Games as a service

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In video gaming, games as a service represents providing video games or game content on a continuing revenue model, similar to software as a service. Games as a service are ways to monetize video games either after their initial sale, or to support a free-to-play model.

History and forms

The idea of Games as a Service (GaaS) began around 2004 with the introduction of massively multiplayer online games (MMOs) like World of Warcraft, where the game's subscription model approach assured continued revenues to the developer and publisher to create new content.^[1] Over time, new forms of offering continued GaaS revenues have come about. A significant impact on the use of GaaS was the expansion of mobile gaming which often include a social element, such as playing or competing with friends, and with players wanting to buy into GaaS to continue to play with friends. Chinese publisher Tencent was one of the first companies to jump onto this around 2007 and 2008, establishing several different ways to monetize their products as a service to Chinese players, and since has become the world's largest video game publisher in terms of revenue.^[2]

Some examples of the forms of GaaS include:

Game subscriptions

Many massively multiplayer online games (MMOs) use monthly subscription models. Revenue from these subscriptions pay for the computer servers used to run the game, the people that manage and oversee the game on a daily basis, and the introduction of new content into the game. Several MMOs offer an initial trial period that allow players to try the game for a limited amount of time, or until their character reaches an experience level cap, after which they are required to pay to continue to play.

Game subscription services

Subscription services like EA Access and Xbox Game Pass grant subscribers complete access to a large library of games offered digitally with no limitations. User need to download these games to their local computer or console to play. However, users must remain subscribed to play these games; the games are protected by digital rights management that requires an active account to play. New games are typically added to the service, and in some cases, games may leave the service, after which subscribers will be unable to play that title. Such services may offer the ability to purchase these titles to own and allow them to play outside of the subscription service.

Cloud gaming / Gaming on demand

Services like PlayStation Now or Gamefly allow players to play games that are run on remote servers on local devices, eliminating the need for specialized console hardware or powerful personal computers, outside of the necessary bandwidth for Internet connectivity. These otherwise operate similar to game services, in that the library of available may be added or removed to over time, depending on the service.

Microtransactions

Microtransactions represent low-cost purchases, compared to the cost of a full game or a large expansion pack, that provide some form of additional content to the purchaser. The type of content can vary from additional downloadable content; new maps and levels for multiplayer games; new items, weapons, vehicles, clothing, or other gear for the player's character; power-ups and temporary buffs; in-game currency, and elements like loot boxes that provide a random assortment of items and rewards. Players do not necessarily need to purchase these items with real-world funds to acquire them. However, a game's design and financial approach that aims to provide ongoing service is aimed to assure that a small fraction of players will purchase this content immediately rather than grinding through the game for a long time to obtain it. These select "whales" providing sufficient revenue to support further development of new content. This approach is generally how free-to-play games like Puzzle & Dragons, Candy Crush Saga, and League of Legends support their ongoing development, as well as used atop full-priced games like Grand Theft Auto Online and Destiny.

Games may combine one or more of these forms. A common example are lifestyle games, which provide rotating daily content, which frequently reward the player with in-game currency to buy new equipment (otherwise purchasable with real-world funds), and extended by updates to the overall game. Examples of such lifestyle games include Destiny and many MMORPG like World of Warcraft.^[3]

Rationale

A principle reason to adopt GaaS is financial, giving a developer or publisher the ability to capture more revenue from the market than with a single release title (otherwise known as "games as a product"). While not all players will be willing to spend additional money to gain new content, there can be enough demand from a smaller population of players to support the service model.^[2] GaaS further represents a means which games can improve their reputation to critics and players by continued improvements over time, using revenues earned from GaaS monetization to support the continued development and to draw in new sales for the product. Titles like Diablo III and Tom Clancy's The Division are examples of games offering GaaS which initially launched with lukewarm reception but have been improved with continued service improvements.^[4]

While the games as a service model is aimed to extend revenues, the model also aimed to eliminate legal issues related to software licenses, specifically the concept of software ownership versus license. Case law for video games remains unclear whether retail and physical game products qualify as goods or services. If treated as goods, the purchasers gains several rights, in particular those related to the first-sale doctrine which allows them to resell or trade these games, which can subsequently affect sales revenue to publishers. The industry has generally considered that physical games are a service, enforced through End-user license agreements (EULA)s to try to limit post-sale activities, but these have generally not be enforceable since they affect consumers' rights, leading to confusion in the area.^[5] Instead, by transitioning to games as a service, where there is a clear service being offered, publishers and developers can clearly establish their works as services rather than goods. This further gives publishers more control over the use of the software and what actions users can do through an enforceable EULA, such as preventing class action lawsuits.^[5]

Impact

Industry analysis firm Digital River estimated that by 2016, 25% of the revenue of games on personal computers results from one form or another of GaaS. The firm argued that this reflects on consumers that want more out of games that are otherwise offered at full price (US$60 at the time of the report) or will look for discounts, thus making the market ripe for post-release monetization.^[6] Several major publishers, including Square Enix, Ubisoft, and Electronic Arts have identified GaaS as a significant focus of their product lines in 2017, while others like Activision Blizzard and Take-Two Interactive recognize the importance of post-release support of a game to their financial bottom lines.^[4] GaaS is also seen as a developing avenue for indie video games, which frequently have a wider potential install base (across computer, consoles, and mobile devices) that they can draw service revenues from.^[7]

References