Electronic Entertainment

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Contents

Introduction

Electronic Entertainment, also known as video games, is a hugely popular form of entertainment that has been widely adopted with the widespread accessibility of electronic devices such as personal computers, home consoles, and mobile devices.

Historically shunned as an expensive pastime for children, and used as a fodder by politicians and activists to blame social woes on, it has quietly crept up to be the largest market segment by revenue in the entertainment industry in the US[1].

Video games in the past have been marketed towards and consumed mostly by children, as explained by Jesse Divnich, vice president of insights and analysis for Electronic Entertainment Design and Research "The Nintendo Entertainment System was targeted toward boys under 10. If you look at the Super NES five years later, it starts targeting boys ages 10-15," [2]. Yet after all these years, the industry has actually matured along with its audience. In fact, the average age of gamers is 31 in 2014 [3] and is actually the largest sector within the key entertainment industry.


This wiki entry aims to showcase how the electronic games industry has grown out of a niche market and is now a significant sector within the entertainment industry. The authors of this wiki entry aim to do this through briefing those who are unfamiliar yet interested about the electronic entertainment industry from a business perspective by showcasing the value chain, production methods, economic and social impacts of the industry, and near future prospects.

The structure of this wiki is as follows. Firstly, a brief overview of the video game market will be provided. Afterwards, the business, revenue, production, and distribution models of the video game industry will be explained. Furthermore, this wiki will discuss the various game design philosophies and best practices of modern game design. After that, this wiki entry will discuss how the business practices of the industry and the community surrounding it impacts the society as a whole, where there will be dissenting opinions among the authors. Lastly, we will look into what is up and coming based on trends and upcoming technology.

Limitations: While China’s electronic entertainment market is enormous and impressive, due to the unpredictable nature of the Government’s stance at the time of writing from the anticipated introduction of new legislation, this article will attempt to refrain from commenting on, and using examples from said region out of respect for the administration.

Brief Background

Industry at a glance

“In 1991, CES put us in a tent. You had to walk past all the porn vendors to find us”
- Tom Kalinske, President and CEO of Sega of America, Inc. from 1990 - 1996 [4]

It is the opinion of the authors of this paper, that the most effective way to understand an industry is through their trade shows. The International Consumer Electronics Show (CES 2018) is largest trade show for electronics, has 182,198 attendees [5] . Electronic Entertainment Expo (E3 2018), similarly not open to the public, has 69,200 attendees [6], that is more than one-third of the largest tech event of the year. There are also similar trade shows in Asia and Europe. Tokyo Game Show (TGS 2018) has an attendance of 298,690 [7]. You may say the population density of Tokyo is much higher than of North America, but Gamescom 2018 in Europe has attracted 370,000 visitors [8]. The entry fees of these events are well over $100, and visitors have to pay for their travel and boarding, showcasing the commitment of the community.

This is a link to Sony’s presentation, where the Los Angeles Convention Center is packed full of people just waiting to see video game trailers. Note the crowd reaction and hype from 34:30 - 35:50 just by seeing the main character alone, demonstrating the value of the intellectual property. https://youtu.be/GwofRzkROo4?t=2072

[9] Although the industry looks to be booming now with $137 billion USD in revenue by conservative estimates, [10] it was not always the case, less than 30 years ago, the gaming industry was a small one, budgets, profits, and influence were not as pronounced. Most developers consist of small teams, with very budgets, and low sales targets, (see: indie developers), which is the opposite of the current industry climate. Tom Kalinske, President and CEO of Sega of America, Inc. from 1990 to 1996 has famously said “In 1991, CES put us in a tent. You had to walk past all the porn vendors to find us”.

Market Size

US Key Entertainment Segments
According to PricewaterhouseCoopers, video game accounts for the largest share in key media and entertainment industries. The following graph shows the United States market share by revenue in billions of US dollars (see figure on right), where video game revenue accounts for more than half of all the key media and entertainment revenue in 2017[11] . For a more detailed breakdown, see #Market_Segments
Gaming Growth Trends


The video game market has seen constant and consistent growth for many years, making it a very enticing investment prospect [12](see trend line on the right). However, the market is more volatile than other industries. Note that due to the extremely high budget for every single product, see #Development_and_Publishing, a single failure can break the firm. Just in September 2018, a major studio with more than 17 million copy of games sold [13] had to shut down. This is not an isolated incident, from small-scale studios with breakout successes [14] to even the largest scale publishers such as THQ, have gone bankrupt.


eSports

According to Superdata, the eSports market was $892 million in 2016 (see figure on right)
Market Size of eSports
. While this number is not very significant within the video game industry, it is the forefront of speculation for growth. Superdata estimates the annual growth to be at 16%, and other market research firms such as Newzoo estimates the grow to be much higher based on brand investment in 2018 growing by 48% [15].


[16]

The explosive potential of esports has attracted investment groups, such as the Aquilini Investment Group to pay Blizzard, a video game publisher 35-60 million USD to have the right to host tournaments of a single game - Overwatch in Vancouver, which covers the Seattle and Portland areas. Private investments like these are what legitimizes eSports as a sport, as their marketing efforts would bring support and create larger markets. [17]. This also shows that video games has significant revenue streams other than sales. Furthermore, the Aquilini Group, which also owns the Vancouver Canucks National Hockey League (NFL), is planning to launch a professional eSports team[18].

While some games have tournaments franchised organized by external investment groups, the publishers of the video games also host the tournaments. Even though eSports is in its infancy, and is still being debated is it a sport or not, the prize pool it offers already surpasses long time established sports. Fortnite[19], a single video game, has offered USD $100 million for its 2018-2019 season[20]. Prize pools of other sports pale in comparison to gaming. US Open, the tennis tournament with the largest prize pool, is only $53 million USD[21]. Riots paying out such a large amount for just one of their new games only highlights the earning potential of this industry as a whole. Riot earns 10 million per day with Fortnite alone [22]. As eSports is not the focus of this article, see: https://www.newmediabusinessblog.org/index.php/E_Sports:_Becoming_The_New_Mainstream for more details

Market Segments

The gaming market is divided into 3 major segments, console, PC, and mobile.

PC

The PC market is the smallest by revenue, accounting for 29.4 billion USD in sales in 2017. This segment is extremely diverse, from people who play casually with poker with basic PCs at offices to enthusiasts who use extremely fast and powerful systems that render hyper-realistic graphics[23]. PCs are extremely customizable, upgradeable, and starting from the mid-range usually are more powerful than consoles, hence fondly refer to themselves as “PC Master Race” [24], when in discussions on which system is better.

With the advent of mobile gaming, the majority of casual players on free to play and social gaming have shifted onto mobile devices [25], the largest segment within PC gaming is budget gaming systems[26]. These systems are categorized by having a consumer grade discrete or dedicated graphics card that allows for better performance in 3D applications. The most popular games are team-based competitive games[27]. These games mostly do not require a lot of graphics rendering or processing capabilities. Multiplayer Online Battle Arena (MOBA) games such as League of Legends(LoL), and DOTA 2 (sequel to Defence of the Ancients) are prime examples[28].

While not the largest segment, enthusiasts has the most buying power and growth within this segment at a time when commodity PC sales decline [29] In 2016, hardware sales for “gaming upgrades” exceeded 30 billion, and is seeing an annual growth of 10% [30]. This segment provides the freedom and the platform for bold new ideas that push the industry forward with its willingness to accept new experiences, from gameplay mechanics, storytelling techniques, physics, and graphical fidelity. Examples of gameplay mechanics: 4x Strategy genre of games where there turn-based strategy and real-time strategy(RTS) - Total War Gameplay https://youtu.be/pwJNuLhr_pg Examples of real-time ray tracing technology and graphical fidelity BF5 RTX: https://youtu.be/rpUm0N4Hsd8

[31]

Consoles

“Software Sells Hardware”
- Nintendo Mantra, reinforced by Satoru Iwata, CEO of Nintendo (2002-2015)
[32] Due to the standardized nature of the console hardware, the development and optimization process in the making of high production value games relatively easy compared to PC. Furthermore, the low price, lack of customizability, and general all in one whole product allows for the mass market to adopt consoles at a much larger scale with its accessibility. Hence, it is the second largest market within the gaming sector.

The console market is where major large-scale game developers focus on. The market is currently dominated by Sony PlayStation, Microsoft Xbox, and Nintendo consoles. PlayStation 4 has won the current 8th generation ‘Console Wars’ outselling the XBox One 2-to-1[33]. These console wars are fought and won over many factors, from function, utility, messages, price, and most importantly according to head of Microsoft Xbox division Phil Spencer, exclusive content<https://twitter.com/XboxP3/status/984852380905689088>. Prominent Examples of exclusive IP include Microsoft’s Halo Series and Gears of War Series, Sony’s God of War series and Uncharted series, and Nintendo Mario and Pokemon games. These exclusive intellectual properties have heavily invested fan base that not only purchases systems and content, they are also very vocal about their preference and act as word of mouth marketing. Hence a mantra of Nintendo “Software Sells Hardware”.

Xbox and PlayStation both sell their consoles at a price point lower than their development cost. They are priced according to the estimated production cost of the console midway through their cost[34]. The business practice of subsidizing their consoles is platform driven and allows Sony and Microsoft to capture a larger market. The money is made back through software distribution through their online store, licensing fees, and network subscription fees[35].

Nintendo business model differs by using mature technology. This allows them to have lower production costs and allow them to still make profits while being low costs. However, due to the system hardware limitations, Nintendo only competes in the casual market, with games that do not have high graphical fidelity, hence their first party titles are limited to art styles such as these, to avoid comparisons with other platforms. Legend of Zelda trailer https://youtu.be/zw47_q9wbBE

[36]

Mobile

Centre

“Do You Guys Not Have Phones?” Wyatt Cheng Principal game designer of Diablo Immortal, BlizzCon 2018

With 2.53 Billion users in 2018[37], and $46.1 Billion USD in revenue , smartphones is the largest market by users and revenue[38] (See graph on right).
Device Segments
With its alluring numbers, many developers who used to work on PC and consoles have switched to developing games for this platform. The largest publisher in the industry Activision Blizzard has announced that they are bringing all of their franchises to mobile[39]. While moving to the largest platform may sound like a rational business decision with the technological advancements in smartphone technology, the reality is far from simple.

A large portion of smartphone games are made free to play in order to increase their user base. The majority of these games use predatory business practices to sell in-game items (as an example, see #Loot_Boxes). These models are frowned upon by the gaming community as not only many gameplay aspects are sacrificed for increasing profits, but are unscrupulous as use a tools that may be illegal depending on jurisdiction to take advantage of their customers, especially ‘whales’ people who spend a lot, often more than $1000USD, , instead of selling the product as a whole for a fixed price[40](There are exceptions, such as Digital Extremes, developer for Warframe).

Of course, gamers have phones, but switching their platform of choice to one that relies on a completely different business model, not only that this creates a huge gap between expectation versus reality, it alienates their current customer base as it shows that the company does not care for its customers. Without the support of fans, there is would be no way a product can breach into the mainstream market[41]. When investors that are not familiar with the industry sees the numbers in mobile and get business executives that agree with their view to force out industry veterans, such as the recent removal of Blizzard’s founder[42], they make decisions such as entering the mobile market without considering their competitive fit, destroying the value their IP [43]. Many valuable IPs and franchises are destroyed by such rash decisions. One need not look further than the like to dislike ratios of promotional videos of EA’s Command and Conquer and Blizzard’s Diablo to see the popularity of their IP plummet. Command and Conquer Official Reveal Trailer: https://youtu.be/fyNXQpAFQJc Diablo Immortal Trailer: https://youtu.be/RtSmAwpVHsA

C&C Dislikes
Diablo Dislikes


To succeed in the mobile market one requires an understanding of the mentality of the consumers of the mobile market. The mobile market is full of people who play casually, such as when in transit. This means that the gameplay has to be assessable and easy to understand, which is the opposite of home consoles or PC gaming, where the focus is on immersion or competition. There are many successful examples, such as angry bird, candy crush, bejewelled, and more. The most valuable example however is Fallout Shelter. Based on the Role Playing Games(RPG) from the Fallout series. While RPGs are known to have deep gameplay systems and mechanics, heavy story and lore, Fallout Shelter only retains the story setting, and removes all the RPG elements, and replaces 3D immersive gameplay with extremely simple and casual 2D systems, while at the same time of its release, heavily emphasizing that this is a spin-off and not the main focus of the company. This had lead to great reception from the community as a whole, and it makes one wonder why are the top levels of Blizzard and EA are so incompetent as to not understand their own market. Fallout Shelter gameplay: https://youtu.be/HY4jCjufLG8

Future: Hybrid and Remote Access

There was a time where handheld gaming devices when extremely popular, with devices such as the Gameboy, NDS, 3DS, and the PSP.(Link to pics) However, with the widespread use of smartphones and their use for mobile gaming, the popularity of portable consoles died down [44].

However with the hybrid console Nintendo Switch, where it can act as a home console and be used as a portable device, it has reignited interest in the portable market. So much so that Sony, who originally decided to permanently exit the handheld market, has been rumoured to have been developing a handheld with 5G capabilities that focuses on streaming games and remote access[45]. (For more information about 5G see: https://www.newmediabusinessblog.org/index.php/5G_-_D100)

Video of Switch: https://youtu.be/3c6MWsEE8

2 forms of Switch

Production

Development and Publishing

Most video games are produced by teams of people, these teams are known as developers. With the current internet structures and platforms, it is entirely possible to publish their own games. The developers that publish their own video games are known as indies, for independent developers. While most indies are of small-scale and low budget, some indies have visions of putting out quality work that rival the largest game companies in budget, scope, ambition, and quality. [46] CDPR, a Polish developer is one example of an indie that outputs such work. See figure on right for HellBlade GDC presentation of their indie business model, which was revolutionary at that time due to its high production value and low cost.

HellBlade Business Model

Other developers have a publisher that fund and publish their video games. Major publishers, such as EA, Activision Blizzard, Ubisoft, and Take-Two Interactive have numerous studios under their ownership. These publishers fund the development of games, market, and distribute them in both retail and online stores. Due to the nature of the components required to develop a video game, both the cost and revenue of these products are often enormous. GTA 5 (released 2013), had a cost of 265 million dollars and a revenue of 6 billion dollars [47]. Contrast to Marvel’s latest movie, Spiderman Homecoming, which cost $175 million to make, and had a box office of 880 million [48], it is apparent of how large the industry is. These big budget items are known as AAA games.

It’s easy to see why a video game as such a high cost. A modern AAA title is developed by a team averaging 300 people. Sequels take around 3 years to develop [49]. And an average game develop costs $70000 per year [50]. This results in a $63 million in labour for development alone. Hence why most developers are attached to a publisher.

While most game publishers publish their games for all platforms, hence their title “third party”, Microsoft, Sony, and Nintendo also publish games for their systems exclusively. These “first party” titles are the major differentiators of the system. They are so important, that Microsoft bought four game development studios this year alone[51].

The major distribution channels aside from the local brick and mortar stores are digital stores, which accounted for 79% of revenue in 2017, which was growing at an immense pace since 2011.
Digital Distribution Growth

[52]


The major online stores include the Xbox store, the PS store, the Nintendo store, Apple Apps Store, Google Play, and various online stores owned by major publishers, such as steam (by valve), gog.com (created by CDPR to avoid the distribution fee), Origin (By EA), Battle.net (by Activision Blizzard) that allow you to download games and play. The first party stores all dominate their own market, leaving competition only to PC. While Steam is the market leader, Facebook[53] and Amazon[54]is entering the distribution platform business and may be great potential disruptors. Retailers and online platform can take from 30%-50% of the developers’ revenue. [55][56]. To avoid having their cut taken, many major publishers and some indie devs, such CDPR, have created their own online POS to retain sales revenue. Epic Games has just announced an online store with 12% which is a game changer [57].

Game Design

“We have a lot of energy, a lot of devotion, a lot of love around storytelling, around narrative...I don’t want to go to any of those teams and tell them I read in a magazine there’s something call games as a service, make me one of those” -Shawn Layden, Chairman of Sony SIE Worldwide Studios [58]

When people think games, they usually think of the competitive games from esports, like Fortnite, Overwatch, and League. However, competitive games is only one of design philosophies. There are many other design philosophies. Some acts as a games as a service, like Activision’s Destiny [59] , and Ubisoft’s Rainbow Six Siege [60]where the sell content bit by bit. Sony’s first parties studios [61] with games such as God of War and the Last of Us are focused on immersive single player storytelling blurring the lines between movies and video games. And Nintendo games, such as Mario focus on creating fun through gameplay mechanics.

Competitive game Overwatch Gameplay: https://youtu.be/gCTG5Spr6Iw Immersive single player game: The Last of Us Gameplay Demo: https://youtu.be/btmN-bWwv0A More immersive single player games: Witcher https://youtu.be/c0i88t0Kacs Mechanical based games: Mario: https://youtu.be/u6oPBIVjf8E

Production Models

  • Waterfall Production Model
    Waterfall Production Model

The Waterfall Production Model is a development cycle that progresses in stages. It is a highly organized process that is simple to understand and execute. Using this model, many key decisions such as the core game mechanics or features of the game are set very early on. Therefore, the designers' vision for the game is usually well preserved throughout the development cycle. Due to the structured nature of this production model, the end product is usually in a more cohesive and completed state. However, this also means previous stages must be completed before the next process can begin. Consequently, there can be various efficiencies and wasted time if there are any delays from one department to another.


[62]


  • Parallel Development Methodology
    Parallel Development Model
    [63]

Based on the waterfall methodology, a parallel development strategy differs by split the project into subprojects A video game has many different components, such as physics engine, art assets, story combat systems, tools, levels. and music. Studios usually are split into multiple teams that work on different parts [64]. The merging of the systems are generally the hardest to do and requires a lot of experience to do well.



  • Agile Production Model
Agile Production Model

[65]The Agile Production model is a more flexible development process that allows for foundational design elements to be changed throughout. This can be beneficial as foundational mistakes can be scrapped in the middle of development without having much impact on the work packages of other teams.It also allows for more efficient use of resources since managers can allocate developers to work on different work packages at the same time. However, this method can be highly disorganized if not managed properly and efficiently. It can be difficult for creators to see the direction of the project if all the pieces of the project are not in a cohesive state.

Destiny[66]. And Warframe[67] are examples of games that became even more successful than when it released due to constantly update and changes in its design during development.




Design Psychology

When designing video games, it is the designers' job to create a game that is enjoyable to the player. Although every video game is different, there are a couple of key considerations that set the foundation for the development of most video games.

Core Gameplay

The Core Gameplay is the interplay between objects, attributes, and actions within the game. For example, in Super Mario Bros, Mario (object) can jump on enemies (object) to earn points (attributes) to proceed[68]. The core gameplay is what the players will spend that majority of their time doing it is important for these gameplay interactions to be fun and satisfying. Below are several strategies the designers implement to make the game more fun and engaging.

Rewards

Rewards can be used to encourage players to participate in the core gameplay. Extrinsically motivated players might prefer rewards that they can use to enhance their gameplay such as equipment or in-game currency. Intrinsically motivated players can be rewarded with the feeling of satisfaction as long as the objective is inherently challenging and fulfilling. In order to keep players motivated and engaged in the game, designers need to understand the nature of their player base and design the game rewards accordingly. Here is a video that delves into more details about rewards and their effects on human behaviour. https://youtu.be/h86g-XgUCA8

  • Feedback

Feedback is an important tool that designers can use to immediately communicate to players that they are playing the game properly. For example, when Kratos swings his axe in God of War, players will hear swinging noises and experience a haptic feedback from the rumble of their controller. In addition, the axes also briefly pause upon contact while everything else remains in motion. This combination of audio, haptic and visual feedback mimics the sensation of an axe cutting deep into an object and briefly getting stuck. As a result, Kratos’s swings feel a lot more powerful to the players making the core gameplay very immersive and satisfying. To see this in action: https://youtu.be/zpr-EE2In1M?t=54

Learning

A well-designed video game often does a good job of teaching the players the core mechanics of the game in an intuitive manner. Furthermore, it is more important for the designers to continue to build on those core mechanics throughout the game and repeatedly offer players the opportunity to apply what they learned. This concept is reinforced by the Associative Learning theory which suggests that people retain information better through repetition. (Consumer Behaviour, 7th edition, Michael Solomon). Memorable game mechanics results in stronger brand loyalty from the players and increases the likelihood of a potential sequel to the game.

Immersion

In a well-designed video game, players should feel fully immersed and engaged in the game world. Immersion is a critical value proposition that video games can offer players because it is an effective form of escapism. Many players enjoy taking a break from the stressors of reality by entering a fictional world and videos game worlds are especially convincing for players to escape to due to its high information density. For example, fictional books may be able to tell a story by describing the plot with text. Video games, on the other hand, are able to convey additional audio, visual, and haptic information which results in a much more convincing and immersive experience. This is why the video games industry is currently undergoing massive growth as more players crave the experiences that video games can offer.


Marketing Trends in the Video Games Industry

Experiential Marketing

Nintendo's Experiential Marketing at Small Events
Experiential marketing focuses on engaging with the customer to build stronger customer relationships. This is usually done by having a presence in small or major events where brand ambassadors can set up their games to sample to event goers. Unlike a sales pitch, the goal is for these interactions to be memorable experiences that customers will remember the next time they go shopping. By eliminating the pressure to push sales, Brand ambassadors are able to focus on making the conversation more personal and genuine. These positive experiences ultimately reinforce brand loyalty and as a result, companies would be able to make more money out of each customer’s lifetime value.


Preorder/Presell Marketing

Using social media, companies are able to convey gaming announcements to a mass audience long before a games release date. Video game trailers are often premiered at massive trade shows such as E3 and Games.com in order to generate excitement and encourage presells. In addition, E3 even offers price discounts on certain games that are ordered during the event time period[69].

Strong pre-order sales are incredibly advantageous to developers as it provides them with more resources to successfully finish development. In addition, Pre-orders also provide publishers with valuable data that can indicate accurate expected sales numbers. However, some video game companies are criticized for abusing preorders and the goodwill of their customers. Since pre-order sales are made before the game is complete, developers might be inclined to cancel planned content in order to decrease the workload and development costs. This often results in players paying full price for an incomplete and lacklustre product.


Revenue Models

  • Free to start/Demos:

Video games that minimize barriers to entry by offering a free trial for players to immerse themselves into the game. MMORPGS (Massively Multiplayer Online Role Playing Games) such as World of Warcraft [70] usually adopt this model by allowing players to start playing for free up until a certain level, also known as level gating. After that, players have the option to purchase the full game to unlock the rest of the contents. Star Wars the Old Republic [71] is another game that level gate as well.

  • Pay to Play/ Pay to win

Games that implement the pay to win model put a heavy emphasis on the player's ability to pay in order to play or win at the game. Publishers can do this by putting essential equipment, powerups that are necessary for progression behind a paywall. This particular type of revenue model can be seen as a greedy business practice from the gaming community especially if they were already charged full retail price for the game. A famous title that exploited the pay to win model is Star Wars Battlefront 2 published by EA games in 2017. EA was notorious for requiring players to purchase loot boxes for a chance to win items that are necessary to progress in the game at a reasonable pace. The immense controversy resulted in overwhelming negative reviews from both critics and led to significant losses in sales[72].

  • Retail
EB Games
The conventional distribution model for console video games where the publisher distributes a physical copy of their game through retail stores. It is worth noting that publishers are slowly moving away from this model as they are able to cut down manufacturing costs by distributing their games digitally instead.

EB Games the largest retail chain in Canada

  • Microtransactions

As the name suggests, Microtransactions usually feature small in-game rewards or power-ups at a relatively low price. This type of revenue model is especially effective on casual players who have shorter play sessions and prefer inexpensive rewards that offer instant gratification. As a result, microtransactions are especially prevalent in mobile games. This term now often refers to in-game purchases in general. (see: #Microtransactions)

  • DLC (Downloadable Content)

Additional content that is created for a game after its initial release. Players can purchase and download DLC’s from the games official publisher using the internet. DLC’s may come in the form of additional characters, levels, or game modes to supplement the main game. This type of monetization is especially popular among modern console games because it allows the publisher to continue earning revenue from their player base even after selling the games at full retail price. However, the viability of DLC’s is often contingent on the success of the of the main game. Many publishers nowadays release multiple DLCs as it requires minimal effort to generate continuous revenue.

Total Cost of DLC for Dead or Alive 5 on steam


  • Loot boxes

(See: #Loot_Boxes) Loot boxes are in-game purchases that offer players the chance to obtain variable rewards based on random chance. They are a highly controversial method of in-game monetization due to its addictive nature similar to gambling. There is currently debate whether government regulation is necessary for loot boxes.


Social and Legal Issues

Video games have become a part of many people lives and it has gained attention worldwide. Some welcome the attention, others may use them for their own agenda. Video games are often used as a scapegoat for politicians and activists to blame social problems such as gun violence[73]. To the right is a picture of US Senator Joe Liberman having difficulty distinguishing a toy from the real thing when blaming video games for gun violence. Other concerns may include whether or not some video games features are a form of gambling. Censorship has also become a factor in video games released in different countries. NRA blames video games for violent games https://youtu.be/PPqOy54oyZ0


[74]

Microtransactions

Many video games employ this practice as a means to obtain additional revenue on top of the initial purchase. It is a way for players to usually obtain items or services that can enhance gameplay or merely as additional fun. These include items such as extra costumes for characters or even items that could advance the gameplay progress significantly. Free to play online games are the ones that employ this tactic the most as it is their main source of income. Types of microtransactions include downloadable content, premium items that can help progress, loot boxes, season pass etc.

The gaming industry is moving towards relying more and more heavily on microtransactions instead of focusing on outright purchases for some time. EA, the second largest video game company by market capitalization sees this model as their major cash cow [75]. and GTA V, the highest revenue generating game of all time have the majority of their revenue brought in in this form, exceeding $700 million a year [76]. An in depth look at the top 10 mobile games by revenue in 2017 shows that all of them rely on microtransactions to make money. These 10 games made a combined total of 21.72 Billion dollars in 2017 [77][78].

The authors of this article have dissenting opinions on this issue as follows.

For Microtransactions: Video games have stayed at the USD $60 price point for a long time. With ballooning costs and inflation, microtransactions are necessary to maintain profits. Furthermore, firms exist to generate maximum returns for their investors.

Against Microtransactions: Products are meant to be sold as a whole. While people are willing to pay for additional content, many firms cut out content and gate them behind splits content that should be with the game. And this practice makes games developers focus on how to milk player with psychology tricks rather than a good game. In the current market, if one does not use unscrupulous monetization models if a game is decent, customers would praise such behaviour, and become loyal buyers, increasing sales potential for future games[79]. The following illustrations showcase how this model gives the wrong incentives.

Loot Boxes

Gashapon, the original real-life gacha

One of the most popular microtransaction tactic for online games. Loot boxes are essentially a game of chance where players pay a fee to get items. In most games that have loot boxes, certain extremely rare items can only be obtained from loot boxes. A type of premium currency needs to be used in order to play the loot box. This currency can usually be obtained for free albeit very slowly through daily login and certain task or by using real money to obtain in large amount fast. In Japanese games, loot boxes are termed as gacha. The concept is similar to gashapon the toy capsule vending machine where you put a coin and obtain a random reward.

Some may question how come this mechanic can be so addicting. The gacha mechanic does have a bit of psychological effect on the players. Most gacha usually has a special event almost every time in which special items or characters can only be obtained during that limited time. Events are usually unique and only happen once. The rewards are therefore only available for a limited time. Failure to get the prize during that time will result in the player may never be able to obtain the prize ever. This is usually the common case in Japanese games where gacha is involved. Some people tend to spend a huge amount of money on gacha and these people are called “whales”. These whales can spend any amount of money ranging from a thousand to a tenth of thousands. A player in Final Fantasy Brave Exvius spent $1,500 in order to get the character Elza from a gacha [80]. Another player from the Fate Grand Order game spent $70,000 for items and characters [81].


A simple custom gacha program is provided in a link below for you to test out the randomness of Loot Boxes, try to see how many time you need to play to get Charizard https://drive.google.com/open?id=1p-uXyNap1qtgxVQm2DR2Po0nspIZAB8r

Government Regulation

Loot boxes/gacha has caused a lot of controversies regarding whether or not it is considered a form of gambling or not. Again different countries have different regulations, but there some common ones such as showing the list of item that can be obtained from the loot box and showing the chance of getting each item. Other regulation may include the prohibition of certain types of loot box such as the kompu gacha in Japan to complete banning of the loot box system.

  • Belgium

In certain countries such as Belgium, loot boxes are considered gambling and the government asked the developer to remove the loot box system from the game completely If they want to release those games in their country [82]. Several AAA games developers have been asked to remove the loot box mechanic from the game. These games include CS:GO, Overwatch and FIFA 2018. However, EA the developer and publisher of FIFA 2018 game refuse to follow the regulation and is currently under criminal investigation [83].

  • Japan

In Japan, the Japanese Online Game Association requires that any gacha should have a 1% minimum payout and impose a limit of 50000 Yen billed to the player [84]. The 1% payout means that players will have a 1% drop rate of either getting the highest rarity item or the specific limited item from the gacha pool. The limit of 50000 Yen can be different for some games and also depending on what age the player input to his or her game profile. In general, the 50000 Yen limit applies per month and for younger players the limit may be less than 50000 Yen. Several games banned younger players from playing the gacha entirely.
A type of gacha in Japan that has been completely banned since 2012 is called kompu gacha or complete gacha [85]. The concept is still similar from regular loot box or gacha where the player can obtain a rare item from the gacha. However, kompu gacha add another level to its mechanism. In kompu gacha, the player needs to obtain several items from the gacha before obtaining the ultimate prize. For example, the player needs to obtain item 1, 2, 3 and 4 in order to obtain item 5.

  • US

In the US, the regulation for loot boxes is still being debated and several bills were passed recently for measurement. It has been debated whether or not loot box is considered gambling in the US. However, prizes from loot box are considered digital objects which have no real money value [86]. Some debated that it does not have to be money value and as long as it is something of value, it should be considered gambling. Marc Whipple, a lawyer who is experienced in the gaming industry, states that gambling require 3 elements which are the need to pay to play, the outcome of the game is based on chance and a prize [87].
On April 2018, a bill was introduced to prohibit the sale of any games that contain any gambling like mechanic to people who are younger than 18 years old [88]. It also requires that the game includes specific warnings or labels that says it contains gambling like mechanics. Though, some argue that loot boxes are not mandatory for playing the game [89]. It provides alternate or extra experience for the players to enjoy the game but, should the player chose not to play the loot boxes, they won’t lose anything. In the end, the player can still decide whether to play for the loot boxes or not. Some free-to-play games, however, does make it so that without playing the loot boxes, a player may not be able to compete with other players due to lack of higher grade item which can only be obtained from the loot boxes.

The authors of this article are all against loot boxes as they believe you should be able to buy what you want for a fixed price.

Self Regulation (Rating System)

In general, any video games have a rating system that indicates who are the intended players for the game. The ratings set the minimum age required to play the game. Different countries may have different rating systems but in general, the age group is divided into everyone, teen and mature. Some common rating systems include:

  • ESRB: Entertainment Software rating board. North American rating system. The age are grouped by RP, eC, E, E10+, T, M and AO
    ESRB
    [90].
    • RP means that the game rating is still being decided as the game is only shown to the public as promotion material only such as trailers.
    • eC rated games are intended for preschool children.
    • E rated games are intended for everyone.
    • E10+ games are intended for everyone who is 10 years and older.
    • T rated games are for teens specifically ages 13 and older
    • M rated games are for mature audiences ages 17 and older.
    • AO means the game is intended for adult only, 18 years and older.


ESRB rating icons

  • CERO: Computer Entertainment Rating Organization is the Japanese rating system for video games. The categories are divided into A, B, C, D, Z, Kyouiku Deetabeesu, Shinsa Yotei and Kitei Tekigou
    CERO
    [91].
    • A rated games are suitable for all ages
    • B rated games are suitable for children age 12 and older
    • C rated games are suitable for people aged 15 and older
    • D rated games are suitable for people aged 17 and older
    • Z rated games are suitable for people aged 18 and older
    • Kyouiku Deetabeesu rated games are meant for educational purposes, though it may contain material not suitable for children. As such, educational games for children are still rated with A.
    • Shinsa Yotei simply means the rating is still pending for decision.
    • Kitei Tekigou are for demonstration game which does not have all the final content yet.

From top to bottom, left to right: A, B, C, D, Z, Shinsa Yotei, Kitei Tekigou and Kyouiku Deetabeesu

  • PEGI: Pan European Game Information is the European rating system. There are five categories which are in numbers: 3, 7, 12 ,16, 18. Each number indicates the suitable age except number 3 which means suitable for all ages. [92].

Author’s views Neutral: Rating systems are insignificant and are always ignored. Except for when parents need recommendations from stores. For: It is great that there is a self-regulated rating system to keep governments limiting our freedom of speech. Against: Most developers want to get an E rating to access a larger market, and thus are very politically correct and limits creativity.[93] Nintendo removed an achievement icon of Tharja from smash bros 4 due to her ‘promiscuous’ character design in order to maintain the E rating.[94] File:Tharja.jpg[95]

Violence

As video games become larger and more realistic, it tends to become a target in social issues. The most common issues that video games face is violence instigator. Certain types of games such as shooting and fighting games are the main target. These games are considered by some to promote violence in people who play the game. Politicians usually blamed video games for the shootings that happened in many cases especially when the suspects are young people. For example in the US, President Trump has blamed video games as one of the reason why a shooting happened at the Parkland school [96]. Games such as Call of Duty is one of the most common video games people play and young children are playing it as well. However, a point to note is that whether a child is allowed to play the game or not is still up to the parents [97]. Some may argue that if a child is exposed to such material and become violent, it’s the parents' fault for not monitoring their child activities. Research has been conducted to see whether video games affect a person’s behaviour. Those researches show that there is no evidence of video games affecting the behaviour of a person [98]. The study test whether the degree of realism in combat video games affect the players. One test uses a game with ragdoll physics. Ragdoll physics is a game mechanic that allows in-game model such as human to have a more smooth animation, especially when dying. The other test uses a game without the ragdoll physics mechanic. After exposing the players to the games, the researchers asked the player to complete word puzzles. Should the games affect the behaviour of the players, the researchers could expect more violent related words from players who are exposed to the game with the ragdoll physics. The result shows that neither side of the players shows more violent related words. A group of scholars also stated that blaming video games for violence is a view that is outdated [99]. It is also important to note that the majority of people who play video games does not commit crime [100]. Video of ‘extremely’ violent game Street Fighter V https://youtu.be/KIOMBc6E_MQ


The authors of this article have dissenting opinions on this issue as follows. One view is that there is no evidence supporting video games make people more violent Whereas the dissenting view is that, through video games, there is a place to release rage and frustrations onto a virtual world and would not be manifesting in real life, only people who do not understand video games cannot distinguish real life from fiction.

Censorship

Censorship in video games has been stricter ever since. In the past, most video games don’t have a lot of censorship. In today’s game industry where games are released basically all around the world officially, censorship has become a standard rule for all video games. Certain contents of a game may be welcome in some region, while in other regions it may be perceived as inappropriate.

Types of censorships range from toning down the detail, restricting access to certain content, cutting certain contents and lastly banning the game entirely.

  • Toned down details

Toning down the details can be considered as the smallest type of censorship as it just changes some details without removing it completely. Some example includes changing blood colour to black instead of red or changing the blood to sweat in fighting games. Other example includes less blood splatter effect on a certain version. Mortal Kombat for SNES is one example for this type of censorship where the blood is changed into sweat for certain version of the game. https://youtu.be/kG2psMsfnRM

  • Content access restriction

This type of censorship has slightly more effect on the game content as it basically restricts the access to certain features of the game. However, it does not remove the feature completely. An example would be Fire Emblem Fates [101]. In the Japanese release of the game, the player can “pet” the character using the 3DS stylus to increase affection with the particular character https://youtu.be/A1DHrpGBFCU. In the western release, the feature is still implemented but, the petting aspect of it is removed.

  • Cut content

This type of censorship is the one that affects the game contains the most. Not to be mistaken between content restriction as this type of censorship completely cuts certain feature of the game usually in the form of removing certain levels or mechanics of the game. A theoretical example using the Fire Emblem Fates game is instead of removing the touching feature only, cut content censorship will remove the entire affection mechanic. An example of this censorship would be on the game called Call of Duty: Modern Warfare 2. In this game, there is a particular mission where the player will act as a CIA agent posed as a terrorist and has to shoot Russian civilians at an international airport in Russia. In the American version of the game, the level is available to play although players can choose to skip the mission. In the Russian release of the game, this level is completely removed from the game [102].

  • Banning the game
Although not actually a type of censorship, banning of the game could be due to the amount of censorship required is too much thus efficiently censoring the entire game content. Another example includes censorship of certain features of the game that may affect the entire game such as certain characters who have an important role in the game storyline. An example would be the game called Omega Labyrinth Z, a Japanese RPG with a lot of fanservice material which is the primary reason why this game is banned in the West. Example of fanservice mentioned. [103].


The authors of this article have dissenting opinions on this issue as follows. One view is that as long as ESRB exists, censorship exists, and creativity would be limited. The dissenting view is censorship is unnecessary in a capitalist society with freedom of choice. If you have an issue with content, then do not consume it. Forcing your beliefs on others is an infringement of personal freedom. Another dissenting view is that censorship limits the creators' vision of art and expression.

Social Justice

Double standards: No complaints for the revealing male outfit?
Social justice warriors or SJW in the video games world are considered people who claim to fight for the right thing but, in reality, they are people who like to blame video games for their own agenda. Numerous game censorship are usually caused by complaints from SJW. In most cases, the complaints made are about how video games depict female characters. The complaints range from how the developer oversexualized the characters, unrealistic or overly appealing female characters, to unbalanced ratios of female and male characters. Most people find that the complaints can be extremely ridiculous. Some people argue that the artistic content of the should be up to the developer. The developers are the one who developed that game and they should have full control of the artistic content of it. If they have a problem with it, then they have the freedom not to buy it. There are much larger problems with society if people need protection from others who enjoy their hobbies privately.

Visually appealing characters has been the primary target for SJW especially if the characters are female. Certain releases of video games ended up getting censored due to complaints from SJWs. An example would be the character Tracer from a first-person shooter by Blizzard [104]. The characters have a certain emote that is considered rather inappropriate by some. The emote was then removed by Blizzard. However, other male characters such as Hanzo who wears relatively revealing outfit is not getting any complaints.


Other complaints include the actions of certain characters. In a game called Valkyria Chronicles 4, there is a scene where one of the male characters grab the bottom of one female character and another scene where another male character accidentally saw the underside of the skirt another female character is wearing. An article commented on these scenes “sets the tone for the rest of the game” [105].
more decent than the sitting US President?
This is not true as the only time when those scenes existed in the game are just those 2 scenes. If one plays the game until the end, it’s easy to forget this scene due to its insignificance.[106]


This is one example where SJWs complain about the game for even just tiny details. Based on the incomplete experiences they described, many of these people who have issues do not seem to have actually played the games they are so happily complaining about. An example will be people outrage of Doom Internal dialogue. The game is still unreleased and they already proclaim it is a bad game. [107]. Some even argue that such complaints is targeting video games unfairly when music videos and movies have even more visceral contents. If one doesn’t like the content of the game then just ignore it and let other people enjoy the content instead of forcing one’s beliefs onto others.

The authors of this article have dissenting opinions on the main reason SJWs should have no place in gaming. -Social Justice is not Justice. Justice is Justice. Justice is a dealt by legal systems, not by mobs doxxing people and creating nuisances with death threats. Social Justice is a corrupt form of justice as no due process exists. -Social justice is that what people use to push their agenda on to others, restricting the individual freedoms and thought by defining a correct way to think. -They do not even play video games and use this platform to push their agenda -Get offended on others behalf, complaints can be extremely ridiculous -They are not target market, if they have an issue, then do not buy it. -They misrepresent facts to their favour. There is a YouTuber that played RDR2 and within the game, he punched a feminist, and SJWs represent the game developers encouraging this behaviour in fact, this is an open world game where the play can do anything, such as slaughtering countless men where SJWs do not seem to have an issue with[108].

Gender Issues

Women representation is always seen an issue within video games, there are always people who complain there is not enough representation within video games. They also state that eSports are not welcoming to women, and female content creators are always harassed, and there are not enough female video game characters. In reality, there is a myriad of significant strong female characters leads. Samus from Metroid, Lara from Tomb Raider, Bayonetta from Bayonetta, Chun Li from Street Fighter, Zarya from Overwatch, Ada Wong from Resident Evil. Mention these names to any gamer, and they can describe in detail how these are strong female leads. eSports are truly the sport that is open to all genders equally as there are no physical barriers where men can vastly outperform women, hence there is no push for gender segregation in eSports except from feminists. CS:GO has a female only tournament but turn out is very low[109].The difference is in the pool of players within a game where the female population for competitive games are smaller, hence there are no one who is able to break out and become pro. As for online harassment, men are as likely to be harassed as women [110], where the difference is men are more often subjected to doxxing[111] and swatting[112]. There are also issues with gender representation with Barbie dolls, there is also a gender mismatch within nursing and education. Hence the question: is it just a difference in personal interest and marketing or is there a real issue.

Authors of this paper have dissenting views on this issue as well. One view is there are no issues as an example, Nintendo is very neutral in their marketing. Another view is that so what if certain games pander to one gender. There is no problem with that in a capitalist market. No males are going to complain that SIMS is marketed towards girls as well. Everyone has different tastes, for example, Yaoi VN games are all marketed towards girls.

Journalistic Integrity

The articles game journalist write today, are not as accurate as we once thought they would be. Certain articles (for example see section 3.7) may deliver incomplete or downright wrong information. The reasons such articles are made can vary. It can be because of pushing their political views and agendas or the affiliation of the journalists to a certain party. The types of inaccuracy can be plain lack of knowledge about the subject or saying that something is bad since the journalist cannot play the game. Some example below:

The Lack of Ability to Play Games

As a game journalist, one should have the basic skills to play the games he or she will review. This way the journalist can review the game in accurate manner. This is sadly is not the case for some journalist as they lack the basic skills or understanding to play the game. Yet, they still criticize the game despite not being able to see the full potential of the game. Such example includes a journalist from Gamesbeat who failed at basic task within a tutorial when playing the game Cuphead. This video is of the game journalist failing miserably https://youtu.be/848Y1Uu5Htk . This video is a 5-year-old outperforming the game journalist. https://youtu.be/hC4F6ctEO4g

A polygon game journalist playing Doom https://youtu.be/d3pQ0oO_cDE


Biased Review or Lack of Knowledge

A lack of knowledge on the subject can also result in inaccurate articles or biased. Just because a journalist cannot do the task such as building a pc, doesn’t mean that the task is too hard. An article from Motherboard says that building a pc is far too hard and people who are not experienced in this field should just buy Apple products [113]. In a sense, this is true, however, building a PC and buying Apple products are two different things for different purposes. In the article, the journalist built a gaming PC but recommend people to buy Apple products which usually are not designed for gaming purposes. Another fact to note is that if a person has never built a PC before, then it is going to be hard for the first time obviously. Everything is hard for the first time. If one does not have the basic ability to use YouTube. Complaining and concluding after only doing it the first time is not the right move. The Verge also has an amazing tutorial where they completely fail at building a PC[114]. As they have removed the video, here is a reaction video towards the original upload. https://youtu.be/gFB5SlXhykQ


Conflict of Interests

The integrity of an article can be questionable when a reviewer is reviewing something that is considered an asset to the organization of that particular reviewer. An example is IGN a company that is well-known for reviewing games. The company acquired Humble Bundle, a digital video game distributor, in 2017 [115]. There was some concern that IGN may make some favourable reviews for the games that are being sold by Humble Bundle in order to boost revenue. In addition to this IGN has already under question for some of the reviews they made since some reviews are very biased such as the review of the horror survival game Prey [116]. The reviewer gave the game a 4/10 just because of a rare bug that caused the game save data to be unplayable. Other players review the game as good and the bug is not a widespread issue.

Aftermath

With the integrity of articles falling, other sources for news eventually emerge. Nowadays, mainstream media is not the only source where people look for information. YouTube has also become a very reliable source of informations as well. Channels such as Jim Sterling and SkillUp are considered to be as reliable or more reliable than some articles in regards to video game reviews. They also stream their game progress showcasing their reactions and aptitude in the subject that they are reviewing. A dissenting view is that game journalists are no longer reliable given their track record of not even playing the games and pushing their agendas as their reviews spend more space on non-issues and than the game itself

Consumers & Content Creators

This section will be about business opportunities that cannot exist without social media. Content creators, or more commonly known as YouTubers and Twitch Streamers. The general public knows them as people who ‘play video games for a living’, and assumes they have an easy life just making videos and making 12 million a year[117]. However what they do not see is the time spent editing videos, or the countless people who did not succeed in breaking out. While it is common knowledge that these content creators earn money through ad revenue, there are many other revenue streams.

Engagement Platforms and Content Platforms

The major platforms for content creation is YouTube[118] for videos and Twitch[119] for streaming. These two major platforms are owned by Google and Amazon respectively. These tech giants are using their channel to not only gain ad revenue but to sell video games themselves. Potential disruptors for streaming include YouTube Gaming, and Valve’s Stream.tv.

Content

Content types are varied, they mostly consist of Gameplay with commentary, Gameplay without commentary Montages (displays of skill): https://youtu.be/OX0lkRh2Sjw Guides: https://youtu.be/8yyxWSR3ESE Parodies: https://youtu.be/EQD3fadSF6k Reviews: https://youtu.be/uyYbCNp1Rjk And more

Replacing Traditional News Outlets

See Journalistic Integrity With the integrity of traditional article falling, alternative sources of news are starting to emerge. A lot of articles from traditional journalists are condescending in tone and some are downright false. This leads to people unwillingness to trust the article nor the journalist both that are right and wrong. Other platforms such as youtube can have the advantage of delivering the news in a manner that allows the audience to see the tones of the reporter. This allows people to better judge whether the information delivered is good or bad.


C2C Revenue and Business Opportunities

With gaming starts to invade different aspects of our life, opportunities also start to appear. With new sources of news or information such as Youtube booming, the opportunities for advertisement also increased. More and more companies are putting advertisement on channels of content creators. Sponsorship of such streamers and reviewers also rises and can be useful for bridging the company product to customers. People are more willing to listen to their favourite streamers and reviewers again due to journalistic integrity issues. The opportunities are not limited to only streamers and reviewers. The video games itself can also be a good platform for product placement. Introducing brands through video games can be very cost efficient since landing pages and codes allow tracking for the effectiveness of individual content creators.

ESports and ELO Boosting

Ever since competitive gaming is born, eSports is becoming a significant aspect of gaming. Games such as Dota, Counter-Strike and StarCraft are very popular games for eSports. People who become competitive games can generate a large amount of income. ESports, however, is not the only way for people to gain income. As stated above, streamers can also be successful. Other jobs that exists due to competitive gaming is called ELO boosting. The goal of ELO boosting is to boost the stats of a player account such as number of wins, number of kills and other stats, to make the player more appealing to be invited into better-skilled teams. Which is very lucrative as well [120], and do not require a charming personality or photogenic appearances.

Future Influence on the Industry

Gamification

Gamification is the concept of incorporating game design mechanics into non-gaming applications. This is particularly effective for making unpleasant tasks or objectives more fun and engaging. For example, many fitness products such as the Apple watch or Nike + Running integrate leaderboards in their app to introduce a competitive aspect and encourage runners to motivate each other and run more often. Retailers also utilize gamification to encourage customers to purchase certain items by offering rewards programs. By offering rewards and discounts, customers tend to feel as if the “won” the deal. This type of mindset drives customers to purchase more than they would have otherwise. Gamification is highly applicable to almost any industry and is a powerful tool that companies can use to encourage action. See: https://youtu.be/1dLK9MW-9sY for more details


Summary

Gaming has become a very big aspect in our life. Gaming functions as interactive activities, social platforms, storytelling devices, competitive activities and more. The industry is constantly growing, achieving conservatively 138 Billion USD in revenue in 2018. Physical distribution is still common for some games especially consoles, but digital distribution is would soon take over as 80% of the revenue in 2018 is generated digitally. These digital distribution parties such as Steam, Humble Bundle, PlayStation Network, Microsoft Store and Apple Store has changed how we consume entertainment. Society has been greatly affected by gaming and even though there are lots of positive effects, it has been under undue criticism from many special interest groups. More options and living styles are made availiable through the medium other than playing competitively. All in all, the future of gaming is bright and people can expect more to come from Electronic Entertainment.

The following is the Gartner Hype Cycle for Emerging Technologies, which shows emerging technologies and their stage of development. Electronic Entertainment would fall in the slope of enlightenment, which means there would be stable growth within the industry. Even though games have been around for 70 years, the mix of constant innovation of new technologies, creative art forms, storytelling, and gameplay mechanics, means that it would only reach the plateau of productivity when the population of gamers is equal to the population of humans.

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Authors

Echo4117 Hekla Six dehung
Beedie School of Business
Simon Fraser University
Burnaby, BC, Canada
Beedie School of Business
Simon Fraser University
Burnaby, BC, Canada
Beedie School of Business
Simon Fraser University
Burnaby, BC, Canada
ejw6@sfu.ca ydarmawa@sfu.ca dehung@sfu.ca

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