The illusion of "doing it better"

Imagine there's a game publisher with a design doc for some truly innovative advances to the MMO field. They've done their homework, they know how to build it right, they've done the numbers, they know how much it will cost. This stuff will knock your socks off. We'll refer to these people Game A.

Now, imagine there's some game publisher with a Triple A game which dominates the market. Game B.

The Game A people have done the math, they figure it will take about $M to implement this innovation to the full extent they have in mind. This means they need to attract some N thousands of players to their game to satisfy this budget expense.

Game B, seeing all the attention and interest that Game A is garnering from their early press releases and dev interviews and such, and seeing that some number of players are considering defecting to Game A for this feature, decide to also implement something similar.

Does Game B need to spend the same $M on this feature to remain competitive? (Assume that every $M that Game B spends produces the same value as what Game A has, assume no special advantage or brilliance).

Surprisingly, the answer is No.

See, if they spend (say) 0.6 x $M, then they will retain some portion of potential defectors. Those defectors are not available as new subscribers to Game A, and thus impact the revenues available to spend by Game A. Without Game B in the picture they figure they would have sufficient revenue to afford to spend $M, but with Game B making similar promises (remember, neither have working code to demo at this point) they no longer have $M available, they only have 0.4 $M available.

Game B doesn't need to develop 100% of the original idea at all. They can do a half-assed job, split the market, and forcing Game A to compromise on their design doc vision.

Now, if Game B was an equal player in the market and not a monopolistic behometh, the innovation would be still be pretty good. We, the players, would get at least 50% of the original concept to play with.

However, since Game B is a massive presence in the industry (leveraging network effects, market inertia etc), they know they don't even need to implement 50% of the innovation to split the market and retain potential defectors. Game B only need to implement (say) 10% of the idea, and Game A would be left in the position of only affording to implement about 9% of their original idea.

If Game A doesn't get sufficient traction, then they shut down and we never see the other 90% of the original innovation.

Things are now looking bad for us, the players, and the industry in general.

The galling thing is that commentators will be saying "Game B took the idea, polished it, and did it better than Game A". Sorry, but although 10% is “better” than 9%, that 10% is still much less than the original 100%.

Doubly galling because Game B only needs to spend 10% of the original budget to achieve this, yet retain 100% of their profits. Which suits them just fine.