The Actual Reason Behind Layoffs And Why Unionization Is Not Enough Part 3 - Monopoly Moats

How Much F2P Could A Tech Monopoly F2P If A Tech Monopoly Could F2P?

One initially shocking thing as I was growing from a pureplay classic game designer into a Free To Play designer and eventually a game economist from 2010 onward was the growing overlap between games and app / social media / adtech economics. Coming from EA and a world where impressive tech and gameplay were the main decider of a game’s success, it was initially a shock to see app marketing and growth hacking replace that.

There was a concerted effort towards the easiest explanation for this mass commercial movement nobody fully understood and as usual everyone setttled on the good old “change in consumer preference” as if the game consumer one day woke up and decided all by themselves buying games upfront is for rubes and “by gosh we will just not stand for such shenanigans any more”.

Google and Facebook entered, then metastasized into the intertwined media and advertising markets, essentially becoming them. The process of Facebook and Google becoming media and ad monopolies was so sudden, perfect and complete their sudden intermediation and commoditization of old media wasn’t even noticed in games.

The monetization guys, VCs and data guys who really should have known what was up because they were running the same “enshittification” playbook as the monopolists have no excuse. When ATT hit they were exposed as clueless as anyone and have been shaking their fist about it in Apple’s direction ever since.

Many executives were up until recently still partying like it’s 2010, which I’ve talked about before on here. Take Sony who in 2020, the year ATT was yanked, just got to thinking hey we really should get in on this nifty mobile live service thing. Hilariously just in time for the other main driver of the mobile market, ZIRP, to end a few short years later.

Of course by now the likes of Scopely, Machine Zone, Zynga and Playrix have got theirs and then some, even if the F2P market as a whole is deflating. Which is unfortunately what is leaving the industry as a whole in disarray. Because despite the outer appearance of hard-nosed businessmen making strongman moves with layoffs and studio closures, two big and terrifying questions remain unanswered for them:

1. How much of the live service games market is actually sustainable without the twin pillars of free credit and tech monopoply subsidies like ATT?

2. If that model stops working at the scale it used to, what are the new moats that companies need to be sitting behind when the music stops? Subscription, streaming, AR, UGC?

Because the one business model that is evergreen in games is what’s behind those moats (which we’ll get to) and that’s the walled garden.

Fun With Walled Gardens

Ex-Microsoft engineer and tech founder Alexander St John, while famously and extravagantly wrong about game industry work practices, did recently hit on the perfect way to sum up why consoles and Steam even exist.

“Good games are valuable. If they’re not tied to expensive proprietary hardware platforms they’re easy to steal and if you just want to download them to your personal computer/mobile device they’re a security threat so Apple/Microsoft/Steam need to interpose themselves between you and your games to protect you from all the hazards of downloading a game at great cost to everyone involved.”

This is largely accurate apart from the implied “need” of the platform being on anyone’s behalf or benefit more than their own. Platforms not only “need”, but want to interpose themselves. Because not only does this intermediation prevent games from being stolen, this is also the mechanism behind owning entire marketplaces.

The only reason Windows wins over Linux in PC OS market share and consoles/phones win over PC is because they are much more accessible to users, a trait which will always be in higher demand than a technically superior yet less accessible alternative. And where there’s demand there’s a market. The thing about being most accessible to users is as a platform you need to be proportionately more closed to developers.

Open platforms can be modified and customized for any purpose. An open platform is very extendable, customizable and offer many inputs and options. This wealth of inconsistent options predictably ends up confusing the non-enthusiast consumer who wants a product that does one or a few jobs with the least cognitive overhead, not thousands of jobs to varying degrees of competence if you can figure out the learning curve.

To preserve that simple Job-To-Be-Done the platform holder has very few options better than straight up keeping people from messing with it in ways that add complexity or even replace its original JTBD.

Pre-2005, when retail was THE software sales channel platforms were only able to intermediate betweeen individual software products and the end user when it came to utility and UX while the sale itself happened in places with shelves and checkout counters. Digital distribution turned every platform into its own store, launching a thousand “are walled gardens killling the tech industry” thinkpieces suddenly made relevant again.

The fundamental balance of power that held for decades between 3rd party devs, platform holders and distributors was shifted decisively in favor of the former and has remained that way to this day.

But while distribution became a no longer defensible business model, it is definitely a fully integrated core pillar in every strategy dominant players currently employ. A necessary but not sufficient one as it turns out, at least not without the three things:

• superior UX

• integration

• counter intuitive moats