Analyst Predicts Industry 'Pullback' On Microtransactions In 2018

by Suriel Vazquez on Jan 27, 2018 at 02:12 PM

Although us here in the gaming world could have seen this coming, the backlash against aggressive microtransactions has extended into the financial sector, where predictions and forecasts can have consequences.

Analyst Doug Creutz from financial service and investment banking firm Cowen made statements yesterday regarding the performance of Activision Blizzard and EA's stocks. "Game development times are getting longer, and R&D costs are growing faster than they had previously," he said to clients, according to CNBC. "This isn't a monopoly business … Angering your customer with bad [microtransactions] does matter."

Creutz held the values of Activision Blizzard and EA's shares at $66 and $104, which are seven and nine percent lower than the market's close, respectively. According to Creutz, gaming industry "plans to further expand live services revenue appear to have run into some roadblocks with gamers sounding off against some recent titles." He cites the uproar around the microtransactions in both Star Wars: Battlefront II and Destiny 2 (though in the case of the latter, Creutz also acknowledge other issues hindering the game's view in the eyes of fans). "[Star Wars Battlefront II] has pretty clearly significantly underperformed expectations and remains without a live services revenue stream, while Destiny 2 has at the least suffered some unwanted engagement attrition," Creutz said. "We suspect that 2018 will see a pullback on industry attempts to aggressively drive [microtransaction] growth as a result."

Microtransactions weren't the only reason Creutz cited for the lowered valuation, however. He also pointed out that a combination of high expectations from investors and player dissatisfaction could be cause for more underperformance. "It's not just that gamers are angry and complaining; there have clearly been performance consequences for the games involved. And in an industry where every company is dependent upon a relatively small number of franchises, this matters."

Apart from the financial effects of overreaching MTX, there may soon be more legal ramifications for including loot boxes in games, as Washington state Senator Kevin Ranker recently introduced a bill to investigate whether they constitute gambling. For its part, EA has stated it isn't giving up putting microstransactions in Battlefront II.

[Source: CNBC]


Our Take
Whenever a controversy regarding publsihers' actions and customers' outrage at them arises, there's an undercurrent of defeatism about whether anything will really change. But as the backlash against microtransactions continues to grow outside of acute outrage and into chronic distrust, it's looking ever more likely that anger will start to affect publishers' actions in a measurable way. Hopefully, this will manifest in us looking back at this time years from now and thinking "remember when tons of console games had microtransactions?"