The Makings of the MMO Microtransaction Model in the West

League of Legends

From the Wikipedia article on virtual goods and microtransactions:

[Microtransactions] are non-physical objects purchased for use in online communities or online games. Digital goods, on the other hand, may be a broader category including digital books, music, and movies. Virtual goods have no intrinsic value and are intangible by definition.

The last several years has witnessed a titanic realignment of revenue strategies in the Massively Multiplayer Online game domain.

For the better part of the last twenty years the dominant paradigm has been that of a subscription model. Asian MMOs, in large part driven by very different playstyles centering around Internet cafes, were the first to aggressively pursue an alternate model – microtransactions. Instead of charging a flat monthly subscription fee, this new model relied instead on innumerable smaller charges.

Some of these microtransactions were (and are) cosmetic or convenience charges, but many are, flatly, pay-for-power. In extreme cases, these microtransactions are de facto necessary to achieve success in the game. Through all of this, generally only about 10% of players in free-to-play (F2P) microtransaction-driven games ever pay a dime, it should be noted; the tactic is to make up for this in sheer volume, as F2P and modern provisioning games via online download mean a very low barrier to entry.

North America and Europe were much more reluctant to embrace this model, essentially fearing Western audiences would never accept the model. Back around 2009, Turbine’s Dungeons & Dragons Online was on a steady slide towards irrelevance as subscriptions were withering. Turbine made the radical – some might say desperate – gamble to convert DDO to a free-to-play (F2P) microtransaction model. The results frankly staggered the industry, with some reports suggesting that DDO increased its revenues ny as much as four times from pre-F2P revenues.

Money talks. Since Turbine’s gamble, the Western development market has undergone a sea change, with a majority of new MMOs being F2P, and even those that are not are increasingly relying on microtransactional revenue. What once was taboo and later became a sign of a failing game has essentially become convention with games relying on a subscription rapidly becoming outliers.

Since Turbine’s conversion of DDO to a F2P microtransaction model other games such as League of Legends (pictured above) have aggressively refined the model in the West, not to mention the burgeoning market in Facebook and mobile social games that overwhelmingly rely on similar models.

There remains resistance in the West to the F2P microtransaction model, in particular in the area of what is derisively referred to as “Pay to Win”, but more accurately should be described as “Pay for Power”. The more conservative elements of the industry have skirted this, frequently claiming to only charge for convenience and cosmetics (though many of these claims are frankly dubious).

The reality, however, is that while players are certainly willing to pay for convenience and cosmetics, these things alone struggle to bring in the revenue necessary to support a good-sized MMO development team without supplementary revenue from box sales (essentially the approach Guild Wars 2 is taking) or subscription sales in addition to microtransactions (the World of Warcraft approach).

Despite the backlash, however, there is already emerging data suggesting that the resistance is more nuanced than first appeared. Setting aside convenience and cosmetic microtransactions, there remain certain types of microtransactions that are both successful and acceptable to a majority of F2P gamers.

First, and probably most importantly, players rightfully resent double-dipping. If a player pays a subscription, they tend to be hostile to the prospect of nickel and diming with microtransactions that affect gameplay. Players are somewhat more tolerant of microtransactions on top of box sales, but the most acceptable model incorporating microtransactions is the model that relies solely on microtransactions; as a general rule, the microtransaction model does not play nicely with the other kids.

Second, players are generally willing to accept accelerants in the form of experience point boosts, gold/Magic Find boosts, even direct pay for resources such as is done with Star Trek Online‘s duty officer system. Technically, all of these things are in fact Pay for Power, but because the items purchased tend to be somewhat abstracted, they are more comfortably accepted by most players. (Also included in this category are skill or talent respecs).

Third, so long as there is some way – no matter how obscure, difficult or time consuming – to obtain a benefit in game, players are generally willing to accept its inclusion as a microtransaction, essentially considering it a sort of convenience cost since it is technically possible to acquire the benefit in game.

Fourth, players are generally comfortable to accept microtransactions that proffer tactical options that are different, but not necessarily superior to other options obtainable for free in the game. For example, ships, character classes, powers that have different – even with unique gameplay – but still numerically comparable effects are readily accepted, provided the playerbase accepts the differences as being truly comparable, something that can be a definite design challenge.

Fifth and finally, it is possible to offer Pay for Power items that are very marginally better – say, up to 10-15% superior to other items and benefits otherwise acquirable in game – that will be accepted, albeit more reluctantly. This last method does not tend to upset balance in a terribly significant way as measured statistically, but it does result in more pushback from players than the first four methods. Counterbalancing this, this final approach is by far the most profitable type of transaction with the lone exception of lockboxes/grab bags, something I will go into in a later article.

In terms of revenue, the F2P microtransaction strategy has injected new life into an industry that has been struggling as the world economy has tanked. In this case, necessity was indeed the mother of invention, and the result has been a complete realignment of the industry in the West. Despite remaining distrust, the fact remains that a large number of games that otherwise would have folded still live due to various microtransaction strategies.

There have been a lot of missteps along this path, and there remains quite a ways still to go, but it is possible now to see the beginnings of a set of approaches that will both allow for sustainable revenue in the Western market using microtransaction models, while also avoiding alienating a majority of players.

12 thoughts on “The Makings of the MMO Microtransaction Model in the West

  1. I am looking forward to the lockbox article. I think the MMO approach to coop/multiplayer itself is tanking more than the world economy can be blamed for the lack of subscribers. I think the classic MMO scheme is not as suited to the time constraints of the modern world and has to be adapted to give players with less time also an incentive to play. Star Trek Online does that quite nicely! World of Warcraft works despite all that, but see how much leveling speed has been accelerated over the last decade not only in WoW.
    I rather see a way to entice people to play to offer easy and convenient coop gameplay rather than following a very generic MMO Trinity approach a la EQ/WoW. Diablo 3 comes to mind, grouping with friends or others is SUPER easy and whatever people might think about the game and other aspects of it like the RMAH (Real Money Auction House), this is an amazing design highlight.

    I recent read EA’s CEO Ricitello say SWTOR is “fully going to embrace the F2P model.”
    He means like STO and LOTRO probably more F2P+optional SUB (how “optional”?)
    Blaming it all on the business model doesn’t make the game better. It had flaws.

    But F2P worked miracles for DDO and LOTRO in terms of revenue. At least for LOTRO and STO I can attest the games are really getting better with more money rolling in. Now I wonder if this helps SWTOR recover and make the unrealistic profit and player numbers they imagined. But it is IMO putting too much emphasis on the business model, the heavily story based game was played and enjoyed as long as people were following the story and then it was just WORSE than competitors, IMO.

    F2P games tend to have more players than people live on Earth, apparently make more money than purely subscription based games and apparently they are founded by 10% of the players. Those who play a lot subsidize 90% who don’t pay. Hey, I belong to the 10% and see a problem there! 😛

    People who find a subscription to be too expensive often manage to pay nearly as much if not more for not so micro microtransactions, but are fine with that.

    Why not offer new kinds of MMO or rather coop online play? Right now I see too many classic takes of the genre MMO trying to “innovate” by going F2P, which isn’t that novel by now anymore.

    • I agree that the economy tanking cannot account for all of the struggles that development efforts have gone through. I would suggest two additional factors as well:

      1) Increasing mean age in the demographics of gamers. Older gamers translates into (as a group) less time and more money. Games that offer people the option to essentially pay for time become a way of preserving some of the earlier experience without abrogating on new responsibilities. This is essentially your original point, I should note.

      2) No payment ceiling for those with money and social benefits to a game for those with no money – i.e., flexible monetization. A gamer who cannot afford to play a game is still a potential asset to an MMO because of the socialization benefits, specifically the retention benefit arising from in-game social networks. Gamers who have the money for subscriptions and love a game are absolutely willing to spend more if it enhances their experience or their friends’ experiences; subscriptions essentially cap this.

  2. Nice to see this article after our conversation on the subject. I think that you have a good handle on what players will and will not happily accept in terms of microtransaction models. I might say ‘reasonably acquire’ when it comes to the second point though; imagine the player reaction to the first round of Mk. 12 ground set drop rates, and the resultant furor had they been offered for sale simultaneously.

    As to the games getting better; in the case of STO, many longstanding problems remain unaddressed because the increased profit to be gained from fixing those issues is far outweighed by the revenue potential to be realized by devoting those same resources towards new pay-for-power content. You must also ensure that, as mentioned, any edge gained from powerful items is small; would you say that was the case with STO before you left Cryptic?

    • “Small” is very much in the eye of the beholder. That being said, the power differential between, for example, C-Store ships and their free counterparts historically – that is, pre-Fleets, and I only say that because I am far less familiar with the Fleet ship structure – was about 13% better as I recall the numbers.

      Personally, I think this is pretty modest and well within even a single standard deviation of the variation in effectiveness offered by player skill and tactics. That being said, for those who want a precisely even playing field, even 1% would be too much. Ultimately, it’s a call of philosophy versus business model.

      I found the setup to be tolerable given the constraints and structure of the game. Had I been building the game from the ground up with the C-Store in mind – and recall when STO was made this was definitely not even a glimmer in anyone’s eye – I would personally be inclined to make the quantitative difference comparable across the board, but to provide certain tactical options – perhaps something like the unique consoles – available only through the C-Store.

      I am a big fan of expansion through tactical flexibility rather than power curves, and that’s not the way STO was actually built. As a designer, one always has to work within the system one has.

  3. “it is possible to offer Pay for Power items that are very marginally better – say, up to 10-15% superior to other items and benefits otherwise acquirable in game – that will be accepted, albeit more reluctantly.”

    What is your POV on such items being offered in a highly limited fashion ?
    For example the “Bug” ship in STO .
    That was a “premium” lockbox item that was offered for a limited time , and there is no other “escort” type ship like it , and it is considered to be the “best” ship in PVP .
    I’ll note that I’m not interested in flying that ship , as I have a “Kirk-ish attitude” towards the Dominion (I don’t like them / don’t want to fly their flag , period) .

    But I am looking for an alternative escort — one that is comparable in maneuverability & resilience , and there isn’t any .
    Adding such a “one time” and especially “limited” item/power to a game seems a bit baffling to me .

    • Synergies are always problematic to anticipate, and internal estimates of the value of, say, a Commander Universal versus a Lieutenant Commander Universal, or a Lieutenant Tactical versus two Ensign Tacticals are intrinsically estimates and inevitably will need subjective tweaking.

      From a pure mathematical perspective – meaning, the above console and bridge officer seating estimates, combined with hull strength, shield multipliers, etc. – none of the lockbox ships was ever more than about 13% superior to the next best ship.

      Now, it is possible to argue context, as certain things are more or less valuable in normal play versus STFs versus PvP. Similarly, different individuals will value things differently. On top of all of this is the acclimatization period where players learn the best (and worst) ways to use new configurations.

      It is also, of course, reasonable to argue philosophy, or the value of something being 5% or 10% or 15% better. On this last axis, highly competitive individuals will willingly (note, I said “willingly”, not “happily”) grind/buy or otherwise to get even a +1% or +2% advantage. See, for example, the difference in cost on the STO Exchange between a Mk XII Blue and a Mk XII Purple.

      Ultimately, the question I think you are asking is “should” one offer such one-time items via a store or similar mechanic. Fundamentally, if a game is F2P, for the game to be viable there has to be functional, not just just cosmetic bonuses. No F2P game to my knowledge has managed to be profitable purely on the basis of cosmetic bonuses. (You can get away with it if you also have subscriptions, or also have a box price, but those are non-cosmetic benefits.)

      Now, the limited component is more debatable. The reason it is done – not just in STO but in F2P games of all stripes – is because it creates scarcity and urgency. Want this? Better get it now, or you may never get it. It drives sales and it does increase overall revenue; a company might opt not to do it for philosophical reasons, but there are no financial reasons I am currently aware of to not do it.

  4. >Now, the limited component is more debatable.
    >Want this? Better get it now, or you may never get it. It drives sales

    I guess I understand what you’re saying , but the overall supply strategy is what I find to be a bit curious .
    It makes me wonder if my perception is skewed by thinking that there is demand but no supply , when in fact it may be that there is demand only/mostly in the PVP community for that ship , as it has not been proved as noticeably superior against NPC’s .
    (it’s better to be sure , but not superior — unlike in PVP , where it’s turn rate+endurance does make it superior)

    Back to the issue of supply — there is definitely a lack of supply on the secondary market (when looking up the Exchange) — but as I’ve said , I am not interested in this ship , only in a proverbial equivalent … , which , seeing as Fleet Ships are now , is not forthcoming from the Starbase arena .

    As to your “Better get it now, or you may never get it” — you have to understand that for longtime STO players this too was a “new” concept (even if it’s not a new concept in MMO’s) .
    We had “limited time awards” from FE’s , but they came back sooner rather than later .
    I’m not sure the same argument can be said about the Bug ship , even if it did grace us for a short while not too long ago .

    I guess we were “spoiled” by more or less balanced ships up until the Bug ship … , but from what I understand (I’m not a regular MMO player) — there are single “special” items that are THE most powerful in other MMO’s as well .
    I guess that for now , the Bug ship will be our version of The Sword of QQ ! 🙂

    • At some point in the development of any game, there has to be made a decision as to what types or gradations of items/powers/abilities will be rewarded by what actions. Sometimes this decision is implicit, but more often the decision is very explicitly laid out, very early on in development.

      When you are at this stage, it isn’t really a design question, it’s a business strategy and philosophy question. That is, what do you want to reward? Time? Skill? Money spent?

      If you have a game model that is, say, subscription or single box sale based, then one of these (money) drops off the table and it becomes a question (very vehemently argued, let me note) between time versus skill (and, occasionally, other things, but those are the big two).

      There has been a seachange, however, in the modern game development market that is attributable to the fact that unless (and maybe not even) you are in a market leader position (read, you are Blizzard, if we are talking about MMORPGs) you will make more money and have broader market share both if you adopt a F2P model with functional microtransactions than if you rely on a subscription or single box sale model. Hands down. The numbers aren’t even vaguely close.

      It is very rare for a developer to be able to self-fund, so most development efforts are done via investors, whether through a publisher or venture funding or angel funding. Investors look at the numbers, and it’s not surprising they fund those efforts that rely on the model that is more likely to bring them a return on their investment.

      Now, that being said, there are still a great number of variants in pursuing a microtransaction strategy. Straight buy from a store? Buy from a lockbox-style arrangement? Buy boosts that essentially accelerate your time, and base it off of a time mechanic?

      Some of these players will rebel against. Some of these won’t bring in as much money as others. Some of these may even run into legal complications (though I do think the chance of this has been greatly exaggerated by misunderstandings of the law). Some of these will negatively impact games and make them less viable over the long run. Some of these will constrict design, and in so doing may lead to entirely new and potentially cool design mechanics that nobody’s thought of because before this they didn’t have to.

      What is helpful to understand right now is that F2P has a lot of structural benefits as a business strategy that mean it is unlikely to be going away. What hasn’t been settled, however, are the best ways to leverage that. What we are seeing right now in the industry is a ton of experimentation as to what works financially and what players will accept. It will finally settle out, but we aren’t likely anywhere close to that point yet.

  5. While I don’t mind the idea or practice of micro-transactions, I object to feeling like I’m being fleeced by them. If there is something to be bought, I’d much rather just be able to buy the stuff I want. I don’t want to buy a chance to get something I want, and possibly spend hundreds of dollars or more to get it. I just don’t worry about it at that point, but I know people that will and do participate in the lockbox/grab bag system.

    I also object to having an item that costs real money plus other in-game currencies/commodities to acquire. Again, if I see something I want to buy, just let me buy it. I don’t go to a shoe store, pick out a pair of shoes, then search the store to find “shoe points” to add to my money to buy the shoes. I pick out the shoes I want, and pay for them. When I played Perfect World Int. I believe it was that way as well. If you wanted a c-store item, you bought it. It may have changed since then as it has been a few years, but I like that model. They may have had special boxes as well, but if they did I don’t remember and didn’t buy them then either.

    So yeah, while I don’t mind the microtransaction model, I don’t like the implementation of it in some games such as STO. If a company wants me to buy something, just let me buy it. Don’t make arbitrary conditions/requirements or milk me for everything I’m worth or willing to give. If I find value in it, be it cosmetic, sentimental, or functional, I’ll buy it. They’ll still get my money and I’ll be a happier player for it. If I feel like I’ve wasted my money by spending a large amount of money to not get an item I want, or if I feel like it’s just a “money grab”, I (and I’m guessing others like me, which might be the minority lol) am much less likely to want to spend my money with that company again, or even to spend it at all in the first place. Especially since all of the shop items are digital creations. Once they are made they are infinitely copy-able. The sense of urgency they try to create is something that is a sales tool for retail and other physical goods stores that like to advertise limited quantities, but with digital goods the quantities can be essentially infinite, only limited the company to try and drive sales in the short term. Then again, even physical goods stores have time limited sales to create the sense of urgency even if quantities aren’t an issue, but at least with them if you find you don’t like the product, you still have the ability to return the item, which is something I’ve never seen a game with microtransactions do.

    • Very fair comments.

      Personally, I don’t have a problem with a system where you don’t know exactly what you are going to get, but you do know that what you get will have value, if not to you personally, then to someone else you can give/trade/sell to.

      So, I don’t have a problem with CCG-style packs such as the duty officer packs; you don’t know what you’re going to get, but there’s a definable value. Pure lotteries, on the other hand, where there is a tiny chance to get something really good but a very high chance you will get something worthless, I think is bad longterm business, honestly.

      The STO lockboxes were always intended to be a combination; that is, you get something with definable value but you also get a tiny chance for an unexpected bonus. Where STO has struggled – and I think is starting to find its footing – is in understanding what players genuinely find valuable that can also be handled by the game system.

      The early lockboxes had, in my personal opinion, high ceilings but low floors. The basic duty officer packs had low ceilings but high floors. The Reinforcements Duty Officer pack and the limited edition Gamma Quadrant packs had high ceilings and high floors, and thus they worked well both business-wise and in the realm of acceptability to players.

      That being said, I tend to agree with you about wanting to simplify the purchase systems in not mix in game requirements with out of game requirements, though I do think some situations may unfortunately demand that sacrifice.

  6. I agree with def monkey, and I am seeing what STO was doing better after reading your reply. I for one enjoy the duty officer packs. it’s just like a ccg and I do have a problem about spending money on those in particular. The lock boxes too me just felt like a lottery. the difference i’m seeing with these two products are the duty officers advertised that yes, you where going to get a random item, however you knew how many and of what quality you where going to get. The lock boxes advertised the best product, but you never knew what the odds where going to be, nor what if anything else you where going to get.

    I know this is beating a dead horse, if there is a way you can relay this information, I think that keeping with duty officer type offers, will pay more dividends in the long run.

    • Cryptic in general, and Geko and Stahl in particular, are very much aware of this. There are a lot of competing interests in that kind of decision, which is why the progress sometimes can seem from the outside to be slow or move in odd directions.

      I am obviously not privy to anything currently being discussed, but at the time of my departure from Cryptic there was a growing awareness of the need to raise the floor. The specifics on how and when this is carried out are still, I think, a work in progress and subject to a number of additional opinions on the proper strategies.

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