Historical Systems of Control

Systems of control have been around as long as civilization. One could argue that a civilization is defined by its systems of control. Ancient systems of control tended to promote massive wealth disparity, with a King and associated nobles controlling the vast majority of a nation's wealth. Maintaining such wealth disparities is very expensive, as the military power required to maintain them gets geometrically greater as the disparity increases.

Thus advanced societies have tended to go one of two routes to maintain control. One way is to reduce the wealth disparity and demobilize their military. This yields greater per capita productivity because militaries themselves do not produce income except through pillaging or coercion. If you are under threat by a militaristic neighbor, this may not be an option.

The other way to maintain control is by making the control less obvious, more subtle. When a person goes to a casino, they are offered the opportunity of empowerment in the form of a jackpot if they play. Of course the fact that the house always wins over time, and that if one player wins big that means a lot of other players lost, these details are often obscured by the number of layers you need to understand to see what is really going on.

When a person says they “own” their own house, but they have a 30 year mortgage, the situation is far from ownership. The bank owns the house, and the bank allows the occupants to stay there during the 30 year term if they agree to perfectly repay typically 5 times the loan amount during the term. If the loan is not repaid perfectly, then the real owner (the bank) will evict the occupant and any funds invested by said occupant are forfeit, even if they far exceed the original value of the loan.

Of course the true relationship is never explained like this when you “buy a house” or visit a casino, because these are systems of control that benefit others at the expense of the participant. The more complex the terms of the control, the easier it is to hide it. Technology is constantly making this easier. If a collector had to come to your house every month to collect your tithe then the system would look and feel like Feudalism. Modern technology allows the tithe to be extracted painlessly from one's bank account automatically every month without any sort of human interaction ever being needed.

This provides the citizens of modern societies the feeling that they are “free”. While they may indeed slowly be gaining more freedoms (possibly at the expense of others), this varies by region and caste, and a full discussion is not necessary for the purposes of this paper.

Dynamics of Control

People generally enjoy a certain amount of control. They welcome it. Without it they feel disoriented, uncomfortable. Thus they will tolerate control to a point, but will rebel if the control becomes “excessive”. To better explain what is going on, I am going to introduce two terms:

Visibility of Control (VoC): This is how obvious the controlling system is to participants. If A leads to D directly, then VoC will be high. You can reduce VoC by adding intermediary steps that cloud the relationship. So by having A go to B go to C go to D, then the mechanism of control between point A and D becomes more subtle and effective.

Tolerance to Control (TtC): How much control a participant can tolerate, or even crave, represents their TtC. Some people are more tolerant to some kinds of control than others, and their TtC can change over time, especially as they become more familiar with complex forms of control that they may not understand at first. The “A to D” example above is an example of this. Some people will recognize the relationship between A and D very quickly, even with a number of intermediaries masking it. Others may never figure out the relationship.

So here is what I am getting at:

if VoC < TtC then transaction proceeds

if VoC > TtC then transaction is rejected

Treating Consumers Like a Disease

Imagine that in the old days a game consumer would spend $60 to go from A to D, and get a game they could do whatever they wanted with. You know, back in the dark ages of gaming, like 10 years ago. Now we do something like this instead:

A ---> B (free)

B--->C ($1)

C--->D ($500)

Because we include a “free” step, from A to B, we call this model “Free to Play”. The second step, from B to C we can describe as the “Lure”, because we know that once a consumer spends any amount of money, no matter how small, they are then much more likely to keep spending. I will call the third step the “Hook” because once we find a consumer who cannot recognize the relationship between C and D, and thus A and D, they can be farmed fairly mercilessly. These players have very high TtC, for whatever reason, at least initially. Also, by layering our monetization we are attempting to lower our VoC as much as possible. Thus if we can keep VoC below the TtC of enough customers, and milk them rapidly before they realize what is going on, we can make a lot of money.

There is a “real world” system that mirrors this very well. It is our battle against disease where we use antibiotics as our weapons. By hitting diseases with new antibiotics we can wipe them out before they have a chance to adapt. If you could wipe out every last disease this way, this approach would work long term. The problem is that some diseases survive and over time they become more resistant to our antibiotics. Eventually the only new antibiotics available to us might kill us too, and at that point we lose this war despite winning so many battles. The other alternative, removing the source of the disease, is not receiving serious consideration in the USA. This is why we get less bang for our buck in medical care than any other country.

By attempting to trick our consumers into paying much more than the value of the product they are receiving, we are angering our customers. Over time their TtC goes down, and they become much faster at identifying the “A to B to C to D” mechanism. Our industry is very rapidly adopting a strategy where we reduce product quality (and cost to produce) but attempt to maximize our income by adopting an “A to B to C to D” version of F2P. While I could call this “layered F2P”, I think I am going to just call this Coercive F2P.

So in my analogy we are feeding Coercive F2P (the antibiotics) to our consumers (the disease) in order to make money in the shortest and easiest way possible. This has led to some early victories against the consumer. Here I will point to pretty much the entirety of social network game makers, with rare exceptions. Mobile is quickly following the same battle plan.

Note that the current Coercive F2P models that we use now were developed and iterated in Asia starting in 2001. There were successful there (and still are) because on average the consumers there have a much higher TtC. In the West, our average TtC is much lower and due to the way we are treating our consumers their TtC is getting even lower.

Because consumers have the option of not purchasing products that they perceive as coercive, given their TtC (which is lowering), the end result of this business strategy is the extinction of Coercive F2P. This trend will take much longer in Asia because of their higher initial TtC. The only way it could not also happen in the East is if non-coercive business models were outlawed by the state, a situation that seems improbable.

Note that F2P is not in and of itself coercive. F2P is potentially incredibly empowering to our consumers. It is entirely possible to explain to customers up front how you plan to sell to them. I am also of the opinion that low TtC consumers tend to be more wealthy than high TtC consumers. Thus the issue is not only that the number of convertible consumers using Coercive F2P is approaching 0%, but that as that percent gets smaller, we are tapping the least wealthy tail of the consumer market. This group may give till it hurts, and do so profitably in the East for a few more years, but this whole approach is heading for extinction.