Tuesday, September 12, 2006

Micro Transactions vs. the Subscription Model

Some of the thoughts coming out of the Austin Game Conference revolve around the discontinuation of the subscription model for MMOs. Several games already exist that make use of different pricing models but for the majority of MMORPGs the subscription model is still king. Publishers just aren't that anxious to abandon what's been the industry standard since the days of Ultima Online. However, there are factors such as rising game costs and increasing casual gamer numbers that are pushing for a change in revenue models.

Most of these alternative revenue models seem to involve a form of billing which is commonly called micro-transaction or micro-payment billing. This involves setting up a series of small bills which are applied only when the customer wants to access a specific part of the game. Usually the base game is provided for free which means there is almost no cost of entry to playing. Three Rings, the company responsible for the Puzzle Pirates MMO, has set up servers using both the subscription and micro-transaction model.

Their subscription server works normally with players paying a fee either monthly, quarterly or yearly to access the game. The micro-transaction server requires no commitment though and players can log onto it and experience the beginning parts of the game for free. Once beyond the initial puzzles and items though the game starts charging a mixture of in-game and real world currency. The real world currency amount is small but accumulates the longer the person plays. This way players that put more stress on the game end up paying more then players who only casually sign into the game world.

While the Puzzle Pirate MMO is a sign of willingness by independent publishers to experiment with alternative subscription models, most large scale companies are less enthusiastic. That's perhaps because if you examine the micro-transaction model you can find a few flaws that don't quite scale well for a large scale North American MMO.

Micro-Transaction Flaws for Publishers
- Griefing capabilities increased since the cost to the player of a banned account is nothing
- Cost to Hardcore player base much higher which will influence most reviews of the game play
- Risk of Real Money Transfers happening outside publisher control are much higher

There are also some benefits to the micro-transaction model which could complement some growing trends.

Micro-Transaction Benefits for Publishers
- Players are never confronted with a big bill
- Casual players would pay less for access and are the largest growing market segment
- The payment process is more complex which allows publishers to easily raise revenue without an obvious price hike.

The benefits of the micro-transactions model for players are much less clear. Sure casual gamers would be charged less for playing their game then hardcore players. Yet the micro-transaction model makes it to easier to hide charges for the game. It might be that both types of players end up paying much more then what they were paying under a subscription model. Eventually publishers would be tempted to put fixes and necessary updates behind mircro-transactions. Not to pick on SOE or anything but lets use the Legacy of Ykesha expansion for Everquest as an example.

The Legacy of Ykesha expansion made huge improvements to the banks in the game and effectively allowed the pulling of resources between a player's characters. Anyone who didn't buy the expansion didn't get these improvements even though they were more in line with game fixes then new content. In fact this expansion had very little new content except for the bank changes and a new playable race. If a company was willing to hide an update behind a expansion cost then you can be sure they would do it behind a micro-transaction. Companies are in the business of making the most amount of money they can without losing their customers. In my opinion it seems as if this revenue model allows publishers to squeeze their customers harder without them noticing.


Tide (Adam MacDonald) said...

yeah I think you're right -- tiny charges are easier to dismiss and ignore on a CC statement. The thing is they do add up as you noted. I don't know yet what might happen in the West, but people like me are still more comfortable paying for a subscription for something we enjoy. Like several designers have said and repeated at the AGC, MMO's reward devotion (not skill). Keeping a subscription is a means for a person to reinforce that, and even with a longer term subscription they can create a more lasting token of that faith in the provider/title. Thing is like you were suggesting, there's nothing else for the people like me who wouldn't checking in every few months maybe. With disk size at a premium we can keep several MMO's without a problem and it would be nice to dip for only one session if only to see if gameplay is different etc. Micropayments would enable that.

Relmstein said...

I just wish we had more information on alternative revenue models. At this point its all guesswork and personal opinion. Puzzle Pirates is decently sized at around 40k active accounts but it's a non traditional MMO so most publishers won't look at it as a trendsetter. Yet after a couple hours of searching they seem to be the biggest MMO that uses a non subscription revenue model. I would love to get my hands on their earnings reports and compare the subscription and micro-transaction servers.

Drinkitt of Cho'gall said...

Companies are simply never going to implement a system which makes them _less_ profit than the current system.

This means that if they change to Micropayments, you can be assured that sooner or later both casual and hardcore players will pay more than they do now.

Who in the financial department of these gaming companies would approve a business plan that gave them less profit?