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

You're making an argument for not paying for virtual goods. That's okay; but don't pretend there's actually a revenue model for game developers hidden in here.

We charge money for virtual goods not to cover some imaginary wear and tear costs during the rental period or even to cover the marginal cost at sale time, but simply to generate revenue through which to run the game. Your suggestion provides plenty of value for customers (by giving them whatever they want at minimal cost, approaching zero) while given developers minimal revenue, approaching zero.

The paper suggests the IP holder may invest the money however he likes. This is a lie. [/quote]ye.. that sounds very impressive, but please read more carefully before making an impression

Oh, I did, that's why I am saying this :)

The two parts in emphasis contradict each other:

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

If you are required to return all the money, then you cannot possibly invest the money at your own discretion. You can only invest the money in a very rigidly limited way that is guaranteed not to lose value. So, buying ground property is pretty much the only thing you are allowed to do. Therefore: "It's a lie".

Remember that stocks may lose value for non-foreseeable reasons and not recover, obligations may go up in smoke (and you're just out of luck, if the debitor can't pay, your obligations are not worth the paper they're printed on, and there's nothing you can do!), and even banks can -- and have -- gone bankrupt. Twenty years ago, one could have said "Oh, but that never happens", but not today. You can't even store your money at the central bank (under the assumption that the central bank cannot go bankrupt, go ask the Icelanders) because not only are you not getting any interest, indeed you have to pay to do that.

As an example of that, the top rate of completely safe Government-backed savings in the UK right now is about 1.45%. Subtract the current inflation rate of 0.9%, and you're looking at a tiny rate of return in real terms. Maybe enough to hire someone on minimum wage for every million users you have...

As an example of that, the top rate of completely safe Government-backed savings in the UK right now is about 1.45%. Subtract the current inflation rate of 0.9%, and you're looking at a tiny rate of return in real terms. Maybe enough to hire someone on minimum wage for every million users you have...

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?

"A lot of constant buyers" doesn't really change anything, it just complicates the analysis. The big problem is the N months between the day one sales and the time the day one revenue can be realized. Once you get past that threshold, this model is (barring the whole investment issue, which I'll cover) basically no different from a model where the customers return window is longer: it will normalize out over time. The question is is there anything in here for the seller that is beneficial enough to justify the difficulty of that first few months of dead time. I assert the answer is no.

Any investment carries risk of loss. Generally risk of loss scales with potential for return. You have to understand that a business, in this sales model, cannot consider money from sales theirs until after the N month period. That means they're investing somebody else's money with the obligation to return it later. That means they must be extremely conservative with the investment, bordering on basically not investing it at all. If the business is unable to pay their debts at the end of the term because they have lost money on bad investment choices, they will go out of business, either by their own choice or because they will be sued into oblivion by the lenders (customers). The only truly safe place to stash this money is in a bank account, which is insured against loss (although in the US the FDIC insurance limits are only up to $250k, so you won't be stashing "tens of millions" of dollars in there. I feel fairly confident assuming there is a similar limit on the "complete safe Government-backed" banks in the UK Kylotan was referring to.

Not to mention that there is nothing in a game developer's skillset that necessarily suggests they will have brilliant, mutal-fund-management-style minds and thus have any real clue how to effectively shepherd this investment. But others have harped on your misrepresentation of the value of the investment clause of this model enough, I think.

In the US you can get a high-yield savings account that approaches 1% APY. That's 0.01% after inflation, per Kylotan's 0.9% figure. On 250k that is... drumroll.... $250. And that's after a year. After two or three months (which is the most reasonable term for this agreement, I think) you're looking at about $25. You're not going to float your studio for three months on $25. Even if this number were something more realistic for covering a studio's operating cost for three months... even if you could somehow safely earn enough on these investment to get you $25,000 in three months... that's not enough because you need to keep that money invested to capitalize on all that interest gain. For the entire three months. So you still have nothing to pay your day to day costs (including payroll) with, unless the publisher, for some reason, decides to cover you for that time).

but i'm not sure this is a really big problem or at least there should be companies that could live with it

You don't seem to understand how the majority of game development companies function. They are not usually financially independent, they are generally funded by publishers to produce a game. That means it's the publisher basically footing the entire bill for the studio's day to day operation. Why on earth would they continue to pay for an extra few months of the studio running when they're getting nothing out of that studio during that time? One should not plan one's business model around the idea that everybody involves will make poor financial choices, and paying a studio to do nothing for a few months is exactly that.

publisher may pay advance money as it happens with books?

Again, here's a misunderstanding about the game development business. The publisher has already paid the developer an effective advance to make the game. The is an advance that the developer is generally contractually obligated to repay, in whole or in part, before the developer themselves gets to see any actual profit from the game. So not only would the publisher balk at the idea of funding a studio to spin its wheels for three months, the studio would as well: it increases their debt to the publisher but adds no value to the game, and thus does not increase potential sales (which would allow the developer to see a profit sooner).

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

No, I think it means fewer actual paying customers. Customers are not altruistic in the general case, they will make the choices that benefit themselves over you the game development. If this means they have extracted sufficient fun out of a game in the N month window, they will return it to you. They will not, in the majority case, elect to let you keep their money just because you're such a nice guy who chose a business model that favored the customer exclusively.

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

As above, this is unrealistic. This paper (and perhaps you) is analyzing a business model in a fantasy world where everybody loves everybody else and appreciates their good faith gestures and sings Kumbaya every night around the campfire.

This is not the world we live in.

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

This does not make any sense to me at all; I cannot figure out what you're trying to convey. But microtransactions are not interest, nor are they investment. They are a simple, direct exchange of currency for virtual goods or perks, completed immediately. They're not hidden or shady at all, accounting-wise.

Sometimes there are some interesting accounting issues with them, for example if you exchange real money for virtual currency, and then use the virtual currency to purchase in-game items, sometimes for accounting purposes the revenue for the transaction is not realized until the latter transaction (virtual currency for virtual good). This is not unlike the way gift certificates at retail work commonly, though.

Tax is another interesting topic. Or analysts, if you have gone IPO.

You sell one million worth of licenses. The tax office immediately says: "Oh wonderful, you owe us 180k in VAT", and at the end of the year they'll say: "Of the remaining 820k, you still owe us 300k business tax, and uh... next year, we would like to see quarterly advance payments, that'll be 75k on April 1st".

Meanwhile, your zealous analysts post on their tweets: "Expecting upwards of 500k win, FY17 forecast 750k".

Then comes that day you've been waiting for: 50% of your customers ask back their money. Unluckily, there's only 520k left. Win expectations are not quite met, your company's stock value plummets into a nothingness, and guess what the tax office will say: "Huh, what do we care. Just, the fuck, pay your due tax".

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

as for me the second part does not contradict but just explain and specify

but ok this is a worthless word-play

So, buying ground property is pretty much the only thing you are allowed to do

dont be this conservative :)

do you use banks? everybody does. even large companies with huge money take the risk

so you argue against all our finance system (which i agree is actually not so good)

Government-backed savings in the UK right now is about 1.45%

eu is not the best place to invest now, especially uk with its brexit

china, india, russia, brazil

much higher interests even with the most conservative government bonds

I can only dream of getting 1.45% here

where?

Eventually the bubble may burst, and then suddenly your investment is worth 20% less...

yes, that may happen.. and it would be a funny time for everybody

They are not usually financially independent, they are generally funded by publishers to produce a game

but this monetization scheme seems to suit much more a publisher or specialized monetizator company rather than a single gamestudio

the more so since - yes, i agree that investments are for professionals - not for game developers

This does not make any sense to me at all; I cannot figure out what you're trying to convey. But microtransactions are not interest, nor are they investment. They are a simple, direct exchange of currency for virtual goods or perks, completed immediately. They're not hidden or shady at all, accounting-wise.

i mean if a user put his 100$ to a bank for a year and receives some interest, say 5$ (it is still possible, not in eu and maybe not in us, but anyway)

than this 5% is his "shaded" fee to the developer, his short-received income

from "microtransactions" i meant only the "micro" part :) like in the example with 5$ the user pays about 1$ each 2 months

Tax is another interesting topic.

this does not seem to be the case

the situation resembles banking rather then selling

i doubt bank pays his tax from the overall deposit

income is the tax-base anyway

by the way, bank may even be a direct monetizer,

a bank and a large game publisher or a bank and the Steam may play as one

and yes, thanks for everybody!

this does not seem to be the case the situation resembles banking rather then selling i doubt bank pays his tax from the overall deposit income is the tax-base anyway

That is what you are saying, but it is wrong (or imprudent) for two reasons:

First, the tax office (and that's the only opinon which matters!) will have a different point of view. As soon as you get money in exchange for a product, you pay VAT/sale tax, and you have sales (presumably "win") which you must declare. Your negative sales when customers ask their money back after a year are of course allowable against tax -- but only that year, against that following year's sales. But before that happens, first of all you pay for this year. Nobody cares where you take the money to reimburse your customers from, above all the tax office doesn't care. They want their money now.

Second, arguing "but this is rather a bank" is a very bad idea. That means you have to follow a huge stack of regulations, FATCA and 2015/849/EU only being the two most well-known recent ones with an international scope (there's about two dozen others, plus local laws). Another interesting detail about calling yourself a bank would be the obligation to keep a minimum reserve (usually 10%, but in China it's a whopping 20%) and the obligation to engage a reinsurer, which again means you cannot use the money at your own discretion and you have very non-trivial expenses.

china, india, russia, brazil much higher interests even with the most conservative government bonds

Those are risk investments. I have invested in Brazil in the past (15 years ago), and it worked out well because I was lucky. But that doesn't mean it's not risky. Someone doesn't pay you 14% because they enjoy paying high interests. They do that because they aren't credit-worthy, and nobody will otherwise lend them money.

Risk investments are not a viable survival strategy in conjunction with "must pay back".

Another interesting detail about calling yourself a bank

yes, you are right, but why to be a bank? why not just to work with a bank

like people anyway come to office bring their money to deposit

and here they just sit at the computer, and make this deposit through your game but directly to the partner-bank

they do not get interest but they get some virtual bonuses in exchange

technically and legally it is just a deposit - the bank operates it

what if a real bank plays with you in one team?

Those are risk investments

not more risky than us or eu if you KNOW what you are doing and have a trustable partner in there

state-banks investments are very stable and they are.. mm.. inertial

i mean you may see if something is going to happen with ALL the economy in advance

of course there are exceptions like 2008 or 2015, but risk is not so high if you work with state banks