Starfield: Can this Game Survive?
Bethesda, a now wholly owned Microsoft game development studio division, stands poised to release its new space role-playing game (RPG) entitled Starfield on September 6, 2023.
Starfield’s release has already been delayed once by nearly a year, when it was formerly slated for release on November 11, 2022. Starfield’s nearly year long delay along with being made exclusively available to the Microsoft’s gaming platforms, coupled with its Game Pass inclusion might not signal great things for this upcoming game release. It might not even signal great things for Bethesda as a company. Microsoft is definitely not doing any favors for Bethesda. Let’s explore.
PlayStation 5’s Banner Launch
According to Kotaku, Sony is now seeing banner sales with its PS5. It can be difficult tell what’s boastful speculation around such sales, but one thing is certain, getting your hands onto a PS5 console can still be difficult nearly 3 years after the PS5’s November 2020 launch. For nearly 2 years, the PS5 was almost impossible to find on store shelves. When they did manage to appear, they were gone within hours. Going into the third year, it’s become somewhat easier to find as the demand has somewhat eased, that or Sony has drastically increased production or both. “Somewhat”, doesn’t imply that the PS5’s sales are in any way slowing, however. For Sony, the bristling sales of the PS5 continue.
Because this sales fact means Sony’s console is shaping up to be the banner console of this decade, one has to question both Bethesda and Microsoft’s decision to keep a game like Starfield exclusive to Microsoft’s platforms alone. One thing is certain, cutting off sales to a massively growing gaming segment is probably not the brightest of ideas. For Microsoft, Starfield may not become an overall major problem for Microsoft on the whole, but why intentionally tank part of your company when you don’t have to? For Bethesda, on the other hand, these mounting problems could end this division.
Exclusivity and Sales
Prior to the digital download explosion, the primary way that video games had always made bank was by selling physical game copies. Physical copies would show up at retailers like Amazon, Best Buy and Gamestop. Once the digital download explosion began, not only could retailers sell boxed copies, they could also sometimes sell digital codes for online digital stores.
Because both the PlayStation and the Xbox are the primary two video game consoles on the market for a game like Starfield, this meant sales from both platforms play fully into both the success and the revenue of that video game title. So as not to exclude the Nintendo Switch from this conversation, know that this console also exists and some “adult” style games do eventually make it to the Nintendo Switch console. Whether Starfield would have been tapped for the Switch is questionable. As of Starfield (and likely many future Bethesda game titles), though, producing availability across all non-Microsoft platforms has halted.
Bethesda (likely at Microsoft’s prompting) has made the dubious decision of making Starfield (and likely most new Bethesda games) available exclusively on the Xbox and on Windows-based PCs (Microsoft’s platforms). You might have thought that Microsoft’s Bethesda would have stopped there and just accepted the loss of half of the video game market in revenue, but no. It gets worse for Bethesda.
According to Forbes, the PS5 has also sold the fastest amount of consoles since its launch that Sony has ever sold in its history. That means that the PS5 appears to be on-track to outsell the PS4. Considering that the number of PS4 consoles exceeds 117 million today combined with the over 38 million PS5’s sold so far, that’s a huge number of potential buyers to exclude from a video game’s sales. I did say it would get worse.
Game Pass
For video game players, an all-inclusive monthly game subscription service like Game Pass is a huge win. For video game developers, not so much. Let’s understand why. Video game buyers can, for a relatively small monthly fee, instantly buy into a massive library of games that can all be downloaded and played immediately. A single game that formerly cost each buyer $60 to purchase new, now costs a game player $9.99/mo for 30 days of play! That $10 doesn’t just cover one game, though. That monthly fee covers hundreds or maybe thousands of games available in the Game Pass library all unlocked the instant the subscription starts. No trips to the store. No game discs to scratch up. No wasted plastic. Quick and easy access over the Internet.
Sony has a similar subscription product called PlayStation Plus Essential. It’s effectively Sony’s burgeoning version of Game Pass, with a similarly growing library of games all accessible at a flat monthly rate.
With these subscription services, the monthly costs can be reduced if you’re willing buy into 24 months of Game Pass service. Unfortunately, this bundled deal is only available if you buy an Xbox console at the same time. Still, not a bad deal. If you already have an Xbox console or are looking to extend your existing subscription past the 24 months, the only option is the $9.99 per month deal.
Game Pass versus PlayStation Plus Essential
This article would be remiss without discussing an important aspect around buying into Game Pass versus Sony’s PlayStation Plus Essential. The $10/mo Game Pass plan DOES NOT include Xbox Live Gold, the service needed to play online multiplayer games. This means that in addition to the $10/mo, you’ll need to buy or have Xbox Live separately. However, with Sony PlayStation Plus Essential, this plan offers both access to the PlayStation Network along with a limited library of games. Essentially, Sony’s lowest tier plan is equivalent to having Xbox Live Gold and Game Pass together at Sony’s lowest monthly price tag. While Sony gives you both services together, Sony only allows limited access to games with the Essential tier. You’ll have to pay up into Sony’s larger PlayStation Plus tiers to gain access to more games from Sony’s game library.
To get Xbox Live combined with Game Pass for your Xbox, you’ll need to buy into the Game Pass Ultimate edition, which is priced at $15 a month ($5 more than the base Game Pass edition without Xbox Live). However, that’s still a savings of $5 a month when paying for Xbox Live Gold monthly, which is priced at $10 a month separately.
Why is having access to Xbox Live and PSN important? These services are required to allow you to play online multiplayer games. Because many games these days require Xbox Live and PSN to function, buying into the lowest edition of Game Pass alone won’t allow you to play games that require Xbox Live. You’d need to pay up to the $15/mo edition to buy Game Pass Ultimate to enable play of online multiplayer games along with gaining access to the Game Pass library of games.
Having Xbox Live is not required when buying into the Game Pass $10/mo edition. However, without Xbox Live, you will be limited to playing only Game Pass library games that do not require Xbox Live, which consist of offline single player games. There are fewer and fewer of these games released every year.
Subscription Services vs Profits
The one thing that hasn’t been discussed much with these gaming subscription services is exactly how developers will make money. Right now, $9.99 a month is great for a gamer who immediately gains access to perhaps thousands of games, including many day-one releases.
For the game developer, Microsoft cannot afford to hand that game developer $60 for each downloaded game from Game Pass. Same for Sony. This means that developers see drastically reduced revenue from games on Game Pass.
What this means is that for each download from Game Pass, the developer will receive a tiny fraction of money in a monthly payment tallied up for each gamer who downloads a specific game title. No download = No money. Simply because a game has been listed in Game Pass doesn’t mean the developer gets money. Developers are only likely to get paid IF a player downloads and plays the game. Even then, once a player deletes the game after installing it, the monthly revenues stop.
Let’s do the Math
Console Physical Disc Model
If there are 117 million PS4 consoles and if just 10% of those console owners buy a game at $60, that’s 60 * 11.7 million = $702 million in total revenue from that game’s sales. Of course, that’s what the retailers get. The wholesale price for a video game is around $50 paid by the retailer to the game studio. That’s 50 * 11.7 million = $585 million in sales that went directly to the game studio. Clearly, other fees will need to be paid out of that revenue by the developer who might net $200-300 million or so. This revenue windfall occurs within a month of two of a video game’s launch.
Game Pass Model
There is no revenue windfall, at least not for the developer. As stated above, a video game placed into the Game Pass library means drastically lower income. Instead of the $200-300 million windfall in physical disc sales nearly all at once, now developers must live on a much lower fraction of revenue that gets spread out over many months.
If 11.7 million players subscribe to Game Pass, in one month that equates to $10 * 11.7 million subscribers = $117 million per month (assuming that the number remains steady). This next part assumes that ALL 11.7 million decide to download the Starfield game. We know that’s not likely, but let’s assume this anyway.
If a game developer drops a brand new day-one game onto Game Pass, like Starfield, the game’s revenue will be a tiny, tiny fraction of that $117 million per month. Where a game developer receives 100% of the wholesale revenue from physical box sales, subscription based sales might receive 1% (probably way less) in total revenue from the revenues brought in by Game Pass’s monthly subscription fees. Why $1 million? That’s ~1% of $117 million. Keep in mind that $117 million is already fractionally less than the $585 million the developer could have received by selling boxed copies.
Instead of the $200-300 million for boxed sales for a single game, the game’s developer might now receive $1 million in that first 30 days after release, possibly not even that much. Keep in mind that the monthly revenue collected by Microsoft for the monthly Game Pass subscriptions must be shared amongst ALL video games that are being played and downloaded that month. The more games being played, the more developers must share in that revenue. That means that the more wide diversity of games that are being downloaded and played, the less revenue there is to go around to all of these developers. That $1 million mentioned might actually become $100k because of the revenue sharing and the wide diversity of games being played at any given month.
Revenue paid to developers who place games into Game Pass library is only for actively played games. Once gamers play the game fully, then each deletes the game from their console, the revenue stops the instant the game is deleted from the console. The game developer will only be paid as long as the player keeps the game installed and likely only if the game is launched and used periodically. If the game can be beaten in under 30 days, then the developer will be paid for only the days the player has actively played the game. If many players beat the game in 10 days, that’s only 10 days of revenue paid out for each specific player.
What all of this means is that it offers Microsoft ways of reducing payments to developers based on how often and how long a player plays a game. In other words, instead of the pay-$60 model where the revenue is locked in as long as a sale is made, developers are now under a much stricter, lower revenue model. It is also a model that can see Microsoft reduce payments because of revenue sharing and lower use. If two games were the only games played on Game Pass in a month, that means that Microsoft would only need to pay out revenue to 2 developers from that $117.5 million pool of income. If 100 games from 100 different developers suddenly become active, Microsoft must now share revenue amongst those 100 developers from that same $117.5 million pool of income.
Microsoft must also determine which of the Game Pass games deserves a larger portion of revenue than the others so that the most often played games get the most revenue. Meaning, of those 100 game developers some might only see .01% of the sales while some might see as much as 1% or 2% of total revenues from monthly subscribers. As stated, the point here is that $117.5 million in subscriber fees is a mere fraction of money that could have been had using the $60 per disc price.
It only gets worse from here. Microsoft itself also instantly skims revenue off the top of the Game Pass subscriber fees to cover its own service management costs (hosting, managing listings, paying out revenue, etc). Only after Microsoft skims its own Game Pass revenue is any remaining money left over to cover developer game use payments.
Assuming there’s $117.5 million in total Game Pass revenue (as exampled above), there might only be $20-50 million left (after Microsoft skims its expenses) to pay developers for their games. This ultimately means there’s fractionally less than you might think to pay off developers for the inclusion of their games on Game Pass.
For Starfield, this game’s revenue may fare even worse. Because Microsoft wholly owns Bethesda, Microsoft may have chosen Starfield to become a loss leader. In the sales world, that ultimately means that the product is intended to be a “giveaway”. In other words, Microsoft may require Bethesda to forgo receiving any payments from Game Pass. Thus, Starfield may not make ANY revenue from its day one release on Game Pass. Under this loss leader strategy, the only money Bethesda may make would be from the tiny amount of boxed copy sales from stores like Amazon and Best Buy. Considering the price of Game Pass and its current popularity, not many players are likely to opt to pay $60 for boxed copies.
Digital Sales
While you might be thinking that some people might opt to buy the game digitally, like boxed copy sales, a few will opt for this approach. Some don’t want to invest in Game Pass and be saddled with a monthly expense to keep track of. This means that some digital sales will occur. However, the benefit of gaining access to thousands of game titles usually wins when it comes to these types of sales. Like physical boxed copies, digital sales are also likely to be limited and few. I fully expect the vast majority of Starfield players to play via Game Pass (both on the Xbox and on the PC).
Sleazy Game Pass Sales Strategy
One sleazy strategy which Microsoft has used with Game Pass and which attempts to force gamers to buy a game outright is when Microsoft removes a game title from Game Pass library 30 days after its release. This limited time release followed by speedy removal is solely an attempt to prey on the consumer’s wallet. Many gamers do fall for this tactic and opt to buy a digital copy over a boxed copy. Digital purchases offer instant access and allows the gamer to continue playing once the game is downloaded. No trips to the store looking for a physical copy.
This Game Pass sales strategy is extremely sleazy and is also worth noting because Microsoft could pull this stunt with Starfield; tease players with a 30 day Game Pass limited availability, then pull the plug and force all players to purchase the game full price to continue playing. Because of the purported scale and size of the questing within Starfield, a player likely cannot fully complete Starfield within 30 days. Be wary of this sleazy sales tactic when buying into Game Pass. Personally, I’d consider this tactic as a form of bait and switch, which is illegal in the United States under federal law.
If you’re concerned that this could happen with Starfield in Game Pass (it has a reasonably high chance), you should opt to buy the game outright either a physical boxed copy or a digital copy at full price and forgo using Game Pass to play Starfield. This will allow you to continue playing the game should Game Pass decided to pull the game quickly. Of course, you can opt to play under Game Pass until the game is pulled from the library at which point you’ll need to decide whether you want to buy it to continue. If the game is as potentially buggy as I expect it to be, many Game Pass players may choose not to buy it after only a few days of play. This sleazy sales tactic has a high probability of backfiring on Bethesda and Microsoft if the game launches with as many problems as Fallout 76.
Starfield Sales Cannibalized?
Why spend $60 for a single game when you can pay $10 and gain access to perhaps thousands of games, along with day-one releases like Starfield? While a few physical disc sales might be forthcoming, the vast majority of players are savvy enough to realize the usefulness of buying into a large library of games under Game Pass all for $10.
For Starfield, the revenue handwriting is on the wall… and it’s doesn’t paint a rosy picture. Voluntarily cutting revenues by less than half via excluding the Sony PlayStation – fractional amounts of revenue by placing Starfield on Game Pass day one = drastically reduced income for Bethesda. Instead of the potential for nearly a billion in sales by tapping the overall video game market (Xbox + PS + PC + Switch) by forcing boxed sales only, Microsoft has made the dubious decision to reduce Starfield’s potential revenue down to perhaps at most $100 million in Day One Game Pass downloads. That number is if Bethesda is very, very lucky. If Starfield is considered a “loss leader” on release then it will receive zero in revenue from Game Pass.
You might be saying, “But what about physical disc sales?” What about them? With the Starfield game being released onto Game Pass day one, what incentive is there to run out and buy a physical disc copy at $60 when you can save $50 and instantly sign up for Game Pass at $10, download and play the game on release day sans disc? For that matter, what incentive is there to buy a digital copy at $60? Sure, Starfield may see a smattering of physical box and digital sales, but the total revenue for these sales might not even exceed $10 million. Game Pass is most definitely cannibalizing boxed and digital video game sales. This Game Pass idea is actually one of the strategies that Microsoft wanted prior to the introduction of the Xbox One; basically, an all digital universe of games. Microsoft is moving in this direction rapidly, clearly at the expense of the developers.
Keep in mind that subscriptions can be cancelled at any time. This means that a player can pay $10, play and beat the game in 30 days and then cancel their Game Pass subscription. Instead of paying $60 to own the game, they’ve now paid only $10 to play the game. That’s a whopping $50 savings for the gamer and a massive amount of lost revenue for both the game developer and Microsoft.
While the release of Starfield might see a temporary boost in Game Pass subscribers and in Xbox hardware sales (this is the hope Microsoft has for Starfield), that boost still won’t be any where near enough for Microsoft to cough up the nearly $1 billion in revenue that Bethesda could have had by including all consoles and by releasing only boxed copies day one. Instead, Microsoft has relegated Bethesda’s Starfield to becoming one of the least profitable AAA game titles to be released by a major developer.
Revenue over Time
Subscription models gain revenue slowly over time. You might be thinking that maybe Bethesda can reach the $1 billion revenue mark in 12 months. Video game sales don’t work like that. Video games see a surge in play until many players play the game out. One the game has been played out, it’s dropped and forgotten. The only games which can see continued revenue models are massively multiplayer online (MMO) style games like Call of Duty, Fallout 76, Fortnite and even Destiny. Even then, these MMO style games see dwindling subscribers over time until eventually there aren’t enough playing to support the game financially. When that happens, the MMO game shuts down.
Starfield as an MMO?
We don’t yet know enough about Starfield to know if it even contains an MMO component. Only when the game is released will we know if Starfield is designed like Fallout 4, a completely offline single player experience… OR if it is similar to Fallout 76, a completely online MMO. Maybe it’s like Grand Theft Auto and offers both an offline gaming experience and has a separate online MMO map. Until the game releases, there’s also no way to know if Starfield has been built to support an ongoing revenue model.
It’s clear, the sales revenue for Starfield (as a game) will not be had by day-one game sales. That means that Bethesda must make up for the severely cannibalized day-one game sales by compensating for that major loss in revenue in some other way. With Fallout 76, that’s done by using the Fallout 1st subscription and the sale of Atomic Shop “Atoms.”
For Starfield, I’d expect Bethesda’s team to make up for that loss in day one game sales by forcing an in-game monthly subscription plan. This separate in-game monthly subscription will likely unlock downloadable content (DLC) and other required add-ons. With Fallout 76, Fallout 1st is not required to play the game. However for Starfield, Bethesda may be forced to make this change. Starfield might offer up a very basic and limited gaming experience included in the base price, then require paying into a monthly subscription plan to unlock the entirety of the game. At least, this is one avenue that could be taken. Even the $60 full disc buyers might be forced to pony up for these extras to continue playing.
This avenue may end up the primary means that Bethesda utilizes to make back the amount of lost revenue required to cover its multi-year game development expenses when producing Starfield. As described above, Game Pass revenue alone will not be enough to cover these incurred expenses. Keep in mind that Starfield had been in development before Microsoft bought Bethesda. After Bethesda was purchased, Microsoft has seemingly tied Bethesda’s hands by forcing exclusivity to the Xbox and PC and by also forcing Bethesda to release the Starfield game through Game Pass on day one. It’s possible that Microsoft might rollback the decision of a day one Game Pass release for Starfield. It’s also entirely possible that to play the game via Game Pass, a separate second subscription might be required.
For Bethesda, that means that once each player enters the Starfield game world, revenue will need to be found separately by Bethesda inside the game… and that likely means a separate monthly subscription for Starfield itself. It may also mean paying for a separate currency, like Atoms, to unlock in-game features, spaceships, outfits, consumables and so on. If you buy into Starfield, expect to be hit in the wallet at every turn within the game’s universe.
Can’t progress? Pay up. Can’t fly into a new solar system? Pay up. Need a special outfit to complete a mission? Pay up. Even though Microsoft has seemingly tied Bethesda’s hands for how the game gets sold initially, Microsoft likely can’t tie Bethesda’s hands once the gamer enters the game’s universe.
Inside of a game’s universe, Bethesda has seemingly complete control. It can force subscriptions, microtransactions and a whole slew of other for-pay options to draw in more revenue. As a direct result of Game Pass’s near non-existent revenue, expect Starfield’s game world to be chock full of microtransactions using your credit card almost incessantly. It’s honestly the only way Bethesda can recoup the money it took to develop this game over several years, even if Bethesda can’t control how the game gets into the consumer’s hands.
PlayStation Plus Essential
For all of the reasons as Game Pass above, all of the revenue and low developer payment arguments will apply to the PlayStation Plus Essential service. With that said, let’s hope that Sony will change the PlayStation Plus Essential service name, though. This current naming is completely clumsy and does not in any way state what it is. Even re-using the PlayStation Now brand would have been a better choice in naming for this game library service, as the “Now” indicates instant access.
Bugs, Bugs and more Bugs
One thing Bethesda has not been good at is writing solid, bug free games. It doesn’t matter what game it is, the affectionate moniker of Bugthesda has been given and it is more than just for humor’s sake. This moniker is at once both truthful and problematic. It says that bugs are inevitable with any game released by Bethesda. Bethesda’s Todd Howard chooses to laugh this off as not a problem at all, as if Bethesda’s products are truly bug free. Sorry to disappoint you, Todd. Every Bethesda game I’ve ever experienced has had myriads of bugs and still contain many bugs to this day. Fallout 76 STILL contains day-one release bugs nearly 6 years later!
Starfield won’t fare any better. Starfield will release day-one with a massive number of bugs. That’s not a prediction. That’s a fact. If you go into Starfield on day-one, expect it to be chock full of bugs. Some of the bugs might be minor and cosmetic (lights don’t work right, 3D characters standing and moving in T-poses, weapons don’t render properly, etc). However, there will also be at least one showstopper bug where mission progress cannot move forward. Oblivion had them, Skyrim had them, Fallout 3 had them, Fallout 4 had them and, yes, even Fallout 76 STILL has them.
There has not been a single Bethesda game released that has not had showstoppers. I expect Starfield to have at least one, but probably more than that. I also expect Starfield to have crashing bugs; bugs that see you play for an hour, then the entire game crashes back to the OS… possibly losing progress.
Why mention bugs at all here? Bugs have become the bane of the video game industry. In the 1990s, video game developers took pride in shaking out nearly every single bug before placing their games onto cartridges. When the Internet wasn’t the “thing” that it is today, game developers had to make their games function 100% before sending it out to the consumer. Unfortunately, using the Internet as a crutch, revisionism has allowed video game developers to become extremely lazy. This allows developers to release horrible, bug-laden experiences, then begin shaking out the bugs along the way with one, two or even hundreds of releases… all while using paying players as beta testers.
Unfortunately, games like 2020’s Cyberpunk 2077 initially released to incredibly bad reviews over its horrible bugs. While Cyberpunk’s developer, CD Projekt RED, has ironed out many of the bugs since its 2020 release, that doesn’t make the game’s overall reviews better. Once those reviews are there, they’re there for the life of the game. Those low reviews will remain and taint the review system regardless of whether the developer shores up the game. If you release a bad buggy game initially, your initial reviews stay there to impact the game’s rating long into the future. Those bad reviews, thus, impact that game’s sales forever.
Was Cyberpunk 2077 able to recoup from its initially bad launch? In some small way, perhaps. Maybe through word of mouth, but definitely not via its Metacritic scores.
For Starfield, the first 3 months after its launch will become crucial to its success or failure. Starfield’s release date is set for September 6, 2023. Bethesda’s developers are now all working at a feverish pace to complete this game in time for that September launch date. Yet, we know it won’t be complete even after a year’s delay. If it was delayed a year, that means its bugs were major and the game was as yet unfinished. It is doubtful a year will buy them enough time to fix all of that.
What this means for Starfield is that its initial reviews will make or break it. It also means that game players are becoming intolerant of being taken advantage of by game developers. Game players are not beta testers, yet more and more game studios are treating game players as tertiary beta testers. Instead of hiring actual beta testers, game developers forgo those expenses and expect paying players to report the bugs. Worse, they do. More than ever, this is the wrong choice and it is a choice that can doom a game. We pay to PLAY the game, not BETA TEST it.
Overall
Considering the massive loss in revenue due to Game Pass, the high probability for the inclusion of pay-for-play micro-transaction features, the probable need for a separate subscription, Starfield seems poised to become one of the worst games ever released by Bethesda. Unfortunately, Bethesda has too many “fanboys”; “fanboys” who are willing to buy anything released by Bethesda regardless of its useful state. For the purposes of this article, “fanboy” is used in a gender neutral capacity, encapsulating both males and females alike. For the same reason, Apple has too many of these same “fanboys” type buyers willing to buy anything Apple releases, good or bad. Bethesda’s “fanboys” are just as avid and ravenous and, for whatever misguided reason, believe Bethesda can do no wrong. To them I say, enjoy being exploited.
The purpose of this article is to call out all of the problems that Bethesda faces with the release of Starfield. Because Microsoft has strongly tied Bethesda’s hands in very specific ways, that leaves Bethesda employing other not-so-favorable options to gain that lost revenue back. As a result, I fully expect Starfield to be a poor gaming experience overall, mostly because of the compromises required for Bethesda to make back the revenue it ultimately lost as a result of Microsoft’s exclusivity and Game Pass release decisions. That and Microsoft isn’t likely to allow Bethesda to delay Starfield any longer. Whatever state Starfield is in come September is how it will launch.
How does this make a difference to me as a gamer?
Good question. For you as a gamer, you might not care much overall. That is, unless you’re really looking for a new high quality gaming experience. Though, while the incessant micro-transactions designed to bilk you for money exist at every turn, the rest of the game might seem still like a benefit to you. Game Pass itself was designed to be a huge benefit to gamers, giving them access to a huge library of games. If you don’t like Starfield, you move on and try another. In the hundreds or thousands of games out there, there may be some that work for you. If Starfield bombs, it will simply be relegated to a game on Game Pass that no one plays.
For Starfield, it doesn’t mean good things. For Bethesda, it means even worse things. For Microsoft, it means great things. Well, maybe not great, but definitely something Microsoft can ignore. If Bethesda is forced to continue down this path by Microsoft, as a developer it may cease to exist inside of Microsoft… ultimately being folded into other game studios. Microsoft doesn’t care about exactly who does what as long as someone does it. Does that mean Fallout or Starfield or other Bethesda franchises disappear? No.
Like Halo before it, Microsoft will hand Bethesda’s intellectual property to another developer to continue building new games under those franchises (or not). Microsoft doesn’t actually care who develops any given franchise as long as they’re willing to do it and what they create sells more of Microsoft’s goods and services. Once a franchise runs its course and it’s done, Microsoft is also willing to shelve the franchise indefinitely, like it did with Fable. If Bethesda as a developer fades into oblivion, Bethesda’s IP may or may not live on depending entirely on Microsoft.
That’s why all of this might (or might not) matter to you.
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CEO Question: Should I sell my business to a Venture Capital group?
This may seem like a question with a simple answer, but there’s lots to consider. The answer also depends on your goals as CEO. If you’re here reading this, then you’re clearly weighing all of your options. Let’s get started.
Selling Anything
A sale is a sale is a sale. Money is money is money. What these cliché statements lack in brilliance is more than made up for in realism. What these statements ultimately mean is, if the entire goal of selling your business is to make you (personally) some quick money, then it honestly doesn’t matter to whom you sell.
Selling your company to your brother, a bank, another corporation or, yes, even a Venture Capitalist group, the end result is the same: a paycheck. If your end goal is that paycheck and little else matters, then you can end your reading here and move forward with your sale. However, if your goal is to keep your hard built business, brand and product alive and allow it to move into the future, I urge you to keep reading to find out the real answer.
Selling your Company
Because you are here reading and you’ve got some level of interest in the answer to the question posed, I assume, then, that you’re here looking for more than the simple “paycheck” answer. With that assumption in place, let’s keep going.
Companies are complex beasts. Not only does a company have its own product parts that makes the company money, companies must also have staffing parts, the people who are hired to support those product parts and maintain those new sales. Basically, there are always two primary aspects of any business: product and staff. As a CEO, it’s on you to gauge the importance levels of each of these aspects to you. After all, your staff looks to you for guidance and they rely on you for continued employment. There’s also your legacy to consider and how you may want to be remembered by the business (and history): positively, negatively or possibly not at all.
Reputation
Let’s understand that in countries like China, reputation or “face” is the #1 most important aspect of doing business. I don’t mean the business’s reputation. I mean the person’s own reputation is at stake. If the person makes a critical misstep in business, that can prevent future opportunities. In the United States, however, “face” (or personal reputation) is almost insignificant in its importance, especially to CEOs. Short of being found guilty of criminal acts (i.e., Elizabeth Holmes), there’s very little a CEO can honestly do to fail their career.
Indeed, I’ve seen many “disgraced” CEOs find, start, and operate many more businesses even after their “disgrace”. It’s even possible Elizabeth Holmes may be able to do this after serving her sentence. As I said, in the United States, someone’s business reputation means very little when being hired. In fact, a hiring business only performs background checks to determine criminal acts, not determine whether the person has a success or failure track record at their previous business ventures.
Why does any of this matter? It matters because no matter what you do as a CEO, the only person you have to look at every day in the mirror is you. If you don’t like what you see, then that’s on you. The rest of the industry won’t care or even know what you’ve done in the past unless you disclose it.
Venture Capitalist Buyouts
At this point, you’re probably asking, what about those Venture Capital Buyouts? Are they good deals? That really all depends on your point of view. If you’ve put “blood, sweat, tears and sleepless nights” into building your business from literally nothing to something to be proud of and you still hold any measure of pride in that fact, then a Venture Capital group buyout is probably not what you want. Let’s understand the differences in the types of buyouts.
- Direct Business Buyouts — These are sales made directly to other businesses like Google, Facebook, Amazon, Apple and the like. These are sales where the buyer sees value in not only maintaining the brand and products under that brand, but building that brand as a sub-product under the bigger buyout company. With these kinds of buyouts, your product will live on under that new company. Additionally, the staff have the option to remain on board and continue to maintain that product for the new company for potentially many years. This kind of buyout helps maintain the product and maintains “face” among staff members. This kind of buyout rarely involves resale and, after the acquisition dust settles, is usually seen as a positive change.
- Venture Capital Buyouts — This kind of buyout is an entirely different beast. Venture Capitalists are in the purchase solely to make money off of their “investment” as a whole. The business itself is the commodity, not the products sold by the company being purchased. No. Venture Capital buyouts are a type of investor who buys a “business commodity” to “fix up” then “flip” to make their investment return. Thus, Venture Capitalists don’t honestly care about the internals of the products or solutions the company offers, only that those products / solutions become marketing fodder for their sales cap. Venture Capitalists do weigh the value in the products prior to the purchase, but beyond that and once the purchase completes, the business is treated not as an ongoing concern, but as a commodity to be leaned out, fixed up and made attractive to a buyer. This kind of buyout always involves resale. This fact means that remaining staff must endure acquisition twice in succession, probably within 1-2 years. This kind of buyout is usually viewed by staff (and the industry) as a negative change.
Thus, the difference between these two types of purchases is quite noticeable, particularly to staff who must endure them.
Undervalued
[Update 2/8/2022] Everything up to this point has only implied what this section actually states. I’ve decided to explicitly state this portion because it may not be obvious, even though I thought this information was quite obvious while writing the initial article.
Bottom Line: If a Venture Capital group is considering a purchase of your business, know that what the VC group is offering is only a fraction of what your business is actually worth. They can’t make money if they pay you, the seller, the company’s full value. Keep in mind that the VCs consider the business a “fixer upper”. That means they will invest “some” money into the business to “dress it up”. How that “dress up” manifests isn’t intended to turn your business around, however. What “dress up” means is investing money to make the business look pretty on paper… or, more specifically, so the books look better. That means they’ll pay an accountant to dress up the numbers, not pay to make your business actually better. Though, they will cut staff and then pull out the whips to make sure everyone sells, sells, sells so the business appears to have better year-over-year profits. When a prospective buyer looks at the books, the buyer will notice improved numbers and, hopefully, be willing to fork over double (or more) what the VCs paid to buy the “company” from you, the original seller.
Even the smartest, brightest, most intelligent CEOs can be taken in by the lure of a Venture Capital Group company purchase offer. Know then that what VCs have offered you isn’t what your company is actually worth.
Ultimately, it also means that you as the seller are being taken for a ride by the VCs. You can dress up your own company and do exactly as the VCs. Then, find a direct buyer willing to pay double what the VCs offered, which will make you twice as much money AND remove the VCs entirely from the picture as an unnecessary profiting middleman.
Acquisition Woes
Being the acquired company in an acquisition is hard on staff. Lots of questions, few answers and during the transition there’s practically silence. It’s a difficult process once the deal closes. It only gets worse. Typically, the then CEO becomes a lesser executive in the new firm. However, most times the CEO changes position not because they want to, but because the buyout contract stipulates a 6-9 month transition period and obviously most companies don’t want two CEOs. Though, I have rarely seen transitions that agree to co-CEOs. It’s an odd arrangement, though.
This means that the newly demoted executive is only on board to complete the transition and receive 100% of their contractually agreed buyout payment. In fact, most buyout contracts stipulate that for the CEO to receive their 100% payout, they must not only remain on board in a specific position for a specified period of time, they may also be required to meet certain key performance indicator (KPI) metrics. So long as all goals are met, the contract is considered satisfied and the former CEO receives 100% payment.
However, if some of the goals are only partially met, then reduction of payment is warranted. Such other metrics may include retaining key staff on board for a minimum of 6 months. If any general staff have ever gone through a buyout and have received a special bonus or incentive package, that’s the reason. The incentive package is to ensure the CEO’s KPI is reached so that the contractually defined buyout payment is paid at or as close to 100% as possible. This is also why these acquired executives can get both grumpy and testy when they realize their KPIs are in jeopardy.
Trust
Let me pause for just a moment to discuss a key issue, “trust”. While contracts stipulate very specific criteria, such as payment terms, not everything in a buyout is covered under the contract. For example, the acquiring company’s executives can find anything they wish wrong with the KPIs to reduce payment. Contracts usually do not contain intent clauses that hold the acquiring company execs accountable if they “make up” flaws in the agreement that don’t exist. It is ultimately the acquiring executives who decide whether the KPIs have been met, not the incoming CEO. If you trust these people to be morally and ethically sound, then you have nothing to worry about. However, because Venture Capitalists aren’t always practical in what they do and are driven by the need to see a return on their investment, they could find faults in the KPIs that don’t exist, solely to reduce payments. Basically, you’ll need to be careful when extending trust. Meaning, you must place full trust in those VCs willing to purchase your company. This means, doing your homework on these people to find out where they’ve been, who they’ve worked with and, if possible, get references. Let’s continue…
Buyouts with Strings
Every buyout has strings attached. No buyer will purchase a company outright for straight up cash without such strings. Such strings ensure the company remains intact, that key staff remain on board and that the product remains functional. These are handled via such stipulated “insurance policy” clauses in the form of KPIs applied to acquired CEO and executive team. These KPIs, when reached, allow the business seller to receive payment for reaching those KPIs. Were key staff to leave and the product have no knowledgeable or trained staff left to operate the product, then the purchase would be useless and the product would fail. For a buyer, requesting such insurance policies in the contract is always a key portion of buyout contracts. Expect them.
Saving Face
Circling back around to Venture Capital group buyouts, it’s important to understand that the point of such a buyout is for those “investors” to return their investment sooner rather than later. The sooner, the better. That means that their point in a company purchase by a Venture Capital group is not to take your business into new and bigger directions by dumping loads of money in and growing it. If they dangle that carrot in front of you, know that that’s absolutely not how these deals work. Don’t be deceived by the dangling of this carrot. This carrot is absolutely to get you to sell, but will almost just as definitely not pan out… unless it’s contractually obligated.
On the contrary. They’ve spent loads of money already simply buying the company. They’re not planning on dumping loads more cash into it. Instead, they plan to lean it out, get rid of stuff that wastes money (typically HR, insurance and such first), then move onto erasing what they deem as “useless” staff and wasteful costly third party services (ticketing systems, email systems, marketing systems, etc).
As for staff cuts, this means asking managers to identify key staff and jettisoning those staff who aren’t “key”. This usually comes down in the form of a mandate that only X people can be kept on board out of Y. For example, 10 people may be employed, only 3 may stay. Who will you pick? That then means jettisoning 7 people from the staff roster.
You won’t know this aspect going into the deal because they won’t have made you privy to these “plan” details. It also likely won’t be in the buyout contract either, unless you requested such a buyout stipulation. It’s guaranteed you’ll find out this plan within 10-20 days after the deal closes. As I said, the Venture Capitalists don’t look at it as an ongoing business to help flourish, they look at it as commodity to lean out, pretty up and hope for a high priced buyer to come along.
Venture Capitalists understand that it does cost some money to make money, but they’re not looking for a money pit. The purchase price is typically where the money pit ends. You shouldn’t expect an infusion of cash as soon as the Venture Capital firm closes the sale, unless such investment has been stipulated in writing in the purchase contract. Of course, you are free to take some of your own sale money and invest it into the business, but I don’t know why you’d do that since you no longer own the company.
What this means and why this section is labeled “Saving Face” is that eventually you’re going to have look into the face of not only the 7 people you had to fire, but the 3 people left and explain what’s going on. These situations are extremely hard on morale and makes it exceedingly difficult for those 3 who stayed on to remain positive. Surviving a huge layoff cut is not a win. In fact, it’s just the opposite. It’s also not simply a perception issue, either. Such a huge layoff places an even bigger burden on those who remain.
The 3 who remain feel as though they’ve lost the lottery. Now those 3 must work at least 10 times harder to make up the work for the 7 who are no longer there. Honestly, it’s a lose-lose situation for the acquired company. For the venture capitalists, it doesn’t matter. They’ve leaned out the company and the books now “appear” way better and the business also “appears” far less costly to operate in the short term. “Short Term” is exactly what the VCs are banking on to sell the company. This makes the “business” look great on paper for a buyer. As I said, the quicker the Venture Capitalists can flip their investment and make their money back, the better. The VCs are more than willing to endure hardship within the acquired company to make the company appear better for a buyer. As the saying goes, “It’s no skin off their noses”.
Technologists vs Venture Capitalists
Being a Venture Capitalist and being a Technologist are two entirely separate and nearly diametrically opposed jobs. It’s difficult to be both at the same time. As a technologist-founder-turned-CEO, the point is to build a business from scratch, allow the business revenues to help grow the business further and expand and build a reputation and customer base. Building a business from scratch is a slow road to a return on investment, which typically takes many, many years. That investment takes years to accrue, but can make an executive a lot of ongoing money. Just look at Jeff Bezos and Amazon. It can and does work.
As a Venture Capitalist group buying companies, the point isn’t to build a business. It’s to buy already built businesses as “commodities”, lean them out, make the books look great, then sell them for at least double the money, usually in months, not years. If the VCs dangle a “five year plan” in front of you, claiming to grow the business, please re-read the above again. To spell it out, there’s no “five year plan”, unless it randomly takes the VCs that long to line up a buyer. That’s more of an accident than a plan. The VCs would prefer to line up a buyer far sooner than 5 years. The “five year plan” rhetoric is just that, rhetoric. It was told to you, the seller, to keep you interested in the buyout; not because it is true.
If the “5 year plan” carrot is dangled in front of you, then you need to have the VCs put up or shut up. What this means is, make them write the “5 year plan” investment explicitly into the purchase contract. If they are legitimately interested in growing the acquired company, they should have no problems adding this language into the buyout contract. This will also be your litmus test. I’d be highly surprised to actually see VCs contractually agree to adding such “5 year plan” language into the purchase contract.
As I said above, these two types of jobs are nearly diametrically opposed.
One method slowly builds the company as a long term investment opportunity, the other uses the existing whole company itself as a commodity to sell quickly as a fast return on an investment. As a CEO, this is what you must understand when considering selling your business to a group of Venture Capitalists.
If you want your business and brand to continue into the future and have a legacy listed in Wikipedia, then you want to keep your business going and growing. Once you sell your business to VCs, the brand, product and, eventually, staff will all disappear. Nothing of what you built will remain. Selling to a Venture Capital group likely ensures that this process happens in less than 1 year.
Selling to a direct business, the brand naming may hang around much longer than 1 year. It’s really all about whether you care about your legacy and your resume. You can’t exactly point to producing a successful business when nothing of it remains. Selling the company makes money, yes, but has a high chance of losing everything you’ve spent loads of time building. Unfortunately, Venture Capital group purchases almost ensure the fastest means to dissolution of the brand and of that time spent building your business. Still, a paycheck is a paycheck and you can’t argue with that in the end.
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What Microsoft’s purchase of ZeniMax means?
I’ve had this question recently posed to me on a Twitch stream. Yes, I stream games on Twitch in addition to penning this blog. I haven’t cross promoted my Twitch stream on this blog because blogging and gaming are mostly unrelated. However, if you’re interested in watching me game, please leave a comment below and I’ll post my Twitch channel. Let’s explore the answer to the above question.
Bethesda and Microsoft
Microsoft isn’t really a gaming company. They are a software company who produces gaming products in among all of their other hardware and software product lines. Sony is, likewise, not really a gaming company for a similar reason. Sony is mostly a content producing company who also produces gaming hardware.
Anyway, Microsoft’s purchase of Bethesda’s parent company ZeniMax likely means eventual changes to all of Bethesda’s game franchises. In fact, I’m actually surprised that the FTC has allowed such a purchase considering the negative impact it will likely have on consumer choice.
Sony and Microsoft
Let’s start with the elephant in the room. Sony and Microsoft are rivals when it comes to gaming systems. Sony has the PlayStation and Microsoft has the Xbox. Because Microsoft owns the Xbox console, purchasing large gaming companies firmly pushes this situation into conflict of interest and consumer choice reduction territory. Additionally, Microsoft’s purchase of ZeniMax before the PS5 has really launched can become an easy way to keep the PS5 from succeeding.
Why? Microsoft has designs on making the Xbox Series X console succeed and be more successful than the PS5. To do this, they want to lock Sony’s platform out of as much content as they can. How will this manifest with Bethesda’s games?
While the final outcome is entirely uncertain, the handwriting is on the wall. What I mean is that Microsoft may eventually make all of Bethesda’s newest released games exclusive to the Xbox. That means that Bethesda’s game franchises (plural) may ultimately end up playable only on the PC and on the Xbox console. Yes, that could mean that both the Nintendo Switch and Sony’s PS5 are equally negatively impacted by this purchase.
Both Sony and Nintendo could find themselves without future Bethesda titles on their gaming platforms. That could mean no more Fallout, no more Elder Scrolls, no more Doom and no more Wolfenstein will make their way onto Sony or Nintendo’s platforms. It doesn’t stop there. Titles like Bethesda’s upcoming Starfield, which has yet to be released, could be pulled from release on both Sony and Nintendo’s platforms… leaving this game only available on PC and Xbox.
Sure, it may lose Microsoft money by not releasing these games on these non-Microsoft platforms, but Microsoft will more than make up for those game sales losses by pushing more Xboxes and PCs into the home. Eventually, these games will be sold to newly purchased Xboxes and PCs more than making up for the losses in sales on those other platforms. Basically, Microsoft has an easy way to do the dirty to both Sony and Nintendo as far as Bethesda games are concerned.
Microsoft is also well aware of the leverage they hold over the gaming industry by purchasing Bethesda. More than this, Microsoft can steer new consumers onto their Xbox line of consoles and away from Sony and Nintendo consoles strictly by enforcing Xbox Exclusives.
Exclusives
Bethesda isn’t the only studio on the planet. However, Bethesda is a large studio with many very cherished video game franchises… franchises that bring in a lot of cash and drive console purchases.
While Microsoft can enforce making upcoming Bethesda games exclusive, Microsoft doesn’t necessarily have to take this step. However, knowing that Sony pretty much kicked Microsoft’s butt with the PS4’s sales, Microsoft isn’t eager to repeat that trend with the Xbox Series X. Purchasing ZeniMax gives Microsoft a definite edge. It also means Microsoft might also be eyeing the purchase of Activision, EA, Rockstar and even Ubisoft. Don’t be surprised if Microsoft snaps up some of these additional game developers as well.
By Microsoft purchasing large game studios like Bethesda, they can control which console becomes the dominant console this time around (i.e., theirs). This means even more exclusive Xbox games.
Exclusive games force consumers to buy specific hardware platforms to play these exclusive titles.
PS5
What does this news mean for a console like the PS5? It puts the PS5 at a severe sales disadvantage. Microsoft could request Bethesda to not produce PS5 games. Without Bethesda’s support on the PS5, that leaves the PS5 at a major disadvantage in the upcoming next gen gaming market.
This is part of the reason I am not purchasing a PS5 at this time. I’m waiting on how this plays out. Bethesda’s ownership by Microsoft means a very real possibility of future exclusive Xbox titles from Bethesda, with no releases on the PS5 or the Nintendo Switch.
This change would put Sony and Nintendo with a clear sales disadvantage. Sony would have to rely not on Bethesda games to drive the PS5’s sales, but instead rely on Sony Studio game releases… games they have developed themselves or by studios they own (i.e., Sucker Punch).
That doesn’t mean the PS5 will be worthless, but it means that the future of Bethesda’s games being released on the PS5 has become very unclear. In fact, I’d use the word “muddy” to describe these waters.
Here are some questions that come out of the above:
- Should I buy and Xbox Series X or a PS5? The answer to this question entirely depends on what Microsoft has planned for Bethesda. If they intend to turn all future Bethesda releases into Xbox exclusives, then the answer to this question is… buy an Xbox Series X. Even then, I’d still recommend buying an Xbox Series X because there’s a zero chance of losing Bethesda games on the Xbox. However, there’s a high probability the PS5 will lose Bethesda’s future games. The even larger answer to this question also depends on whether Microsoft plans to buy more large game studios.
- Will Bethesda lose money? The answer to this question is, no. Microsoft has deep, deep pockets. They can withstand any short term monetary losses from making Bethesda’s games exclusive to the Xbox and they can also withstand the long term needs to recoup those losses by selling new Xbox consoles and any exclusive Bethesda games. The more consoles Microsoft sells, the more games they can sell.
- Will Microsoft force Bethesda to make exclusives? Yes, they will. This is guaranteed. The question is, which games will be forced into this category? That’s still unclear. Will it only be some of Bethesda’s games, all of them, new games only or some combination of this? We don’t know. However, I can guarantee at least one of Bethesda’s games will be released as an Xbox exclusive. My guess is that most of Bethesda’s games will become exclusives.
- What about existing Bethesda games? What happens to these? Microsoft isn’t stupid. They will allow existing games to continue to be sold and operate on the PS4 and any other older non-Microsoft consoles. They won’t rock this boat. Instead, Microsoft will look at upcoming unreleased games and use the games that have never been released to become exclusive.
As a result of these questions and answers, it’s clear that if you love Bethesda’s games and you wish to play future upcoming Bethesda game franchises, you may want to wait before investing in one of these new consoles. It would suck to spend a wad-o-cash to walk home with a PS5 only to find that the one Bethesda game you thought you could play is now an Xbox Series X exclusive. That means, you’ll never see that game released on the PS5. Microsoft is very likely to make this situation a reality.
If Microsoft buys even more of these large developers, they could lock Sony’s PS5 out of the mainstream gaming market. That would push Sony’s PS5 into a situation like Nintendo (and the PS Vita), where the console maker is entirely responsible for creating compelling game franchises for their respective console on their own. Unfortunately, that’s just not enough to keep a platform like the PS5 alive.
In other words, with the purchase of Bethesda, there’s a very real possibility that this time around that Sony’s PS5 will be the underdog.
Ramifications
The bigger ramifications of this purchase is the lack of and reduction of consumer choice. This purchase can easily push Microsoft into an even more monopoly status than they already are. Locking down the biggest game developers to exclusivity for the Xbox means causing the PS5 to ultimately fail and for the same reason the PS Vita failed.
Personally, I believe this is Microsoft’s true agenda. The Xbox One’s sales paled in comparison to the PS4. Microsoft is not eager to repeat this situation with the Xbox Series X. By buying large developers like ZeniMax / Bethesda, Microsoft can all but assure the success of the Xbox Series X… and, at the same time, assure Sony’s failure of the PS5.
This purchase is honestly a one-two punch to Sony…. and for Sony, it’s gotta hurt.
Sony and Gaming
If Sony is smart, they’ll run out and buy Rockstar or Ubisoft right now. They shouldn’t wait. They should purchase one of these companies as fast as they possibly can. Rockstar would be the best choice for Sony.
Sony could then have this same bargaining chip in their back pocket just like Microsoft has with Bethesda. Should Microsoft dictate Xbox exclusivity for Bethesda’s upcoming games, Sony can do the same thing for Grand Theft Auto and Red Dead Redemption (once they own Rockstar). Ultimately, it will be a “tit for tat” situation.
In fact, Sony should buy both Ubisoft and Rockstar and have two bargaining chips. Even still, such a game exclusivity war would lead to fracturing the gaming market in half. Basically, the consumer would be forced to buy multiple consoles to play games that formerly landed on both consoles. It’s a loss for consumer choice… which is why I’m surprised the FTC hasn’t stepped in and blocked this one.
I’m guessing that because the final outcome has not yet manifested, the FTC can’t see the forest for the trees. However, once hindsight forces 20/20 vision, it will be too late for the FTC to block this purchase.
What does this mean for Fallout?
I know this is a very specific question about a very specific game. However, I was asked this very question on a Twitch stream. Let me answer it here.
If you’re a fan of the Fallout series and you’re unsure which of the upcoming console to buy, I’d recommend waiting to see what Microsoft has in store for upcoming Bethesda games.
With that said and to reiterate what I’ve said above, there is now zero chance that Microsoft will withhold Fallout for the Xbox Series X and newer Xbox consoles. However, Microsoft can easily block the release of future Fallout games from the PS5 and the Switch. This means that a consumer’s investment of cash into a PS5 could see the console without any future Fallout or Elder Scrolls or Doom games.
What that means is that should Bethesda take on the challenge of remastering Fallout 1, Fallout 2 and Fallout New Vegas for the newer consoles, these games may only find their way onto the Xbox Series X as exclusives and may not be found on the PS5.
Basically, proceed with caution if you really, really want a PS5. You may find that like the PS Vita, without titles released from Bethesda, the PS5 may end up a dying console before it really gets the chance to take off, particularly if Microsoft buys even more of these large game studios. If the PS5 does fail due to Microsoft exclusives, it will be mostly thanks to Microsoft.
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Rant Time: PlayStation Store Return Policy
Looking for that elusive PlayStation Store return policy? A lot of people have been asking, “Where and what is the PlayStation store’s return policy?” Let’s explore.
PlayStation Store Digital Goods vs Retailers
When you buy digital goods from an online store, you expect a similar return policy to what you find in a standard retail store. Retailers today mostly offer 15-30 days to return your purchase for a full refund. However, there are rules to boxed content such as video games and Blu-ray or DVD movies. If you crack open the shrink wrap, you own it. Once you crack that shrink wrap, you can only exchange the item for another like item. If the entertainment item remains wrapped (i.e., movie or video game), you can return it for a full refund so long as it’s still within the stated return window. Other physical items have usual refund windows of usually no less than 14 days and usually no more than 90 days. Still, these are reasonable return windows.
For digital goods, there is no such concept as a shrink wrap or even a plastic box. For these sales, you’re limited to whatever return policies the store offers. For Apple and Amazon, if you mistakenly make a digital purchase, they’ll happily refund you so long as you do so right away. For Sony’s PlayStation store, the waters here are much more murky.
Where is the PlayStation store refund policy?
That’s a really good question and, unfortunately, there’s not a good answer that covers the entire world. Sony has intentionally fractured the PlayStation store rules into world territories. This means that there is not a single return policy that covers the globe. Instead, return policies are by region.
In the US, Sony doesn’t actually publish an actual Return Policy. Instead, they rely on their “Terms of Service” agreement to cover their for their returns on digital good purchases.
Return Policy
I’m going to rant just a little bit on this topic before getting to the meat where to find the information you’re looking for. A Return Policy is just that. It’s a clear, concise, non-technical, non-legal statement that explains exactly what a store provides for after a sale. For example, Target’s return policy states:
Most unopened items sold by Target in new condition and returned within 90 days will receive a refund or exchange. Some items sold by Target have a modified return policy noted on the receipt, packing slip, Target policy board (refund exceptions), Target.com or in the item department. Items that are opened or damaged or do not have a receipt may be denied a refund or exchange.
Then, Target breaks this statement down into types of items and their specific return policy details such as…
Returns and exchanges without a receipt may be limited. Other restrictions may apply.
- If you’re not satisfied with any Target Owned Brand item, return it within one year with a receipt for an exchange or a refund.
- Target REDcard℠ debit and credit card holders will receive an extra 30 days to return nearly all items purchased with their REDcard at Target and Target.com. See Target.com/REDcard for full details and exclusions.
- All electronics and entertainment items must be returned within 30 days for a refund or exchange. For these items purchased between 11/1 – 12/25, the 30-day refund period will start on 12/26.
- All mobile phones must be returned or exchanged within 14 days. All items purchased with a carrier contract at a Target store must be returned or exchanged within 14 days and may be subject to early termination fees per carrier contract. Contract items and carrier plans must be sold and returned by a Target Tech Rep.
- All Apple® products, excluding mobile phones, must be returned within 15 days. For these items purchased between 11/1-12/25, the 15-day refund period will start on 12/26.
- … more
And so on… This is a short example of a Return Policy, this is not Target’s complete return policy. Please click the link if you’re really interested in reading that.
Anyway, this is to show exactly how a Return Policy should be written. It is written in clear, concise, everyday language. It is not written in legalese jargon that requires interpretation. Let’s compare this to what Sony considers a return policy for its digital goods.
Sony’s Return Policy which isn’t
The difficulty with Sony is that Sony US chooses not to create an actual store return policy and instead chooses to rely on its “Terms of Service” to cover for the lack of an actual return policy. When you ask someone on the chat service to give you a link to the PlayStation store’s U.S. return policy, they give you the following link.
Here’s the link to Sony’s “Terms of Service” agreement:
As you can see from this link, it is a legal document labeled “Terms of Service”. This is a legal agreement, not a Return Policy. Buried within this Terms of Service legal agreement, there is a section labeled Wallet. Here is where the return options are listed, but in fact, they aren’t really listed at all. Under the section Wallet, begins the information about purchases, which is about as clear a mud. But, let’s examine this mess they call a policy.
WALLET
Your Account has an associated wallet, and all purchases made on PSN Services, including purchases funded from an outside payment source (e.g., a credit card or PayPal account) at the time of the purchase, are made through the wallet. Your children’s Accounts that are associated with your Account do not have a separate wallet, and all purchases made by them will be made through your wallet. Wallet funds have no value outside PSN and can only be used to make purchases through PSN Services and certain Third Party Services. You can only hold a certain maximum amount of funds in your wallet as determined by us (“Limit”), using either (i) a credit or debit card; (ii) a prepaid card or promotional code with a specified value where available; or (iii) other payment methods approved by us and made available from time to time in each specific country. FUNDS ADDED TO THE WALLET ARE NON-REFUNDABLE AND NON-TRANSFERABLE EXCEPT WHERE THE LAW REQUIRES THAT WE TAKE THOSE ACTIONS. WE HAVE NO OBLIGATION TO REVERSE OR REFUND UNAUTHORIZED CHARGES MADE USING ANY PAYMENT METHOD TO FUND THE WALLET. WALLET FUNDS THAT ARE DEEMED ABANDONED OR UNUSED BY LAW WILL NOT BE RETURNED OR RESTORED.
blah blah blah… a bunch of legalese jargon that no one wants to read. But wait, there’s more to read….
TRANSACTIONS All transactions made through your Account or an associated Account of your child are solely between you and SIE LLC. By completing a transaction through your Account or allowing a transaction to take place through an associated Account of your child, you are (i) agreeing to pay for all transactions made by you or your children, , including recurring charges for subscriptions that are not cancelled; (ii) authorizing SIE LLC to deduct from the wallet and charge your credit card or other applicable payment instrument or payment mechanism all fees due and payable for all your transactions; and (iii) agreeing to any applicable Usage Terms and terms associated with use of the particular PSN Service. All transactions are final upon their completion and may be deemed to be governed by law and regulatory requirements applicable at the time the transaction was completed. PAYMENTS FOR ACCESS TO CONTENT OR SERVICES ARE NOT REFUNDABLE EXCEPT WHERE THE LAW REQUIRES THAT THEY ARE REFUNDABLE.
Pre-orders and Bundles. You may have the option to order a license for certain content in the form of bundles (such as seasons of television series) or a pre-order. We reserve the right to deduct funds from your wallet for any pre-order or bundle order at the time you order the content, but some or all of the content may not be available until it is released for license via the PSN Services.UNLESS OTHERWISE REQUIRED BY LAW, YOU MAY NOT CANCEL OR OBTAIN A REFUND FOR A PRE-ORDER OR AN ORDER FOR A CONTENT BUNDLE ONCE YOU PLACE YOUR ORDER, AND PRE-ORDERED CONTENT OR CONTENT INCLUDED IN A BUNDLE MAY BE CHANGED WITHOUT NOTICE.
Aha… here’s the meat of it!
Notice the ‘UNLESS OTHERWISE REQUIRED BY LAW’ provision. This is Sony’s legalese for telling you that they are leaving their return policy requirements in the hands of U.S. federal, state and local laws (if applicable). This means, it is your responsibility to understand and determine exactly what the laws govern returns in your jurisdiction. This is convoluted statement because most people aren’t knowledgeable or familiar with the laws that govern such returns in their jurisdiction. I have to assume Sony’s lawyers naively thought that no local jurisdictions legally covered this part of their “Terms of Service”.
Before I jump into what this statement means to you if you live in the U.S., let’s rant about why this is NOT a return policy. This document is a “Terms of Service” agreement. It is a legal document that governs your use of services. While it might cover some of what a return policy does, it in no way considered a comprehensive return policy. Compare this document to Target’s clearly written, concise, plain language readable policy above which clearly lays out classes of items and their respective return periods in explicit detail. A return policy is supposed to be written in plain language that anyone can understand. Sony’s “Terms of Service” document is anything but clear, concise and plainly readable. Sony’s document is designed to be read and interpreted by a lawyer, not a layman. Meaning, it is on you, the buyer, to understand all laws where you live.
Federal and State Laws
Before I begin here, I will state that I am not a lawyer and nothing in this article is intended to be construed as legal advice. If you have questions about laws in your jurisdiction, you should contact a lawyer where you live.
With that out of the way, because Sony has chosen to leave returns up to the laws in the buyer’s jurisdiction, thankfully it appears the US federal government has such a law that governs returns in these cases.
This federal rule that at first glance may be applicable to PlayStation store purchases seems to be the 3 day Cool-Down law. This is a contract law that states that you have the right to return anything within 3 days and receive your money back as long as you cancel the contract before midnight on the third day. However, it seems that this FTC rule doesn’t cover online sales, although in my opinion it should cover it. Regardless, it doesn’t mean you can’t make a complaint to the FTC regarding Sony’s refund policies.
State laws are a different matter. Because there are effectively 51 states (I’m including Puerto Rico as a state even though they haven’t yet gone through the statehood process), there are too many states to list each one’s return laws in this article. I will point you to this Findlaw article which has very concise information on the state by state laws regarding refunds and returns.
FTC Complaints and Consumer Protection
The primary methods that you have as a consumer for refund redress is 1) asking the company for a refund, 2) using the 3 day Cool-Down rule when applicable and 3) disputing the charge with your credit card company. Sony has control over all 3 of these. Because Sony has complete control over refunds, they can always deny them. Because the PlayStation’s stores sales are online, the 3 Day rule doesn’t apply. And finally, because a chargeback will lead Sony to terminate your PSN account in retaliation, you can’t perform chargebacks without losing all of your purchased content.
This is an unfair situation for the consumer. All of the possible consumer avenues to get a refund cannot be used against Sony. Sure, you can dispute with your credit card company if you’re willing to lose your PSN account. Most gamers are not willing to lose all of their digital content they’ve purchased over a single refund. This is really a scam that Sony has going here. Thankfully, state laws may apply.
California
I will cover California here simply because I have enough knowledge after reading California’s specific law regarding this issue. Keep in mind that all laws are open to interpretation such that a judge can interpret the subtleties and applicability of those laws to any circumstances and in any way that he or she deems appropriate. That means my interpretation isn’t necessarily the interpretation a court of law might rule for a given case. However, Sony does have a presence in California which strengthens California’s laws against Sony.
It seems that while physical presence retailers are bound by California law to post and maintain a comprehensive Return Policy within their place of business, this law appears to have not been updated to explicitly cover businesses performing online sales and which also have a presence in California. This means that online retailers may or may not have a loophole with regards to posting and maintaining a Return Policy. Though, if the law requires physical businesses to post a Return Policy, I don’t see any reason why it wouldn’t apply to online storefronts who also have a presence in California.
According to Findlaw, California law states that:
Retailers are required to clearly post their refund policy unless they offer a full cash refund, exchange, or store credit within seven days of the purchase date. Retailers failing this requirement are required to accept full refunds within 30 days of purchase.
Assuming that the word “Retailers” applies to online sellers who have a presence in California, this law may extend your refund rights to 30 days as Sony clearly doesn’t post an actual refund policy anywhere visible on either their storefront or on their main web site. If “Retailers” only applies to stores with a physical presence and this law does not apply to online retailers, then this provision wouldn’t apply. California seems a little behind on explicitly stating its laws also apply to online sellers doing business in California. This means that assuming California’s law applies to PlayStation store sales, it does so implicitly through interpretation of the law.
For this reason, you would have to talk to a lawyer and ask them to interpret California’s law and whether or not it applies to Sony’s online storefront. Personally, I’d interpret that this provision applies, but I am not a lawyer. I’d certainly argue that the law does apply when arguing for a refund with Sony when you also live in California. I also happen to know that Sony has a business presence within California in San Mateo which makes a difference when dealing with legal matters of business in California. If your state doesn’t have a Sony business presence, any laws governing “retailers” might not apply to Sony.
Not all states have consumer refund policy laws such as those in California. You’ll need to review that Findlaw article and look for your state to determine if such a law applies that might extend your refund rights.
Sony’s Cancellation Policy
You might be saying, “I just Googled and found this Cancellation Policy on Sony’s web site”. Remember when I said the return policies for Sony are fractured around the world? Well, here’s the example of this. While this web published Cancellation Policy is visible to the world (including U.S. residents), apparently it only applies the UK (even though it makes no mention of this in the article body itself).
Simply reviewing Sony’s Cancellation Policy, it states a refund policy of 14 days so long as the digital item has not been downloaded or streamed. It’s a reasonable policy if they enforced it in the U.S. However, they apparently do not offer this policy to U.S. buyers. Instead, if you talk to someone on Sony’s U.S. PlayStation Store chat service, they will point you to the above “Terms of Service” document for their return provisions. The U.S. PlayStation store reps claim the Cancellation Policy does not apply to U.S. store purchases.
By making this claim, it does two things, 1) it says Sony does not publish a comprehensive return policy anywhere on its web sites for U.S. buyers and 2) it states definitively that the published Cancellation Policy does not apply to U.S. buyers. This means that the “Terms of Service” provisions rule. This also means that if you live in a state with a law that states that failing to establish a visible return policy in a store front results in a 15-30 day return period. That also means Sony is obligated to uphold the legal requirements of that state. This is why the “UNLESS OTHERWISE REQUIRED BY LAW” statement is important to understand your return period for Sony PlayStation store digital goods.
This “Terms of Service” document squarely puts the burden on you the buyer to understand the laws in your jurisdiction governing Return Policies. Assuming your state extends your rights, you might have 15-30 days to return the item unopened.
Unopened Digital Items?
It’s best to follow the “Unopened” rule when asking for a refund of a digital item. What does “Unopened” mean on digital goods? It means you haven’t downloaded or streamed the product. Effectively, it is the same definition that’s in Sony’s UK-only Cancellation Policy. If you have downloaded or streamed the item, then the federal and state laws likely may not apply to the refund. To be safe and avoid arguments with Sony, stick to the unopened rule when attempting refunds. Pre-orders would automatically be considered unopened while still a pre-order.
Disputing Charges with your Card Issuer
Assuming you’ve bought your purchase directly with a credit card and not with wallet credit you bought via a gift card, you can always dispute this transaction with your card issuer. However, Sony has a provision in their “Terms of Service” for this:
Fees and Other Charges. We reserve the right to deduct from the wallet all bank fees related to any transactions or failed transactions (e.g, chargebacks from your bank or credit card provider) initiated by you or your children, including domestic and international transaction fees. We reserve the right to terminate your Account and any associated Accounts of your children for failure to complete transaction payments. In lieu of termination of your Account, we may elect to provide a mechanism by which you fund the wallet associated with your Account to prevent your Account (and any associated Accounts of your children) from being terminated.
What this says is Sony reserves the right to terminate your account over service fees or chargebacks. If you dispute a charge with your card issuer and your bank accepts your dispute, they will force a chargeback to Sony. This means Sony will likely retaliate against that chargeback and close your PlayStation Network account. If Sony does this, you will lose any wallet credit and any purchases that were linked to your account. If you had any significant amount of digital goods purchased, they’ll be gone. Weigh carefully the decision to dispute a charge through your bank. If you buy through PayPal, you do have PayPal’s buyer’s protection, but Sony may still retaliate against your PSN account if you dispute a charge via PayPal.
If you do choose to try a dispute, I’d suggest unlinking the card from your PSN account before you begin the dispute process with your bank. This may prevent Sony from easily tying the card back to your PSN account.
Buying Digital Goods
When you buy digital goods from stores like Apple, Amazon, Google, Microsoft and Sony, you need to carefully read and understand their rules. You’ll also need to understand the laws that govern where you live. Most digital sellers are reasonable for mistake purchases. However, Sony appears to be ruthless in not wanting to issue refunds at this point. In addition, they have the power to hold your PSN account hostage against your only means of consumer protection via credit card dispute. I’d complain to the FTC on this one alone. This is an entirely unethical business practice.
My point here is that you shouldn’t ever buy any digital goods from Sony. At least, not until they come to their senses and offer a reasonable return policy and publicly publish it on their PlayStation Store web site in a visible location.
If you get caught in a situation where you bought something you didn’t intend, try your best to get a refund. There are no guarantees Sony will honor any federal or state laws. If they choose to ignore these laws, report them to the FTC and to your state Attorney General’s office. If you don’t care if they close your PSN account, then by all means contact your credit card issuer and request a dispute against that charge. Good Luck.
Sony’s Corporate Legal Compliance and Responsibility
The “UNLESS OTHERWISE REQUIRED BY LAW” provision should be Sony’s legal responsibility. Legal compliance and maintaining compliance with all laws has always been and should remain a corporate burden. Since Sony has taken it upon themselves to state “UNLESS OTHERWISE REQUIRED BY LAW”, Sony should be required to keep a list of all laws in all jurisdictions and uphold those laws with regards to digital returns on PlayStation store purchases.
This means that when you call or chat into a Sony representative asking for a return, it should be the representative’s responsibility to ask you the city and state where you live, then pull up a reference document containing the laws for that jurisdiction. Then, determine if those local return window laws apply to your return before outright denying the return.
It should not be the buyer’s burden to inform the representative of local laws that apply in that jurisdiction. By forcing the buyer to inform the representative of applicable laws, it then forces the representative to make a decision regarding that return. If Sony has told their representatives to reject all such arguments as invalid, then Sony is in willful in violation of some state and federal laws. It also means that the burden of upholding laws has been left in the hands of phone or chat reps.
Sony, do you really want some of your lowest paid staff making corporate legal decisions for Sony and potentially putting Sony at legal risk?
As most corporations today are trying their best to mitigate legal risk, Sony seems to be willfully instigating legal risk at their own peril. Get with the program Sony and write a real Return Policy and post it on the checkout screen. It’s not hard! Otherwise, you need to take on the legal responsibility of informing your reps of which jurisdictions have laws that apply to digital returns.
To PlayStation Store Employees
If you work for the PlayStation Store as a chat or phone rep, you need to understand your own personal legal risks. Because you are being made to decide the fate of a return based on “UNLESS OTHERWISE REQUIRED BY LAW”, you could face personal legal penalties because Sony has placed you into this legally risky position. I’m pretty sure you didn’t sign any legal indemnity clauses when you hired onto the PlayStation Store. As an employee, it is not your responsibility to decide legal matters over the phone or via chat. If you make the wrong decision and that decision is illegal, you can be held personally liable for breaking that law in addition to Sony. Do you really need legal fines and jail time?
As a representative for Sony, you need to take this article to your management team and explain to them that you no longer wish to be legally responsible for Sony’s actions. Explain that you don’t want to be fined or jailed for making the wrong decision on the phone. That’s not part of your job. Your job is to answer the phone and perform returns. But, it is not your job to take on personal legal responsibility for Sony.
As a representative, you need to insist on corporate legal compliance. This means that you need to insist that it is Sony’s responsibility to provide you with all necessary legal information to ensure you always comply with federal, state and local laws for each and every return. Sony hires lawyers. Sony can get their lawyers to provide you with this legal compliance information. After all, those lawyers are getting paid a whole lot more than you as a representative. Let’s make those lawyers do some real work for a change. Better, ask your management team to publish an actual Return Policy on the checkout page of the PlayStation store, which fully describes return windows and avoids this entire legal problem.
I welcome comments regarding your personal experiences with Sony’s PlayStation U.S. store return policies. I’m also always interested in hearing any tricks you may have used that helped you get a refund.
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Unlimited Vacation: Blessing or Curse?
I don’t usually get into discussing workplace stuff because it’s relatively boring. However, Unlimited Vacation is one perk that is really, really needs discussion. Let’s explore.
Perks and Jobs
I get it. I understand why companies offer perks. They have to offer perks for talent acquisition reasons such as:
- Companies must keep up with competition — If a company doesn’t keep up with what other companies are offering, they lose talent during recruiting
- Companies must offer perks that seem inviting — Again, this is a talent acquisition feather-in-the-cap sort of thing. It’s something the HR team can cross off the checklist of things to entice candidates
- Companies must offer perks that are inexpensive — Companies don’t want to give away the farm to offer a specific perk
What kinds of perks can you typically find in tech companies? You find perks like the following:
- A stocked kitchen — This includes soda, coffee, tea, milk / cream and then for food, this can include fruit, nuts, chips and cereal
- Bagel Friday — This perk includes donuts and bagels on Friday
- Lunches — Some companies offer subsidized and/or free lunches one or several days of the week
Those are all food related, however, other perks include:
- Day Care or reimbursement
- Commute expenses
- Free parking
- Tuition Reimbursement (job related)
- Training / certifications (job related)
- Paid sick days
- Paid vacation
- 401k
- ESPP (if public company)
- Company holidays
These are the HR type of benefits that many companies offer. Many of these have a real dollar based cost to the business. However, there’s a new perk that seems great, but really isn’t for several reasons. That perk is ….
Unlimited Vacation
This ‘perk’ (and I use this term loosely) is now becoming popular in businesses. Why? Because it doesn’t cost the business anything to implement and may actually save the company some money (or so companies think). On paper, the idea seems enticing, in reality it’s a pointless benefit to employees and actually encourages more employees to take vacation which may hinder productivity and deadlines.
Why is this benefit so bad? This benefit is pointless because there is no way any employee can actually use it in its unlimited capacity. If you were to try, you’d be fired and walked from the building. I don’t know of any business that doesn’t require approval for vacation from a manager. Even if you could request excessive amounts of vacation, it’s unlikely your manager would approve it. But, within reason, you can request time off and here’s where it begins to break down for employers.
The only people who can even use this benefit as unlimited are those who are in management positions, who don’t have to report their own vacation usage. In other words, subordinates won’t be able to use it, but managers will (and they will use it frequently).
This is one of those perks that will be abused by those in charge. Those not in charge will be penalized whenever they attempt to use it in any unlimited way.
Vacation Time
In general, asking for vacation time off is tricky. It must always be coordinated with ongoing projects, team commitments (i.e., on-call), other team member time off and holidays and requires manager approval. Even people who end up out sick can interrupt or force rescheduling of vacation time off.
Don’t be tricked by this perk, it doesn’t make vacation time off any more accessible and, in fact it is entirely designed entirely for …
Ripping off Employees
There are two fundamental problems with Unlimited Vacation. The first problem is that the benefit (ahem) is being implemented as a cost saving measure to rip off employees when they leave a company (and is designed to appear to save the company many thousands of dollars). This issue really only affects long term employees. You know, the ones who have devoted several years to your business. But now, you’re going to give them the finger on the way out the door? Smart.
With standard paid time off (PTO), you are allotted a certain amount of hours that accrue over time. Let’s say for every year of service that you complete, you will accrue up to 1 week off (with a maximum of 2 weeks that can be held in total). After 2 years of service, you’ll have those 2 weeks accrued, assuming you never take time off. If you leave the company after 2 years without taking any vacation, you’ll be paid out your accrued PTO balance for the 2 weeks that you didn’t take. That’s two weeks worth of salary you’ll receive upon exit, in addition to any other salary owed.
With Unlimited Vacation, that vacation payday goes away. Since it’s now unlimited, there’s no more time accrued and no more PTO to pay out for any employee. The only thing that payroll needs to keep track of is how much time you’ve used solely for timekeeping purposes. When you exit a company offering Unlimited Vacation, you won’t receive any vacation pay because they are no longer accruing any. This means that when you were formerly paid 2 weeks of PTO, with Unlimited Vacation you now get $0.
Unlimited Vacation is then an HR cost-cutting measure entirely designed to screw exiting long term employees over so companies no longer need to make any vacation payouts.
Here’s where the second problem begins. As employees realize this screw-over job and to make up for the lack of accrued time, this means employees will need to take as much vacation as is allowed without getting fired in the process. Since you can’t accrue, you now need to use.
Accrued PTO vs Unlimited Vacation
Businesses don’t seem to understand the ramifications of this perk on its workforce. The first ramification is that employees with accrued PTO no longer get the exit vacation payday. This is significant when exiting your employer and moving on. But, this only occurs on a termination event. Employees should remain cognizant of this event, but even more employers should remain cognizant of how this will change how vacation is used. As an employer, it means you need to understand how to retain your workforce better.
Here’s the second problem in a nutshell. PTO encourages employees to stockpile their vacation and rarely take it. Up to 50% of the workforce does this. However, Unlimited Vacation encourages employees to take as much vacation as they can legitimately get away with.
With PTO, employees might work and work and work with little time off. With UV, more employees will take more time off, thus working less. This is something that HR and management will need to understand about this benefit. If the point is to get people to take more time off, then UV is the answer. If you’re trying to encourage people to stay at their desks and work, PTO is the answer… but has the end payout.
It really all depends on how you want your staff to work. If you want people at their desks not taking time off, then PTO is your answer. If you want people constantly taking time off, then UV is your answer. Sure, UV saves you on the exit payments, but at the cost of people taking more time off throughout the year. It does one more thing.
The up to 50% of employees who rarely take time off will change their work ethic to include significantly more time off. Since they know can no longer stockpile and get that payday when leaving, they will now be encouraged to take time off to make up for that loss of money. This means that a workforce that you relied on to work excessive hours to make ends meet will no longer continue that trend in your business.
If you think that people will continue the same type of vacation behaviors they used with PTO when on UV, you’re mistaken. People will use what they are owed. If they are encouraged to take time off, they will whenever possible. This means that for the folks who rarely (if ever) took PTO days will now begin scheduling more time off throughout the year. That’s not because it’s unlimited, but because they understand that they no longer get the payout at the end. This compromise ensures they get the equivalent benefit and that means scheduling and taking time off. There’s entirely nothing the HR team can do about this change in vacation usage behavior when on the Unlimited Vacation plan.
It’s a use-it-or-lose it situation. If you never take vacation with PTO, you can justify it with the payout at the end. If you never take vacation with UV, not only do you get no time off, you get no payout at the end. It’s simple math. No payout at the end means using more vacation time to get the equivalent benefit. Employees aren’t stupid and they will realize this paradigm shift and compensate accordingly.
This outcome will happen. You can even watch your employees behaviors after you convert from a PTO to UV system. I guarantee, your employees will notice, understand and modify their vacation schedule accordingly. This may impact your business, so caveat emptor.
Good or Bad?
That’s for each company to decide. More employees taking more vacation is good for the employee and their morale. But, it may negatively impact the productivity of your business. With PTO, people not taking vacation means more productivity. With UV and more vacation time off, this likely means less productivity. It might mean a happier and less stressed workforce, but it likely also means less work getting done.
I’m not saying any individual will take excessive time off. No, I’m not saying that at all. That’s simply not possible. What I am saying is that if 40-50% of your workforce never takes time off under a PTO plan, you will likely find that number reduces to less than 10% of your workforce not taking time off with a UV system. That’s a significant amount more people taking time off throughout the year than on a PTO system.
If you delude yourself into thinking employees who don’t take vacation time off will continue a PTO trend on a UV plan, your HR team is very much mistaken. I can also guarantee that if managers deny vacation requests to keep employees at their desks, this too will backfire and your talent will leave. This will become a catch-22 problem in your business.
As an employer, you spend a lot of money hiring talent. You also spend a lot of money holding onto that talent. Why jeopardize all of that with a policy like UV that won’t really do what what you hoped it would? On paper, it seems like a great cost saving policy. In practicality, it will likely backfire on your company’s productivity efforts and cost you more money in the end, but not for the reasons you think.
Conversion Process
You may find that if you are converting from some other vacation system to unlimited that people do continue their traditional habits. However, that will change over time both as turnover happens and as people realize their loss of PTO payout. Once employees wake up to the realities of the new system, the amount of employees requesting and taking vacation will increase.
A UV policy will make it more difficult on the managers to juggle vacation timing, fairness and who can take what when. This will increase manager load by taking them away from managing projects and deadlines to managing the minutiae of juggling even more staff vacations.
Hourly Employees versus Salary Employees
This type of perk works best in salaried environments. With hourly employees, trying to offer a perk like Unlimited Vacation won’t really work well. This is particularly true of employees working in a call center or similar type environments. With salaried tech workers, this kind of benefit may work for you with the caveats that have been thus far described.
Startup or Established Company
If you run a startup, you should stay away from the Unlimited Vacation policy entirely. It won’t do your business any favors. Sure, it’s more cost effective, but only when long term employees leave. If you’re a startup, you won’t have long term employees to worry about for a while. Your duty is to entice your talent to stay, not leave. If you have a problem with a revolving door of staff, then you have a much bigger problem than a benefit like Unlimited Vacation. The problem for a startup is that a UV plan encourages more people to take vacation more often rather than stockpiling it for use later. Again, more workload for a manager to juggle vacation schedules rather than handling projects and deadlines.
In a startup, a UV policy means more people taking time off. This isn’t what you want when you need all hands on deck to keep the business afloat. You want most people at their desks and readily available at all times. When people take vacation, they expect to be cut off from their job including no email, no pager and no contact. And, rightly it should be. If you’re on vacation, you’re on vacation. PTO plans encourage staff to accrue now and take time off much, much later, perhaps years later. With a UV plan, this encourages more people to take vacation regularly. Not exactly what you need in a startup. PTO works for a startup because employees stockpile and then once the business is off the ground years later, they will then take their vacations. This is why PTOs are actually better for a startup than a perk like UV.
If your business is established with 500 or more employees, then implementing an Unlimited Vacation policy might be worthwhile depending. With larger numbers of staff, there’s more opportunity for someone to cover an employee who’s out. This means if your 40%-50% staff who are stockpiling decide to start taking vacation in increasing numbers, you can withstand this change in your workforce behavior.
It’s up to you to decide how to operate your business, but PTO vs UV is one perk you should thoroughly investigate and then weigh all pros and cons before implementing it. Don’t do it simply because it might (or might not) save you some cash when employees exit. Do it because it’s the right plan for your business’s current operating goals.
Toys R Us: Say Goodbye to an Era
For many, we grew up with Toys Я Us as the go to place to find that cool new toy, game, doll, action figure, Teddy Ruxpin, train set, learning toy, crayons, movie or even video games. Times are a changin’ folks and Toys R Us now finds itself way less than one Barbie away from permanent closure. Let’s explore.
Update from the News Desk — 2018-03-14
Toys R Us headquarters has apparently informed all US and UK employees on Wednesday, March 14th that all US and UK locations would be closed, a move that would lose 33,000 jobs. This would be one of the biggest retailer liquidations. CEO David Brandon intended to file paperwork to begin the liquidation proceedings on Wednesday.
From small to BIG to defunct
In the 70s, I remember toy stores primarily consisting of smaller retailers in malls, usually carrying Lincoln logs, wooden toys or learning toys. While I didn’t mind visiting these places, they felt more like a library than a toy store. They also didn’t carry much of the things that I liked. It wouldn’t be until sometime the mid-70s when a Toy R Us opened near my house. That’s when toy shopping all changed, at least for me.
I’m sure my parents hated taking me to Toys R Us, just as so many parents do. For us kids, it was like a day at Disneyland: a gold mine, a treasure trove, a place of dreams. Unfortunately, the parents were having none of it… or at least, as little as they could walk out of the store carrying. Good on them, but that didn’t make Toys R Us any less magical to a 8-10 year old. We loved it, we loved going there and we especially loved it when we got to take something home with us.
Geoffrey
I was never a super big giraffe fan, but Geoffrey was a fun and charming mascot constantly pointing out cool new things in the store. I would come to see Geoffrey as cute mascot designed to help me find new stuff. Not always, but a good bit of the time. Sometimes he was just present, like Mickey Mouse. That Giraffe always made me smile because I knew that I was at that magical place, like Disneyland but local. Over the years, Geoffrey began being used less and less by TRU, but he’s still considered their mascot.
Every once in a while, Toys R Us would offer an enter-to-win a fill-your-cart shopping spree. I always wanted to win one of those as a child, but alas never did. To think what I would have filled my cart with. The mind boggles, if only because some of those toys are considered highly collectible today. Though, those toys most assuredly would not have remained closed in their packaging after making their way home.
Growing Up
As I grew into my 20s, got my own car and job, my relationship with Toys R Us changed. No longer was it that magical place, but it now had firmly become a store and I was a consumer. Still, it was a place to go to find that hot new toy that everyone’s talking about. It also became the place to find computers and video games. If I couldn’t find it at Target or Kmart or, later, Walmart, I could almost certainly find it at Toys R Us or Kaybee or Children’s Palace (competitors at the time) and to a much lesser degree FAO Schwarz. Toys R Us was always the first place to go, then the others as they were less reliable.
Dominoes
As the competitors fell over one at a time, first Children’s Palace in 90s, FAO Schwarz in early 00s, then in the middle 00’s, Kaybee Toys, Toys R Us was still standing and, in 2009 would acquire the FAO Schwarz brand, but would sell it off in 2014. It was (and currently is) the place to go to find all things toys. Unlike Target and Walmart that choose to stock limited toy items, Toys R Us (like the previous Children’s Palance and Kaybee) still carries aisle after aisle of wide ranging toys you can only find at Toys R Us. You simply can’t find this selection of toy items at a discount department store. This is why I always ended up at Toys R Us in search of fun, exciting new things.
The Mistakes
Throughout the later years, I’ve grown a love-hate relationship with the Toys R Us chain. Not only because I worked there for a short time while in my 20s, but also because the management does a lot of things that don’t make sense. For example, Babies R Us. For a time, Toys R Us stores devoted half of their space to baby goods. I don’t have a baby, so there’s no interest in that. Yet, Toys R Us decided to kill half of their store space to devote to these products. This meant, less space for toys, games and other items.
I understand that the management wanted to expand their selection into babyland, but it was a mistake to take away valuable Toys R Us aisle space to devote to all-things-baby. This, in my opinion, was one of the biggest mistakes the Toys R Us management foisted upon its stores. That was, until they finally spun Babies R Us into its own stores and gave it its own space.
Later, the management decided to do away with separate Babies R Us stores and chose to abut the two stores together for one seamless one-store experience. That was at least better than taking away shelf space from an already cramped toy store, but even that was unnecessary and, in my opinion, a mistake. They can be next to each other, but walled off and separate stores with separate stock and separate staff. I know why they did chose to hook them together. They did it so they could use one set of checkout lanes, one set of cashiers and one set of staff to stock both stores.
The X
At around the time that Babies R Us was coming into its own as a separate store chain, Toys R Us decided to change its shelving layout. Instead of the more logical long rows running from the front to the back of the store (with middle store aisle breaks) which made it easy to find everything, the store layout designer decided to change the aisles to be side to side and then create X shaped rows in the middle of the store. Not only were these rows much harder to navigate, the layout of the aisles were crippled as a result. This layout made finding things incredibly hard and it seemed like they had less shelf space.
Not only was everything now moved around haphazardly, it made finding what you’re looking for overly hard. Meaning, now you had to navigate the whole store looking at everything just to find that thing.
Maybe the designers thought this was a good idea? It wasn’t. This is the second mistake from Toys R Us management.
Overbuying and Stocking the Wrong Toys
I don’t know how many times I visited Toys R Us in the 90s only to find the same toys every time I visited, sometimes months apart. These we affectionately call peg warmers. This mistake continues to plague Toys R Us to this day. Not only did Toys R Us have incredible buying power way back when, they just didn’t use it to their advantage. Instead, they would continually overbuy on dud toys and not buy enough on the hot toys.
You can’t sell toys that you don’t have in stock. For example, Cabbage Patch kids. When that craze hit, they couldn’t keep them on the shelves. You’d think Toys R Us could have negotiated with the manufacturer and buy 10x the amount they originally bought… simply so they could fill the demand. Sure, there might be a drought while the manufacturer created more, but eventually they would have enough stock quickly to satisfy demand. Alas, they didn’t and the shelves remained bare until the toys were so cold you couldn’t even give them away. Too little, too late.
Further, Toys R Us needed to let the local managers order stock for their specific location to stock toys that are regionally hot. Not every toy sells the same in every store, yet Toys R Us felt the need to send cookie cutter stock out to every single store. If you walked into a Toys R Us in any state, you’d see identical stock. Each store manager needed to be given free reign to specifically order stock in sizes that made sense for amount of local demand they were seeing for a given toy item. If they couldn’t keep a specific skateboard stocked, then the manager should be able to order the proper amount to cover the local demand from their store. In fact, stores that couldn’t sell the item should have shuffled the stock over to stores where the demand was high. That’s smart inventory management. Nope.
Store managers should also be able to nix slow selling items from their shelves and replace it with hotter selling toys. Why continue to carry that obscure toy that you can’t even clearance out when you can sell 100x as many Tickle Me Elmos? Having great selection is fine as long as you’re not stocking 50 of an item you can’t even give away. Again, smart inventory management people. Stock them in small quantities, sure, but not in the quantities that each store was getting. Shuffle extra stock to other stores that have none. Remember, I worked there, I saw the stock amounts in the stock room.
Nope. Toys R Us continued to make this mistake year after year.
Over-expansion
Nearly every business thinks they should open as many stores as physically possible. But, you can’t do this when most of your stores are operating in the RED. Toys R Us was no exception. This chain continually felt the need to open new stores rather than trying to shore up their existing stores and get them each to an individually profitable status. If the management had stopped their expansion plans and, instead, focused their efforts on making each store profitable by the end of Q1 each year, Toys R Us would not be in this predicament.
Dated Store Displays
Not too long ago (perhaps early 00s), Toys R Us did away with the X aisle layout and converted them back into horizontal rows once again. However, the aisles now run left to right in-store rather than the original front to back design (which was arguably its best floor plan). Unfortunately, their fixtures are all incredibly dated pegboard and 70s style metal fixtures. They look like they’re straight out of a 70s store… even when the store is brand new. Maybe these are the cheapest fixtures they can buy? No idea, but they don’t look modern.
The store is also incredibly jam packed with stuff. The shelves are always full of stock yes, but it doesn’t help when the stock is old and is sitting on dated shelving units lit by 70s style fluorescent lighting fixtures.
The Business
Here’s Toys R Us’s primary operational problem and the problem that ultimately leads to where we are today. Toys R Us always relied on the holiday shopping season to pull its stores into the black. Meaning, Toys R Us always operated its stores in the RED through 80-90% of the year hoping for the holiday season to pull each store up and out and operate in the black for that year. This was the chain’s primary mistake. This operating model had been ongoing since the 80s. This was the way that TRU intentionally chose to operate its stores. This was also entirely their biggest operating failure and it’s the mistake that is now what’s threatening closure and costing TRU its business.
In addition to operating in the red, Toys R Us also didn’t wield its buying power to get the best possible credit terms, the best possible deals and the best possible return arrangements. If a toy doesn’t sell, package it up, send it to another store that can sell it or send it back to the manufacturer for full or partial credit. Let the manufacturer deal with that stock rather than trying to organically clearance out items on the shelves years later. No, get these old toys off of the shelves to make way for new toys. Fill the shelves with toys that can sell and that will pay the bills.
If you can’t pay your bills, you can’t stay in business. Business 101. Yet, Toys R Us management felt that they were above these rules. The management team felt they could continually run their stores in the red without ramifications. Well, fate has now caught up with you, Toys R Us.
Being Acquired by Private Equity Firms
Because of the way Toys R Us chose to operate its stores, it could not support being acquired in this way. This acquisition was entirely shortsighted on the part of the private equity companies involved and they (and us consumers) are the ones who are now paying the ultimate price.
In 2005, Toys R Us was acquired by a set of private equity firms. These firms included KKR & Co., Bain Capital and Vornado Realty Trust in a $7.5 billion buyout deal. These three companies (and their investors) sank $1.3 billion of their own funds into the purchase, leaving the rest of the purchase price of $6.2 billion to be made up in loans. These loans saddled Toys R Us with an over $6 billion debt burden. A debt that, because of the rather nonsensical business model that the stores had been following since the 80s, could never be recouped. All of this leads to…
Bankruptcy
In late September 2017, Toy R Us filed for bankruptcy protection against its creditors. This means that its creditors can no longer go after Toys R Us for not paying bills. It also meant that the loans left over from that terrible 2005 buyout deal could no longer collect on those loans. Of course, in return for this court issued bankruptcy protection, the company has chosen Chapter 11 to work through a plan to reorganize in a way to get themselves back to profitability and pay their creditors over time before time runs out. For the Toy R Us management, that meant finding a suitor to buy the business… because, of course, they couldn’t be bothered with actually trying to restructure the stores in a way to make them profitable. Oh, no no no.. that’s just too much work.
What? Are you kidding? Are you really expecting some well funded company to swoop into this ailing business holding onto a mountain of debt and offer to buy you? Really? The way that TRU operates is textbook operating procedure for failure. It cannot continue to operate in the way that it does. Even closing half of the stores may not be enough to solve this operating problem. It’s only surprising that it took this long for this toy chain to make it to this point. I expected this day to come a lot sooner.
Toy Collectors and Toys R Us
I full well expected to see Toys R Us fail in the 90s. However, Star Wars saw to it to keep Toys R Us in business. The Star Wars collectors came out in wild abandon to snap up tons of revamped Star Wars merchandise for not only the previous trilogy (including the Orange and Green carded Power of the Force series), but also snapping up the then new prequel trilogy toys. These toys still remained hot even after 1983’s Return of the Jedi cooled down. It all heated up again when the Prequels began in earnst in 1999 (toys beginning to appear in stores about a year earlier). Toys R Us got a reprieve from their red ledger problems due primarily to Star Wars collectors, Hasbro and a few other unrelated hot toys during the 90s (Tickle Me Elmo). Almost every year, there was some new fad that kept Toys R Us’s year end strategy in check. Though, this strategy would ultimately fail them when, in the last 10 years or so when there just haven’t been those must-have toys or collectible Star Wars toys. Even the Zhu-Zhu pets weren’t enough. Even the latest Star Wars trilogy from Disney has not had the merchandising power that the 90s saw. Though, Disney isn’t crying over what they have sold.
In fact, I’d venture to guess that the 90s collectors have all but stopped collecting and have moved on with their lives… which put a huge crimp in the Toys R Us budget. In fact, during the collector heyday of the 90s, Toys R Us did their very level best to chase away the collectors. Much to their own chagrin, they succeeded in doing so by the mid-2000s. It also doesn’t help that collectors can now buy full cases directly from places like Entertainment Earth, which no longer meant the need to scour the pegs at Toys R Us in the wee hours of the morning. You could order cases directly from the comfort of your own home, then see them delivered to your doorstep.
Amazon and Online Shopping
Because of the power of the Internet, Amazon and eBay, it’s pretty easy to find that hot toy at more reasonable prices. Yes, Toys R Us is still a staple in the current shopping landscape. When it closes, both Amazon and Entertainment Earth will simply pick up where Toy R Us left off without missing a beat. If anything, I’d suggest that Amazon pick up the Toys R Us branding at a fire sale during liquidation and rebrand the Amazon toy section to Toys R Us. Keep the TRU brand alive, but not with all of that bloated store baggage. Then, dump the Babies R Us brand entirely. You can still sell baby things, but branded as Toys R Us.
Toys R Us Closing
As I said, I have a love-hate relationship with Toys R Us. I do enjoy visiting and seeing what’s new, but every time I walk into a store, I’m confronted with the dated shelving and decoration, the continual nagging reminder of just how careless the management is and how much of a wasted opportunity that Toys R Us was when it could have become the biggest most profitable toy chain in the world. Yet, they’ve failed.
If Toys R Us can manage to pull a rabbit out of a hat at the last minute and keep the lights on, I’ll be fine with that. Sadly, I think this is likely where it will all end for Toys R Us.
Gift Cards or Rewards — Use em’ or lose ’em
If you have any remaining unused gift cards from Toys R Us, be sure to visit a store now and use them immediately. Don’t wait until after Toys R Us begins closing its stores.
Likewise, if you have any rewards points left on your rewards card, log into Toys R Us Rewards, issue certificates and use them up now. Same for Babies R Us Cashback Endless Rewards program. Otherwise, forfeit your chance to convert those points into dollars. Representatives for Toys R Us have said that they will honor gift cards, rewards points and cashback programs for 30 days. The 30 day clock likely began on Wednesday March 14th, when they filed their liquidation paperwork with the court.
I guess in an odd way, I do kind of get that shopping spree after all, and many years later. I just found that I have over 2500 points in my rewards account. That equates to a $100 shopping spree.
For my $100 in rewards points, I got a Nintendo Monopoly set, a Care Bear Grumpy Bear, Two Schliech Geoffrey branded figurines, 5 different Halo Hot Wheels, a Pit Amiibo, a Pain-Yatta Skylander, a Playmation Vision figure and two Geoffrey branded reusable shopping bags. I ended up paying $9 to cover the tax. I also bought a $5 Geoffrey gift card and immediately used it to get dock protector straps for a Nintendo Switch. I wanted the Geoffrey branded gift card as a souvenir. I’d also previously purchased the day before, two Geoffrey 18″ plush and one Geoffrey plush gift card holder, which I’ll put that used Geoffrey gift card in.
Returns and Exchanges During Liquidation
Check any purchased merchandise thoroughly for defects the same day you buy it. If there are any problems, return it the same or next day and exchange it. Don’t wait even a few days to exchange as you may not be able to find the same item. According to Toys R Us representatives, all sales are final. This means, no refunds. However, they may continue to honor exchanges for a period of time. If you’re uncertain of any of this, ask for details at the service desk before you buy.
If you’re thinking of shopping for gift items, you might want to buy elsewhere. Buying a gift for someone could mean the gift recipient can’t return or exchange the item. You don’t want to force a gift onto someone when it’s not something they want only for them to find they cannot return it.
Be that Toys R Us Kid one last time
If you grew up visiting and are as fond of Toys R Us as I am, I’d suggest for you to take a few minutes out of your day and visit your local Toys R Us to reminisce about the good ole days. Once the liquidation sales start, they’re quickly going to look like half-filled shells of a store. Note that the deadline for Toys R Us to find a buyer is early April of 2018, so visit them quick. You have less than a month.
You might even want to pick up a souvenir, such as a plush Geoffrey, to remember what was Toys R Us and what it meant to us as kids. If you want a plush Geoffrey, ask at the Customer Service desk. It seems they keep them there for some reason.
How not to run a business (part 10): Undermining Your Business
There are lots of very subtle actions that can be taken where you can unknowingly undermine your business success. Let’s explore.
Don’t fire a position multiple times in a row
While this somewhat depends on the position, it’s still never a good sign when you must fire staff from the same position over and over. Even if you’re disenchanted with the people you’ve hired doing the specific work and after firing a position more than three times, this says more about your needs than the position. It’s clear, what you need in the position and the type of people you are hiring is mismatched. You need to rethink the job requirements for the position and hire the correct talent to fit that role. When you fire leaders in this way (i.e., VPs, SVPs or C-Level execs), this situation is even more detrimental to your business.
How will this undermine your business? Firing a position more than three times says several things. First, it says you don’t know what you’re looking for. Second, for all of those people whom you’ve hired and fired, the word will get around that anyone who’s a competent candidate won’t even consider the position. Once you realize that the most talented pools are relatively small and that they do talk to one another, firing a position multiple times means the word will get around to not hire on at that company. Once the word gets around about this situation, it is never a good thing for your business. The higher the profile of the position, the stronger the word gets around and this will severely undermine your ability to acquire top-end talent.
Additionally, the word will also get around in the recruiter community and they also choose not to place talent at your company.
Don’t choose an industry without researching its requirements
When you’re setting up your business plan, you need to thoroughly research the industry your business will be in. For example, selling a product or service to the medical industry is profoundly different than selling it to marketing teams, which is also profoundly different than selling your wares to the government or doctors or lawyers or farmers.
How will this undermine your business? If you fail to properly research the types of clients you are working to obtain, you won’t understand their demands and requirements. Every industry is bound by laws and regulation (some industries more than others). If you fail to realize that the industry you are targeting requires strict compliance to laws, you may also fail to understand how those laws apply to your business and that your company’s compliance may be unattainable and far too costly. If you can’t comply with the laws, you may never be able to land the deals on which your business depends. Yes, for many companies, vendors must comply with certain laws, security requirements and industry standards before a company will agree to close your deal. Failing to research these requirements may undermine your ability to remain in business. Or, it may relegate your business to smaller companies needing much smaller deals.
Don’t fail to underestimate the power of word of mouth
Sites like Glassdoor exist for a reason. Before Glassdoor, there was no transparency except by word of mouth. Now, there is.
How will this undermine your business? Before Glassdoor, recruiters would make the determination of where to place candidates. Recruiters also won’t choose to place prospective employees in toxic environments. That is, environments where firings are common, where turnover is high and where employee morale is extremely low. They won’t place anyone for a very good reason… they know the new employee won’t stay long enough to allow the recruiter to collect their commission. Recruiters only get paid their commission if the placed employee stays for the specified duration of time (3-6 months depending on the placement contract). Recruiters, therefore, will not place would-be candidates into an environment they know will be a short lived role. It also likely means that when you do find recruiters who will work with your hiring needs, they likely are unaware of the problem. Though, once they place and realize they are making no money, don’t expect to hear from them again.
Additionally, with sites like Glassdoor, employees can remain anonymous and be brutally honest about their experiences at the business. This can also undermine your ability to hire. Sites like Twitter and Facebook just compound the problem. As work gets around and your business’s reputation becomes tainted, you’ll find that it can be nearly impossible to not only attract good talent, but also retain it. Word of mouth in an industry is as good as gold to a job candidate, but can be poison for a business. You need to make sure your word of mouth is always high quality praise. Never negative backlash. If you choose to ignore the word of mouth, it will be to the detriment of your company.
Don’t skimp on employee perks
Employees spend 8 or more hours of their day working for you (not to mention commute time). Morale is a big part of that work day. If morale sinks low, your employees will exodus. Perks help keep employee morale up. Choosing the right morale boosters is critically important to employee retention.
How will this undermine your business? The Shining said it best, “All work and no play makes Jack a dull boy”. I’m not recommending that you allow your employees to play. But, offering employees a place to relax when they are having a break is important. You also need to understand what other companies in your same vicinity are offering to their employees. While I understand that every company can’t offer all of the same perks, you need to offer at least some of them. Not offering perks to your employees is tantamount to telling would-be employees and recruiters, “Don’t place people here”. Word of mouth spreads, once again, and you’ll find it hard to hire strong candidates because the perks are better somewhere else.
Secondarily, this goes back to several of the previous Don’ts. Lack of perks in combination with more problematic industry and poor morale, leading to negative word of mouth, could lead your business into a tough hiring spot. You could find that it’s nearly impossible to hire staff across the board. What you’re left with hiring are people who are not the top end of the hiring pool and instead end up the middle to low end staff. Once your business is forced to hire lesser qualified staff, your business will tank.
Perks like free food, subsidized or free daycare, subsidized or free transportation to and from work. Other perks can include tuition reimbursement, travel discounts and store discounts. When you skimp on perks when other companies are not, you will find it difficult to hire and keep any talent, especially top end talent.
Don’t assume you can live without top end talent
Without top end talent, your business is doomed to mediocrity.
How will this undermine your business? Once you hit the mediocrity stage, your customers will, one by one, leave you. They will realize you aren’t providing the quality service that you promised. Oh, you’ll still get some new signups, until they also realize the mediocrity of your business. Competition is fierce and it’s guaranteed that your business will have competition. If your competitors are doing it better than you, then your product/service offering will end up behind all others. It’s important to understand that top end talent drives your business forward. Low to mid level talent, keeps status quo. Top end talent provides innovation, low to mid level talent doesn’t.
Once you understand this fundamental distinction between the levels of talent, you will understand why you pay top dollar to have top end talent. And note, I’m not necessarily talking about top-end talent in Director, VP, SVP or C-Level positions. While it helps to have top-end talent there, those positions do not typically get the work done day to day. It’s those doing the hands-on day-to-day work that are driving your business forward. You want motivated self-starters who are willing to own the work that they do. Low to mid-level talent won’t actually own their work. Ownership of work is critically important when looking for talented staff to hire.
Note that some industries are harder to hire for than others. If you choose, for example, to open a business that does email marketing, you’ll find it very difficult to hire into this industry no matter what the position. Most technical people understand spam and realize they don’t want their resume to contain anything to do with a ‘spam related’ business.
Don’t ignore the value of social media
Social media offers a brand new marketing approach. Social media now offers grass roots marketing team that you have at your disposal. For example, if you can get your business placed onto certain people’s Facebook or Twitter feeds, this can drive lots of people to your business.
How will this undermine your business? If you fail to understand the power of social media either by ignoring it or by assuming that it is pointless, you have deluded yourself and this immediately undermines your business. Every marketing technique is appropriate and should be exploited to its fullest. Interactive marketing is even better. If you hire people to actively scout Twitter and Facebook, they can write comments that counter any negative feedback. By hiring a team of people to manage all social media outlets, they can head off problems before they even start. By having an active team countering Twitter or Facebook posts, it shows your business is proactive and willing to counteract any negative postings by disgruntled customers.
Don’t ignore the power of mobile marketing
Smartphones are now ubiquitous. Yet, this technology as a marketing platform is still in its infancy. While in this infancy, you can latch onto this technology early and get an edge over your competition. Companies that choose to embrace mobile marketing now will have the upper hand when marketing on these devices becomes commonplace in the future (and when email is ultimately dead).
How will this undermine your business? If you fail to understand that mobile marketing is the future, you will also fail to understand how quickly you can reach out to your customers with the immediacy of a phone call. Email, for example, is a slow mechanism by nature. It can take anywhere between 5 minutes and several days for people to read your email. With push notifications, your marketing is given to the user instantaneously. They can then go find out what the hubbub is all about within seconds. Nearly every push notification is read immediately. Emails take far far longer and are prone to spam blockers, image blockers and link blockers. Mobile marketing, at least today, is under no such blocking constraints. If you take advantage early, you can add a significant advantage to marketing for your business.
To take maximum advantage, however, it must be with a solid and useful app. An app you can direct the push notification to and give critical information. If you’re a retail business, for example, offering coupon discounts for purchases can be the difference between a purchase and not, such as 20% off of a product. Discounts are always a good idea when done regularly, but infrequently.
Mobile marketing needs to be relevant, targeted and location based. You need to know exactly what this customer’s interests are and provide them with spot on marketing that gives them exactly what they need when they need it. For location based marketing, if they are close to one of your stores, you should immediately send a push notification to notify them of any special offers located with that store.
Don’t change upper management every year
Or.. even every other year. This is can be a hard one to actually accomplish depending on lots of factors and it can cause severe morale problems.
How will this undermine your business? Whether it’s through a firing, through so-called ‘voluntary’ severance (aka The Velvet Hammer), people quitting, demotions, promotions or lateral moves, frequent or regular departures in the upper management team creates more questions than answers for employees and, if a public company, stockholders. Stability in the upper management team (at least for 4-5 years at a time) says volumes about loyalty, stability and allows employees to recognize the upper management. Changing this team frequently says something is wrong internally. Not only do employees begin questioning what’s going on, these changes plant seeds that “maybe I need to seek employment elsewhere”. Operating a musical chair management team will undermine your ability to operate your business. It takes at least 6 months for any new hire to get his feet in a position. Changing critical management positions often means the person in the position never has time to get an understanding of what they need to get done. Worse, just about the time they are about to get something done, they’re being seen to the door.
You can’t operate your business with a constant stream of new people in critical management positions. If you aren’t absolutely sure the person is the right person, don’t hire them. It’s far better to leave the position vacant for just the right person than it is to fill it with a person you know won’t work out. Additionally, if you can’t ever find someone to fill the role to your satisfaction, perhaps you’re looking for answers in the wrong place. You might want to start by looking at yourself and your expectations of the role. If you can’t clearly define the expectations of that management role, don’t expect anyone you hire to magically gain this understanding and define it for you. That will never happen.
← Part 9 | ↓ Parts 10.1, 10.2, 10.3 10.4 | Chapter Index | Part 11 →
Rant Time: You gotta hate Lollipop
You know, I can’t understand the predilection for glaring white background and garish bright colors on a tablet. In comes Lollipop trying to act all like iOS and failing miserably at it. OMG, Lollipop has to be one of the most garish and horrible UI interfaces that has come along in a very long time. Let’s explore.
Garish Colors on Blinding White
Skeumorphism had its place in the computer world. Yes, it was ‘old timey’ and needed to be updated, but to what exactly? One thing can be said, skeumorphism was at least easy on the eyes. But, Lollipop with its white backgrounds and horrible teals, pinks and oranges? Really? This is considered to be ‘better’? Sorry, but no. A thousand times, no. As a graphic designer and artist, this is one of the worst UI choices for handheld devices.
If, for example, the engineers actually used the light sensor on the damned things and then determined that when it’s dark in the room and then changed the UI to something easier in the dark, I’d be all over that. But, nooooooo. You’re stuck with these stupid blinding white screens even when the room is pitch black. So there you have your flashlight lighting up your face all while trying to use your tablet. I mean, how stupid are these UI designers? You put light sensors on it… use them.
Stupid UI Designers?
Seriously, I’ll take skeumorphism over these blazing white screens any day. I mean seriously? Who in their right mind thought that this in any way looked good? Why rip a page from Apple’s horrible design book when you don’t have to. I’ll be glad when Lollipop is a thing of the past and Google has decided to blaze their own UI way. No Google, you don’t need to follow after Apple.
Just because some asinine designer at Apple thinks this looks good doesn’t mean that it actually does. Get rid of the white screens. Let’s go back to themes so we can choose the way we want our systems to look. Blaze your own path and give users the choice of the look of their OS. Choice is the answer, not forced compliance.
Smaller and Smaller
What’s with the smaller and smaller panels and buttons all of a sudden? At first the pull down was large and fit nicely on the screen. The buttons were easy to touch and sliders easy to move. Now it’s half the size with the buttons and sliders nearly impossible to grab and press. Let’s go back to resizing buttons so they are finger friendly on a tablet, mkay? The notification pulldown has now been reduced in size for no apparent reason. Pop up questions are half the size. The buttons and sliders on there are twice has hard to hit with a finger.
Google, blaze your own path
Apple has now become the poster child of how not to design UI interfaces. You don’t want to rip pages from their book. Take your UI designers into a room and let them come up with ideas that are unique to Google and Android. Don’t force them to use a look and feel from an entirely different company using ideas that are outright horrible.
Note, I prefer dark or grey backgrounds. They are much easier on the eyes than blazing white backgrounds. White screens are great for only one thing, lighting up the room. They are extremely hard on the eyes and don’t necessarily make text easier to read.
Google, please go back to blazing your own trail separately from Apple. I’ll be entirely glad when this garish-colors-on-white-fad goes the way of the Pet Rock. And once this stupid trend is finally gone, I’ll be shouting good riddance from the top of the Los Altos hills. It also won’t be soon enough. For now, dayam Google, get it together will ya?
Rant Time: No Survey For You
While I understand the need to ask for surveys or ratings or whatever after a purchase or talking to a sales or service rep, but give us a friggin’ break constant hounding. Flat out, I am not doing them any more.
Wasted Time
It seems that more and more places want to request surveys after having an interaction. Either they want vocal surveys over the phone after the call, place links on receipts or they want to send long and torturous Survey Monkey surveys. Worse, they are getting longer and longer and longer.. Worse, they’re getting to be so in-your-face with these requests now. These requests are way overreaching….and I’m not going to do any of them.
Yes, I’ll do them if I have a bad experience, but other than that, suck it up. I’m not doing it. So, don’t send me 2, 3 or 4 ‘reminder’ emails that I need to go and do it. Give it a rest. I’m not doing it. Worse, if you keep sending me these emails, I’m highly likely to mark them as spam, which isn’t going to help your email reputation. So, give that reminder thing a rest!
No intention of doing surveys
As the title says, not doin’ it. It’s a waste of my time to do these long survey forms that don’t really help me in any substantial way. If you want me to participate in your survey, why not give me an incentive? Like money off my next bill or a coupon for money off my next purchase? Seriously, how hard is it? If you really want me to do it, give me an incentive to do it. I’m not here to run your business for you. That’s your job. My feedback is likely to be tossed anyway. So, that 15-20 minutes I just spent on your behalf is a total waste of my time. If you want me to do them, then give me a substantial reason.
Bad service = bad review
On the flipside, if your service is awful, expect a bad review. So, you might not want to ask for them. Of course, if you actually intend to make your service better, then by all means ask. Not that I’m going to fill out a survey if the service is good. It just frustrates me when I fill out a survey and submit it to a company that has no intention of changing (Comcast, Verizon, AT&T, et al).
I get the reason for asking for these surveys, but let’s end this trend. Let’s figure out a way to get what you need in another way. Surveys don’t provide you with what you need anyway. You may think they do, but they don’t. In the end, they don’t work to improve things and, in many cases, fall on deaf ears. So, they’re pointless. For this reason and the lack of incentive, I’m not doing any future surveys and will decline them every chance. I also plan to start marking them as spam at every turn. So, I’d seriously suggest businesses start being much more careful when sending after-the-fact emails asking for completion of surveys.
Bottom line… no survey for you.
Apple Watch: A commentary
I had not planned to write anything about the newest Apple announcements, but I’ve decided there are few things that need to be said about the Apple Watch. Let’s explore.
Apple Watch
So, this is the one thing that’s on everyone’s mind. I mean, it basically stole the show, but not necessarily in a good way. Why is that? Let’s start by saying that phones are the new watches. Most people don’t need to wear watches any longer because the phone itself suffices for that purpose. I mean, why carry around two different devices each needing their own battery charges when you can carry around one? I think this is where Apple assumes their distortion field is enough to overcome people’s recent aversion to wearing watches.
It’s not like the Apple Watch has reinvented something new. It’s a bloomin’ watch for chrissake. Its most basic feature is to tell time. It’s not like that’s new or revolutionary. It’s all the extra bells and whistles that come along for the ride that make or break the deal. Are those extra bells and whistles worth it? For some maybe yes, for others likely no. I mean, if you don’t need the pulse monitor or step tracker and you don’t really plan to use it as an iPhone controller, then you’re cutting about 60% of its functionality right off the top. For the $349 price tag, that’s quite pricey for a bulky thick watch.
Yeah, it’ll have a music player, but how much storage? We’re not really sure yet. But, if I know Apple, it’ll go out on the cheap and we’ll get 8G or some piddly amount like that. Just enough to hold a tiny music collection, but not enough to really be useful nor is that storage in keeping with a $350 price tag. It might also play movies, but why? Who wants to watch a movie on that tiny watch screen? Not me. That’s why I bought an iPod touch, though I don’t really much like watching moves there either. So that’s why I also bought an iPad.
Watch Failure?
Adoption of this device will be tough for Apple primarily because it will be difficult to retrain so many people to embrace the need for the Apple Watch. I mean, people have done without watches for the last decade just fine. For those people who love to wear watches, though, the Apple Watch might appeal to them. But, at that price tag, it might not. I mean, you’re going to be wearing a $350 device on your wrist in addition to carrying around a $500 valued iPhone. After all, what’s the point in buying this watch unless you have an iPhone? The other problem Apple faces is name brand watches. There is no way Apple will push aside such luxury brands as Rolex, Cartier, Patek Philippe, Tag Heuer or others. For the person looking for a luxury brand, they won’t think twice about looking at their favorite luxury brand. The Apple Watch won’t even factor in other than just having it as a novelty item. I guarantee the red carpet crowd will still show off their Rolex watches and not the Apple Watch when showing off their newest duds waltzing down the red carpet.
However, there will be a core group of Apple early adopters who will invest in this technology from Apple just because it looks cool and is new. After those people are done shelling out the cash, what then? We may find that the Apple Watch fares no better than sales of any other watch brands, which are not doing all that well today (other than the super ritzy brands of which the celebs adore).
Battery Life?
Apple faces a whole new set of problems when introducing this new device. Obviously, the battery will be a big deal clincher for a lot of people. If the battery lasts 3-5 hours, that’s just not enough to be useful or you’ll be yanking that watch off your wrist to charge it up frequently. This would be the absolute kiss of death for this device. No one is going to put that much time and effort into keeping it charged constantly.
Knowing that this device has Bluetooth and possibly WiFi, both of these wireless protocols are absolute battery hogs. There is no way around it. If you have Bluetooth and WiFi enabled, you can say goodbye to any decent amount of battery life on a device.
For example, when I cut off WiFi and cellular data on my iPhone 4s, I can typically get at least 3 days worth of charge out of the battery. With cellular data on, you might get a day at best. With WiFi on, you’ll get a day at best. These wireless protocols are out and out battery killers. For this reason, that’s why it wasn’t on the original square iPod nano. And, the battery on the iPod nano (aka. first gen Apple watch) lasted amazingly long.
Overall
This new Apple Watch itself is bulky, and bulbous. Though, I like some of the features, like the less breakable crystal. But, there are things I don’t like, like the icon vomit on the main screen. It’s easily one of the most ugly eyesores I’ve seen on an Apple device yet. I’m also not sure that Apple can sufficiently overcome this last decade of training people to use mobile phones as watches. Apple even ironically ushered in this trend with the iPhone itself. Now they’re trying to undo this? Good luck. I’ll wait and see just how the sales do on this long term, but I’m not holding out much hope with this first version of the watch.
Perhaps Apple can fix a lot of these problems in the 2G version of the watch. Personally, I’d rather see them do a pocket watch edition. Now that would be more useful. The screen would be bigger, you can hold it in your hand like you do a pocket watch and it has that cool button at the top which could be used for so many things (including opening a flap covering the display like a normal pocket watch). Not to mention, there are many people who collect pocket watches over standard wrist watches. We’ll just have to wait and see how well this all turns out.
Random Thoughts - Randocity! 
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