[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.