In the past I’ve spent a lot of time criticizing the behavior of the big videogame publishers: EA, the Game Division of Microsoft, Ubisoft, and the rest. I’ve criticized their approach to staffing, scheduling game development, marketing and selling products, setting prices, fighting piracy, forging business relationships, and managing creative decisions. I see a lot of problems in all of these areas and I always hope that if I outline their shortcomings in enough detail, using clever enough metaphors, and using interesting enough stock photos, that eventually more people will follow my site and I’ll be able to complain to an even larger audience.
Well, let’s give it another go…
Part 1: Corporations
Whenever I make these complaints, I always try to frame it in terms of the companies making bad decisions and missing out on opportunities. The objections I get from people generally fall into one of two categories:
- Corporations exist to make money.
- Hey, they’re making money, so they must be doing something right!
The first response incorrectly assumes that I’m making some kind of moral argument. They seem to think that I’m demanding that the leadership of these companies all magically transform their enterprises into utopian non-profit arthouse gaming studios. But I’m not. I know that would be an unreasonable and unrealistic demand. I’m actually saying that even when judged solely on their merits as a money-making enterprise, these companies frequently make horrible decisions that destroy opportunities for profit.
Which brings me to the second response, which is that if they’re making money – and some of these companies are indeed making an amazing amount of money – that they’re doing fine and there’s nothing to criticize. It’s silly for a programmer to question the expertise or actions of a CEO, because these companies wouldn’t do these things if they weren’t a good idea.
This argument is a logical fallacy known as appeal to authority. Sure, a business major is in general more likely to make better business decisions than a programmer, but that does not mean that business majors always make good decisions or that a programmer can’t ever make better ones.
Now, most people arguing on the internet would stop here. You made a logical fallacy, therefore I win the argument LOL. But I respect you too much to dismiss this with such a glib answer, so instead let me give a long, disorganized answer that begins with a tangent talking about…
Part 2: Baseball
I want to talk about the 2003 book Moneyball by Michael Lewis. And to be clear, I’m really talking about the book and not the 2011 movie based on it. The movie is good, but you need to read the book if you really want to understand what happened to baseball.
Baseball nerds are notoriously obsessed with statistics. Ask one for information on their favorite player, and they’ll send you a spreadsheet so incomprehensible and so filled with inscrutable acronyms, you’ll think it was taken from the back pages of a Dungeon Master’s Guide. It will contain rows and rows of carefully gathered and curated numbers that describe the abilities and performance of the player. These numbers are ostensibly as important as the attributes on a D&D player’s character sheet. It’s a document that clearly defines what they can and can’t do.
Except, Paul DePodesta, assistant general manager of the Oakland A’s, didn’t think this was the case. He suspected that those numbers were wrong. Or if not wrong, they were tracking the wrong things or interpreting the data in the wrong way. He believed that everyone else in baseball was measuring the worth of a player using incorrect statistics and a faulty premise.
Imagine if scouts sought FIFA players by looking for guys who were tall, wore large shoes, had really big foreheads, and could jump really high. Those are all basically good things in the context of the game, but none of them will automatically make you a champion futbol player. None of them are as important as being able to control the ball and having keen situational awareness. DePodesta’s thinking was that this is what baseball scouts were doing. They were fighting over players who might be great sprinters or look great in a baseball uniform, but weren’t necessarily the best baseball players. They might look like baseball players and they might be great athletes, but nobody was paying any attention to the stats that showed how good they were at scoring points and preventing the other team from doing the same.
It’s not that they were recruiting bad players, it’s that they were greatly over-valuing certain attributes and under-valuing (or even outright ignoring) others. DePodesta began looking at things in very practical terms. “Given the stats of this player, how much will we pay for each run we score?” This stripped away decades of tradition, habit, and superstition that had shaped the way players were recruited.
The Oakland A’s began quietly looking for people based on the stats that DePodesta thought mattered. They recruited guys from the farm leagues that nobody else thought was pro material. They found players who were under-valued on other teams and traded for them. They traded away their own players that weren’t performing well in terms of dollars-to-runs, even if they were supposedly the best players on the team according to convential wisdom.
As the new team took shape people began laughing at the A’s and their lineup of mutants. None of these guys had the attributes baseball scouts prized. Some of them were fat. Their pitcher was called “The Creature” for his bizarre throwing style. One guy even had a limp. They were Baseball’s Island of Misfit Toys.
More importantly, Oakland began beating bigger, more well-funded teams. They beat teams that could afford players with supposedly better stats. This happened often enough and went on long enough that it clearly wasn’t a fluke. DePodesta had been right.
My goal here is not to lionize DePodesta. I don’t think he’s some one-of-a-kind super genius. I mean sure, he’s probably smarter than me. But that’s not a very high bar. He didn’t come up with these ideas on his own. This supposedly “new” thinking went all the way back to the 1970’s at least. DePodesta wasn’t the first person to seriously question the system, he was just the first person to question the system who was in a position to do something about it. What’s interesting about this story isn’t DePodesta, it’s everyone else. Because everyone else was wrong.
Even once the new strategy started winning games, other people had trouble believing it wasn’t a fluke, simply because it meant that an entire industry had been wrong for a century. Billions of dollars were misspent by generations of baseball scouts, recruiting players using faulty thinking. Anyone could have come to DePodesta’s conclusions at any time, and yet nobody did. People kept doing things the way they’d always done them.
These teams made money, but they were wrong. These teams won games, while being wrong. These teams grew their fanbase, expanded to new stadiums, made the playoffs, and won the World Series, while the whole time they were wrong about how to measure players and appraise their skills. They won because they were up against teams who were just as wrong as they were. All it took was for one person to be right to upset the entire balance.
And they did upset the balance. When the Oakland A’s rolled out their new strategy, the second-poorest team in baseball was suddenly competitive with the richest teams.
If a large number of baseball experts can be wrong about a century-old game, then certainly it’s plausible that a small number of game publishers could be wrong about this relatively new industry. So claiming “EA is fine because they’re making lots of money” is missing the point.
Part 3: The High Cost of Wrongness
So I imagine your next demand is that I have something to back all of this up. Sure, many people in Major League Baseball were wrong, but if I’m going to sit here and claim I know better than the titans of the gaming industry then I ought to be able to point to some long-term mistake in gaming. Can I point to an instance where a small underdog might outwit and overpower a gigantic company?
Yes I can. It’s already happened. It’s still happening right now. In fact, it’s been happening for thirteen years. Steam happened.
Back in 2003, Valve was not a gigantic corporation. Sure, they had a really successful game. Half-Life was a popular title and had lots of expansion packs, but Valve was still much smaller and less famous than the likes of Blizzard, BioWare, and iD Software. This was right around the time when lots of medium-sized studios like Valve were being absorbed into big publishers.
But instead of being absorbed, Valve launched their own digital delivery platform. This small company correctly predicted where the market was headed and what the consumer wanted, and they built a platform to meet that demandBut not me. I had to be dragged onto Steam kicking and screaming. I’m one of those people who LIKES boxed goods..
The big publishers had no answer to this. Ubisoft had nothing. Microsoft had nothing. Activision had nothing. At the time, EA had their own digital service called EA Downloader. It was dreadful and EA didn’t seem to be inclined to improve on it. Steam began to eat up the digital market and none of the big players even showed up to compete with them.
In less than a decade Valve – who started as a medium-sized game developer with a single hit game – became a multibillion dollar juggernaut. They did this without an infusion of public investment money. They did it without selling themselves to someone larger. As far as I can tell they did it without even acquiring debt. They just understood the market better than the supposed experts. Everyone makes a big deal about how big Wal-Mart is, but today Steam controls the digital PC market more thoroughly than Wal-Mart dominates the retail marketWhile numbers are all over the place, This article claims Wal-Mart has a 25% share while most of the estimates regarding Steam market share are in the 50% to 80% range..
Just like the Oakland A’s were able to beat better-funded teams, Valve was able to crush companies many times their size.
I’m not faulting EA and the rest because they didn’t make Steam first. That sort of thing happens all the time. I’m faulting them for not being second or even third. It took Electronic Arts seven years to get around to releasing Origin, their answer to Steam. That’s eons in this industry. And EA was the smart one. Microsoft had Games for Windows LIVE, which was even worse. Ubisoft has Uplay, which I can’t even criticize properly because I can’t tell what they’re trying to do with the platform beyond annoy people. This would be a shameful display if these companies had showed up with this stuff in 2007, much less 2017. The degree to which they have failed to understand and adapt to the market is astounding. Today these companies are at the mercy of Valve. If they want to sell on the PC, they need to hand over a big chunk of their gross income to this new rival.
Just like the baseball leadership was wrong for generations, the publishers have failed to grasp many basic principles of the business.
The publishers claimed you couldn’t make money in Russia because Russians would just pirate games. Then Valve turned around and made money from Russians who were perfectly willing to pay for games if it meant they could enjoy the convenience of Steam over the hassle of torrents.
The publishers insisted the $60 price point was ideal and that AAA games should forever remain there. Valve cleaned up by selling games at a variety of price points, discovering a largely still-ignored source of downmarket sales.
The publishers were sure that the market was cleanly divided into AAA and “casual”, and that the people who bought expensive AAA shooters were unrelated to the people who played cutesy 2D games. The indie revolution showed that us AAA players actually enjoy a good point-and-click or a match-three or a 2D platformer after a hard day of Battlefielding and Grand Theft Autoing. Valve sold indie games and AAA games alike, from the same storefront and to the same people.
So yeah. It is possible for an entire industry of experienced executives to completely miss the boat and make billion-dollar blunders. It is my belief that the publishers have been led poorly, and continue to be led poorly, because the people in charge do not have a background in gaming and are thus unable to see trends as they form. Instead they can only respond in a reactionary way. Their understanding of the market comes from earnings reports, not from buying and playing games.
The fact that they post profits at the end of the year does nothing to change this. A lot of people were very wrong about digital platforms for a very long time, and so it’s plausible that they might be wrong about other things that are equally important.
I anticipate that now you’re saying to me, “Shamus, I totally buy into your premise that companies can be wrong about stuff. And I think that you – an indie developer and author of very minor renown – are totally qualified to second-guess these executives and explain how their companies should be run. So please tell us what they should be doing differently.”
Well thanks. I appreciate your vote of confidence. Okay then. Next week I’ll talk about how I’d do things if I were elected King of All Videogame Business.
 But not me. I had to be dragged onto Steam kicking and screaming. I’m one of those people who LIKES boxed goods.
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