R4TTIUS wrote: »

Lets make this insanely simple, if ESO made $1 profit a year then the game would be fine. Apart from no new content.

Profit is the figure worked out after you've paid all your bills, which include salaries, bonuses, electricity, water etc etc

So if loot boxes/ crown crates get stopped the game isn't going to go into apocalypse mode people

EDIT

SEEMS LIKE I NEED TO MAKE THIS CLEAR I AM NOT SAYING THEY WOULD CONTINUE TO RUN
AS AN EFFECTIVE BUSINESS BY MAKING $1 PROFIT NO SHAREHOLDER IN THERE RIGHT MIND WOULD BACK THAT BUSINESS.

I AM TRYING TO EXPLAIN THAT THE CROWN CRATES ARE NOT THE BE ALL AND ALL OF THIS GAME IF THEY GET BANNED.

THERE IS ALOT OF PEOPLE WHO SOLELY BELIEVE THEY ARE THE ONLY THING THAT KEEPS THIS GAME ALIVE, JUST READ THE FORUM POSTS OVER THE LAST FEW DAYS.

WHERE ESO HAS PROFIT FROM MANY DIFFERENT WAYS.

Jarryzzt wrote: »

"You keep using that word. I do not think it means what you think it means."(TM)

1. Every private business will have equity holders. I.e. owner or owners.

Some businesses are not public. Their equity holder or holders are...well, can be anybody, but generally we are talking about a handful of persons or entities, often not even five. [This applies to large private businesses as well.]

Others are public, at least to some extent - that is some or all of the equity is sold on a stock exchange, and so you could have a list of thousands or even millions of "owners" (though likely a significant chunk will again be in the hands of a handful of persons or institutions). [There is also a distinction between "voting" and "non-voting" equity - I, the owner, can give public shareholders 80% economic interest in the business but retain 100% voting interest, you see this, for example, with energy MLPs - but that's really a separate discussion.]

The point is that statements like "take the shareholders out" are meaningless. Equity holders will always exist. To the extent ownership is concentrated, it can exercise more control over the business (typically to extract more for themselves, e.g. as dividends); if it is diffuse, as with some large corporations, then you are falling back on the CEO and a clique of directors (also in the business of extracting more for themselves, e.g. in the form of bonuses).

TLDR - a non-government owned corporation in a capitalist economy will generally act, firstly and chiefly, in what its owners or (in cases of diffuse ownership) management believe to be their short-term economic interests (rightly or wrongly).

2. Zenimax is not a public, i.e. listed, company. Rather, it is a portfolio company of a private equity firm (read: financial speculators), although SEC also shows some registered equity sales (minority stakes) to people like Les Moonves (CBS) and a Robert S. Trump (surely not a relation to anybody). Source: https://www.bloomberg.com/news/articles/2016-05-11/providence-said-to-weigh-options-for-video-game-maker-zenimax (and note that the $2.5 billion "valuation" is really the Excel model run by the private equity guys, representing what they want to be paid for the business).

Incidentally, this means at least four things:

- As per #1, there are a handful of owners who will always, always act in what they believe to be their economic interests even if that means literally taking Zenimax apart and shutting down ESO (or firing half the ESO developers and replacing them with trainees in India - which I have seen happen - so if you think bugs are bad now...).

- Private equity funds make money from their portfolio companies in three, and only three ways - "flip" them, i.e. sell them, to either public or private investors; extract dividends from them, often financed with debt ("dividend recapitalization"); and have them pay the fund annual "management and advisory fees", which might range from a few millions to a few tens of millions of dollars (pounds, euros) per annum depending on the particulars. That is the endgame for Zenimax in the minds of Providence - find a way to inflate the value and sell it, and until you can do that milk the thing for fees and dividends. Enter all sorts of ideas on monetization of in-game content.

- Private equity funds "work" because they buy their portfolio companies with other people's money, literally. I.e. they borrow, oh, say, 2/3 of the purchase price (sometimes more) with the company itself responsible for paying off the debt. I.e. Zenimax likely has some debt against it, somewhere, which oh by the way does limit its financial flexibility and influence its decision on things like monetization of in-game content.

- Incidentally, "profit", or "earnings", a stupid and meaningless term (more correctly: an accounting construct) popularized by CNBC and the like, is utterly meaningless. Private equity firms (as well as banks, hedge funds...the entire financial sector, pretty much) value and operate companies based on: EBITDA (read: how much cash income do I get out of my operations before paying debt interest, taxes, etc.); and "free cash flow" (read: how much cash is left over at the end of the day after paying interest, taxes, etc.). Companies are generally bought and sold on EBITDA valuations, and the surest way to get EBITDA up is (not a complete list): fire a bunch of workers; pay them less; cut any other sorts of operating costs; and yes, generate more revenue (even phantom revenue). In practice for ZOS this probably means, on the one hand, a cap on development resources (since these cost money), and on the other hand, constant, unceasing and unremitting efforts to get every ESO sub to pay more.

TLDR - given ZOS's ownership and their economic incentives, "milking" players for microtransactions of all kinds is sort of the name of the game, and we should be thankful that ZOS and its owners have, thus far, had the presence of mind not to turn F2P into P2W.

3. Turning to the original...post. With caps and all that.

- The "loot box crisis" is, at this juncture, a non-event. Some idiot politician (singular) somewhere said something, and another idiot politician (also singular) halfway across the world said something similar. Between this and actual government action there are a lot of gaping chasms to cross.

- Even if loot boxes were banned by the entire world tomorrow (on pain of death! death!!), a) no other part of ESO's microtransaction economy would be impacted, and b) ZOS would immediately scramble to replace the revenue stream by, for example, unbundling the loot boxes and selling individual items at, say, 10x-20x the cost of a single loot box.

- Incidentally, while we have zero (so far as I am aware) knowledge of Zenimax's financials (since a PE fund owns them and there are no SEC filings I can find in five minutes), and while Zenimax owns a number of franchises of which ESO is just one, to put a $2.5 billion "paper" valuation on the thing (see the link above) the Providence people are likely to be using an EBITDA number in the $200-$250 million range (Activision - WoW - is actually trading at a higher multiple, but the numbers are messy this year and I don't care enough just now). Now - this is most probably an inflated EBITDA number, i.e. "really" they are doing something like $150-$200 million per year. But understand, this means that after paying all their operating expenses they are still clearing that $150-$200 million (which then goes to pay interest, capital spending, and so ad infinitum). I highly, highly doubt that banning all loot boxes tomorrow (on pain of death I say!!!) would put very much of a dent in this figure even if the ownership did absolutely nothing to compensate.

TLDR - there is no loot box crisis and Zenimax as a whole makes enough money not to care too much*.

* - unless the Providence people had hung up so much debt on the business it needs every penny to pay the interest, or, alternatively, for their own internal reasons want to cash out as soon as possible, which usually leads to no small amount of short-term stupidity.

---

Was this a public service announcement? It sounds like a public service announcement. Eh, I do not care enough to make it a public service announcement. Besides which, I will lay down odds of one hundred to eight that nine out of ten people shouting about loot boxes on the Internet will either not read or not care (or both) about the foregoing.

DieAlteHexe wrote: »

monktoasty wrote: »

I've given the reasons why kinder eggs and blind toy boxes are fundamentally different than digital goods.

Briefly..when you buy a blind box..you are Gaurenteedynamic a toy..you won't get anything else but a toy..so the value is there..also..at any time..you can trade or purchase what you want from other sources.

Loot b9xes are full of junk..and you can get nothing of intrinsic value to what you want. You may never get mount which is exactly what people want those apex mounts..youas not even get anything useful to you.

Kinder eggs are bought for chocolate..not the toy.

It's just bad business sense to have so many customers feel cheated..which is why every loot box should contain something of true value to players.

Casuals who buy a blind box get a toy from their favorite series..no matter what they get they ate generally happy to get something for their money.

A casual in a video game who drops 20 dollars and gets crown food and a tattoo will be left disgusted. Which is why this situation is grow8ng and consumers are mad.

It's not good business sense to leave a majority of customers really pissed off while having just a few happy to win.

Disagree. The contents of the crates is subjective as to whether it's of "use". There is nothing in the crates that is not useful. What some are objecting to is that they are not getting the über thing that MIGHT be in the crate. This, however, does not nullify that there will always be something in crates (of use) whereas when you gamble, there is a pretty high chance that you will receive nothing. Absolutely nothing.

Oh and there is a huge number of folk who buy the Kinder eggs and couldn't care less about the "chocolate" (in quotes because personally I don't consider that to be chocolate...it's greasy and too dilute). I'm one of them. I either pitch the "chocolate" or give it to someone who likes eating brown glop.