There is too much defeatism spreading through the community as of late. Most of which centers around the defeatist mentality that postulates our actions and voting with our wallets is ineffective strategies. How we are ultimately unable to affect the course of the world with our actions and thus are merely leaves floating downstream at the mercy of the currents. What an absurd rhetoric! It is time we discussed the logistics of why our victory is inevitable and how companies do their best to hide poor sales.
Before going into the logistical aspects of how companies budget and operate, we first need to discuss what drives video game sales. By now, you should have noticed the great lengths various publisher companies will go to to silence consumer criticism. Typically through attacking their social standing with labels or implications that you are the odd duck out if you aren’t part of the group that agrees product X is fantastic.
This behavior occurs because market influencers such as outlets, reviews, and advertisers do not drive sales. A 2009 study by Waggener Edstrom Worldwide, reaffirmed in 2014 by Cornell University, showed word of mouth drove 33% of sales for video games. To understand the magnitude of impact this has on sales performance, consider this, for every 1 million sales, 333,000 of them occur because of word of mouth.
Detractors will argue that is one study, but the science overall demonstrates to various degrees word of mouth drives sales across the board. In 2018 a study by Convince and Convert found word of mouth is responsible for up to 88% of sales. Word of Mouth Marketing Association in 2014 put out a landmark study demonstrating word of mouth represents 13% of total sales comprising over 6 trillion dollars in GDP yearly. Offline word of mouth had an impact on two-thirds of all transactions while online word of mouth, aka you annoying “Russian bot trolls”, affected one-third of all sales.
Word of mouth is crucial to sales. The only debatable aspect is how intricate a role it plays in any given market or exchange. Regardless of the magnitude, you are looking in order of magnitude of an impact between 333,000 to 888,000 out of a million sales. By word of mouth alone, rendering significant poor word of mouth very disastrous for companies. No, the Streisand effect doesn’t come into play here. Often misunderstood, it is more aptly put if you have a good product, but will receive no publicity. Any and all publicity is good publicity. For example, negative attention on Comicsgate pulls more eyes to good products. Negative attention on Gillette cost the company $8 Billion in revenue.
At this juncture, the defeatist will argue, “but the normies will buy anything that is shiny!”
Certainly, there is truth to that, but normies are emotionally rather than logically driven humans. That means they are more susceptible to word of mouth marketing than a person who would take it along with a slew of other factors into account during their decision making. They are more concerned with fitting in socially and conforming; thus are more likely to be swayed by word of mouth rather than the objective reality of a product or event.
As you can see, you should never just shut the hell up. Don’t be obnoxious, though. People tune out obnoxious, but they listen to calm collected presentations. From anecdotal experience, I’ve had people who ultimately didn’t agree with my stance, but said they appreciated that I remained calm and collected in its presentation. When your opponent is flipping out and acting emotionally, then you will always appear to be the authority in the situation.
As professor of social sciences, Robert Cialdini illustrated there are six critical elements behind the science of persuasion.
1: Reciprocity
2: Consistency
3: Social Proof
4: Sympathy/Like-ability
5: Authority
6: Scarcity
Where progressives, centralists, and moderates attempt to undermine your social proof, aka your social standing, they ultimately undermine themselves in four of the other five elements to persuasion. Leading to their inevitable defeat in the cultural and political argument.
When we’re calm, but our enemy isn’t, people note they are not reciprocating. When we are consistent while SJWs switch from “believe all women” to “fuck women Biden now”, we win the argument. When we’re pleasant, whereas SJWs will tolerate no deviation, we win the argument. When we have the facts and SJWs have emotions and fake news, we win the argument.
Best of all, when our predictions of how far the progressives will go continue to come true, we demonstrate the final element over time that there will be consequences to letting their ilk go unchecked. Many casual gamers find themselves not agreeing with us because they care about an ideological battle or cultural civil war, but because we are the side that wants to let them just enjoy their escapism.
Sure not all actions will bear fruit. Sometimes we’ll be shouted down, we’ll be ousted, we’ll be demonized, but when year-over-year you find the average person increasingly taking up your talking points, then you know you’re winning the long game. Something the animals on the left with their short-sighted emotionalism can never achieve.
That took longer to illustrate than anticipated, but clearly, there is no denying the importance at this stage of word of mouth. Nor the impact it has culturally and financially on the industry. Now let’s address how these companies can still fail even with sales that would have indi devs making a pact with the devil to achieve.
It’s a simple matter of logistics. When a sale occurs, the publisher does not receive all the money from the sale. First, the retailer will take a percentage of the sale. Digital sales range from 25-30% on average, with physical retail sitting roughly at the same percentage. After the sale, there are taxes to be applied both on the state and federal level. By the end of the process, a company is lucky if they see just over half of the value of each sale, as detailed on Trading Economics.
A single word explains why, at this point, that still isn’t enough to break even. That word is Bloat. I am a massive fan of the 80/20 principle of employment. A theory that states 80% of a company subsists off 20% who actually produce income. Remember, management and marketing can only ever optimize revenue and direct operations, never generate income themselves. With the exception where management is a service being offered to offset companies having to fulfill certain obligations. Typically this includes but isn’t limited to, Human Resources, Customer Relations, and Accounting.
In the gaming industry, you’ll often see AAA companies spend nearly as much or even more on management and marketing than they do on actual game development. What pays for both management and marketing doesn’t materialize from the ether. It must be acquired through the production of products and the rendering of services. AKA the sale of video games, dlcs, and various microtransactions. Said revenue income must then pay for the cost of development, the cost of management, the cost of marketing, and then have enough left over to pay out dividends to investors.
For this reason, merely breaking even or taking months to break even is considered to be disastrous. What it means in financial terms is the entire company has operated at a net loss for the venture.
Let’s examine Activision/Blizzard to highlight how this issue works. In 2019 the company spent $998 million on development, $926 million on sales and marketing, before spending an additional $732 million on general and administrative staff. That’s before they paid out $0.37 per share. All of that has to be paid for by their revenue generators.
Right now, Activision/Blizzard owes $2.7 Billion in outstanding debt with $1.5 billion of that debt coming due in 2021-22. Add that to the ever-growing bloat, revenue generation has to prop up.
An example of a healthier company that ran into issues is that of Ubisoft, who from 2018-2019 spent €740,969,000 on development, €410,070,000 on marketing, before spending an additional €157,295,000 on administrative and IT. Two underperforming games, along with one outright flop caused operating income to drop by 93% and drove significant restructuring for the company, as reported by Forbes. Keep in mind the concept of underperformance means the company had certain expectations for the game’s performance, which was used to determine how much to budget on other operations. When a game underperforms, it doesn’t generate the revenue needed to finance said operations or meet certain internal milestones for economic performance.
Another reason companies fail is simply an inability to budget for the development of the game itself properly. Square Enix is infamous for having out of control budgets that require sales in the double million figures in order for the venture to be successful chiefly because they have very costly bloat as well.
When they tell you that your actions ultimately have little impact on the performance of a company, understand that is an outright lie. These companies often operate with a very narrow window of success and are kept afloat at current not just by net sales, but by microtransactions. A mechanic China has already rendered nonviable for western companies with the west likely to have regulation in place in 2021-2022. Only the current pandemic and political occurrences of impeachment and Brexit have bought the industry more time to enjoy abusing the mechanic.
A final criticism that is often lobbied against the word of mouth and our ability to impact the industry at large is the notion of enormous launch day sales. Three examples outright prove why this is a weak argument. Gears of War 5 launched to some of the best launch sales in the series history. Then the next week, they dropped off to never recover, leaving the game to be considered a flop. Resident Evil 3 Remake had good launch week sales, then dropped off the sales charts in week 2, leaving Capcom scrambling to determine why the game failed. Final Fantasy 7 Remake had great shipped numbers and now manages to stay on the sales charts as a result of a lack of competition.
In all instances, remember their publishers budgeted their operations under the idea these games would be a certain level of success. They didn’t just budget for development, they budgeted their entire operations and green-lit new projects under the assumption of predicted returns. When FF7 remake ships half the number of sold copies of 15 that is disastrous for Squares budget. The same for Resident Evil 3 Remake failing to match the last Remake’s numbers has for Capcom’s future. A future they now need to adjust to not see a return to near bankruptcy for the company.
Never let it be said we are losing. The average person is tired of politics in games, and from a scientific standpoint, word of mouth has a significant impact on the industry. If it didn’t, if our words were irrelevant, these companies and individuals would not devote as much time, effort, and resources into silencing us as they do. They would find it a counter-effort even to mention our dissent.
By the sheer fact, they fight you, that they try to silence you, should tell you one thing. The left and publishers are afraid of the consumer. Since at the end of the day, we possess the money they need. We set the terms collectively, not them. Akin to a bugs life, if the consumers ever realized this, there goes their way of life.
Loading comments…