axemtitanium

First they came for PlayStation Plus, and I said nothing...

Last year, Senator Elizabeth Warren and colleagues called on the Federal Trade Commission to investigate the Microsoft-Activision Blizzard deal in the context of monopsony—monopoly’s inverse cousin in which one entity exerts power by being the sole buyer in the market. The recent Ticketmaster hearings shed light on what that actually means. It turns out that Microsoft is just speedrunning the process of enshittification for Game Pass.

Platform capitalism and rent-seeking

The arc of enshittification usually plays out in three phases. First, the platform rapidly acquires users by any means necessary. Uber did this by massively subsidizing the price of rides (and forever distorting the price of transportation in the minds of users). Amazon did this by making Amazon Prime the best deal in town. Free two-day shipping for everything? And half price for students too? Sign me the hell up! Companies with enormous cash reserves—or backed by venture capitalists with low interest rates from the Fed—will spend millions or billions to jack up their user bases for later exploitation. They even have a fun acronym for this: Customer Acquisition Cost (CAC). Yes, companies know exactly how many dollars they need to spend to buy you.

Once they build a sufficiently large corpus of users, the platform can command producers to do business with them. Amazon used its customer base to lure in third-party sellers which could fill in gaps in its product catalogue. With access to a huge number of customers and sweetheart deals on seller’s fees, it was hard to see the downsides. And once they were in the system, the contracts made it hard to leave. Amazon quickly became most internet users’ one-stop shop… and most sellers had to go through Amazon to even get sales at all.

This is monopsony at work. By inserting itself in between producers and consumers, Amazon became the ‘sole buyer’ of all the producers’ work. Locked in a year at a time by Amazon Prime, customers no longer shopped around the web to find the best deal; they’d start their search on Amazon and usually picked the best price among Amazon’s options. Thus, Amazon acts as a great funnel for ecommerce—all third-party sellers had to go through Amazon and thus they could extract fees from both sides. A similar process happened with Ticketmaster. By controlling the vast majority of online ticketing and concert venues and therefore access to customers, Ticketmaster holds monopsony power over performers (the sellers in this example) and can force them into unfavorable contracts.

Once both buyers and sellers are locked into the ecosystem, the final phase of enshittification ensues. As Cory Doctorow aptly puts it:

surpluses are first directed to users; then, once they're locked in, surpluses go to suppliers; then once they're locked in, the surplus is handed to shareholders and the platform becomes a useless pile of shit

Amazon’s search gets infected with ads for unrelated products. Ticketmaster forces both users and performers to pay out the nose in hidden fees. Facebook forces publications to pay to reach their own followers. And Uber destroys the entire taxicab industry to replace it with a worse version of itself. Monopsony breeds monopoly breeds monopsony in one big enshittifying spiral.

Speedrunning enshittification

So how does this apply to video games, where arguably none of the players exert as totalizing a force as Amazon or Ticketmaster do in their respective domains? One way is to look at a service that’s already enshittified: PlayStation Plus. PS+ launched in 2010 as a monthly free game service to help build the install base for PlayStation 3, which was badly losing to Xbox 360 at the time. Over the years as PlayStation gained market share, Sony saw fit to make it required for online multiplayer and reduce the quality of the free game offerings. In a recent revamp, they somehow managed to “combine” two services (it and PlayStation Now) into three tiers without actually saving customers any money—the highest tier that gives full Plus and Now perks costs the same as the two services did individually before.

Thus, it’s important to realize that companies can exert monopoly and monopsony power long before they achieve the “mono” part of those respective terms. Large players with large warchests can swing their weight around by offering too-good-to-be-true deals that competitors simply can’t match, or by buying competitors outright. With this in mind, Microsoft’s strategy is clear. Since Phil Spencer’s ascension to head of Xbox, he’s pursued the first two phases in record time. Game Pass boasted an un-credible deal to upgrade existing Xbox Live Gold members to Game Pass for up to three years for just $1, to the tune of nearly 30 million active subscribers. From the other end, Microsoft is signing sweetheart deals left and right to get third-party games to launch ‘for free’ on Game Pass (and taking the loss on retail sales for first-party games from their newly acquired menagerie of studios). And that’s not to mention the $69B elephant in the room.

We are clearly still in the honeymoon period where both customers and game developers are benefitting from the surpluses provided, at great cost, by the Microsoft mothership. Game Pass is the best deal in gaming! Developers are tweeting about how Game Pass saved their studio! Don’t look a gift horse in the mouth! But Microsoft is still a business, not a charity, and these surpluses are provided with a specific goal in mind. The company believes, nay requires, that costs borne today to gain subscribers and build its ecosystem of partners will create the monopoly conditions and monopsony network effects necessary to generate revenues that far exceed today’s costs in the future. Subscriber count can’t grow infinitely and game development isn’t getting any cheaper so the only place to squeeze more blood from the stone is tightening the belt—charging more and providing less. In other words, enshittification.

But you can rest easy tonight. Game Pass is still the best deal in video games. For now.