go by Statista, the average price for a movie ticket in the United States is nine dollars and sixteen cents, or at least that's what it was in which is news to me because here in Atlanta, it's much higher than that. The average price seems to be closer to around fifteen dollars.

In fact, I actually did a quick check before this podcast and found a ticket to Mortal Kombat, which would set me back fourteen dollars thirty four cents plus it would steal a hundred ten minutes of my life away and I would never get those back. Mm hmm. I've seen Mortal Kombat. It wouldn't have been worth the fourteen dollars and thirty four cents. So one minutes, that's a

smidge under two hours. So you're looking at roughly seven dollars per hour of entertainment value if you're taking that perspective that you're paying seven bucks per hour for your entertainment. But now let's take a look at a triple A title video game, and since Ubisoft is the company that got us talking about this in the first place, let's use one of their recent titles with a ses sence, Creed Valhalla. That game cost fifty nine cents or sixty

bucks when it first came out. According to PC Games to the nth Power, the expected play through time for Assassin's Creed Valhalla is somewhere in the neighborhood of sixty to nine hours. So when you average that out, it comes down to somewhere between sixty seven cents to a dollar per hour of entertainment. So, if you're looking at this as a quantity of entertainment per unit of currency perspective, movies are way more expensive per hour than triple A

title games for the consumer. On the flip side, movies net studios way more money per hour of entertainment than video games. So if you're looking at it as a company that makes video games, you're left with the question of, well, how can we get more money per hour of entertainment. We're giving away hours of entertainment here. We should really rethink how we're going about generating revenue for games. We can't leave money on the table. We need to figure

out a way to optimize the monetization of entertainment. Well, the free to play represents a way to get more money per player over the long run. Now, some players might never spend a dime on our free to play game, but others will end up spending way more money than they would if they were just purchasing a triple A title outright. Someone who might have balked it dropping seventy bucks on a game all at once, could, over the course of their time playing a free to play game,

spend twice as much as that or more. Once it's all said and done. It's just all of these transactions are on a much smaller scale, and then they add up. Plus, this approach can bring development costs way down. I mean, you still have to develop the base game. That is still a big commitment, but once that's done, any additional development can be done on top of that existing framework. Now,

it might require some tweaks. So for example, if you introduce new weapons or characters in a multiplayer shooter game like Overwatch, you might have to rebalance the game if the new character proves to be too powerful or not powerful enough to go toe to toe with the characters who are already part of the roster. Now this marks a shift of games as being you know, distinct units of entertainment for purchase into becoming more of a service.

There are many manifestations of games as a service. There are subscription plans. There's like the Xbox Game Pass, which for a monthly fee, gives you access to a selection of games that you can play. You know, you could argue you can play them for free, though you're not really playing for free because you've got the subscription fee.

Then you have persistent online worlds like World of Warcraft AFT, which you know traditionally had a subscription associated to it or with it rather or g t a online which has lots of different versions of micro transactions to get access to various types of content in the online world.

And there are free to play games that have additional content available for purchase, and all of these are different variations of the same basic idea creating a game that allows publishers to continue to make money on an ongoing basis, rather than have a game launch and then sell x number of units of that game and then that game fades from consciousness, so you have to do it all over again with a new title. And this coincides with more players purchasing fewer titles but spending more time in

individual games. So it's not that people aren't playing games as much as they used to, it's rather that they're spending way more time playing specific games. So in some cases this goes along with branding. So for example, there are twitch streamers that I watch who are best known for playing one or two specific titles. Uh Meg Turney is a dead by daylight fiend and she scares me in some is a phasma phobia expert who can practically run through the toughest levels of that game with his

eyes closed and still win. Joe Woudle is best known for his content around Seven Days to Die and Sure for streamers, their brand often gets tied to specific titles, and that's a little different. But apparently even for non streamers, the trend is that folks are buying fewer titles but spending more time playing each title. Anecdotally, I can say that that is true for me, but anecdotal evidence isn't really evidence. But here's my version. I've been playing a

few games, an awful lot, you know. I've been playing a lot of Star Doo Valley because I got to get that completionist achievement and it's I didn't go about setting up my farm super efficient at least, so it's taken me way more time than it should. I also spent a lot of time playing hit Man three, which continues to release more specific content for that game and

continues to be really interesting to play. I spent a lot of time playing the game Hades, which is a roguelike game that is really exceptionally well done and infuriating, but I love it. And we see a long running trend in Triple A titles of sprawl and epic epic nous so games like the Elder Scrolls series. They have so much content in these games that it might take you more than a hundred hours to see it all. Some of them have so much sprawl that I, as a player, tend to get worn out before I ever

play through it, and I just never finished the game. Now, this is a personal issue for me, Like I have trouble with side quests because I always want to complete all the side quests before I finished the story. And I get this, this fear of missing out. If I continue the story, it means I might shut myself off from certain side quests, and I don't like that. So then I end up pursuing all the side quests and I never finished the story mission. And yeah, it's a

I get it. It's a personal problem. Now, the free to play model depends on creating essentially open ended gaming experiences. The game can't end because if it did, then players might move on and the whole value proposition from the corporate standpoint is that the game never ends. It encourages

continued play. Now, some games work really well with this model, and they tend to be stuff like competitive shooters and Battle Royal games and that kind of stuff, because those games aren't so much about completing a story, but rather about competing against other players in various types of matches. There are lots of good games that fall into this category, they just don't tend to be the games that I prefer. Meanwhile, the financial numbers show that this trend is likely to

continue and in fact accelerate. Jeff Keeley tweeted out that when it comes to e A's revenue, just twenty six percent of that revenue came from selling premium titles, and the rest of the stuff came from things like mobile games and micro transactions and DLC. So nearly three quarters of all of e A's revenue came not from selling big ticket titles, but rather all this kind of additional stuff that's on the periphery of a big title. And

developing video games is incredibly expensive. It takes a lot of time, and there are ways to make way more money for smaller investments of time and effort, so it's no surprise that Ubisoft is making a larger move toward that direction. Now, does this mean that the era of the self contained single player video game experience is coming

to an end? Should we expect all game titles moving forward to be about this ongoing experience and and more consistently an online multiplayer experience, one that encourages players to spend smaller amounts of money over time, but to continue to do so over the course of years. I feel like that's going to be a major focus for a

lot of big publishers out there. That being said, we continue to see some incredible games made by smaller studios, and some of these games are exploring storytelling in really interesting ways. Some represent a smaller experience, something that has a definitive ending and perhaps doesn't require forty or more hours of play to get there. Personally, I'm finding those style of games really rewarding. I enjoy it when I

get a chance to play them. It's refreshing to play something that isn't trying to coax me into another dozen hours or whatever. It's just a really compact, well to designed experience. I really think that those are awesome, And I think we're going to see a mixture of these approaches, with smaller studios kind of filling in the big gaps

that are left by the larger companies. To be Soft and Activision and e A are likely to prioritize games that have these ongoing transactions as part of their design, maybe in fact, the central part of their design. And I guess that's okay. I mean, I'm not super jazzed about it, but these tend to be games that I don't play all that frequently anyway, with the exception of games like hit Man. I mean, I do play some

of them, just I don't play all of them. And meanwhile, you've got other studios making experiences that aren't meant to be persistent ones that last indefinitely. That's okay too. As for the whole free to play movement, if I don't know that it's going to bring more people in to try stuff out and might I mean, for me, it's not always the perception of the cost to me, it's the perception of am I going to really enjoy this experience.

So for certain titles like Assassin's Creed, it's heavily dependent for me on the context of where that game falls, Like Assassin's Creed Black Flag was a pirate Assassin's Creed, and that was speaking my language. I love the the the romantic image of piracy, not the real one, but the romanticized piracy image. I I find that really compelling,

and so I loved playing that game. But there are other titles in the Assassin's Creed franchise that just, you know, I didn't have any real interest in, so I didn't try them. I don't think that making those free will necessarily encourage me to try them out. I think it just has to appeal to me first, and whether or not it's free or I have to pay for it, uh,

is kind of beside the point. However, I also knowledge I'm in a very privileged position where I can generally afford to play these kinds of games, and for other people who might not have that kind of privilege, this could be great. Like they get a chance to try out games that they might really enjoy. Uh. They might not be able to access all the different content of those games, which is kind of a bummer, but they'd at least get a chance to play the games, So

that's kind of cool. I'm curious what you think. Um, for those gamers out there, shout out to me over on Twitter text stuff, hs W is the handle and uh, let me know, do you think the free to play micro transaction approach is that okay? Is it ruining games? Do you like it? Do you hate it? Are there types of games that you really enjoy? Are there some that don't really exist anymore? Thanks to independent game studios. I think that a lot of the styles I really

enjoy still get produced, depends on the studio. They can be of, you know, very in quality. But I get inspired by some of the stuff I see, especially the weird stuff I see all of independent studios. Anyway, that's

it for this episode. Uh. Usually I would just do a tech news episode straight up, but this particular item really hit me, and I thought it would be great to have more of an opportunity for me to get on a soapbox and talk about games and monetization and revenue and how how this business of making games is in fact a business and so we have to admit that, you know, we have to acknowledge that and not just say that this is something about, you know, creating entertainment

for any altruistic purposes or whatever. But um yeah, I'm curious to hear what you all think, so let me know and we will be back next week with more episodes of tech Stuff, including our usual news episodes. And with that, I'm out of here. Y'all take care and I'll talk to you again really soon. Y Text Stuff is an I Heart Radio production. For more podcasts from I Heart Radio, visit the I Heart Radio app, Apple Podcasts, or wherever you listen to your favorite shows