Project: Business Management and Leadership Roskilde University

PC gaming production monetization

1st Semester - Master in Economics and Business administration - Autumn 2018 Rudolf Olexa [57927] ​

Number of Characters: 94177 Supervisor: Kirsten Mogensen ​

Rudolf Olexa [57927] ​

Abstract

The purpose of this project is to understand complex interactions of PC gaming companies with consumers, through different strategies of monetization or business model. It unveils a different issues business models contain, like pay-to-win content and loot boxes, as a controversial aspects to their PC game. Business model for single player and multiplayer PC games where project longevity and revenue stream stream is sketched. It depicts different variations to the business models, where does the value come from as well as what could be monetized. Gaming communities are then questioned about their preferences for PC games and the importance of business model on the fate of the PC game as a product. Their consciousness about the business model are explored as well as their values and ethics. Consequently, this research depicts the gaming community preferences for a game so that company, tries to match them ethically and ultimately economically both from community’s perspective and company’s.

Keywords: Business model, PC games, loot boxes, pay-to-win, cash shops, business ethics, ​ revenue stream framework, single player, multiplayer, gambling

1 Rudolf Olexa [57927] ​

Table of contents

Abstract 1

Table of contents 2

Glossary 4

1.INTRODUCTION 5 1.2. Problem area 7 1.3. Problem formulation 8

2. Literature review 9

3.Theoretical framework 12 3.1. Business ethics 12 3.2. Revenue streams framework 14 3.2.1 Model tailoring 15 3.2.1.1. Single player or Multiplayer 15 3.2.1.2.Building Framework 16 3.2.1.2.1. Single Player Revenue Stream Life 16 3.2.1.2.2. Multiplayer Revenue Stream Life 18 3.2.1.2.2.1. Cash Shops 20

4.Methodology 21 4.1. Research strategy 21 4.2. Philosophy of Social science 22 4.2.1. Pragmatism 22 4.3. Abductive research methods 23 4.4. Data collection 23 4.4.1. Survey Creation 24 4.4.1.1. Questions creation 24 4.4.1.2. Sample 27 4.5. Project Design 28 4.6. Self-criticism , Limitations and delimitations 28

5. Analysis 29 5.1. Statistics (quantitative reception) 30 5.1.1. Single player stats 30 5.1.2. Multiplayer stats 31 5.2. Qualitative output 33 5.3. Survey reception of respondents 36 5.4. Analysis conclusion 36

2 Rudolf Olexa [57927] ​

6. Discussion 37

7. Conclusion 40

8. Bibliography 42

3 Rudolf Olexa [57927] ​

Glossary DLC - Short for Downloadable content, it usually is an addition to the original content, can ​ be something minor and can be almost a new game with the basis of the product

Mods - Represents modifications, which can be applied to set game. These modification cna ​ range from visual enhancement, to new mechanics and other of the game

Coop - Cooperative, usually refers to the game, which are able to be played together with ​ multiple people (online or next to each other).

Single player - Games, which are played only by one person at the time. ​

Multiplayer - Games, which are played together with more people. ​

Cash shop - In game shop, which offers variety of cosmetics, pay to win content, boosters, ​ etc. for real money.

Cosmetics - Term referring to items, which purely serve for the visual perspective (Example: ​ Buying nice clothes in game). These are bought in cash shop and bought by real money.

Pay-to-Win - This refers to a model, which offers items/services within cash shop, which ​ should give more advantage against regular players for real money.

Loot Boxes - Are in game boxes, containing random cosmetics/pay to win content/boosters, ​ which drop upon opening. These can be bought and opened for real money (gambling) or just opened and received for the in game playtime. Loot boxes, shall be explained more in depth further.

4 Rudolf Olexa [57927] ​

1.INTRODUCTION

Gaming entertainment industry has gone a long way. From basic word games, cards and board games to virtual and augmented realities. It has become a booming industry recently, with improvements within the technology, from regular games qw have gone to the video games, by playing a game using video technology (Wolf, 2008, p.3). Evidence to the increase in popularity of video games is the increasing number of platforms video games can be played on, esports (electronic sports), YouTube “Let’s Plays”, streaming services such as Twitch as well as the record of US video game industry in 2006 which made around 12.5 billion dollars (Ibid.:1). Video games have started off around 1962, most well known video game being Spacewar! ​ working on PDP!-1 mainframe computer (Ibid.:13). The design of Spacewar! was later taken and enhanced and even implemented in 1972 to atari 2600, which is one of the most well known video game system as being one of the first consoles (Ibid.). The prices of these systems were high as well as televisions, however companies found a way how to capitalize on it too, by creating arcade game cabinets, which could be started by inserting coins (Ibid.:14) making it more affordable to play video games. Different gaming systems were made, from console based ones, to handheld and cartridge systems (Ibid.). That being said, it was still at it's basic state as the memories of these cartridges and other storing systems were low, not allowing the games to be more advanced. Magnetic disks, and later CDs, DVDs (Ibid.:15) and now HDDs, SSDs and USBs have made a bigger difference (being million times larger and faster), and has become standardized as more advanced technology allowed video games to be more graphic and therefore bigger. The technology has moved so much that even the older games are now able to be emulated through video games emulator (Ibid.:16) like gameboy advance games by nintendo such as Pokemon Red and other. Some exclusives (video games for certain platforms), have also been ported to PC and being huge success (Ibid.) milking even more money, however satisfying more audience. For example, Bayonetta being a successful port, firstly releasing on Xbox360 and PS3, making its way until recently released PC version with stunning 93 positive reviews on Steam. With the creation of Web 2.0 these entertainment services can be practiced online, with people from all over the world. Due to such a large market, there are a lot of opportunities for

5 Rudolf Olexa [57927] ​

big and small companies to explore new horizons and exploit them. For example, starting a kickstarter, or perhaps expand region locked game to the rest of the world to reach new audience. Naturally, there are various strategies how expansion, and kickstarting a product may be executed, however that is different project. History wise, prices of gaming services have undergone several changes and it's price is being questioned if it's justifiable. However, this is mainly due to the prices of the internet, have been high for domestic use due to inflation. Internet providers have been charging monthly fee, which has provided only certain amount of hours of available internet (Odlyzko, 2001, p.31). If the limit has been crossed, there was additional fee for using extra time on the internet (Ibid.). There were also also premium services such as sending an email, which were also monetized (Ibid.). There is essentially also other costs, such as the cost of a computer, in the past different computerized devices such as atari, which were also very expensive for it's time. Consequently, the use of gaming systems was definitely not the most popular. As of now, there are multiple platforms, where gamers can enjoy themselves online and offline, however platform does also have an effect on how companies structure their business model. The expenses from having internet, have now become more game service related, meaning that some business model make more money from in-game content than for the game itself. Currently, the prices of entertainment services for PC gaming industry depend mainly on the business model production company practices since most of the PC games require standard computer which is common to have right now in every home. These business models have different properties and ways on how to monetize their products and therefore have distinctive effect on the company as well as on the consumers. The prices of technology, software and other means to access video games have been on a rollercoaster, changing drastically over the decades with the improvements and innovation of technology. This project will therefore take a better look on the relationship between the company and consumers and how does form of business model regulate one aspect of the customer satisfaction.

6 Rudolf Olexa [57927] ​

1.2. Problem area

Gaming has evolved to become a huge part of many people’s life, especially the younger generation increasingly spend their free time playing various video games. There are however many different types of games that are contained under the umbrella term of gaming. Dictionary.com defines the term “gaming” as three things: “1. Gambling, 2. The playing of games developed to teach something or to help solve a problem, as in a military or business situation, 3. The playing of computer or video games”(Anon 2018). This paper’s interest is exclusively on the latter of the three definitions and such the term when used will refer to that. However, even with the term limited in that sense it is still quite complex. Gaming can as such commence on a number of different console platforms apart from simply PC, such as Xbox, PlayStation, Wii, Nintendo Switch, among others. Even Mobile phones now have the capacity to run some video games, such as for instance the very popular game “Fortnite”. The concept of E-Sport is also growing rapidly where players, sometimes in teams, compete against each other, here there is a wide array of games, running competitive E-Sport events. Otherwise there is also a lot of different takes on more casual games, where the aim for the players is simply to be entertained and enjoy the gaming experience, not necessarily winning against someone. For this project the aim is to gain a better understanding of the relation between the players of the different games and the business models in use behind the games on the international scale. This is because the wide spread evolution of gaming has evolved to contain different business models where for example some companies offer their games freely to the players to play, but then later offer to buy different things additionally, to either make the gaming experience look better operate better or to simply unlock additional gaming content. Others will let players buy the game, but then offer additional content or functions to be bought additionally in the game. Several inquiries can be derived from that context. For example, if it is ethically okay for the companies to use these business models in order to get more money out of their customers. Subsequently it also raises the question about how rational or conscious the consumers of gaming content are of their buying choices or if it even matters to them.

7 Rudolf Olexa [57927] ​

Additionally, it could also even be the case that they do not care, or that they even prefer the additional offers after already owning the game. Naturally it can be hard to actually make precise inquiries on the basis of consumers since they are very likely to be quite diverse in their preferences and buying patterns. This research is therefore just scratching the surface, but there is also very little research on the area to begin with. However, in order to be more precise, I would like to limit the term of gaming even further to in this paper only refer to gaming on the PC platform. As this will somewhat limit the amount of business models for gaming, as PlayStation for example offer buying a subscription that gives the player free games each month. It will hopefully also limit the buying patterns in consumers so that they are more comparable.

1.3. Problem formulation

I hypothesize that there are several factors of a business model, which takes priority for every user. Each one of them has preferences, and therefore it's individual. Although, I believe that the quality of the product, needs to be as good as it's business model. If the product is good, but the business model is going to be “bad”, the products longevity shall decrease drastically. Positive consumer reception equals overall satisfaction with the products business model. Thus the research question is:

How does the business model of a gaming company releasing content for PC as platform, reflect the reception of consumers?

The research question tries to understand the relationship between the consumers and the business model of a PC video games. How much is the satisfaction of the consumers dependent on the business model and what are the key factors and issues. Additionally, I have made few sub-questions in order to build up to answer to research question. These also serve me as a way so that I may stay with the red thread of the research. Sub questions:

1. What kinds of business models exists, and how they are tailored for PC games? 2. What are the gaming community preferences for PC games business model?

8 Rudolf Olexa [57927] ​

3. How conscious are consumers in regards to their purchases of PC games and in-game content?

2. Literature review The idea of literature review is consequently a review of literature about chosen topic of the project (Bryman, 2016, p.6). It should give me an overview of extent of study, which was already conducted as well as various techniques that were used to observe the phenomena (Ibid.). Additionally, it will provide me with information on what has not been covered, and therefore gives me the opportunity to address issues or knowledge gaps. This study inherently contains interdisciplinarity between two areas of literature, in order to say something normative about the state of the contemporary business models for gaming on the pc platform. The prerequisite for that here is a conceptualizing of ethics into a framework that can be used for analysis of business models, business models inherently being a concept pertaining to the literature of business strategy. The literature on ethics has been evolving over a very long time, starting out even before Christ with Greek philosophers such as for example Aristotle who lived 384-322 B.C, who is considered together with a handful of others to be the founders of philosophy in the western world (Iep, n.d.). Philosophy, however did not only occur in Greek, although they are properly the most famous for it. Even earlier than the Greeks, the Chinese actually had a movement called Mohism, which was a philosophical and religious line of thinking that occurred in 479-221 BC (Fraser, 2015). Today, ethics is a very developed field, with ethical theories and standpoints about almost everything. Generally speaking ethics can be categorized into three areas, those being Meta-ethics, Normative ethics and applied ethics (Feiser, n.d.). Meta ethics tries to unravel how we can understand our own values, this often leads to a discourse between relativism and objectivism. For instance, why we inhabit certain values, the underlying variables and structures imbedded in our cultural norms and so on (ibid.). Normative ethics tries to discern the best way or principle for something to adhere or be conducted. These are generally speaking rather unidimensional, with only one rule or principle being the best thing, hence why it is called normative (ibid.). The last one called applied ethics, studies the specific

9 Rudolf Olexa [57927] ​

ethical considerations in certain conditional settings. For example, inferring what the best ethical standpoint or application would be in different business practices. The definition of those are however somewhat lose and in practical studies they are often overlapping each other (ibid.). In this study they are also somewhat overlapping as what this study is doing can be thought of as adhering under both normative and applied ethics. This is the case since it is a study of a specific situation i.e. the consideration of the business models in gaming on pc platforms. However, as can be seen in the theoretical chapter, it is done within a normative framework where utilitarianism is thought of as the best ethical position. Business strategy is also mostly a normative field, in the sense that most of the literature is build upon the premise that businesses can accrue advantages if they behave, structure and manage themselves in the most appropriate way in relation to external and internal contingencies in order to reach their goals (Ayitey, 2010, abstract). Many different things can be considered for analysis here both internally and externally. The most obvious one internally is properly the strategic capabilities of a company. Meaning the prospects of what the company is able to do in order to survive on the market, this is an internal value, but it is naturally in comparison to the rivaling companies (Johnson et al., 2009, p. 62). In terms of analyzing externally there are many different frameworks that can be considered, one of the most well known is properly Porter's five forces. The framework is often used to get an idea of the structure or inner workings of the particular market. Here the bargaining power or threat of external forces are considered, those are usually buyers, substitutes, suppliers and potential entrants. A synthesis of all the considerations regarding those external forces then gives an idea about the competitive rivalry in that particular market (Ibid, p. 30). Another of Michael Porter's concepts is the value chain, which is a conceptualization of the entire process from production to the marketing and sale of the product to the customer. This study primarily manifests its inquiry around the last bit, which is the experience of the customer. More specifically the interest is in the business model that those companies are using. Business models are defined by Investopedia to be the way in which companies plan to generate revenue, as such it is a concept similar to value chain, but not quite the same (Investopedia, 2018). The contemporary way in which pc gaming companies are making their money are currently becoming increasingly more scrutinized and part of discourse. For instance, the incorporation

10 Rudolf Olexa [57927] ​

of loot boxes in games have become illegal in Belgium, as it is considered to be too similar to gambling (BBC News, 2018), which will be discussed further in the project. The concept of loot boxes is a relatively new area of scientific inquiry, as there are only 4 peer review journal articles on the topic at the time of writing this. King and Delfabbro produced two of the before mentioned journal articles. The first one is a rather short article that mostly just puts attention upon business models within gaming that are predatory and tries to lure people to spend extra money through psychological tricks (King and Delfabbro, 2018). The second one proposes counter measures or potential social responsibility measurements that could be taken to reduce the harm of harmful monetary business models. Following similar lines Zendle and Cairns concluded in their article through a large survey that exposed similarities between the system of loot boxes and problem gambling (Zendle and Cairns, 2018). Macey and Hamari are the only one in the bunch appearing to not be convinced that gaming and gambling can be so easily associated with each other. They also included other aspects such as tendencies to follow the e-sport scene their article also had a very large survey which they analyzed and was skeptical of the notion that gaming was the same as gambling. They were rather cautious of making hasty conclusions but suggests that it should mostly be seen as an activity to pass time or to entertain oneself (Macey and Hamari, 2018). All in all, the contemporary literature on the area is currently a discourse on whether or not certain business models in PC gaming can be considered gambling. Instead, this study aims towards adding to the literature by considering the preferences of the consumers in their buying choices. This inquires whether or not the consumers have similar ethical considerations as the Belgium government and some of the literature, as they might not even consider such things. Additionally, even if they do the results might show that they prefer it, which certainly puts forth new implications for both game developers, legislators and academics. In the ambition to map out the preferences of the consumers, it is however also recognized that it is almost certain that people will show different preferences depending on willingness to buy, socio economic status and simply different tastes. This study is therefore not an attempt to categorize the most normative or best business model, although that potentially can be a result. However, there it is more likely that it will instead be a mapping

11 Rudolf Olexa [57927] ​

of the distribution of preferences across consumers, which can also lead to interesting considerations.

3.Theoretical framework In this part, theoretical implications of the project shall be used. I will introduce revenue streams framework for video games, in order to find the extent of business model tailoring, as well as business ethics to understand the limits of corporate good and interests of consumers.

3.1. Business ethics In order to help answer the second sub question “How conscious are consumers in regards to ​ their purchases of PC games and in-game content?” as well as to some extent “What is the ​ ​ gaming community preferences for PC games business model?”. It has been useful for me to ​ consider the perspective of the consumers in terms of the perceived ethics of the business model or games. In terms of leadership and CSR it has become normative for some time that there should be considerations regarding the ethics in the conduct of corporate endeavors. This is somewhat imperative as unethical practices can turn into media scandals very quickly and in turn damage the customer relations and therefore revenue. The ideal for businesses is therefore a balance between legal, economic, ethical and philanthropic considerations. In other words, they need to consider their corporate social responsibility (Rendtorff, 2011). ​ ​ The ethical perception of the consumer is therefore part of the inquiry in this paper. In order to conceptualize this, a framework from the leadership ethics theory is utilized. Here I have chosen a framework that is based on the way leaders conduct themselves, for me this will instead be the conduct of the game, or more precisely the business model. Here it is conceptualized to be either Ethical egoism, Utilitarianism, or altruism.

12 Rudolf Olexa [57927] ​

Figure 1 – Ethical theories based on Self- interest versus interest for others (Northouse, 2016, p. 334).

Ethical Egoism is understood to mean the conduct of business in such a way that the only consideration is the benefit for the business i.e. the highest possible profit. This is a rather singularly minded approach, as it doesn’t consider anything else and as such is volatile if the CSR becomes a problem for the business (ibid). Examples thereof are businesses that try to get away with scamming customers, lying about the products or otherwise takes from the value of the customer in order to further self-interest. Utilitarianism is sort of a middle way and properly the most optimal for businesses. Here the approach is a balance between self-interest, and the interest of others. In this case, it can be taken to mean the maximization of utility for the consumer, with a minimization of the cost. As such providing as much value as possible without sacrificing the profit (ibid). This is the best approach since that even though the customers feel that the business is focusing on making a profit, they still feel like they are not being cheated or scammed and that they are still offered and acceptable amount of value. Lastly, altruism is the sacrifice of self-interest, in order to focus completely on the interest of others. For organizations focusing on making a profit this is not really a viable option. As such it will properly mostly be seen in volunteer or charity organizations, but it will however be part of the model regardless (Northouse, 2016, p. 335). This theory shall serve as a catalyst for discussion as well as one of the key inspirations for the survey questions.

13 Rudolf Olexa [57927] ​

3.2. Revenue streams framework In this project, I shall borrow a framework created by Locke and Uhrínová (2017, p.23). This framework, was utilized for general gaming industry, as opposed to my narrowed down topic to only PC. In their framework, they have created a graph representative of business model shape of video games - key elements being value proposition and revenue streams (Ibid.).

Figure 2 - Revenue streams framework (Locke, Uhrínová 2017, p.23)

Value proposition is to contrast, which of these two sides are the ones providing value from the product (Ibid.:24). This is when the companies are the ones adding value to the product continuously (creating majority of the product, releasing new downloadable content), or is it the consumers or other parties (crowdsourcing, mods, new levels, etc.) (Ibid.). It has become more popular to crowdfund, and crowdsource gaming projects. However, companies can always stay vocal and transparent, whilst getting feedback from the community. Regarding the revenue stream, the axis represents that consumer is either paying for the product, or having it for free (Ibid.). This is one of the most important parts, as this will be talked about in the tailored model a lot, as the meaning of free and paid can be theoretically used interchangeably.

14 Rudolf Olexa [57927] ​

Based on the age (eras) and therefore advances in technology they have identified business models practiced in different eras: Traditional, Transitional and Modern era (Ibid.:35). Out of these three eras, only modern era shall be discussed, since Traditional and Transitional are not relevant for this project. Modern era, has been described as a time when most people are already owning any gaming device, either by having a phone, console or PC (Ibid.:38). This is where free models of games have been introduced and companies have figured out new ways how to create revenue stream even from a free game, through externalities (Ibid.). These externalities are sponsors, advertisements and most importantly microtransactions. In the tailored model, microtransactions are one of the key enhancements of the model, as they have started to take various forms, as these externalities have started to become quite common in PC games, evidence to that will be presented in the analysis. The income from microtransactions are relatively minor, however with great amount of people the revenue skyrockets. I will not use the whole model, as purpose of my project essentially is not about putting current business model into the typology across time (Ibid.:23) but to understand the variations of business models and where the conflict of interest between these two occurs. Essentially, I will be reshaping it to fit into current era. This tailoring will be mainly done in order to answer the research sub-question “What kind of business models exists, and how they ​ are tailored for PC games?” . ​

3.2.1 Model tailoring This part of theoretical framework will take a look at different games available on PC through different gaming platforms (“Battle.net”, “Steam”, “Origin” and other standalone platforms for games). I will try to distinguish single player from multiplayer and then draw models inspired by the revenue streams framework. The main knowledge about this is my first hand experience as I have played these games, have been part of communities there and heard a lot of remarks from players directly. So the basis for the changes and adjustments of the graph is knowledge of the researcher. This part, shall try to answer the 1st sub question of this project.

15 Rudolf Olexa [57927] ​

3.2.1.1. Single player or Multiplayer First of all, it is necessary to explain what is a single player and multiplayer game. As the name suggests, Single player is a game played by a one person whereas multiplayer is a game played by many people online or even using only one device. There are games, which are combination of both, having the option to play Story related gameplay meaning alone, or some games with other people. However, there are also game who are strictly focusing on one aspect of these two. The differences are visible only through companies revenue stream from the product. The monetization techniques vary as these two types of games provide different values. For example, a person playing a single player game, is not necessarily concerned with cosmetic aspects to it since it will only be visible to him himself. Regarding the multiplayer game, these cosmetics are then showed through gameplay to other people meaning it holds some value. There is also a reason why these are employed within multiplayer games as well as other monetization like subscription, dlcs, etc. The need of maintenance of a multiplayer game is more undeniable compared to the single player. Multiplayer based games need servers that are constantly maintained, meaning it comes with some extra overheads. However, this will be discussed more in-depth in the later chapter revealing both single player and multiplayer revenue stream model.

3.2.1.2.Building Framework By taking the Revenue stream framework, I made several adjustments in order to help our research topic as well as reflect on the contemporary situation of PC games and their business model. It will help me to identify what options do customers have then survey structured accordingly.

3.2.1.2.1. Single Player Revenue Stream Life This model was made based on observing various games ranging from Elder scrolls, Witcher, Sims games and many other indie games. Left axis all in all represents the revenue stream of the product in this case the Single player game and shows the variations of what can happen. First and most importantly, the game can be free to acquire or be paid to acquire (one time transaction). Basically, there is a price of a game, which continuously drops from having a

16 Rudolf Olexa [57927] ​

good sale of a game as well as the end of it's cycle. The later ones happens also with the multiplayer games. This drop in price happens until certain point, depending on the value of the product, player base, piracy, ect. The original price is not retained for longer than half-year. The bottom axis is representative of a project life cycle, meaning that for how long can this single player game keep retaining some revenue stream, which is of a more significant state. This graph generally assumes both free and paid games to have estimately the same life cycle, with paid games having tendency to last longer as their budget is most of the time a lot higher and the game time is longer and content being more advanced (graphics, story, etc.). However, for the sake of this graph, they have the same life cycle. At the end of their cycle, as it was mentioned their price starts to drop consistently until certain point guarded by barriers also mentioned above. However, there are options for companies to still prolong this life cycle, still offering content for their audience as well as create longer revenue stream. The answer is the creation of DLCs or downloadable content, which is a way how to attract previous audience back even baiting new potential audience. This would make loyal customers buy the DLC as well as the new audience buying the whole game (being already discounted) together with DLC. On the graph, I can see both colours of of paid and free are used on this DLC part, meaning that they can be for free as well as paid. Making them free, helps retaining good relationship with loyal audience improving the name of the company. Another key factor, which pushes the games’s life cycle are the users. If the game has been made on engine, which is available for public to create their own games or mods. A great example would be game Half-life or Half-life 2, where users of these engines have created standalone game (For Half-life 2 it was Nightmare house 2, Half-life having Cry of Fear) with story, different mechanics etc. These games have been publicly available, but could only be started by having the original game. Naturally, there are other ways of obtaining this game without owning the original Half-life copy but that matter revolves around piracy. The reason why they are coloured with both paid and free colours though, is because they create revenue stream indirectly. Or the same game Half-life, which was released in 1998 has had an offspring called Counter-strike (out of single player game, multiplayer game was created), which was developed initially as a mod to this game by to Minh "Gooseman" Le and Jess "Cliffe" Cliffe (Time.graphics, 2018). However, the intellectual property was then acquired and released as a standalone game by Valve

17 Rudolf Olexa [57927] ​

Corporation (Ibid.). This has created value by users, making a new product, which still continues to be released, latest Counter-strike game being released in 2012 (Ibid.). Finally, the origin of value is self-explanatory. It represents, where is the value coming from. At the very least, it gives an impression where is the values that are important for users. For instance, the good will, where company releases DLC for free, attracting players back to play their game. This can trigger users to believe their next product to not be necessarily good, but at least it should give the impression that the company cares about the community and that the next release should be community friendly. This whole model puts company into position, where they are the ones influencing the graph the most, as the main origin of value stems from their product.

Figure 3 - Single player revenue stream life (graph)

3.2.1.2.2. Multiplayer Revenue Stream Life Regarding the model for the multiplayer game, this is where it can get a little complicated. This complexity is hard to capture but I will try to summarize it within one graph. There are multiple ways of monetization of their services through cash shop, such as subscription,

18 Rudolf Olexa [57927] ​

DLCs, cosmetics in natural form, cosmetics through loot boxes, pay to win monetization and other premium boosters. Cash shops and their monetization techniques are explained more explicitly in the next chapter. As for the graph, first difference between this and the previous model is now that the paid model is now divided, into three groups. One where game is paid only once. This means after paying once the game is already owned. Second group is when a game needs a subscription in order to proceed to the free users locked content. For example, Runescape a popular web browser MMORPG is Free to play, however a lot of content is locked and available only for those who will pay a monthly fee and become a member. Third model, is a combination of both, where customer pays for the first time, but has to keep paying a monthly fee in order for his account to stay active. The subscription fee, usually helps the developers and producers to keep sustaining the maintenance and support for the game as the company receives money on regular bases. A good example would be World of Warcraft, which practices this model since 2004. As for the DLCs it is the same as the single player model, they are either for free or acquired by one time pay. The origin of value from users in this case is not included as some of these services, which users provide is illegal since they charge for the games cash shop, which was created by another company. Recently there was also a big scandal regarding World of Warcraft private server Nostalrius or pirated if you will. It was a game server moderated by people not from Blizzard (owners of World of Warcraft) and have been maintaining their own server for free, no cash shop included. This server, which was running purely on donations was then sued and closed down by Blizzard (Purchese 2018). They were sued as they were illegally using their engine to create a server and get a huge amount of people to play on it. Nostalrius was offering what Blizzard did not offer and that was their early stage of the game, which was/is very popular. Shocking thing is as it was mentioned, Nostalrius was not monetized and that is why this case could also be discussed in regards to the ethics, who was in a right in this case. Now finally to the main ​ distinguishment from the single player model.

19 Rudolf Olexa [57927] ​

Figure 4 - Multiplayer revenue stream life (graph)

3.2.1.2.2.1. Cash Shops

For some companies, cash shops have become main source of income. This is especially true for games, which are free as their maintenance requires naturally some funds. From these cash shops, various cosmetics, pay to win content, boosters and premium membership can be bought. On the graph, it is very difficult to predict, whether cash shop is the part, which prolongs the longevity of the game or decreases it. As an example, very popular free game Fortnite is simply having cash shop for only premium membership and cosmetic items. This membership just provides additional cosmetic rewards, obtainable only from game-time. Fortnite even won several game of the year awards, so the model seems to be successful as well as constantly updated and maintained. However, there are game who have started practicing model including loot boxes. These loot boxes are obtained through game time slowly, or bought using real cash. They randomly drop cosmetics or other items, making people take a gamble. Some loot boxes are only possible to open using real money, with slim chances of usually getting the better more advanced

20 Rudolf Olexa [57927] ​

cosmetics. Nowadays, the concept of loot boxes has been debated, whether or not it is considered gambling. In some countries, this system has been completely wiped out from their version of the game. For example in Belgium, a law has been passed down to completely remove this feature as loot boxes are affiliated with gambling and may have an impact on mental health (Gerken, 2018). This consequently may also result in a fine posed by the government 800 000 euros and prison time of 5 years for publishers (Ibid.). Pragmatically, it is quite clear that one can buy as many loot boxes as possible, meaning that the price may go from 1 euro to 100 and more and still not be able to receive what they have been wanting from the beginning. All in all, loot boxes in Belgium are no longer allowed as it “makes kids and adults gamble”. There is also examples where these cash shops offer items, which are referred to as pay to win. People have the opportunity to pay the production company money in order to have advantage over the players who have not paid for these items. At the end of this research, I may have a better idea, which hinders back the longevity of the game.

4.Methodology

The purpose of this chapter is to introduce the methodological implications as well as the comprehensive guide to the project. It will provide reader with the methods I have used to conduct the research as well as the validity and reliability of the data. It will also draw upon the philosophical perspective, I as researchers adapted and explain how it helped me to write this project. Additionally, it will discuss the limits of the project as well as biases and other barriers of this projects.

4.1. Research strategy

The research strategy substantially tries to systematically explain intentions, and plans of approach to the project. After I have found the problem area or the purpose of the study, I have searched for suitable theories. The purpose is to comprehend the core values and satisfaction of customers of a product based on the price. I want to see whether or not people feel cheated or that they think that prices of playing PC video games have reached the peak. It is necessary to find the spot

21 Rudolf Olexa [57927] ​

where companies are not going bankrupt but also not overcharging their customers. Based on that, I believed I have to search for theories, which are dealing with ethics and what kind of business models PC game producers employ. These theories, only had to be partially reflective of the case, as I intend to also highlight differences and critique of these theories. Revenue stream framework will be adjusted for the sake of this project and contemporary business model employment in order to to understand business models forms. From that point on, it was clear what needs to be investigated, and I devised most suitable approach to this. The best way how to get a lot of peoples opinion on such matters was using web based surveys. This gives me opportunity, to reach distinctive and wide range of audience. It is important to reach out to a distinct audience as this project is dealing with companies who target the international audience. Questions for the survey were devised and based on the methodology and theoretical framework. I am aiming to collect at least 100 responses from the international PC communities. Afterwards, I engage in a discussion using the results of the survey, reality and theories.

4.2. Philosophy of Social science

It is important to introduce the reader to the philosophical standpoint, which I a researcher am taking, as it informs about the attitude I have had towards this project. I will explain why I have chosen this specific approach and its relevance to the project. Furthermore, it will provide me with general ideas about the reality of the world, meaning that I will use this view to interpret analysis and therefore answer my research question. There are many philosophical approaches, but the most suitable for my project is pragmatism.

4.2.1. Pragmatism

For this project, I have chosen pragmatism as my theoretical lense. Pragmatism stresses out the importance of individuals and their experience and how this experience then influence their future action and surrounding (Egholm, 2014, p. 170). This means that basically people’s action are influenced by their experience and they have certain preferences for a reason. Additionally, it means that the perception of every individual may be always different, however I will try to limit answers of participants who had answered the survey. Main objective in this project is to achieve an understanding of majority’s perception based

22 Rudolf Olexa [57927] ​

on their values prioritization of gaming companies business model on PC and contemplation of ethical values, in order to comprehend their actions. Pragmatism essentially tries to accurately depict what is most likely as close as possible, however believes that the truth is unstable, changes or is impossible to understand completely (Ibid.). So this means, that the perception of the gaming community might change in few years, or that new business model practices may arise in some time, which will utilize better consumer values. Furthermore, pragmatism utilizes interpretation of data through researchers, therefore data produced by this research is not entirely objective since researchers through interpretation impose some of their own understanding of reality (Ibid.). Moreover, abductive research method has been chosen as pragmatism and abduction are compatible set of methodological tools (Ibid.:173).

4.3. Abductive research methods

Abductive research method has been chosen as it is essential to the use of pragmatism. Briefly, it is a combination of induction and deduction as it combines aspects of both of these approaches. Firstly, it starts similarly as induction by observing reality, I will come up with possible hypothesis for the problem or gap in knowledge. In the case of the project, I observe that there are multiple business models in games of pc platform and that these business models are both disadvantageous and advantageous. Secondly, I will continue to test out probability of these hypothesis similarly as deduction (Ibid.:174) by conducting surveys, I will investigate customers preferences and compare it to the reality as what are customers doing. Data then are assessed, evaluated and as researchers will make a “qualified guess” (Ibid.). This means that basing myself on the data, literature and experience I will try to conclude and answer research question.

4.4. Data collection

For this project, main focus will be on the analysis of primary both qualitative and quantitative data. As it will be further explained, I hope to receive both qualitative and quantitative data from the survey. Regarding the literature, I have been using google scholar, as well as Roskilde University library databases such as EBSCOhost and SCOPUS, together with other academic engines.

23 Rudolf Olexa [57927] ​

4.4.1. Survey Creation

As it was already mentioned above in the 4.4. I have decided to collect my own primary data using survey or questionnaire. I will be using google forms software to create the web based survey since it is easy to use and well optimized. I have chosen this method of conducting surveys due to it's advantages such as, good potential in customization, ability to reach out people on different platforms (phones, computers,etc.), low to no cost, fast response, etc. (Bryman, 2016, p.231-235). I have informed respondents of the purpose of the research, as well as the use of the information they will provide for me. I did not find names to be necessary to provide for the purpose of this research. Furthermore, in the survey, I have provided contact information in case the respondents would be interested more in what I are doing as well as the results of the study. Additionally, I have tried to make questions simple, as this research tries to tackle the international market, where most user's native language is not english. Furthermore, this section of the project will explain the basis of the survey questions, as well as validity and origin of data.

4.4.1.1. Questions creation

The survey questions shall utilize the combination of projects philosophy of social science with the theories. By taking these into consideration, it will give me some peer-reviewed overview of the topic, whilst helping the questions to be relevant to the topic. I started of by creating two sections in the survey. First one would question the single player business model, whereas the second one would question the multiplayer business model. Due to multiplayer’s business model complexity, naturally, there are a little bit more questions compared to the first part. Questions will be divided into sets. Each set is targeting one specific topic in order to follow up on the answers. To begin with, I shall explain the motion behind sets of questions touching the general image of game preferences for single player games. “1. Do you usually buy a game or do you prefer to just grab free games on the market?” (survey) With this question, my aim was to ascertain the preferences of the gaming community as a whole. To sort of generalize the option players choose to go with most of the time.

24 Rudolf Olexa [57927] ​

Questions “2.1. If you have played a game, and the company releases a new DLC after a ​ while, will you return to the game again?” , ​ “2.2. If you have never played this game, but saw the new DLC for it, will you consider buying this game with the DLC?” and ​ “3.1. Do you think engine that allows users to create mods, and seperate games even makes you want to stay with the game longer? (Example: Skyrim, source engine Half-life))”(survey) have the same objective even though they are part of different sets, which is to figure out how long is the lifespan of a game - single player (also multiplayer) and if a new features are enough to prolong it. “2.2. If you have never played this game, but saw the new DLC for it, will you consider buying this game with the DLC?” (survey) Can one new features attract new audience’s attention? The direction this question is going is, if a game with zero value for some people, can perhaps get it from a new released content. “3.2.Would you pay for this user created content?” , “3.3. Do you think companies should charge money for this user created content?” and “3.4. Why yes, why no?” (survey) Question 3.1. is tightly connected to questions 3.2. - 3.4. as they are part of set of questions. I intended to discover if the gaming community actually desires the concept in a such a massive scale that it doesn’t care who the revenue goes to and how it reasons the response. Also to identify preferences for these engines availability, or to see how does the gaming community feel about user created content. Moving onto the multiplayer model of games and the idea behind their creation. “1. When the game is paid, do you prefer it to be…. ?” (survey) The purpose of this question is to gather quantitative data about different payment methods preferences for a PC game, in my case I have given options: one time buy, subscription ​ based, both one time buy and subscription based. ​ “2.1. Do you usually try a free game if you like the concept (but don't know details, if it's pay to win, etc.) ?” , “2.2. Do you most of the time read reviews of the game before you play it?” (survey)

25 Rudolf Olexa [57927] ​

I have also decided to measure the free game popularity among players and the impact of a first showcase of a free to play game versus a review based impression players get nowadays.

“3.1. What do you play mostly right now?” , “3.2. If it is a paid game, do you feel like it is worth your money?” (survey) Similarly as with the 1st question of general concept of games above, this inquiry is here to provide me a simple quantitative overview of free to play and paid games popularity. “4.1. How do you feel about cash shops within the game?” , “4.2.Why it is great or why it is bad?” Questions 4.1. and 4.2. are touching a sensitive topic which is debated in a great scale in the gaming community and industry, so naturally I had to touch the subject to gain a comprehension from the side of players on this matter. “5.1. Have you bought any cosmetics for real money within a game? (one skin or anything is enough)” (survey) A confirmation of how many players actually supported games through the cash shops at least once. Additionally, it is also to detect if regardless of their dislike for cash shops, they have used them. “5.2. Do you like the fact that company is providing constant updates to their cosmetic items?” (survey) A question aimed at little updates a game can offer to players to gain their attention, thus prolonging the life of the game. The purpose is to identify the awareness of their company’s hard work of maintenance and keeping the game fresh. “5.3. Do you think it is stupid that some/all cosmetics cannot be obtained using in-game currency?” , “5.4. If it is a free game, do you find spending some money on cosmetics is justifiable?” (survey) This is a simple question about players’ opinion about cosmetics in the cash shop, as the way game gains it's revenue. “6.1. Do you like the concept of loot boxes?”, “6.2. Did you ever invest real money into loot boxes? (Buying them, buying the key to open them)” and 6.4. Do you consider the option to have loot boxes within the game unethical? (survey) To measure the sympathy of players towards loot box system, I had to include these questions to gain quantitative data as well as to have a general idea about the difference between

26 Rudolf Olexa [57927] ​

players liking loot box system and actually supporting it. Additionally, I wanted to find out ​ ​ ​ ​ players’ feelings about gaming industry implementing this system in game.

“6.3. Do you prefer an option to just buy some specific cosmetic item you want?” (survey) As loot box system in game usually includes rare cosmetics I wanted to differentiate the lust about the cosmetics and supporting the loot box system, thus a question as such had to be made. “6.4. Do you consider the option to have loot boxes within the game unethical?” “6.5. Basing yourself on the loot box questions, do you find that loot boxes are taking advantage of younger audience and others?” (survey) I have explained the notion of loot box system above, where I mentioned they are perceived as gambling tools, which is causing this system to be banned in several countries already. I wanted to fathom the opinion of players as much as possible thus letting them express on this element seemed to be an important task i had to include in the survey.

4.4.1.2. Sample

With the improvements of various social platforms, it is relatively easy to get in touch with active and eager gaming community especially on certain platforms. Reddit is an online social platform or forum, which has become a place where a lot of vocal people are part of various subreddits (or subtopics). In this case I have used, subreddits /pcmasterrace, /pcgaming for direct targeting of PC gaming community, and /samplesize, which is a subreddit specifically for placing surveys, to spread the survey out. Moreover, I have also used Discord to get in touch with gamers, which is a gaming communication software where people build communities where they share interests, get in touch and consequently have fun together. These discord channels were found through their search engine with tags pc gaming. Finally, I have used Facebook gaming communities to share them. In all of these communities, it was forbidden to share the surveys or other links, but I have contacted the moderators and they kindly allowed to share it. Nationality, is not of any importance, as I try to investigate international setting. As for other demographic statistics, I have not found it to be of importance, since I try to capture the more general flow of simply the gaming community.

27 Rudolf Olexa [57927] ​

4.5. Project Design

Main objective of project design is to capture and explain rationale of methodological and theoretical employment in this project. This means that I will explain, how these theories make sense to use with these methodologies with this topic. The revenue stream life model is definitely a model needed in order to understand the business models of PC games, how they can be structured and what can be tailored. Unfortunately, it does not show the satisfaction of customers, however it shows longevity of the product as the model tries to help companies to grab the overview of how a company can prolong the length of revenue stream from a product. This framework is essentially, sort of a strategy for business to achieve success and therefore the rationale with business ethics and this fits together. Since strategy serves some purpose to success, ethics are one big aspect of strategy for companies. Regarding the theoretical lenses, it fits together perfectly, as both of these theoretical views or concepts (ethics and revenue stream life framework) can be reflected through box qualitative and quantitative data. Pragmatism also talks about how experience shapes human action, which is exactly what is happening with the case of business models. Bad experience, result in cautious behaviour, evading what was unfortunate or bad. I questioned the morality of various business model aspects, as well as the preferences for their ideal business model, which is only shaped through experience. The application of pragmatism, does also include the awareness of researchers values, which essentially is a strong concept to both revenue stream framework and business ethics. Overall, the rationale of the academic tools should be compatible.

4.6. Self-criticism , Limitations and delimitations

This chapter addresses and reflects upon the limitations and delimitations of this project. I further then critically assess my work, and where improvements could be made. Firstly, I shall address the limitations in this project. As this project has already stressed out, this project intends to observe the international market of gaming industry. This means, that sample’s mother language is not necessarily english. This poses a limitation to their ability to answer and express themselves within the survey, as the survey created is spread out in

28 Rudolf Olexa [57927] ​

english. Furthermore, another limitation is that I as researchers are active gamers, as well as within the community so there might be certain bias inserted unconsciously, however I tried to not include these in the research. Essentially, it is impossible to delete all of the biases, but that is also why pragmatism as philosophical standpoint fits it better. Moreover, I have gathered data from communities that I sometimes participate in discussions and engage with people like already mentioned Reddit and Discord. This poses some biases as I will use these communities to get data. These people are therefore quite likely minded as me and might not be completely representative of the sample. There is also a limitation to the models. These models takes into consideration primarily mainstream games, as they are most successful, I can see what is mainly pushing the longevity of the project. Therefore, the graphs may not be entirely descriptive of the whole PC gaming industry. Secondly, my delimitations are the limitations imposed by me researchers and this project topic. One of the delimitations I have set is to look purely into PC platform. The rationale behind is that different platforms, practice different variations of business models, and generally are distinct to the pc platforms. Finally, I shall address the research from a critical standpoint and discuss what could have been done additionally or better with different approach. One of the main critiques of the project is it's changes in late stages of the project. This imposed more time constriction, making some of the decisions made rushed. Furthermore, the model for multiplayer games is rather complex. It's complexity may be something that is difficult to capture in just one graph.

5. Analysis

In the analysis part, I will analyse answers of respondents about gamers reception in relation to the theories and framework.Consequently, this give the idea of how does a business model have an impact on the reception of PC games. The main purpose of the survey is the capture the preferences and opinions of consumers. I shall ask questions, which were based on the theories, pragmatic philosophical point of view as well as my single and multiplayer revenue stream framework. The initial aim was to get at least 100 respondents, to fill up the survey. Instead, stunning 127 respondents answered within 3 days. This part shall try to answer the second sub question as well as slowly start answering the third sub question.

29 Rudolf Olexa [57927] ​

5.1. Statistics (quantitative reception) Firstly, I will address the answers of quantitative questions about single player games. Secondly, I shall proceed with the multiplayer one where in both single player and multiplayer, I will contrast the theories and philosophical viewpoint with the results of the survey. Interesting results will be highlighted and then discussed further in the discussion part as the results revealed interesting information about gaming community.

5.1.1. Single player stats

As I have said in the methodology, questions have been divided into sets, where each set asks about one topic. In the single player section, there were only three sets. First question was preferences of either a paid or a free game. The player result was more in favor of paid games, 80 percent answering that they prefer paid games as they are most of the time better (Survey 2018). Second set was targeting DLCs of single player game. Based on the graph, the DLC usually are one of the factors in the business model, which helps to prolong the life of a product. I have asked whether people would return to the game if a company releases new DLC. Once again 80 percent were sure to return back, and buy the new DLC and play it (Ibid.). This question is based on the assumption that people have liked the game before returning back to it. We further then ask, whether a DLC is able to attract people to buy the game and the new DLC. Most of the people agreed, as long as the new content seemed interesting (Ibid.). This proves that companies have to some extent second chance to attract new people to their product, as well as captivate those who have been playing the original product to begin with. Consequently, the life of the product is therefore prolonged with the release of new content for a game or at least it attracts people. Finally, to the last set of questions, I have asked about user value input to the game. If a company created a n engine for their game, and allowed people to create various mods, games even, within them, 85 percent of people are most likelier to stay and continue playing the game, for instance Skyrim, one of the most popular modded game today (Ibid.). Most people (65 percent) would not pay for this content to the users, however there are still some who would (Ibid.). This perhaps depend on the quality of this user infused value. When it came to the point where I have asked, if the company should charge money for them, 94 percent disagreed (Ibid.). This

30 Rudolf Olexa [57927] ​

was then followed by the question why? This question will be further dove into, in the qualitative output of the survey. This certainly have an effect on the life cycle, as it seems very important to the community to keep it user friendly. The topic of user created content and it's monetization should be kept in mind as it is an interesting topic to be discussed. Moving on to the multiplayer stats.

5.1.2. Multiplayer stats

First question aimed towards the preference of game time monetizations. Interestingly, mostly 87 percent prefers one time buy. 10 percent though prefer the combination of a subscription and one time buy, the rest are mainly content with subscription (Ibid.). Perhaps, the 10 percentage have drawn a connection with the first question on the single player. It perhaps signifies to them that if the game is subscription based as well as paid, the staff for the game have enough funds to make the game always great, with good customer support, and constant updates of content and other things. Well the preference in this case is clear though, as people try to pay least amount of money to receive greatest product. People want companies to be altruistic, and want companies to indulge them contentwise. As it may not help company financially, it will definitely make the gamers happy. Second question set aimed towards the free game and if they play it before knowing anything technical about it but like the concept. The answers were almost even, 55 percent of people just try it out, but the other 45 percent reads the review first (Ibid.). But for the most part review system is used in most cases as 70 percent of the sample checks reviews before playing any game (Ibid.). It seems like a common mechanism in relation to everything. People have access to a lot of information, and even a slight investment results in people looking for reviews. This is also quite interesting and will be also addressed in the discussion part too. Third set had focused a little bit on paid game, since 73 percent of respondents currently mainly are interested in a paid game (Ibid.). I have asked if they feel like their money was well spent, or that the product was worth it. 78 percent were quite sure that games they paid for were worth it most of the times, whereas only 6 percent disagreed (Ibid.). Now for a little bit interesting set, fourth one questioning cash shops. It is something, which is very difficult to pinpoint on the revenu stream life framework, as it can be quite damaging to the company but also prosperous. If asked about community’s feelings about cash shop, it was really interesting to

31 Rudolf Olexa [57927] ​

see that only two people like cash shops, whereas 30 percent dislikes it and rest 68 percent says that it depends on what is inside the cash shop (Ibid.). This question was further followed with why question and will be addressed in qualitative output as well as in the discussion. Fifth set deals with the questions about cosmetics. First two questions asked about if people have spent any real money on cosmetics and if they like that company provides updates to the cosmetic shops. For both of these questions it was rather even as 79 percent bought something in the cash shop and 80 percent are fond of the constant updates (Ibid.). When then asked about these cosmetics being exclusively for real money only instead of game currency it was even as well. 64 people said that it makes sense whereas 63 said it is stupid (Ibid.). This is fascinating as I can see both sides of the story, one being that people understand that company needs certain revenue to prolong the longevity of the product, but also on the other there are people who feel that it's unfair that they can not get something they want simply for playing the game. One side seems to be conscious of how it works, whereas others just feel like they are being just milked out of money from every direction. This split in opinions could be perhaps related to ethics of the company. In the case of company, they try to get as close to utilitarianism making few things unavailable (self-interest) and some available (concern for others). However, when we asked if it's justifiable to buy cosmetics from cash shop of the free game, 83 percent agreed that it is (Ibid.). There is a bit of a contradiction or perhaps some of the limitations playing it's part in terms of formulating the question. Moreover, it could be just a matter of being fair. This is also something, which can be discussed in the discussion. Finally, in the last set of the survey I was asking a lot about loot boxes as it is one of the more controversial ethical subject and relevant today. I first asked whether the community likes loot boxes, and 67 percent answered that they dislike them (Ibid.). However, most people from respondents, 55 percent have spent some money to buy or open some of these loot boxes. I suppose, buying loot boxes is mostly not preferred due to it's randomness. I have further asked, whether just buying the specific cosmetic or other items they want was easier and better for them 82 percent agreeing (Ibid.). What about others? Was it due to their consciousness to the company, knowing they wouldn't make more money or simply that they love the effect of a surprise. On the other hand, the loot boxes are random and can take several of them maybe twice or more money spent than it could have been on just buying the specific cosmetic needed. Is this some form of unethical baiting? The answers to the next two

32 Rudolf Olexa [57927] ​

questions were a bit more qualitatively oriented, therefore they will be included in the qualitative output chapter. Additionally, loot boxes shall be addressed more in the discussion chapter.

5.2. Qualitative output Besides the quantitative output the survey has yield, it has surprisingly shown also some qualitative results. Two questions, one in the single player part, the other one in the multiplayer part, have been also followed with optional why yes, why no, where people could fully express themselves about concerning factors of business models. Those questions were set to be only optional, as a lot of people are not so eager to discuss or write something more elaborative, and may discourage them to finish the survey. In this survey, almost 100 people have had answered Why questions. In this chapter, I shall point out the concerns of the community. Firstly, I will start by introducing what was said on why companies should not charge money for user created content. As there were less amount of people arguing yes for company having right to have some money from it. They argue mainly that user created content was made from an engine (basis) created by the company (Ibid.). They believe it is right for the user that created the content to be compensated mostly, as he/she was the one creating this content (Ibid.). However, most people who answered this question do not believe it is right, as user created content feels self-explanatory (Ibid.). They were the ones making this content and serve to make the game sometimes better than the developers ever intended to making it for free (Ibid.). Overall, it was said that if user created content should be monetized, it should be monetized for the users who created these things but in a form of donations (Ibid.). Furthermore, some even mentioned that they would pay for the content if it was of a high quality, same user referring to most of user created content being goofy or just a little modification (Ibid.). There is also one case (also mentioned by one of the respondents) when company tried charging for the mods to the game Skyrim, mentioned already in this project (Ibid.). This case was basically a drawback when Valve corporation also the owner of the biggest pc game platform steam, introduced a feature where modders could have monetized their mods, however this was received disastrously (McWhertor, 2018). Both Valve and ​ Bethesda (owners of Skyrim) have stated that they have misjudged what people really wanted

33 Rudolf Olexa [57927] ​

(Ibid.). Valve also responded that they may have misjudged community, which has been here for long (Ibid.). This feature though was suppose to reward moders, to actually monetize their projects they worked on, but that obviously backfired with negative feedback from the audience (Ibid.). One can argue about the effects of the user created content, but basing ​ myself on the experience as well as this data it is mostly positive thing for the company if they allow users continue creating content, making the game better, increasing longevity as well as even promoting to broader audience. However, from an ethical standpoint, taking the altruistic approach and letting people create stuff without it being monetized can bring revenue mainly in non-direct form to the company. Maybe not officially monetize them, or even the company getting a “slice of cake” too as it is seen from the survey, as well as the case with Skyrim. Second topic was about why people feel good or bad about cash shops. The responses were overall very similar, as most of the responses understand the importance of funding companies operation (Survey 2018). Some purely dislike it and compare it to the Runescape, when the game underwent changes where creators implemented microtransaction, which reduced its player base. After they have changed it back to normal, the game has regained it's popularity back (Ibid.). Although most people understand the need to have cash shops stressing out mainly free games as they have no revenue stream, they disagree with certain aspects of cash shops and that is pay to win content. There were so many concerns and complaints about pay to win content (Ibid.). A lot of people complained about the fact that, real life wallet is determinant of one's power (Ibid.). It is clear that people do want to play casually, without boosts, enhancements and want hard work and time put into the game be more rewarded (Ibid.). They understand the necessity of other items such as cosmetics or storage enhancements , but pay to win content or features making characters stronger for real money is just a big no in cash shops. This is where utilitarianism is just a perfect approach to this topic since people hate pay to win content. If the company includes also pay to win content, it just means that it is driven by self-interest only. If company tries to limit themselves from that, ethical practices will definitely pay of revenue wise and life of a product wise. Finally, the loot boxes questions, which were moved here due to their qualitative output. First question was asked whether loot boxes are something unethical? 42 percent said that loot boxes are like gambling where 33 said that it is completely fine (Ibid.). As for others, they

34 Rudolf Olexa [57927] ​

have had the option to input different answers. A very comprehensive explanation was given by one of the respondents, saying that loot boxes inherently are gambling, but does not retain real life value as normal gambling making loot boxes loss every time (Ibid.). Basically, the person gambling usually gets something but with loot boxes, person inherently loses always. There is also other people, who say that loot boxes are good only to some extent, for example when you can just acquire them yourself through gameplay (Ibid.). Another concern was with age, that these practices should be age restricted, or perhaps have a system where age would just restrict this practice (Ibid.). They said that if it's for younger audience, implementation of loot boxes is unethical, whereas with adults it's fine (Ibid.). Once again, the content of these loot boxes was pinpointed, referring to Battlefront 2 where EA implemented loot box system which was not purely cosmetic (Ibid.). However, people understand the thrill of loot boxes and the desire something like a high reward (expensive cosmetic) (Ibid.). The second question asked whether the community thinks that these practices of loot boxes, are taking advantage of younger audience or others, where 70 percent agreed and 22 percent disagreed (Ibid.). There was also third option offered to the community, where they could give any input they want. Those responses revolved around not being entirely sure whether companies do that intentionally, however there seems to be a trend of these children being taken advantage of anyways (Ibid.). But one of the respondents mentioned that it takes advantage of the greed of people, that's why they keep buying and opening new loot boxes (Ibid.). Overall it seems like some practices are not entirely ethical, especially when it comes to selling loot boxes to underaged group, as many others have expressed their concern. Also as one of the respondents said, that kids do not entirely understand the real value of money yet meaning that there is a chance that companies are taking advantage of that (Ibid.). It is strictly speculative, however loot boxes are something that is difficult to put on the Northouses graph. In large quantum of loot boxes bought it is definitely something considered to be ethical egoism, however for a small fee it can have high reward being close to altruistic behavior. It seems that it is just the whole point of randomness that is unethical, especially to certain age groups. Using the factor of randomness to bait people to try their luck for the self-interest purpose. As it was already mentioned, it will be taken to the discussion.

35 Rudolf Olexa [57927] ​

5.3. Survey reception of respondents The response from the survey was amazing. I was personally shocked, about how people started to engage in a discussion with me about this topic. I will elaborate on their feedback based on the private conversations we had during the survey. Participants were generally interested in the topic offering a lot of informations and opinions on the side. They felt really invested, saying things like “I could write an essay on that.”, which clearly indicates the gaming community has a voice on its own. People were interested about the aftermath of the survey as well. Moreover, they felt the importance of this subject stating, “I think this is really relevant” and “it's one of those subjects which will be looked at more in the near future”. However, during the survey I have received messages such as, “Lot of the questions i'm like, it depends.”, for example first question about multiplayer in the survey (1.When the ​ game is paid, do you prefer it to be…. ?), according to the majority of the messages, people ​ would agree with all 3 options, withal it being monetized accordingly. Additionally, people have been sending me side notes especially about questions concerning loot boxes. There were not many but those who did, expressed a little bit of sympathy towards the loot box system. The idea itself is not atrocious, rather the implementation in game is just lousy. There had been suggestions about their implementations while comparing different loot box systems of various games explaining why one is okay and the other one is not. Moving onto the cash shop section of questions, as those were a hotly discussed topic as well, few participants compared their own experience with sundry cash shops offering me to assert the fact, that a ‘good cash shop’ is only a way how to obtain in-game items faster - but still keeping the possibility of attaining them in game as well, to give frugal players a way around the Pay to Win model. Furthermore, players from this kind of game zone found themselves spending the money in the game cash shop anyways. In the end, people were absorbed in the question about free or paid game model. Reasoning started to form a shape where paid games are better yet people could not say they prefer to buy games as they do not like spending ​ ​ money.

36 Rudolf Olexa [57927] ​

5.4. Analysis conclusion

The gaming preferences are varied, however there is definitely a trend of preferences, which are preferable more. First of all, it is the quality. People seem to be mostly paying some money to the company in order to enjoy something that they will feel like, ‘Yes, it was worth it sinking these hours into it.’. Secondly, they like if their games are being updated, content and cosmetic wise. It seems like gaming community just likes to experience new things, cool features and different mechanics. If their fans are indulged into new things company releases they feel great. This goes hand in hand with user created content, which should not be restricted by the company and should be thrived for as all the sides are winning. Preferences for the game are one thing, however for the business model are other. Thirdly, it is the other few controversial techniques, which are a ‘double-edged sword’ such as pay-to-win and to some extent even loot boxes as both of them seem to have some ethical conflict. When it comes to pay-to-win content, players prefer it not to be there as it allows people, which invest a lot of money into the game more powerful, making the game unbalanced and making the company ethically egoistic. The same kind of goes for the loot boxes, however it's a bit different. Firstly, it is what the loot boxes contain, so a pay-to-win content is a no go. But secondly, it is the loot boxes themselves. It seems like another cash grab, referred by some countries as gambling, which can take advantage of those who are not able to make such decisions like buying loot boxes for the sake of randomness. Overall, people do not seem ignorant for the sake of the company, as the community understands that company needs to live off something, however unethical practices are deemed to fail as the community is the main stakeholder for business such as gaming companies.

6. Discussion Discussion chapter’s purpose is to discuss crucial and interesting points from the results of the survey. It will also serve as a part to answer the third subquestion. I would like to start presenting and getting a little bit more in-depth with some of the interesting highlights of the research. First up was the results spraked from the user created content. It was very surprising to see people so passionate and vocal about this topic as it was also set to be optional. However, after conducting the survey, it is clear that gaming

37 Rudolf Olexa [57927] ​

community is against company receiving money for the original works of users. Is it perhaps something that might decrease the longevity of the project? It is difficult to say, but we figured out through survey that most people check through reviews of the game before playing. In the case of Valve and Skyrim, where monetization of mods and other content was implemented, people started to give negative reviews to the game. This not only hinders the reputation of the company, but also the potential future audience. What if, there still some people who are genuinely considering buying this game, but get persuaded not to by the reviews? From ethical standpoint, it seems justifiable for the use created content to be rewarded for their work, as most of the time it is offered free. The idea taken from an ethical standpoint and the whole monetization of user themselves might be justifiable as also taken from the survey 35 percent would pay for some content (Ibid.). But there is still the question from the community, “is it good?”. Consequently, it is debatable if the company necessarily deserves the money from this, as it mostly contributes to their product (making it better) as well as bringing in non-direct profit (attracting more users, high value, high longevity). It is also debatable, who goes credit to the most if a user creates a content, on company’s created engine. Some people from the community, have talked about making this free as this gives the opportunity for these creators to create their portfolio, as well as getting recognition. One can say, it is a win-win situation for everyone if it stays free. Naturally, the users come out of this as the biggest winners and company having only one scenario where it can win. However, in this case we can see how much the gaming community is actually conscious of their purchases, as they proposed donations to the user creators instead of direct payment. Some even would buy their content if it's of a significant quality. Now on to next subjects as both are to some extent related to each other. It is the cash shops and loot boxes. As it was already mentioned, a lot of people had concerns when it came to cash shops, not many people liking it. They were curious as in what are the contents of it, and referred to the cash shops having pay-to-win content as being the worst. I have also came across few of these and personally felt the same way. It felt unfair especially when you could not really match the person who has acquired a lot of advantageous things for himself. The game was just unplayable, as the end content (content, which is usually after completing core stages of the game and is the purpose of the time sunk into) was consequently not fun as there was no chance of winning. A good example would be already mentioned Battlefront 2 by

38 Rudolf Olexa [57927] ​

Electronic arts, which had coincidentally loot box pay to win items incorporated (Orland 2018). Basically at the launch the game offered variety of boosts to their characters by opening loot boxes, which were almost impossible to acquire through game time as it required a lot of it. This resulted in uproar, as it also was seen from the survey one person even mentioning this specific case. After this uproar, EA released a statement, apologizing and promising to change it to only cosmetics (Ibid.). This case in particular addresses few more interesting results from the survey, such as pay-to-win content together with loot boxes. The problem with loot boxes in general seems to be it's inherent issue of randomness. To put it in to perspective together with pay-to-win content, there could be a person opening one loot box, gaining immense power within a video game, whereas there can be a person opening 100 not being able to even compete. Additionally, what if a person who is simply trying to have fun and then there is a person just buying loot boxes getting most of the pay-to-win items giving him bigger advantage compared to the regular player. It is simply unbalanced, both pay-to-win content as well as loot boxes. What is more, is loot boxes being a cash grab material for companies, taking advantage of the greed as pointed out by one of the respondents form the survey, especially for certain age group (younger). According to few respondents, to that matter, there should be some way of regulation, it is difficult though. Rating for games (age restriction) are already in place, but parents have not so much control over it as they most of the time they do not understand it, especially when purchased through cloud instead of a regular store. How can this be tackled though is very interesting, as this is definitely something that should looked at. Respondents mostly dislike loot boxes, and have experienced opening them several times. However, they believe it is alright as in acceptable as long as it does not include pay-to-win content. Nobody seemed to mind cosmetics, as the question about justification of free game cash shop also said that they find it completely alright. In these cases it is clear that most of the respondents and assuming, gaming community are aware of various aspects of monetization, it's ethics and mechanisms. They seem to be conscious of their purchases mostly, as this research has not put barriers on the age and perhaps other demographic factors, which may have had an immense impact on the results of it. Single player revenue stream life and multiplayer revenue stream life models essentially represent different aspects to single player and multiplayer games. Survey is confirming their preferences, as it prolongs the life of the product and therefore the stream of

39 Rudolf Olexa [57927] ​

revenue for the company. I have used the boxes of both models, to direct questions towards the topic, which consequently yielded intended result. All in all, the results show that most of the consumers are relatively aware of implications of different business models as well as just the purchase of a game. This research therefore contributes towards the business model utilization, with the use of revenue stream framework as well as the concept of business ethics as they both play a huge part in the creation of revenue stream life model and essentially are build upon.

7. Conclusion Finally, this part of the project will try summarizing the results yielded from the research. I will try doing that by slowly answering sub-questions comprehensively, in order to arrive at the concluding answer of the main research question. There are various business models for different kind of pc games each, which can prolong longevity of income. For a single player game it is relatively simple, as there are not so many monetization variations. Company’s main source of revenue stream for single player games is from the first time purchases as well as downloadable content. There are also other factors, which consequently have an impact on the longevity of the game leading to the non-direct revenue stream. This factors are ability of a game, for users to create new improvement and fun content and perhaps company even making their own content free as a way of promotion. Regarding multiplayer, the model uses similar aspects of paid and free game as well as DLC, however there are also cash shops. Cash shops are of a little bit of mystery, but as we also confirmed from the survey, only few factors from the cash shops are something, which makes gaming community rattled and decreases projects life. These cash shops include cosmetics, pay/to/win content, boosters and other special items. By updating this cash shop, it makes the game feel alive as well as it gives the opportunity to company to sustain their activities and consequently make more money. As for the preferences, it was kind of already answered. The model created by me ought to portray satisfaction of gaming community with business model. However, key preferences were without a doubt spotted. Firstly, the worst thing that company can do is to put pay-to-win content to the game since it ruins it's longevity and therefore a chance for the company to generate money for a longer period of time. It is due to reviews and awareness of the gaming community, that content like that does not last for very long. Secondly, it is the

40 Rudolf Olexa [57927] ​

loot boxes as they stir a little bit of controversy when it comes to a concern for younger demographics. All in all, the loot boxes do not seem like a big issue if it does not contain many times mentioned pay-to-win content (except for the EA’s Battlefront 2 case). The preference is mostly focused on paying for the games as most of the respondents believe that they tend to be better compared to their free counterparts. As for multiplayer, there is a larger majority liking the one time buy model. Cash shops seem to be only conflicted to certain content, but cosmetics seem to be liked and approved to be in games. Furthermore, gaming community loves mods. However, without the access to the games engine and it's customizability, the users will not be able to craft new or improving base content. This opportunity, should not be charged as it may cause setbacks for the company as in the case with Valve and Bethesda. Besides all different variations of business model, game itself is the determinant. Basing myself on that information, it just proves and shows high awareness and consciousness of gaming community regarding business models and their implications. They react to business models in a more predictable manner as gaming community has general preferences before purchasing a game. Those are no unfair cash shops, aversion towards but acceptance of loot boxes, likeability of user created mods and company created downloadable content. Thus finally leading leading us to the answer of the research question. The reception of a PC game product, is highly depended on the business model employed. There are factors, which makes the game “good” from a business model perspective. If these factors are not to be uphold, the game’s longevity is sure to decrease and result in failure. As it was several times mentioned, the scandal with EA’s Battlefront 2. This example shows exactly, how strongly a business model has an impact over the reception of the community. It also shows how to do a lot of things right, but consequently business model makes it an unacceptable product. Business model needs to be aware of fatal errors such as the pay-to-win content as well as the concept of ethics and fairness since the community is well aware of them. There are also other parts, which are controversial and have also an impact on the audience. The audience is used due to the fact that not everyone is a fan of loot boxes, whereas others have no problem with it. The hypothesis introduced before the beginning of this project was technically truthful as there are certain factor, which make the business model successful in this case some no’s like pay-to-win cash shops. However, the without a good business model, once again mentioning the EA’s Battlefront 2, the reception will be always poor. Therefore,

41 Rudolf Olexa [57927] ​

the company needs to be aware of the errors, and implement a business model fitting for the game and it's audience.

8. Bibliography

Books: Ayitey, W. (2010). A simple approach to strategic management. Accra: Akrong publications. ​ ​

Bryman, A. (2016). Social research methods. 5th ed. United Kingdom: Oxford University Press.

Egholm, L. (2014). Philosophy of science. 1st ed. Kbh.: Hans Reitzel ​ ​

Johnson, G., Scholes, K. and Whittington, R. (2009). Fundamentals of strategy. 1st ed. Harlow: Pearson education limited.

Northouse, P. (2016) Leadership. Theory and Practice. 7th edn. London: Sage Publications inc.

Odlyzko, A., 2000. The History of Communications and its Implications for the Internet. SSRN Electronic Journal. Available at: ​ http://www.dtc.umn.edu/~odlyzko/doc/history.communications1b.pdf.

Rendtorff, J. (2011). Institutionalization of corporate ethics and social responsibility programs in firms. In: K. Buhmann, L. Roseberry and M. Morsing, ed., Corporate social and ​ human rights responsibilities, 1st ed. London: Palgrave Macmillan, pp.244-266. ​

Wolf, M. (2008). The video game explosion. Westport, Conn: Greenwood Press. ​ ​

Websites:

42 Rudolf Olexa [57927] ​

Anon, Gaming. Dictionary.com. Available at: https://www.dictionary.com/browse/gaming ​ ​ [Accessed December 12, 2018].

BBC News. (2018). Video game gambling banned in Belgium. [online] Available at: ​ ​ https://www.bbc.com/news/technology-43906306 [Accessed 13 Dec. 2018]. ​

Feiser, J. (n.d.). Ethics | Internet Encyclopedia of Philosophy. [online] Iep.utm.edu. Available ​ ​ at: https://www.iep.utm.edu/ethics/ [Accessed 13 Dec. 2018]. ​ ​ ​

Fraser, C. (2015). Mohism. [online] Stanford Encyclopedia of Philosophy. Available at: ​ ​ https://plato.stanford.edu/entries/mohism/ [Accessed 13 Dec. 2018]. ​

Gerken, T., 2018.Video game loot boxes declared illegal under Belgium gambling laws. BBC ​ ​ News. Available at: https://www.bbc.com/news/technology-43906306 [Accessed December ​ 9, 2018].

Iep (n.d.). Aristotle | Internet Encyclopedia of Philosophy. [online] Available at: ​ ​ https://www.iep.utm.edu/aristotl/ [Accessed 13 Dec. 2018]. ​

Investopedia. (2018). Business Model. [online] Available at: ​ ​ https://www.investopedia.com/terms/b/businessmodel.asp [Accessed 13 Dec. 2018]. ​

McWhertor, M. (2018). Valve kills paid mods on Steam, will refund Skyrim mod buyers. ​ ​ [online] Polygon. Available at: https://www.polygon.com/2015/4/27/8505883/valve-removing-paid-mods-from-steam [Accessed 13 Dec. 2018].

Orland, K. (2018). Star Wars: Battlefront II’s new update axes “pay-to-win” upgrades. ​ ​ [online] Ars Technica. Available at: https://arstechnica.com/gaming/2018/03/star-wars-battlefront-iis-new-update-axes-pay-to-wi n-upgrades/ [Accessed 13 Dec. 2018].

43 Rudolf Olexa [57927] ​

Purchese, R. (2018). Blizzard responds to WOW Nostalrius pirate/private server closure. ​ ​ [online] Eurogamer.net. Available at: https://www.eurogamer.net/articles/2016-04-26-blizzard-responds-to-wow-nostalrius-pirate-p rivate-server-closer [Accessed 13 Dec. 2018].

Time.graphics. (2018). Counter-Strike History - Timeline. [online] Available at: ​ ​ https://time.graphics/line/752 [Accessed 8 Dec. 2018].

Journal articles: King, D. and Delfabbro, P. (2018 a). Predatory monetization schemes in video games (e.g. ‘loot boxes’) and internet gaming disorder. Addiction, 113(11), pp.1967-1969. ​ ​

King, D. and Delfabbro, P. (2018 b). Video Game Monetization (e.g., ‘Loot Boxes’): a Blueprint for Practical Social Responsibility Measures. International Journal of Mental ​ Health and Addiction. ​

Macey, J. and Hamari, J. (2018). Investigating relationships between video gaming, spectating esports, and gambling. Computers in Human Behavior, 80, pp.344-353. ​ ​

Zendle, D. and Cairns, P. (2018). Video game loot boxes are linked to problem gambling: Results of a large-scale survey. PLOS ONE, 13(11), pp.1-12. ​ ​

Thesis: Locke A., Uhrínová B., 2017, 'Change in the Game: Business Model Innovation in the Video Game Industry Across Time', Master Thesis in International Business, Norwegian School of Economics, Bergen, Norway.

Appendix: (Survey 2018) made by Rudolf Olexa, 12th of December. Available at: Appendix

44