Editorial: Loyalty versus Profit: How Important Is Longevity?

Hello, readers! My name is Daniel ‘Deimosion’ Flink, and I am here once again to talk about video games. Based on a discussion from TSM Episode 2, I want to talk about an idea that frequently comes up in discussions among gamers: how important is longevity in gaming? Is it better for a company to seek customer loyalty, or profit? To discuss this issue, I would like to focus on two companies: Valve and Activision.

TF2 and ponies, because why not?
''Hey Applejack, is Valve going to charge me to play Team Fortress 2?''

Valve has recently and famously announced that Team Fortress 2, their massively popular online FPS, is now going to be free forever. To access all of the game’s functions, one needs only to spend any amount of money in Valve’s “Mann Co.” store. Spend just ninety-nine cents on a weapon to gain full access to the game’s trading, gifting, and crafting capabilities. Additionally, Valve frequently updates Team Fortress 2 with new weapons, hats, and maps FOR FREE. Contrast this with Activision’s Call of Duty franchise. Call of Duty: Modern Warfare 2, our readers may recall, received two fifteen dollar map packs. Both map packs added five new maps each to the game, and the first DLC package added a new game mode. Two maps from each pack were simply reincarnations of maps from Call of Duty 4, and three maps from each pack were completely new. Let me reiterate, readers: for a whopping thirty dollars, or half the price of a BRAND NEW Xbox 360 or PlayStation 3 game, one could buy SIX new maps and FOUR old maps from Activision. I will give that information a moment to sink in before moving on in this discussion. Valve, by comparison, has added several new stock maps, a few new game types, and dozens of new weapons and hats to Team Fortress 2 without charging players a dime. Valve has decided to forgo some level of profit in order to bring gamers what they want. Could Valve charge for their updates? As the “Mann Co.” store shows, Valve can and does charge money for items. However, any non-aesthetic item is also available through crafting and random drops for free. Valve has sought not just profits but also gamer loyalty, and, in the long term, their business model is much better than Activision’s.

''Time to go to work, work all day, making Call of Duty!''
The Activision business model is explained in three easy steps.

Gamers will and already are beginning to get sick of Activision’s profit-driven, loyalty-forgoing plan to charge for maps and new game modes. Valve, on the other hand, is guaranteed to sell an enormous amount of content based on customer loyalty alone. By forgoing short-term profit, Valve has guaranteed long-term profit through gamer loyalty. Customers will gladly continue to give Valve money for new games, as Valve has a proven history of quality games, excellent service, and a clear and obvious care for their customers’ desires, likes, and dislikes. Activision, on the other hand, will lose customers as gamers get sick of buying the same game every year or two while getting mediocre support and expensive DLC packs. Activision is clearly seeking to make as much money off their games in as little time as possible. And while this strategy has worked extremely well for Activision in regards to the Call of Duty franchise, other game series have shown that the short-term profit model works only for a few years. As discussed a few weeks ago, the once-successful Guitar Hero franchise was destroyed by Activision’s profit-seeking business practices. Once milked dry, Activision dropped the Guitar Hero series, despite what Activision’s higher-ups may say about a “hiatus”. While the Activision model is currently working out, there is no long-term sustainability, and Activision will lose customers rapidly as gamers move on to the next big FPS franchise, whatever it may be. The Valve model of sacrificing short-term profit to ensure customer loyalty and long-term financial gain ensures that their customers will be in for the long haul. Heck, Valve even makes profit off of their older games; I just last week bought the Half-Life One Anthology, a collection of 9-12 year old games.

Sorry, Shawn Illingworth, but I decided not to use the G Gundam version of this image.
Phillip J. Fry sums up my feelings toward Valve Software succinctly and eloquently.

I have, in the past, been known to call Valve Software “the greatest video game company in the world” due to their obvious concern for their customers and their continued support for their various games. By giving up short-term profit, Valve has managed to achieve massive customer loyalty. Whether including the Steam version for free in PS3 copies of Portal 2 or offering Team Fortress 2 for free, Valve has decided they clearly want to please their fanbase first, rather than simply lining their pockets with gamers’ money. In the long-term, I believe this will pay off for Valve; customer loyalty is a powerful thing for a business to have. Activision, meanwhile, will continue to do extremely well for a short while, but as IPs begin to fail and gamer loyalty to Activision’s franchises declines, their profits will begin to dry up.

What do you think, dear readers? Does Valve’s business model truly have sustainability, or will their attempts to please customers be their downfall? Is Activision truly a money-grubbing company that will destroy itself given enough time, or will gamers continue to stand Activision’s ridiculous policies? Let me know what you think in the comments, readers, and let me know what you think of these two companies. For this editorialist/reviewer, Valve will continue to be a favorite game developer. I do not like FPS’s as a general rule, yet I still would say Valve is a brilliant game developer, and I hope their business model continues to be successful. As for Activision, well, I do not have any interest in any of their current IPs; my interest in Guitar Hero died even before the franchise did. Either way, readers, let me know what you think about this issue; I look forward to reading your comments.

11 comments

  1. I would say that Valve is probably the best video game company in America today. I believe that they will be around for a very long time, if only because Lusipurr will buy every single pyro hat that comes out.

  2. @Reetin: CORRECT!

    Valve makes Pyro hats. Lusipurr buys them. Profitdustry!

  3. It blows my mind that the people running these game publishers can think that the money orgies can last forever without them ever putting anything back. I mean even if a CEO wanted to screw gamers by making cheap, low-quality cash-in games, it must nevertheless occur to them that it would make more sense to produce their gimped games on a ratio basis, ie two lemons to one decent title – I mean that is how you can continue to cash-in with lackluster sequels for longer.

    Gamers must still be able to believe that you are still capable of producing the occasionally good game, otherwise there’s no reason for them to buy your cash-ins.

  4. @SN People who want to make cheap, low-quality cash-in games can easily do so with no negative repercussions by making games for the iPhone and Android. People will buy them even if they’re terrible compared to good console games because…well…people are stupid. Or easily placated?

  5. Rubbish can sell repeatedly as a $3 downloadable titles, but it’s quite different when you expect to do a similar trade with $60 console games.

  6. The threshold of spending is so much lower. People are willing to spend a little money in the hopes that they’ll get lucky and hit on gold–that’s why lottery tickets are such a big seller. Tiny entry price for a chance–a tiny, insignificant chance–at a big reward.

    But imagine if lottery tickets were $60 a pop. They’d still sell, but the sales figures would be much lower, and many people would simply find themselves priced out of the option.

  7. @Lusipurr: You could buy a $60 lottery ticket for a fairly likely chance to win $61, or you could buy a $1 lottery ticket for a very unlikely chance to win $1000 dollars!

    It’s a no brainer!

    (Literally.)

  8. How many 60 dollar games do you really believe are worth their asking price, let alone a $61 return? On the other hand it isn’t hard at all to find $1 games that are worth so much more than their RRP.

  9. That is a very good point too. As the price goes up, significantly fewer games become worth the price. Contrast something like the a Pokemon game with the average $60 game, for example.

  10. And then you start adding Online Passes, Horse Armour and $15 map packs!

    $60 (or $65, Activision) console games represent some of the least value in the gaming market.

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