Used Video Games: Online For $10

It's like this, only the dollar bills are flying out of your wallet.

It started with Electronic Arts, and now the trend has added THQ, Warner Bros, and the latest companies to join are Ubisoft and Sony. What's this trend? Making online access a separate fee for purchasers of the game, if you aren't the original buyer. When you buy an EA Sports game, for instance, it will come with an online code that you enter to allow you to compete online. No extra charge, so it's not really a big deal. But when you sell that game to GameStop, the person who buys the game from GameStop can play it all they like on their console... but when they want to play online, they'll have to pay $10 for a new online code.

Of course, you can expect this to result in a lower price being paid for your used games by GameStop, but the publishers really don't worry about that. This is a way they can get something from a used game sale, which is more than the big fat nothing they currently make on used games. It makes sense to me that someone has to pay for the servers, and it really should be the game players, whether it's the original buyer or not.

It's one more move along the line to software as a service. The publishers have tried different monetization schemes, such as subscription plans. This is one more way to help keep those servers humming. Of course, if more games begin offering free-to-play models with monetization from virtual goods, this may not succeed competitively. For sports games, though, it seems to make sense until they start charging you for each fantasy league player you want to own. Which may happen someday... looks like everything is being tried.

I think the only thing you can be certain of is that you can't really be certain of anything in the game industry.

Riot Sold To Tencent

I found it interesting that there were two big acquisitions last Friday, of nearly equal size, that were covered very differently in the press. One was the acquisition of The Huffington Post by AOL for $315 million; the other was the acquisition of Riot Games by Chinese Internet company Tencent for just north of $400 million. AOL's acquisition was headline news on the television and in the news papers, covered extensively with plenty of speculation about what this might mean to the future of the media business. Tencent's acquisition was covered by a few gaming websites, but otherwise caused nary a ripple.

Riot Games is the creator of the amazingly successful game League of Legends, a real-time strategy game that's free to play. They make money by selling you different skins for the characters, and additional characters that you can use in the game. This model has been a winner for them. Not that they've released any revenue numbers, but I deduce this from the fact that they have 100 job openings (!). Tencent was an early investor in Riot, and they are positioning this as just a further investment in Riot Games. Tencent plans to leave Riot Games management alone, according to their press release. Why mess with success?

Tencent's totem creature apparently lays gold coins.

If you're wondering who the heck Tencent is, this article has some interesting facts. The most interesting tidbit: If you ask the question "Who are the top three Internet companies by market capitalization?", the first two companies to leap to mind are Google (#1) and Amazon (#2). The third one... is Tencent. They apparently do very well in social networking in China (no doubt the Chinese ban on Facebook has something to do with this).

What's more interesting is what this acquisition might mean for the future. We'll no doubt see other games from Riot Games at some point, and they'll probably use the same basic F2P (free-to-play) monetization scheme that's been working so well. I'm sure Tencent, who has other game studios in the US, will be using F2P in their games as well. How long will it take big US publishers to figure this out? Well, it could take a while. Converting an existing game is not easy; you can't just take Call of Duty and make some weapons cost money, not without unforeseen consequences to gameplay. A whole lot of testing and tweaking would have to happen, and even then it's not clear that existing players would go for it in a console game. Then there's the sheer guts it would take for a game publisher who gets the majority of their revenue from physical goods sold in retail stores to take one of those franchises and try to get the same revenue without selling it in stores... or without pissing off the retailers they depend on.