http://arxiv.org/abs/1611.01471

not only games, but games seem to be one of the most suitable areas

what would you say?

This paper proposes a business model wherein the customer lends you some money, and in exchange you lend them a license to your product for an agreed period of time. At the end of the agreed period of time, the customer either chooses to keep the product (and you then keep their money) or return it, causing you to return their money to them. The customer does not have the right to return the product earlier; there is no early-termination mechanism.

On the surface this is not dissimilar from, say, Steam's refund system, although the intent of this model is clearly for the "agreed upon length of time" to far exceed Steam's window of a few hours. That means that you can't (shouldn't) account for any of that money being realized until the end of the agreed-upon time period, at which point hopefully the user will keep the product and you'll get to keep the money. While the paper posits you could invest the money in the interim, that's not very attractive as you must be sure you can keep enough liquidity to pay out all your customers at the end of their agreements. Investing the money into anything risky would thus be irresponsible, but investing in anything that has a guarantee of not losing the money is basically not worth it because the returns would be trivial, especially given the likely term of the "agreed upon period," which for games would probably need to be a few months.

As a developer, your ability to realize revenue and profit is thus deferred for several more months beyond the completion of the game. If you have a publisher, that publisher will not likely pay you while you both sit around and wait, so you'll need some other way to float your payroll until then. That's impractical for many developers. Since you're waiting, you don't have a true idea of how successful your game will be. How many sales did you actually stick? You'll have to wait months to know. In the meantime you can't really tell how much money you're going to make from the game so you can't tell if it is worth investing your time into continuing with that game or finding a new project, et cetera.

This model basically tacks on a few extra months of effective development time to any product, during which a developer must effectively self-fund and suffer extreme unreliability of information about what their next steps could be. It offers no realistic, practical benefit to the developer (or the publisher) that I can see, and consequently is a bad idea. A good business model must treat both consumer and producer fairly and understand the leverage each side has over the other, taking that into account and arriving at something reasonably balanced. This model shifts the balance of power towards the consumer rather drastically.

Also:

• The comment that "piracy might decrease because consumers view this as more fair" blithely ignores a huge portion of the pirate market, those who simply pirate because then can, not out of any principled stand or inability to afford the product.
• The paper posits that this would be useful for products with large initial expenses... and then names some products (like Unreal, Adobe's products, et cetera) that no longer have those large initial expenses and have subsequently switched a subscription or royalty-based model that is more attractive for the smaller companies that the paper claims to champion.
• The paper cites mostly mobile-related platforms when referring to game development, but focuses only only the shortening "lifecycle" (presumably in the consumers hands) of a game. It ignores the fact that any sort of up-front pay model is fairly rare in mobile games these days, where F2P and microtransactions are the norm, and profits are turned primarily by whales and by keeping players hooked on a game as long as possible.

As Josh mentioned, currently when I get a check from steam, I get the money the month following the end of the billing cycle. This is to avoid potential chargebacks etc.

For example, I'll get my check for last month (ending 10/31) on 12/01.

With this system I'll have to wait even longer (maybe much more).

What's more, things like steam trading cards etc can't really be used with this system because someone could buy a game, try to get lucky cards, and refund it if they don't.

Also there's the liability that you'll piss off your community (either because of a bad update or even a rumor) and immidiately lose all the pending transactions (which can bankrupt a developer).

That's a whole lot of bullshit formulae to make conjecture look like science.

If the best case for the seller is "everyone pays the full amount that they were willing to spend at the start" and the worst case is "nobody pays you anything but gets to use the product anyway" you may as well just stick to a standard retail model that is going to be broadly equivalent to the best-case option anyway. The suggestion that the "number of deals in this scheme should be far more" has no support, but any increase is likely to be linked to the likelihood of asking for a refund at the end, making the gains small or even negative.

and if you have to give the money back at any time you'll have to hold it in escrow

no, the seller would have a fixed term contract, say for 3 or 6 or 12 months

Players will have to give the fun they had back as well

yes! you will have to shake them out - up to the very last smile

This paper proposes...

Josh, thanks for the detailed answer

but investing in anything that has a guarantee of not losing the money is basically not worth it because the returns would be trivial, especially given the likely term of the "agreed upon period," which for games would probably need to be a few months

but what if we have just a lot of buyers - they just keep a constant balance level by random payments

that constant level (of course, descreased a bit - just to be sure we can always pay to anyone) is the money we can invest

lot of clients means high constant level which may be tens million

even short-term conservative investments may be attractive with such sums

what do you think?

As a developer, your ability to realize revenue and profit is thus deferred for several more months beyond the completion of the game. If you have a publisher, that publisher will not likely pay you while you both sit around and wait, so you'll need some other way to float your payroll until then. That's impractical for many developers. Since you're waiting, you don't have a true idea of how successful your game will be. How many sales did you actually stick? You'll have to wait months to know. In the meantime you can't really tell how much money you're going to make from the game so you can't tell if it is worth investing your time into continuing with that game or finding a new project, et cetera.

yes, agree

but i'm not sure this is a really big problem

or at least there should be companies that could live with it

This model basically tacks on a few extra months of effective development time to any product, during which a developer must effectively self-fund and suffer extreme unreliability of information about what their next steps could be.

publisher may pay advance money as it happens with books?

It offers no realistic, practical benefit to the developer (or the publisher) that I can see

don't you think it can turn more players into payers? :)

e.g. I save money for summer holidays and use them to improve my character in some online game

best of both worlds :)

This model shifts the balance of power towards the consumer rather drastically

exactly! with the hope that they appreciate it and multiply greatly

not out of any principled stand or inability to afford the product

not sure.. in poor countries with relatively good education they may pirate because the soft is too expensive

It ignores the fact that any sort of up-front pay model is fairly rare in mobile games these days, where F2P and microtransactions are the norm, and profits are turned primarily by whales and by keeping players hooked on a game as long as possible

this actually is another form of F2P as I see

and microtransactions are just shaded - they hide in short-received interest from the money a player deposits to the game

this sheme also seems to help hooking as well ..

because someone could buy a game, try to get lucky cards, and refund it if they don't

but it's ok - buyer had been keeping his money during the contract on your account - the article says it is enough

Also there's the liability that you'll piss off your community (either because of a bad update or even a rumor) and immidiately lose all the pending transactions (which can bankrupt a developer)

yes, you're right,

but look, companies like paypal, visa, mastercard are still alive

people trust them

it seems this sheme is for a specialized monetization company - not for any small gamestudio

well, I thought about large online games when I read this article

not small gamestudios

something like that - large online game tries to sell different ingame stuff for real money

a lot of people feel like idiots to pay real money for virtual stuff

but this scheme may seem more fair for them

so you keep your whales

you keep you sales and other schemes

but you add one more scheme for the army of those who don't pay

There are at least five immediately obvious flaws with that approach:

1. Some goods, software in particular, is worthless after the consumer has used it. Software is just... data. Once conceived, it can be copied at (virtually) no cost, and a copy of the "returned" product can be kept around without an awful lot you can do (online activation, granted... but even that is not failure-proof). The software's value comes only from the fact that the consumer needs it (or at least wants it) and has to pay for a license to obtain the software and to legitimately use it.
2. The secondary "gains" associated with the product cannot be refunded. You cannot un-write a letter, un-calculate a spreadsheet, un-watch a movie, un-play a game.
3. The paper suggests the IP holder may invest the money however he likes. This is a lie. The model states that at the end of the rent time, all money must be returned. This rules out 90% of all investments. This is very similar to how capitalizing life insurances work. What problems do these insurances have? They may not invest in risk capital. Non-risk capital, however, always has low returns. At the present time, in Eurpoe, that's negative returns. This model is therefore not sustainable for someone who needs to make profit to pay bills.
4. Assuming a company really implements this model, and they go bankrupt, and assets are seized, how do you expect to get your money back? With that in mind, why would a company not want to go bankrupt?
5. It makes the entire notion of renting goods absurd. Basically, this is renting without paying. Why limit yourself to IP? Rent a car, rent an apartment. At the end of the month, ask your money back!

The paper suggests the IP holder may invest the money however he likes. This is a lie.

ye.. that sounds very impressive, but please read more carefully before making an impression

section 2, second item

"• Manufacturer may use the invested money at his own discretion, e.g. deposit to a bank, or buy obligations, or invest to development, but he has to return all the money upon the end of the agreement"

Some goods, software in particular, is worthless after the consumer has used it

Why limit yourself to IP? Rent a car, rent an apartment. At the end of the month, ask your money back!

I can't agree with that, by no means

Software is just as good as before after the usage, car - not

but yes, piracy is a hard issue.. I understand what you mean by deprecation here

ok, forget about software, i see it is a difficult topic

but what about all that online stuff like weapon or armor or racinig car

in online games they may be used and returned (absolutelly under control - no piracy) in the same condition :)