Balancing Ethics,Art and Economics: A Qualitative Analysis of Game Designer Perspectives on Monetisation

Introduction

In the past few years, we have seen significant changes in how computer games are monetised. Various freemium models have proliferated, and micro transactions are also increasingly incorporated into premium games. The computer game industry has traditionally been dominated by large publishers such as EA, Blizzard and Ubisoft and the platform triopoly Microsoft, Nintendo and Sony (Nieborg, 2016). The introduction of new platforms, most significantly smartphones and tablets, has expanded the industry, paving way for new audiences and publication strategies. The result has been an upsurge of smaller-scale companies and an influx of game titles (Whitson Simon & Parker, 2018).

From a critical political economy perspective, it has been noted that the industry growth has not created any significant diversification of capital and power (Nieborg et al. 2020). Despite the fact that the barrier of entry into the market has been lowered, a few companies such as Supercell, King and Tencent control a significant share of the market (Kerr, 2017; Nieborg, 2016). The new ‘platform capitalism’ has also created new gatekeepers and enclosed ecosystems such as App Store and Google Play (Srnicek, 2017). This has been described as a winner-take-all dynamic, a dynamic that favours large companies due to factors such as economies of scale and high switching costs (Barwise & Watkins, 2018).

The market dynamic means that small-scale companies have clear disadvantages and that very few of them earn money (Jørgensen, 2017, Lipkin, 2019). This has led to concerns about whether some of the monetisation models that have evolved in this crowded marked – such as pay-to-win, paywalls and loot boxes – exploit players economically (Alha, Koskinen, Paavilainen, Hamari, & Kinnunen, 2014; Griffiths, 2018; King & Delfabbro, 2018). The abundance of freemium games has also led to speculations concerning whether the quality of games are in decline. The hugely influential game design from Zynga’s 'Ville games have, for instance, been described as shallow and addictive and tightly interwoven with aggressive monetisation (Bogost, 2015; Lewis, Wardrip-Fruin, & Whitehead, 2012).

The political economy and monetisation models have, in sum, received much needed attention from academia. A perspective that has received less attention, however, is how game designers themselves experience this situation. What kind of ethical responsibility they perceive as theirs, and to what extent these monetisation models influence the way games are designed, has not been subject to any great deal of research. In order to gain new insights on this topic, the article therefore asks: how do game companies balance artistic ambitions with economical and ethical concerns? Due to the dynamics of the political economy described, this question is especially pertinent for small-scale companies where the right monetisation model may be a question of surviving in the market. Small-scale companies are therefore the object of this analysis.

The empirical basis is interviews with CEOs and game designers from three different small-scale Norwegian game companies from different parts of the market: one indie company, one freemium company and one premium company. Besides being economically independent, indie companies are usually driven by artistic visions and create niche products. Premium companies, for their part, dominate the mainstream market by relying on traditional retail formulas, whereas freemium companies typically offer casual games for free and earn money through micro transactions. The companies were chosen for variety, with the aim of looking at how the upsurge of freemium models also affects other types of small-scale companies. In line with the focus on ethics, game design and monetisation, the analysis is structured along the following questions:

1.How do the informants conceive of the current market situation?

Before I explore these topics, I will present a short review of ethical research in game studies. I will then briefly outline the Norwegian game industry, followed by a description of the three company types I analyse. I will then describe my methodological approach before turning to the analysis, which is organised in line with the three research topics. Concluding reflections and aims for further research will be addressed in the closing section.

Method

The analysis is based on semi-structured interviews with three CEOs and five game designers from three different small-sized Norwegian game companies. While the selection of game companies was done to represent breadth in the game market, the criteria for selecting informants in the companies was to cover a set of roles, including involvement in overall business strategies and monetisation, as well as game design. In small-scale companies, these roles are often overlapping, including in this case, and in order to identify informants with the relevant background, the selection was done in collaboration with the CEOs of the companies. Three people from the freemium and premium companies and two from the indie company were interviewed to cover the targeted roles. The interviews were conducted during 2017 and 2018 and lasted between 45 and 70 minutes each. All, except for one interview, were done in the company’s offices. The last one was done on Skype. The majority of the informants had been working in the industry for more than 10 years, some substantially longer. The informants and the companies are anonymised in the paper, as their exact identity is not important to the findings.

Analysis

A general impression from the interviews was that the informants had corresponding views on several issues across companies and, most noticeably, inside each company. Some of the topics from the interviews seemed to be occasionally or even regularly discussed internally within the companies in connection with concrete game developments. A notion shared across the board was that freemium models and free games were a challenge for the industry as a whole. How they should respond to this challenge, however, varied considerably.

Views on the Current Market Situation

I will now embark on the first topic of this analysis, namely, how the informants conceive of the market situation. Most informants have been part of the game industry for at least a decade and witnessed substantial changes in distributing practices and monetisation models. The CEO of the freemium company has been in the industry for more than 20 years and described a study trip to South Korea around the year 2000 as a crucial moment. There he witnessed how pirate copying had ‘ruined the market’ and in effect prompted the freemium model, ‘as the only logical thing to do was to give games away for free as nothing can beat free. So, this is a development over more than 15 years where you try to adapt to the fact that people increasingly think that games should be free’. Other factors like online distribution, new platforms such as the smartphone and the huge influx of game titles, combined with falling production costs, had accelerated this process. In his view, the tipping point came around the year 2012: ‘Around 2012 premium disappeared from the market on mobile, at least as a way of earning money’. The CEO from the indie company referred to the same period, but from a different viewpoint: ‘In 2013, when our game was launched, all publishers talked about free-to-play like: “It has to be free-to-play. It would be madness if you launch a game for 20 dollars”’. Despite these warnings, they released the game as premium. Relative to the cost of developing the game, it was a huge success, and several years after the release, they still earned money on it and had accumulated a financial buffer. In hindsight, they were happy they were not persuaded to alter the payment method ‘as it would have meant to mangle the game if you were supposed to pay for the next episode or something like that’, the CEO explains. They also plan to release their next game as premium.

The CEO from the premium company said they started in retail and explained that the gradual shift from retail to online distribution was their biggest challenge. While online distribution vastly increased the marketplace, they needed to compensate for lower prices: ‘It’s about the volume, right. You need quite a lot of downloads when a game costs 40 kroner versus 400 kroner’. Moreover, since many of the IP owners they cooperate with have a primarily Scandinavian audience base, the possibility to expand to other territories is limited.

A common notion, which was mentioned in several interviews, is that creating a good game is no guarantee for success. Standing out in the crowd is difficult even if the games are thoroughly designed, produced and promoted. A designer from the premium company said that the largest and most successful companies are able to keep a huge market share due to their economic muscle: ‘sure, you can make a 100,000 dollars a day, but then you would need 90,000 dollars to promote the game first’. Lacking this kind of money, they had to rely on other means to gain exposure. The CEO from the indie company explained that:

If we are on the front on Steam, in the "splash" we will increase our sales a hundred times. We will sell five games a minute. There are 50,000 people who log on every 10 minutes who are exposed to our game. Of the 100 who think oh, this looks interesting and enter our page, maybe 10 end up buying our game.

Coming in the ‘splash’ and gaining exposure, however, relied on having contacts at Valve, who owns Steam, and knowing a ‘gatekeeper’ there who liked your game whom you could contact directly when planning a discount; this is a reminder of the asymmetrical power relation between platforms such as App Store and Steam and small-scale game companies (Lipkin, 2019). Incidentally, their contact was currently on holiday, thus they had to postpone their next round of discount.

Another way to increase sales and exposure was to manipulate pricing. Many informants had experience with different entry points and were generally disappointed with how little people were willing to pay for a game. An informant from the premium company in charge of monetisation was annoyed that the parents did not see the value of their games. She told me,

I was rather angry after Christmas when I checked our sales and saw how little even some of our really great games had sold. So I thought, OK: I’ll do a little experiment. I’ll put everything out for "free" for 14 days, without any advertisement, and see what happens. And then, the first three days 15,000 copies of one of our most popular game was downloaded. You see?

Similar experiences resonated through the interviews. A game designer from the freemium company stated that ‘even though people say they want the premium experience, their wallet says they don’t. People will hardly pay 1 dollar for a premium game because they can get hold of free games elsewhere’. The CEO stated that ‘If you get 1 per cent of the players to spend anything, it’s very, very good’. He added that the conversion rate was volatile and that where the game was promoted and by whom could affect the rate of paying players. If the game is featured on App Store, the exposure would grow enormously, but the retention rate would decline rapidly as the share of players that just wanted to download it and see what it was like would increase. Recommendations from friends worked much better regarding conversion. Their latest game, which at the point of the interview had more than 1.1 million downloads, was still losing them ‘a lot’ of money.

A general problem in the freemium market is that very few players are willing to pay for content, even in hugely successful games such as Candy Crush Saga (King), where allegedly only 3% of players pay for content (Nieborg, 2015). Which market you operate in is also important, and the average income of the population in a country will naturally influence the willingness to pay for games. According to the CEO from the freemium company, less than 0.1% of players in the Philippines spent any money on their games. Such countries were therefore selected as test markets to try out game features such as how tutorials work and general game flow without risking the loss of any potential income.

Almost all the informants describe the current market situation as increasingly challenging due to freemium models, but their notion of how the market works differs. The informants from the freemium company describe freemium games from an almost deterministic perspective, as the ‘fittest’ model in the evolving game market. Informants from the premium company also regard freemium models as a challenge, but are uncertain how, or if, freemium features should be implemented in their own games, believing that the retail formula still has its merits. Informants from the indie company, on the other hand, speculate whether freemium models may soon be in decline, as players grow tired of increasingly aggressive monetisation models and prefer the undisturbed, immersive game experience.

Choice of Monetisation Models and Ethical Concerns

I will now introduce the third topic of the analysis, exploring to what extent their choice of monetisation models is subject to ethical concerns. Most of the informants could describe monetisation models they found abusive or unethical. A typical example would be game mechanics that punish the player by withholding earlier earned content if unwilling to pay, such as the Chinese game Puzzle Dragon where you traverse a dungeon and collect cards along the way. If you die while fighting off enemies you will lose your cards–but are given the option to buy them back.

All three informants from the premium company explained that their choice of using a premium model was mainly due to having children as a target audience. The informant in charge of monetisation explained that parents in general are sceptical towards micro transactions in games and are worried that their children, and in effect themselves, can be exploited economically by hidden costs. They therefore do not use energy systems where energy can be bought for money or ‘hard currency’, even in casual games where this is a common monetisation model. Despite the general agreement on this topic, one of the game designers raised the concern that this might hurt their revenue and explained that if he developed a game where the target costumer was 35+ ‘I would have implemented daily bonuses and premium currency and the like’.

Paywalls, which have caused controversies elsewhere, were, on the other hand, described as a good solution. If they should experiment with a new monetisation form, this was one they thought would be acceptable for their audience. The employee in charge of monetisation used Mario Run as an example: ‘you play perhaps 20% of the game for free and pay for the rest. I think that is something parents might understand and is easy to communicate to the market’.

A solution that divided the informants was the use of ‘gambling mechanics’, like loot boxes. Loot boxes contain random virtual items that are unknown to the player until after purchase. The opening sequence often builds suspense with visual and auditive effects resembling that of a slot machine. Most of the informants described loot boxes as a way of maximising profit. As one game designer from the freemium company explained:

The reason they are so common and used is because they hide true cost. If you take a skin and you put it in the shop and you adjust the price until you find the maximum price point. Ten dollars. If you take that same skin and you put it in a loot box you’ll find that people are willing to pay many times the same amount for the same skin. Many many. They’ll pay 50 dollars for the skin instead. If you put that in the store, the skin in the store for 50 dollars then they would never buy it.

The loot box controversy that erupted after the launch of Star Wars: Battlefield II in 2017 led to a world-spanning public debate whether loot boxes were exploitative or even ‘predatory’ (King & Delfabbro, 2018). This also prompted a large number of academic papers about whether loot boxes were analogous to gambling and hence psychologically harmful (Drummond & Sauer, 2018; Griffiths, 2018). One strand of the academic debate concerned whether it was possible to separate harmful from harmless loot box design. King and Delfabbro, for instance, launched the concept ‘socially responsible game mechanics’ where they proposed various measures that could be employed to render loot boxes less abusive, such as creating larger transparency and accuracy of game design, better consumer information and increased industry accountability, all measures pointing directly back to the industry (2018). An attempt to create a demarcation line between acceptable and non-acceptable loot boxes was also a topic during the interviews.

A game designer in the indie company regarded loot boxes as a negative and potentially abusive design form but agreed that some types were acceptable. ‘I don’t think it’s unethical to let people pay for cosmetic things, sort of. I think it’s cool and I also think that it would be difficult if it had been an open store with set prizes. It would be much less popular, I think’. He was more concerned that loot boxes were not integral to the game play: ‘For instance in Heartstone where opening a card deck looks beautifully, right. It’s really juicy to open a legendary there. But while the feeling of getting a legendary is great, I have never though that, oh, I want so badly to open cards in Heartstone’.

For many of the informants, their view on gambling mechanics had gradually changed over time. All three informants from the freemium company had experience with productions of AAA games and more serious content. Entering a more casual part of the game industry had forced them to transgress what they had earlier regarded as an ethical boundary between gambling and gaming mechanics. One game designer explained that:

Loot boxes was something we initially were not eager to use. We had a "what you pay is what you get" approach, but then, when you look at the marked, what works and what people actually are earning money on ... over time we have sort of crossed that line.

Their initial reluctance was mainly due to the potential risk of causing adverse psychological effects: ‘our inner qualms of using loot boxes was because people are getting addicted to gambling, right’, indicating this would be unethical. One of the criticisms raised against freemium games is that a small minority of players develop a compulsive relationship to the game and start spending an excessive amount of money in order to gain access to exclusive content or cut down on levelling time. These so-called ‘whales’ are few in number but account for a substantial part of the income and are therefore often carefully tended to by game and gambling providers (Schüll, 2014). Tending to whales, or concerns for their wellbeing, was, however, not of great concern to the freemium company in this current study as they had almost no whales. ‘It hasn’t really concerned us. We have rather been concerned about how we can make people spend money on the game in the first place’.

Discussion

A notion all of the informants shared was the idea that monetisation models could influence game design negatively if not executed properly. The extent to which freemium models could be deemed unethical varied, however, and the most sceptical were those less inclined to use them, that is, the informants from the indie company. Informants from the freemium company expressed no ethical restrictions, and claims that loot boxes or other gambling mechanics were unethical were dismissed, the main reason being that the vast majority of players were unlikely to spend excessive time or money on their games. It should be emphasised that the way the informants use the term ‘ethical’ here is in an everyday context and not according to more formal definitions of the term. The way I explored it in the interviews was by asking the informants to explain what it meant by way of examples. Nevertheless, if we analyse their statements in more formal philosophical terms, we can also see the outline of ethical positions for those who rejected the idea of having ethical obligations.

In philosophy, there are many ways to categorise different ethical schools and theories. The categorisation I will employ distinguishes between three schools, namely, deontology, utilitarianism and virtue ethics (Shafer-Landau, 2012). Deontology comprises theories generally claiming that humans should oblige to fundamental rules or principles, such as not committing murder. Virtue ethics is a broad term for theories that emphasise the role of a person’s character. A virtuous person should strive for acting virtuous in all situations of life and not simply follow rules or try to maximise gains. The term utilitarianism, on the other hand, comprises theories that state that the aim with every action in life should be to maximise the positive effect for the greatest number of people, regardless of whether the action aligns with certain rules or virtues (Stanford Encyclopedia of Philosophy).

When analysing the interviews in light of these ethical frameworks, the indie company could be interpreted as representing a deontological view. In their view, they have obligations both to themselves as developers – to follow their artistic values – and their customers – not to allow elements peripheral to the game interfere negatively with the game experience. These ideas are even explicitly formulated as rules or guidelines by members of the company.

Despite the fact that informants from the freemium company explicitly deny ethical responsibilities, their way of describing their overall goals align with utilitarianism. The aim to maximise the positive effect for the greatest number of people would in this case be to utilise a monetisation model that benefits players and developers on equal terms. In their view, manipulating a few players to spend an excessive amount of money would be a marginal concern in light of the positive outcome the majority would experience.

The premium company is more complicated to categorise as they express statements that can be placed both within deontology and virtue ethics. Seen from a deontological perspective, they emphasise general standards and principles, such as always striving for high production quality. Furthermore, they always refrain from using micro transactions to avoid exploiting children. However, they also express a certain pragmatism, in the sense that they envision a future where freemium models could be used. In a sense, that would be able to change their ‘rules’ if they find a ‘virtuous’ way to do it.

It should be noted that not all informants within each company expressed these views equally explicitly and that this categorisation is done to illustrate a theoretical point: that their ethical reasoning can be sorted into widely different ethical frameworks if looked at formally. The way they reason around their own work also shows that they do not consider themselves unethical in the sense that they try to deceive people to part with substantial amounts of money. The most ‘aggressive’ monetisation models or ‘unethical’ game developers are arguably not found in this material.

Concluding Remarks

In this paper, eight individuals from three different Norwegian small-scale game companies have been interviewed about their view on the game market and their own monetisation practices linked to ethical and artistic concerns. The interviews show that there are several differences concerning how the informants conceive of the market situation, and that these are largely in line with whichever sector of the market they belong to.

If we look at the game market from a traditional business perspective, economic incentives and profit-seeking are usually seen as the main motivation for developing new games. Oversupply in the market will, in line with this thinking, lead to decreased profitability and fewer people interested in developing games, in turn leading to a decline in game production and a new equilibrium between supply and demand. From a critical political economy perspective, however, the notion of game production as primarily driven by economic incentives has been described as misleading (Lipkin, 2019). In an interview study of indie developers and producers in New York, during the so-called ‘indiecopalypse’, Lipkin shows that indie game developers are often driven by non-pecuniary motivations, or simply passion for games. They often get along with side-jobs or work on their own games outside of ordinary working hours.

The informants from the indie company in the current study share this passion, but unlike the majority of Lipkin’s informants, they are in an economic position where they can keep unrelenting focus on their own game development. What is more surprising, perhaps, are the informants from the freemium company who express similar motivations and practices. While economic considerations are clearly higher on their agenda, they are at the same time aware that their chances of making an economically successful game are slim. Much like Lipkin’s informants, they keep afloat by doing commissioned work and funnel the surplus into what they hope shall be a really good and successful game. This is a reminder that non-pecuniary motives and passion for games are also found in sectors other than the indie scene, most likely contributing to the oversupply of games and pressure on the market.

Concerning ethics, their view of responsibilities differs, most distinctly between the freemium company and the two others. Informants from the freemium company downplay ethical responsibilities, with reference to the huge number of existing free or low-price games. They describe the market situation as highly beneficial for the players and equally unfavourable for developers. Despite having more than one million downloads of their latest game, they have no ‘whales’ or excessively high spenders and when describing the intentions behind their own game design, there is little evidence of ‘dark’ intentions. Overall, we see the contours of two different notions of the power relations between the player and developer. While the premium company and indie company state that ethical considerations form the basis of their design, and express ethical concerns about players in general, the freemium developers deny any ethical obligations. They openly state that they need to manipulate players through game design, albeit just enough to persuade them to pay something rather than keep playing for free.

A general finding in this study is that game designers' ethical reflections as related to monetisation models are influenced by several contextual aspects, such as what game genre they work in, their view of the player or market and the overall idea of responsibility that a game designer has in the first place. It should be noted that this study is small in size with limited capacity to shed light on all of these aspects. Delving deeper into the relationship between ethics and game genre, different cultural contexts and platforms, and companies of various sizes, are among topics that would benefit from more thorough research. The study also shows the importance of unpacking what ‘ethical’ means to game designers as it may, or may not, align with ethical concepts in a more formal sense.