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Game publishers must deploy a fully featured storefront experience to deter consumers from going to the gray market for game keys, says Jeremy Coker, group vice president for games and entertainment at Digital River.
With the digital games market expected to top $100 billion in 2018, the threat of fraud is growing almost as fast as the industry. For digital game publishers, that means an expanding gray market that offers cheap discounts for consumers, but potential consequences to publishers, developers and the consumers themselves.
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In order to protect against repercussions—both in terms of financial damages and disgruntled players—publishers must implement safeguards at every level of production and in their monetization models. And they must enlist consumers’ help by creating storefronts, backend infrastructure and ecosystems that keep gamers loyal to buying direct. Recommendations include:
As long as publishers offer digital games, there will be a gray market for them. The threat isn’t going away anytime soon, and since reselling game keys may not be illegal, there is little to deter those involved. The solution is not for publishers to end the practice, but to create an ecosystem and user experience that eliminates the problem on its own.
The industry’s movement towards “games as a service” has presented fraudsters with increased opportunities to infiltrate marketplaces and create disruptions. This is as true for free-to-play games as it is for premium and subscription-based games. By offering new DLC, developers can extend a title’s lifetime, boost player satisfaction and increase revenue streams. But this model also opens up more opportunities for fraud.
"As long as publishers offer digital games, there will be a gray market for them. The threat isn’t going away anytime soon."
Scammers are able to buy keys from publishers with stolen credit card information and then sell those keys to unsuspecting consumers on reseller sites. The threat of chargebacks—and their subsequent processing fees and administrative burden—means publishers need to take a more active role in how their content is sold and distributed. This new form of piracy has evolved with changing games monetization models. Before, publishers simply lost revenue from a pirated boxed game but, unlike today, did not have to pay a fee for it through credit card chargebacks. Now, many developers prefer piracy over credit card fraud so they don’t end up with negative revenue.
Unfortunately, fraud is increasingly a threat to in-game marketplaces as well.
This is especially problematic for free-to-play games, which will earn four times more than all other games combined this year and which, almost by rule, adhere to the “games as a service” model. By introducing new items in every update, developers create new commodities to be targeted by fraudsters looking to turn a profit.
Virtual items are also becoming more valuable to players and fraudsters. A miniskirt for PlayerUnknown’s Battlegrounds recently fetched more than $400 on the Steam Marketplace. Consumers who stock up on valuable items are most at risk since fraudsters can hack into their accounts and resell their items on gray-market sites. Publishers can safeguard their consumers and their revenue by creating secure storefronts with in-game transaction security such as two-factor authentication or login IP detection and verification.
The premium games space is where the biggest arms race is being fought between game publishers and gray-market key sellers. Copies of premium games remain the easiest piece of digital content to sell on the gray market, since unredeemed keys usually are not tied to an account. Publishers and storefronts must invest in detecting suspicious game key purchases, since the point of sale is the best place to stop fraudulently obtained premium game keys from hitting the gray market.
As a way to combat these scams, game makers sometimes deactivate illegitimate keys. But consumers who bought them do not usually know they are part of a scam in the first place. This can cause a negative backlash from a game’s fan base since the users may not know why their keys were deactivated. To avoid the problem, publishers must implement systems and develop supplier-consumer relationships to stop the issues before they occur, and share with consumers their policies for handling fraud.
To stop hackers and fraudsters from capitalizing on digital gaming models and disrupting revenue streams, developers will have to use a multifaceted approach not only in their initial designs, but in their monetization models as well. Implementing in-game transaction security measures can restrict the flow of fraudulent commodities. And by creating a storefront, ecosystem, and marketplace that gives players the best experience they can find, developers can deter consumers from entering gray market spaces in the first place.
Although the safest restrictions can cause some friction between publishers and players, it is better for both in the long run. Making it harder to scam players means developers can put their money and efforts into fostering their player community instead of putting out the fires that come from account theft. Players will feel secure enough to increase spending and make purchases more often knowing their items will not get stolen and their accounts will not get hacked.
But combating the proliferation of the gray market doesn’t fall solely on developers, as they are not the only ones at risk. Consumers also bear some responsibility in changing the status quo and limiting fraud. Hackers see opportunity in accounts with valuable in-game items, and consumers can be robbed of their time and money which ultimately end up on the gray market in the form of game keys and items. So it will be up to consumers to recognize that utilizing gray market resellers may offer a discount in the short run, but it will cost them much more in the end.