The Cost of Pixels Is Not Zero, and Why You Should Be Glad They're Profitable

DoctorESO

We play a game of pixels, and special cosmetic pixel items are available at a premium price. It's easy for us to think that the cost of pixel items is zero because it's intangible, unlike a car or a computer. However, let's not forget that there's a labor cost for developing the pixel items. A developer has to create the items, and then the item has to go through a quality control process, and so on, and the salaries of these workers are continually on the rise due to cost-of-living increases, inflation, labor supply shortages, and so on.

Also, it's not just the labor costs of the developers of the specific items, but of the game as a whole. It only costs consumers a one-time fee to play the game for life (or however long the game lasts). But maintaining the servers and the Internet connection (which is more than a computer in someone's basement), the facilities and the lights (and the cooling, backup, power, etc.), continual game improvements, and so on costs money. Premium Crown Store items and chapter expansions (such as Morrowind and Summerset) help pay for that.

And remember that digital items don't exist in a vacuum. They can't be separated from the game itself. Your digital items can exist only within the realm of a live-and-kicking ESO, which produces a massive ongoing maintenance cost. Additionally, ESO continues to exist and grow only as long as it's profitable and the opportunity cost of developing and running another game is lower. If it becomes more profitable to neglect/shutdown ESO and move staff and resources to developing and running a new game - and get more bang for the buck - then prudent business practices mandate that that be done. So also be glad that ESO is profitable.

You may think that Crown Store items and chapter expansions are overpriced, and that is fine. Consumers as a whole set the demand in our market economy, and you contribute to that when you choose to open your wallet or not. You have every right to not open your wallet, but remember that everyone else has every right *to* open their wallet. The cost of pixels is certainly not zero, nor is it de minimis.

Jhalin

A one time labor expense is not comparable to tangible products.

Digital items can be sold indefinitely at no additional cost after the development is over. Tangible items are finite and have a production cost for every item made.

DoctorESO

Jhalin wrote: »

A one time labor expense is not comparable to tangible products.

Digital items can be sold indefinitely at no additional cost after the development is over. Tangible items are finite and have a production cost for every item made.

Not quite. Read the section in the OP about keeping the servers running. Digital items don't exist in a vacuum in ESO. They exist only within the game and server upkeep, which is a massive maintenance cost. You can't extricate the digital items from the game.

Additionally, ESO continues to exist and grow only as long as it's profitable and the opportunity cost of developing and running another game is lower. If it becomes more profitable to neglect/shut down ESO and move staff and resources to developing and running a new game - and get more bang for the buck - then prudent business practices mandate that that be done. So also be glad that ESO is profitable.

TheShadowScout

DoctorESO wrote: »

We play a game of pixels, and special cosmetic pixel items are available at a premium price. It is easy for us to think that the cost of pixel items is zero because it's intangible, unlike a car or a computer. However, let's not forget that there is a labor cost for developing the pixel items. A developer has to create the items, and then the item has to go through a quality control process, and so on, and the salaries of these workers are continually on the rise due to cost of living increases, inflation, labor supply shortage, and so on.

...and anyone going "We deserve this for free" is basically asking the developers, grafic artists, code jockeys, animators, and their support staff of bean counters and workplace landlords to do their jobs without payment. When all of them have bills to pay just like anyone.

DoctorESO wrote: »

Also, it's not just the labor costs of the developers of the specific items, but of the game as a whole. It only costs consumers a one-time fee to play the game for life (or however long the game lasts). But maintaining the servers and the Internet connection (which is more than a computer in someone's basement), the facilities and the lights (and the cooling, backup, power, etc.), continual game improvements, and so on costs money.

...which is the difference between an MMO and an solo game. The standalone game, you get the game for the purchase price, and there are never any more expenses for the developers as you play it at home as much as you like. (until they make an expansion or DLC, and sell that extra; or unless thea basically release a alpha version and then have to fix all the crud that lack of proper playtesting let through with after-release patches)

MMOs on the other hand... see above

DoctorESO wrote: »

Premium Crown Store items and chapter expansions (such as Morrowind and Summerset) help pay for that.

You may think that Crown Store items and chapter expansions are overpriced, and that is fine. Consumers as a whole set the demand in our market economy, and you contribute to that when you choose to open your wallet or not. You have every right to not open your wallet, just as other people have every right to open their wallet. But the cost of pixels is certainly not zero, nor is it de minimis.

Very well stated!

Yes, we all wished we could get more for less money. Duh. And some things may also be rather overpriced (cough, namechange, outfit slots, cough). But they do need to pay their bills -and- show enough profit to keep the suits in charge from pulling the plugs and liquidating the assets... and in the end, its everyones choice if they feel something is worth the money, or not.

Me, I always have been willing to put my money where my mouth is. And stay realistic about the cost of things, instead of whining how I might be entitled to get this or that for free because reasons...

Aliyavana

They should add those pixels obtainable as mounts inside summerset

ssewallb14_ESO

I've yet to see anyone argue that the input cost of digital items is 0. This seems like a strawman of the belief that the cash-shop model produces a disproportionately high market price relative to value and/or input costs, when compared to various other things.

DoctorESO

ssewallb14_ESO wrote: »

I've yet to see anyone argue that the input cost of digital items is 0. This seems like a strawman of the belief that the cash-shop model produces a disproportionately high market price relative to value and/or input costs, when compared to various other things.

Digital items don't exist in a vacuum. They can't be separated from the game itself. Your digital items can exist only within the realm of a live-and-kicking ESO, which produces a massive ongoing maintenance cost. Additionally, ESO continues to exist and grow only as long as it's profitable and the opportunity cost of developing and running another game is lower. If it becomes more profitable to neglect/shutdown ESO and move staff and resources to developing and running a new game - and get more bang for the buck - then prudent business practices mandate that that be done. So also be glad that ESO is profitable.

Bigevilpeter

Its not 0, but its done only once and mass sold, unlike materialistic stuff which has a cost for every unit. The profit margin in digital items insane as compared to real items, so yeah they overprice those things for sure

brandonv516

I already bought the TV. The pixels are mine!

DoctorESO

Bigevilpeter wrote: »

Its not 0, but its done only once and mass sold, unlike materialistic stuff which has a cost for every unit. The profit margin in digital items insane as compared to real items, so yeah they overprice those things for sure

We have X dollars to spend.

We can spend the money on ESO and get a 10% return on investment.
Or we can spend the money on another project and get a 20% return on investment.

How would you spend the X dollars?

It is a good thing for us that ESO is profitable.

Juju_beans

Bigevilpeter wrote: »

Its not 0, but its done only once and mass sold, unlike materialistic stuff which has a cost for every unit. The profit margin in digital items insane as compared to real items, so yeah they overprice those things for sure

In a game that has recurring costs and that's how those recurring costs are paid for.

Vaoh

Bigevilpeter wrote: »

Its not 0, but its done only once and mass sold, unlike materialistic stuff which has a cost for every unit. The profit margin in digital items insane as compared to real items, so yeah they overprice those things for sure

^^^ good point.

Vaoh

This post seems too coincidental in how it has sprung up at the time of this sale. Are people giving you s*** for buying tons of Crowns during the 20% sale?

Tyrobag

Supply & Demand. Digital content has an infinite supply, so the prices should be 100% controlled by demand. However since Zo$ has a "Monopoly" on ESO digital content, they can force the prices up and make things appear more valuable by imitating low supply (impending removal from crown store).

I still argue that, due to the infinite supply, lower prices would actually make more money for Zo$. I've seen many things that I (and many others) would buy, but due to the crazy prices did not. Most of the over priced items (like mounts, motifs, and homes) would most likely sell twice as many at 2/3 the price, thus a significant profit.

SirCritical

Omg sry OP but this is BS. It's not about cost of labour, or worktime, whatever. They know which pixels in which order can they sell best to their customers, and if they see the players want black pixels followed by white pixels much more than blues and reds, they'll price these to the ceiling to get the most profit. It's business, finish this defending speech.

Azarai

DoctorESO wrote: »

We play a game of pixels, and special cosmetic pixel items are available at a premium price. It's easy for us to think that the cost of pixel items is zero because it's intangible, unlike a car or a computer. However, let's not forget that there's a labor cost for developing the pixel items. A developer has to create the items, and then the item has to go through a quality control process, and so on, and the salaries of these workers are continually on the rise due to cost-of-living increases, inflation, labor supply shortages, and so on.

Also, it's not just the labor costs of the developers of the specific items, but of the game as a whole. It only costs consumers a one-time fee to play the game for life (or however long the game lasts). But maintaining the servers and the Internet connection (which is more than a computer in someone's basement), the facilities and the lights (and the cooling, backup, power, etc.), continual game improvements, and so on costs money. Premium Crown Store items and chapter expansions (such as Morrowind and Summerset) help pay for that.

And remember that digital items don't exist in a vacuum. They can't be separated from the game itself. Your digital items can exist only within the realm of a live-and-kicking ESO, which produces a massive ongoing maintenance cost. Additionally, ESO continues to exist and grow only as long as it's profitable and the opportunity cost of developing and running another game is lower. If it becomes more profitable to neglect/shutdown ESO and move staff and resources to developing and running a new game - and get more bang for the buck - then prudent business practices mandate that that be done. So also be glad that ESO is profitable.

You may think that Crown Store items and chapter expansions are overpriced, and that is fine. Consumers as a whole set the demand in our market economy, and you contribute to that when you choose to open your wallet or not. You have every right to not open your wallet, but remember that everyone else has every right *to* open their wallet. The cost of pixels is certainly not zero, nor is it de minimis.

All of what you said is true, but the game has been running for years now. If they need more money to keep up the game, then I am more than happy to help support them. But what exactly caused them to seemingly need so much more money to keep the game running? Why not try to make ESO+ better instead of causing everything to cost more in the Crown Store and reduce the sale? Nothing is free, and I make sure to support products I like. But I am honestly curious as to your take on this, do you think the increased prices are needed?

JaZ2091

Copying and pasting the exact same responses becomes spam.

duendology

Right.

I've yet to see the statistics concerning how much money cost the actual server and crew maintenance and how much money zos actually makes selling the overpriced pixels to players.
My intuition tells me that the company makes insane amount of money than they need to put in maintenance..and even paying a graphic designer to create this or that item (usually just recolour an old design..ughh)..And it is, of course, how every company works. They need to make profits to exist, nothing wrong with that..but it does not change the fact that zos marketing plan sucks..and their pixels are [removed profanity] overpriced. Period.

Anotherone773

Bigevilpeter wrote: »

Its not 0, but its done only once and mass sold, unlike materialistic stuff which has a cost for every unit. The profit margin in digital items insane as compared to real items, so yeah they overprice those things for sure

You obviously think:
*electricity
*bandwidth/internet
*servers
*employees
*Trash, sewer,water, etc
*Office supplies
*insurance
*legal fees
*Licenses,copyrights, trademarks,etc
* and many other costs associated with running an MMO and business in general

Are completely free. Where do you think the money comes from for daily operating cost? Car washes and bake sales on the company parking lot?

AlienatedGoat

DoctorESO wrote: »

We play a game of pixels, and special cosmetic pixel items are available at a premium price. It's easy for us to think that the cost of pixel items is zero because it's intangible, unlike a car or a computer. However, let's not forget that there's a labor cost for developing the pixel items. A developer has to create the items, and then the item has to go through a quality control process, and so on, and the salaries of these workers are continually on the rise due to cost-of-living increases, inflation, labor supply shortages, and so on.

Also, it's not just the labor costs of the developers of the specific items, but of the game as a whole. It only costs consumers a one-time fee to play the game for life (or however long the game lasts). But maintaining the servers and the Internet connection (which is more than a computer in someone's basement), the facilities and the lights (and the cooling, backup, power, etc.), continual game improvements, and so on costs money. Premium Crown Store items and chapter expansions (such as Morrowind and Summerset) help pay for that.

And remember that digital items don't exist in a vacuum. They can't be separated from the game itself. Your digital items can exist only within the realm of a live-and-kicking ESO, which produces a massive ongoing maintenance cost. Additionally, ESO continues to exist and grow only as long as it's profitable and the opportunity cost of developing and running another game is lower. If it becomes more profitable to neglect/shutdown ESO and move staff and resources to developing and running a new game - and get more bang for the buck - then prudent business practices mandate that that be done. So also be glad that ESO is profitable.

You may think that Crown Store items and chapter expansions are overpriced, and that is fine. Consumers as a whole set the demand in our market economy, and you contribute to that when you choose to open your wallet or not. You have every right to not open your wallet, but remember that everyone else has every right *to* open their wallet. The cost of pixels is certainly not zero, nor is it de minimis.

The game was doing just fine prior to crown crates. The only reason they were added was because Heather Powers wanted them to be added. She was repeating the same monetization procedures she did for SWTOR.

You can't convince me that $30 mounts, $150 houses, and RNG-only crate apex mounts are justified because ESO wouldn't survive without them. That's patently false. The game was doing just fine before, and was putting out regular content.

The only reason they were put into the game was because Heather Powers gave those ideas to ZOS and convinced them that they would increase their revenue stream. Which they did, and at a terrible cost.

More and more, this game starts to feel like a free-to-play game. It feels cheap, forced, abusive, and scandalous.

Maybe that's what you like. Maybe you like throwing money at a pit and pretending that its doing some good.

I don't.

I want to support actual development. Not a perpetual cycle of overpriced cosmetic items and gambling boxes.

ssewallb14_ESO

Tyrobag wrote: »

Supply & Demand. Digital content has an infinite supply, so the prices should be 100% controlled by demand. However since Zo$ has a "Monopoly" on ESO digital content, they can force the prices up and make things appear more valuable by imitating low supply (impending removal from crown store).

I still argue that, due to the infinite supply, lower prices would actually make more money for Zo$. I've seen many things that I (and many others) would buy, but due to the crazy prices did not. Most of the over priced items (like mounts, motifs, and homes) would most likely sell twice as many at 2/3 the price, thus a significant profit.

I was about to post almost exactly this, but you beat me to it :P.

They have statistics on sales, and their prices are based on that. It's actually the reason discounts are a thing, they're testing the waters with different price ranges to determine how to price things in the future. The prices seem high because we're for the most part used to competitive markets in the real world, where price will approach value. But, as you said, a cash shop simulates a monopoly, prices are based on maximum profit potential rather than value to the user.

SydneyGrey

Gee, no kidding.
However, the one-time labor cost is miniscule compared to their profit on these virtual items, that are literally only a file on a computer and can be mass-produced by the millions for nothing, until the end of time.

Anotherone773

Azarai wrote: »

DoctorESO wrote: »

We play a game of pixels, and special cosmetic pixel items are available at a premium price. It's easy for us to think that the cost of pixel items is zero because it's intangible, unlike a car or a computer. However, let's not forget that there's a labor cost for developing the pixel items. A developer has to create the items, and then the item has to go through a quality control process, and so on, and the salaries of these workers are continually on the rise due to cost-of-living increases, inflation, labor supply shortages, and so on.

Also, it's not just the labor costs of the developers of the specific items, but of the game as a whole. It only costs consumers a one-time fee to play the game for life (or however long the game lasts). But maintaining the servers and the Internet connection (which is more than a computer in someone's basement), the facilities and the lights (and the cooling, backup, power, etc.), continual game improvements, and so on costs money. Premium Crown Store items and chapter expansions (such as Morrowind and Summerset) help pay for that.

And remember that digital items don't exist in a vacuum. They can't be separated from the game itself. Your digital items can exist only within the realm of a live-and-kicking ESO, which produces a massive ongoing maintenance cost. Additionally, ESO continues to exist and grow only as long as it's profitable and the opportunity cost of developing and running another game is lower. If it becomes more profitable to neglect/shutdown ESO and move staff and resources to developing and running a new game - and get more bang for the buck - then prudent business practices mandate that that be done. So also be glad that ESO is profitable.

You may think that Crown Store items and chapter expansions are overpriced, and that is fine. Consumers as a whole set the demand in our market economy, and you contribute to that when you choose to open your wallet or not. You have every right to not open your wallet, but remember that everyone else has every right *to* open their wallet. The cost of pixels is certainly not zero, nor is it de minimis.

All of what you said is true, but the game has been running for years now. If they need more money to keep up the game, then I am more than happy to help support them. But what exactly caused them to seemingly need so much more money to keep the game running? Why not try to make ESO+ better instead of causing everything to cost more in the Crown Store and reduce the sale? Nothing is free, and I make sure to support products I like. But I am honestly curious as to your take on this, do you think the increased prices are needed?

Because it doesnt reduce the sales. If only half as many people buy something at 3 times the price...guess what that increases sales.

Rouven

SydneyGrey wrote: »

Gee, no kidding.
However, the one-time labor cost is miniscule compared to their profit on these virtual items, that are literally only a file on a computer and can be mass-produced by the millions for nothing, until the end of time.

Umm ... I for one hope that we evolve technologically and that these pixels will be obsolete soon(tm). Replaced by shiny new pixels in a complete virtual real environment(tm) a la Tad Williams Otherland or the like.

We need a lot of cash for that.

A lot of cash.

Kodrac

If crown crates are the only thing keeping this game afloat then just shut it down now. I'd rather the game itself be what keeps the game afloat. If it can't continue without crates then why the F are so many people playing it? For the crates? No. The crates are pure profit, nothing more.

AlienatedGoat

Rouven wrote: »

SydneyGrey wrote: »

Gee, no kidding.
However, the one-time labor cost is miniscule compared to their profit on these virtual items, that are literally only a file on a computer and can be mass-produced by the millions for nothing, until the end of time.

Umm ... I for one hope that we evolve technologically and that these pixels will be obsolete soon(tm). Replaced by shiny new pixels in a complete virtual real environment(tm) a la Tad Williams Otherland or the like.

We need a lot of cash for that.

A lot of cash.

Also a lot of children, if you forgot what Otherland was really about.

Funny you'd bring that up though, because it's a good metaphor for the predatory and cannibalistic nature of the modern gaming industry. ZOS included.

Rouven

Phage wrote: »

Rouven wrote: »

SydneyGrey wrote: »

Gee, no kidding.
However, the one-time labor cost is miniscule compared to their profit on these virtual items, that are literally only a file on a computer and can be mass-produced by the millions for nothing, until the end of time.

Umm ... I for one hope that we evolve technologically and that these pixels will be obsolete soon(tm). Replaced by shiny new pixels in a complete virtual real environment(tm) a la Tad Williams Otherland or the like.

We need a lot of cash for that.

A lot of cash.

Also a lot of children, if you forgot what Otherland was really about.

Funny you'd bring that up though, because it's a good metaphor for the predatory and cannibalistic nature of the modern gaming industry. ZOS included.

How did Tad do it is the question - lol.

Jhalin

Anotherone773 wrote: »

Bigevilpeter wrote: »

Its not 0, but its done only once and mass sold, unlike materialistic stuff which has a cost for every unit. The profit margin in digital items insane as compared to real items, so yeah they overprice those things for sure

You obviously think:
*electricity
*bandwidth/internet
*servers
*employees
*Trash, sewer,water, etc
*Office supplies
*insurance
*legal fees
*Licenses,copyrights, trademarks,etc
* and many other costs associated with running an MMO and business in general

Are completely free. Where do you think the money comes from for daily operating cost? Car washes and bake sales on the company parking lot?

Using services is not the same as being charged upwards of $50 for a digital good that could have been made three years ago with absolutely no costs incurred directly from it in all that time.

Running a server for a game is a completely separate thing that has nothing to do with crown store cosmetics. Once those are in, they’re in. ZOS never has to put any more money into those cosmetics.

Grimm13

McDolnald's has sold over 240 billion burgers. They did not get to this amount charging a premium price on them. They did it by pricing them to be low cost to reach as many people as possible and to create repeat sales.

ESO's practice is pricing the items high to sale to a limited number of people. Discourages repeat sales when you have to think is this really worth a significant amount of money. It drives away impulse buying that low cost structures encourage.

ESO is shooting itself in the foot by losing out on these low cost repeat sales. The people that purchase now would still still same amount of money as they are as they have deemed they can afford the disposable income for that. ESO would gain the additional sales from people that reject the high pricing structure.

MMO's do not keep running by catering to the 10% but by making it reasonable to the masses, thus why it is call Massively Multiplayer Online Games,

Tabbycat

I was reading some gaming article about the rise of loot boxes (aka gamble crates) and the reason why games have them.

Game prices have stagnated for the last decade. The cost of making them has not. Developers have to make money somewhere. And loot boxes (aka gamble crates) were born.

It's estimated that despite player's negative attitudes towards them, profitability from sales of loot boxes will continue to increase and make up a majority of revenue for gaming.

Edit: found the article https://arstechnica.com/gaming/2018/05/despite-backlash-loot-boxes-could-be-essential-to-gamings-future/

Anotherone773

Jhalin wrote: »

Anotherone773 wrote: »

Bigevilpeter wrote: »

Its not 0, but its done only once and mass sold, unlike materialistic stuff which has a cost for every unit. The profit margin in digital items insane as compared to real items, so yeah they overprice those things for sure

You obviously think:
*electricity
*bandwidth/internet
*servers
*employees
*Trash, sewer,water, etc
*Office supplies
*insurance
*legal fees
*Licenses,copyrights, trademarks,etc
* and many other costs associated with running an MMO and business in general

Are completely free. Where do you think the money comes from for daily operating cost? Car washes and bake sales on the company parking lot?

Using services is not the same as being charged upwards of $50 for a digital good that could have been made three years ago with absolutely no costs incurred directly from it in all that time.

Running a server for a game is a completely separate thing that has nothing to do with crown store cosmetics. Once those are in, they’re in. ZOS never has to put any more money into those cosmetics.

The crown store is what pays for the servers as does ESO plus. This really isnt that hard of a concept. They operate the game at a loss. AKA free to play and then sell completely optional luxury items in the crown store to make up for that loss. When you buy crowns, your not pay for whatever you buy in the store, you are paying the daily operating cost of the game. The reason they sell you those cosmetics and reskins is because they are cheap to produce. Some labor from the graphics department and someone to stick it in the game is about all they have in it. All that profit pays for the game to stay operational which means its really not profit. They are just using Peter to pay for Paul