Rants tag

Rants, ruminations, and rambling remarks from my mad, muddled, meandering mind.

Tuesday, January 7, 2014

Station Cash Makes the World Go 'Round

If you are reading this post through RSS or Atom feed—especially more than a couple hours after publication—I encourage you to visit the actual page, as I often make refinements.
My Feedly has blown up with folks talking about SOE's recently announced changes to their subscription policies; specifically, how Station Cash is doled out and accumulates. Bhagpuss offers a perspective from across the pond; The Ancient Gaming Noob has an excellent analysis; and Syncaine has jumped on a comment to that post to illustrate the seeming absurdity from the player perspective. Unfortunately, it is not the player perspective holding sway in this situation.

Far from being the nefarious plot some players may think, the accumulating SC has apparently been wreaking havoc with SOE's IRS accounting. Responding to some questions about accounting rules, I offered these possible explanations on Syncaine's post:
The difference is that, unlike cash equivalents (e.g. gift cards), SC points are not any kind of real currency, especially since you can't get a refund on them. They are [the "good" that] you have purchased. From an accounting (and tax) perspective, any item that you redeem using them is irrelevant to the transaction. And the fact that R&D costs the company money in February is also irrelevant in January. The mount in [Rohan's] example earned them no direct profit from an accounting perspective.

It might also help to think of the items in a cash shop as services rather than goods. If, by way of a gift certificate, you pay in advance for a massage, the tax, etc. is recorded at the point of sale, not upon redemption of the service, even though the (labor) cost of the service occurs [at the time of redemption]. When buying SC (or other cash-shop currency), you are paying for a future service in the form of the intangibles you later redeem from the shop.
I could be totally wrong in the details, after all, the "service" could be represented on the books as a liability (like accounts payable) that will be expensed later. Accounting is complicated, and the potential penalties for screwing it up include loss of investor confidence, criminal fines, and jail time. So we want our favorite game developers to get it right. :)

EDIT: Something just occurred to me, that strengthens my "service" argument. If the items in the cash shop are simply code to be copied and applied to the player's account, where is the inventory? If inventory is not involved in the transaction, is that not a service? (Although to be honest, I subscribe to the economic perspective that there is no such thing as "goods." Whatever you pay for is really a service rendered.)


  1. I know the company my wife works for does their accounting in such a way that until services are completed, the money does not count as profit on the books. In other words, some customer pays them for service X and gives them a check for $50,000. Even though they deposit the check, and the company has the funds in the bank, they do not show it as a profit until service X is completed. If the customer delays a year in implementation - profits are delayed a year. I am told this is at least in part because they are a publicly traded company and it helps with transparency or some such. This could be the problem with Sony - all that SC is showing up on the wrong side of the books and thus acts negatively on their stock prices to the casual observer.

    1. Yes, the money paid would show as an asset, while the service not yet rendered shows as a liability. The revenue/expense equation occurs at the time of service. But, as I brought up in the post, what if the SC is the service or good, not the redeemable items?