Steam Refunds: An eXposition

Who doesn’t like money? Almost everyone will take money if it’s offered to them for free, right? Well, Valve has just opened the floodgates to free money on its Steam service in the form of refunds, and suddenly, millions of gamers might be flush with some new green.

Is this a household name, yet?

In case you missed it, on June 2nd, Steam announced that you can now request a refund for any game – no questions asked – if “the request is made within fourteen days of purchase, and the title has been played for less than two hours.” Did you buy H1Z1 with the intention to play but never did? Get your money back! How about that overhyped new game that was a bug-filled mess on launch? No problem, Steam will reimburse you within hours of your request. This sounds great for the consumer, but there are some unanswered questions and a lot of potential pitfalls with this new policy. I, for one, am quite concerned.

The first group that I think that is going to get hammered by this new policy is indie developers. They operate entirely on having good and consistent cash flow. Money comes in from game sales and immediately goes out to pay programmers, artists, modelers, voice actors, and so on. Small studios need certainty in order to line up development for future content. This refund policy introduces a massive level of uncertainty into their business model.

To begin with, the “two week” refund window mentioned in the press release was more like six months at the time. I tested their refund policy out on a 99 cent game I purchased two months ago. I was refunded within 70 minutes of my request. There are reports out there that the “two hour” cap on games is also not being enforced. That’s not something I can personally verify because that’s not the type of thing I would do to a company. However, there are people claiming it’s possible.

Better known for its games or Steam?
Better known for its games or Steam?

The new refund policy additionally punishes games with clunky or unusual UI’s. This is typical of indie games where inexperience and lack of funds often lead to UI’s that take longer to learn. It’s also typical in games that are attempting to push the design envelope and try something new. How many times in a Steam review have you seen a thumbs down hinge on a “bad” UI? If the two hour rule ever does get enforced, a game with a challenging UI is going to get refunded quite a bit. My fear is that this will lead to a homogenization and lack of creativity in UI development and implementation going forward. The no-questions-asked refund policy incentivizes conformity since that can reduce frustration for the player.

Indie developers are also the type to dabble in short games that can be beaten or essentially played through in less than two hours. The new policy could be a death knell for these types of games. An article on the Dark Side of Gaming highlights two companies that are already facing this reality. In one company’s case, 72% of purchases have been refunded. Kotaku ran a similar article where small studios saw games, whose sales had previously been fine, suddenly cratered after the unlimited refunds began. Check out the graph line below. There’s no way a company can survive that if it continues. This is especially true given that companies had no chance to take this new policy into account for their business models.

Coincidence? Misleading?

But let’s talk about our genre. Take for instance StarDrive – the original game. It currently has a 46% approval rating on its Steam reviews page. That’s a little low by some people’s standards. What if the current refund system had been in place when StarDrive first launched? Would we have ever seen a StarDrive 2 which has a much higher (70%) approval rating? Perhaps we would have, but there is no doubt there would have been fewer monetary resources available to make that happen. It’s hard to say that SD2 would be as good a game as it is today if Zero Sum Games had to return a sizable portion of its revenue to unhappy customers.

Another example is Star Ruler 2, which put out a plea for help since its sales were flagging. Sales have picked up since that posting, but will the six month window for refunds un-do that bump in revenue? What will this mean for other 4X games that try to push the design envelope? The current refund policy makes it much more risky for developers to try innovative game designs. We must also consider future sequels for indie games we have now. I mean, will we get to see a Worlds of Magic 2 or a Horizon 2? The future is really cloudy for these titles now, and we may miss out on seeing some really great games as a result. That’s a cost that I don’t think many people are associating with these refunds yet.

Would StarDrive have been less successful for ZeroSum Games?

This isn’t the same situation as returning an unopened game to a store if you’re unhappy with it. At least a company can restock the game and sell it again. They get something back when you return it. With Steam refunds, the developer gets nothing.

It is exceedingly difficult to be an indie video game developer. However, thanks to the new Steam Greenlight procedures, new game engines like Unity 5 and Unreal 4, and Kickstarter, the barrier to entry has come down a great deal over the last three to five years. Unfortunately, this new refund policy raises that bar once more. Large companies can better absorb the loss in revenue. Small ones can’t tolerate it at all, and I think it’s fair to say that small companies have historically been more likely to take risks in design than larger ones. We’ll lose a lot if we lose the indies.

That isn’t to say that there aren’t benefits to the new policy. Customers benefit immensely, at least in the short term. All of us have bought something we wish we hadn’t on Steam. In fact, a study last year stated that nearly 40% of all games purchased on Steam never get played. Not all of those idle games are eligible to be refunded, but still, that’s a lot of funds that are tied up that could be repurposed by consumers.

Ideally, the refund policy will incentivize players to try new games and new genres. Knowing that you can get a refund if you don’t like something takes a large amount of sting out of buying something like Distant Worlds: Universe which runs at $60 a pop.

Could it make Distant Worlds MORE successful?

In that vein, the policy change is good for large companies that don’t have the same kind of cash flow problems smaller companies do. 2K, for instance, may benefit from people willing to try out Civilization V for the first time since it consistently ranks in the top 10 games played on Steam. Or Amplitude could benefit from people who really do want to see if Endless Legend is as good as people say it is.

Perhaps most importantly, I think that the fear of people being able to get their money back will prompt developers to launch games that are more polished with better content. One of the best things that could come from the refund policy change would be a reduction in games that cause people to request refunds in the first place. No longer will developers be able to take a blasé attitude toward launching a game filled with bugs.

I also think this policy will be fantastic for third party sellers like Humble Bundle, Gamersgate, et al. One of the quirks about the Steam refund policy is that you can’t get a refund for a game bought through a third party seller. So companies are incentivized to sell their games through these sites more now.

Finally, I think it will be great for game designers. Good designers always play the games that already exist in the genre for which they’re designing. You can learn a lot about a game’s UI, general mechanics, character creation system, and strategy from 90 minutes of play. What used to cost an aspiring game maker hundreds of dollars in research can now be had essentially for free. Making a fantasy 4X game? Buy Endless Legend, play it for an hour, then return it. Buy Age of Wonders III, play it for 80 minutes or so, then return it. Rinse and repeat until you’ve covered them all. This tactic isn’t so great for 4X games or cRPGs, but man, if you’re doing a Rogue-like or a racing game, an hour or two will tell you a lot.

There is a lot to learn from Endless Legend…

The refund policy still leaves so many questions unanswered though. For instance, how does it account for playing the game off-line? If I install Galactic Civilizations 3 on my desktop and my laptop, then disconnect my desktop and play it for five hours. Will I be able to get a refund by using my laptop? This would absolutely fall under the “abuse” clause in the refund announcement, but how is that monitored? And will this mean that more and more games will move to “always connected” like Diablo III?

When the refunds started, producers were left wondering if this six month return window open indefinitely? And more importantly, why was it even opened at all? The policy states two weeks except in extraordinary circumstances. Why was that not followed more closely? A six month range is going to hammer a good number of developers — especially small developers — who weren’t given a heads-up about this new policy and certainly weren’t consulted by Valve on what harm it might do to them. No doubt all companies on Steam are wondering how long this extended refund window might last.

Additionally, how will this affect game design going forward? One writer on PC Gamer postulated that this policy change might prompt a lot of games to adopt a F2P model in order to get past the two hour requirement. I think the idea is a little over the top and probably unlikely, but is that the direction we really want for our industry?

Andrew Pellerano on Polygon muses that game companies will begin to alter their designs to make the first two hours a sugar rush of joy to hook players long enough to get past the refund policy threshold before the “real” game kicks in. For instance, will players have to make it through a two hour tutorial before playing? Or complete some kind of involved quest/repetitive task before entering the larger world of the game? I think that if game companies do this in a blatant way, fans will call them out on it.That tactic will certainly show up in the comments of Steam reviews, so I’m not sure how successful it would be. No doubt some companies will try it, though. We don’t want that. It’s disingenuous and lazy design.

There could be some negative side effects for consumers too. Like a caffeine high, the good feelings may eventually wear off, and we’ll be left with a killer headache. Will the new return policy disincentivize Steam sales? One clause in the announcement reads, “We do not consider it abuse to request a refund on a title that was purchased just before a sale and then immediately re-buying that title for the sale price.” Will we see fewer sales in the future as a result? It is certainly less attractive to offer sales now than it was before. It’s unknown how pre-sale refunds might affect corporate decisions regarding sales in the future. This isn’t like bringing in a sales ad to WalMart and getting refunded because shampoo was on sale at Target. Wal-Mart eats that cost differential, not Procter & Gamble. On Steam, the developers eat it. Is that fair? Where is Valve’s stake in this, especially if refunds go straight to a user’s Steam Wallet? And will next years Summer Sale be notably smaller and less generous than this years as a result of this change?

How about game companies deciding to mark up the price of their games to make up for all the returns they’re going to have to face? A typical 4X game now costs $30 to $60. We could see that go to $60-$90 if a good portion of purchasers get refunds. Or, perhaps, companies will mark their games up on Steam by a ridiculous amount and then offer them on permanent sale on websites like Gamersgate. For small, indie companies, this might be the way they have to go to survive. It will be interesting to see if such a lenient return policy results in higher overall prices thanks to forced inflation and a decline in discounts.

So what can be done? First, the term “abuse” in the announcement needs to be defined. Right now, nobody knows what that really means and what the consequences for perpetrating that abuse would be. Second, I think the policy needs to be tweaked. I actually do support the idea of refunds. Good Old Games, for instance, has a refund policy. Their 30 day money-back guarantee provides refunds if the game, “doesn’t work and our team of expert Support staff can’t solve the problem…” That seems fair. No one should be stuck with a defective product. This would include games that launch with terrible bugs or just won’t load on your computer for some reason.

We’re sure that GOG will be watching.

Another solution is to make the policy an opt-in situation for developers. Those that choose not to opt in to the refund policy couldn’t sell their games in markets where refunds are required (like the European Union). This would allow developers to protect their income if they wanted. Meanwhile, the community would be able to use its usual methods of persuasion to encourage a company to offer refunds if it currently doesn’t. There are sound rhetorical arguments to be made for why it is in a company’s best interest to voluntarily offer refunds to unsatisfied customers.

Finally, Steam could start with a more restrictive window for returns that companies could expand on if they wanted to make a gesture of good faith. For example, the window could be reduced to seven days and 90 minutes. If a company wants to offer refunds after 14 days and 2 hours, they could, but Valve wouldn’t force that on them.

Some one reading this might wonder if I’m advocating for developers to be able to dupe the public into buying crappy games. Heavens, no! But words like “good, quality, deep, fun, bad, crappy, and worth it” are relative to each buyer. There’s no objective standard. There are plenty of people who hate Endless Legend or love Apollo 4X. What’s acceptable for one of those games, might not be the right policy for the other. Currently, I feel the refund mechanism is too rigid to adequately accommodate the broad range of games sold on Steam.

All this could change. We’ve seen Steam recently make snap decisions before only to alter or reverse them entirely later (see Paid Mods and Hatred’s Greenlight campaign). I don’t think the refund policy will get changed as quickly. After all, most Steam customers are loving this. The developers, publishers, and concerned community members will have to speak up loud enough and long enough for Valve to hear it. But in the end, it’s all up to the consumer. How this plays out is in the hands of everyday folks playing and purchasing games on Steam. What kind of community are we? Are we the type to take advantage of the situation and try to pack in as much play as possible in 119 minutes and then get a refund? Or are we the type that will use the refund procedures honestly and sincerely while supporting the developers that make our hobby possible? Only time will tell.


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