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Why studios need to think about the ethics of social gaming 15/02/2012
Raf Keustermans
Social media games are becoming hugely profitable for the gaming industry – but are they encouraging addiction? There are lessons to be learned from the gambling sector

Social and free-to-play games are the future of the video games industry. Long gone are the days where you have to pay £50 upfront in the hope that the product won't suck. Today you can start playing a game, for free, and only if you like it can you decide to spend a bit of money on it – you can improve gameplay, buy some clothes for your avatar, furniture for your digital house or acquire extra weapons for your digital hero.

Free-to-play is the dominant business model for most games on social networks, and increasingly so for mobile games and online games in general. Research firm Flurry found that over 65% of the top grossing game apps in Apple's AppStore are free to play. Only 6 months earlier, in January 2011, this figure stood at 39%.

So all is good in this new world of video games; users can play for free and only pay when they like the product. The industry is growing like never before.

But there are some dark clouds over the industry. One is its dependency on "whales": super-users who are spending enormous amounts of money on these games and who make up for the many non-spending users. It's very hard to find reliable data on this subject because the industry is still young and not many companies are publicly listed or willing to share data. But a recent report from an analyst at investment firm Macquarie estimated that the 20% biggest spenders of leading social games developer Zynga are spending over $1,100 (£708) on its Facebook and mobile games. And this is a conservative estimate.

There are even rumours of some players spending tens of thousands of pounds per month on their favourite games. Two months ago Nicholas Lovell, a games consultant, reported that German online games studio BigPoint was selling virtual drones in its Dark Orbit game, for €1,000 a pop. Over 2,000 were sold in just four days. Another example is mobile game developer Glu, who added a virtual gun priced at $500 to their iPhone game Gun Bros last summer, apparently sold to great success.

There are two problems with this. Firstly, investors don't like the idea these firms are so reliant on a very small group of heavy spenders; out of Zynga's 150 million active users, only 0.4% (680,000) account for 80% of its $1bn revenue.

A second problem is an ethical one, but one with a business dimension as well. It's a problem other businesses have dealt with before, most recently the online gambling industry: the problem of addiction and users over-spending. Despite some innocent themes and the family-friendly character of most games, there is a real and growing problem with a portion of their players spending more than they should or can afford.

Of course, it's impossible for a game studio to know whether a user is a rich Premier League footballer who can easily afford spending thousands of pounds to entertain themselves, or if they're a single mum of three, living on benefits. Most will argue that nobody is forcing these players to fork out such amounts for a virtual drone or gun, and the same can also be said about (online) gambling services.

It's interesting to look at what happened with the online gambling industry. When it became clear – after the explosive growth of digital gambling a decade ago – that a lot of users were struggling to control their spending behaviour, government regulators and the industry, with some healthy pressure from public opinion, started looking at solutions. A lot of money, time and energy was spent on research.

Perhaps surprisingly it became clear that it was in the gambling industry's best interest to deal with this problem: it is far more profitable to have long-term customers who only spend what they can afford to lose, than to have a handful of customers overspending massively and burning out in a couple of months.

The gambling industry responded by introducing a host of measures to encourage "responsible gambling" — ranging from self-assessment tests, the possibility to set weekly or monthly spend limits, giving users visibility to their losses and offering problem users and their relatives the chance to completely exclude themselves from gambling. In some cases gambling operators will proactively contact users who show signs of risky behaviour, like chasing losses.

While these measures haven't wiped out the problem of problem gambling, at the very minimum they have stabilised the situation. Recent studies have shown that problem gambling and gambling addiction are not increasing, despite the fact that online gambling is still a growing industry.

So while the video games industry typically thinks of itself as a more "noble" business area compared to gambling, it might consider taking a leaf out of its book to help tackle its growing, unhealthy reliance on overspending whales. Self-regulation of the free-to-play industry and clear guidelines are urgently needed before vide games becomes the black sheep of the entertainment industry.
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