Friday, April 25, 2008

Making Micro-Transactions Work

I've been very negative on the idea of micro-transactions in the past because I see too many parallels between them and the video arcades of the past. In fact the idea of being nickle and dime to death is still very common in our culture. I've seen it pop up in commercials for banks, cell phone providers and basically any industry where people think they can charge more by splitting fees into smaller increments. The free to play MMO's out nowadays are nowhere near as bad as big businesses in using small fee to extract overall higher prices from their customers. Still I think most gamers want to avoid them the problem by sticking with the subscription model.

Plus at the moment there doesn't seem to be a general consensus on where its okay to attach micro-transactions to a game. Some companies attach fees to fluff items which only allow players to better customize their avatars. Others work micro-transactions into their core game play so that those willing to spend money can level faster or have less severe death penalties. Others like Puzzle Pirates are quite honest and allow customers to play either on a micro-transaction server or a subscription server. There's a wide array of choices out there and that in itself is probably making gamers more comfortable with the subscription model. If companies really want to see a micro-transaction model catch on there needs to be a couple of common ground rules.

1) Players shouldn't be able to spend money directly to do better in the game.

2) Attaching fees to fluff items is if but isn't going to be strong enough to make money by itself

3) The game has to be as well thought out and executed as most subscription MMOs.
The problem is trying to come up with a method of charging players without making it look like they are buying a "win" in the game. Current methods of making death penalties less severe or allowing players experience bonuses seem unfair to some people since it allows money to skew the leveling curve. Also micro-transaction games are always going to have some players who stick to the free portions of the game no matter what. This isn't a problem for the more popular free to play MMOs since it give them inflated numbers for advertising purposes.

There is one method for using the micro-transaction model which might actually meet all of the ground rules. The game Saga uses a booster pack model to let players buy additional troops and spells. Saga is unlike most MMOs in that its based on real time strategy games instead of role playing games. I haven't heard much buzz about the game which leads me to believe it's not that well executed. But I do admire their payment model which seems to relate micro-transactions to something most gamers are more familiar with, collectible card games

Games like Magic the Gathering have been using the booster pack model for almost a decade and people seem comfortable with it as a form of micro-transaction. While players can spend a lot more money to increase their number of cards its not a guarantee for success. Random luck and strategy factors in each match along with card selection. Of course this is hard to relate to most MMOs which are based on a DIKU model of getting more and more powerful items. Still it hints at how current micro-transaction models can be modified to produce something gamers are more open to accepting.


Johan said...

I think the issue isn't whether gamers like it or not, it's whether companies will be too entices with micro transactions to care what we think.

I used to work for an online virtual world/game and our primary source of revenue was micro-transactions. We originally had a pure play subscription model, but the lure of the micro transaction was too much for the company. Essentially, subscriptions was money in the bank, but there is a cap on the amount of money each user will generate. Their LTV is pretty set, which accountants love, but the executives don't.

With micro-transactions, the LTV of users was pretty much predicated on the production and marketing thrown at users. Better product (or as is often the case, better marketing) meant that the LTV of a user was no longer pegged to a static value as it was with subscriptions, but was rather a fluctuating value that, if the right levers and buttons pushed, could generate more revenue for the company.

Coming from the business side of things, I know that these debates happen almost daily, with product people pushing for a pure play subscription model, and the executives/marketing people pushing for the micro-transactional model.

Another aspect that both product and business people can't deny is the simple fact of barrier to entry. Both want a low barrier to entry to paying for their product. With subscriptions, that barrier is high since you're usually asking people to shell out cash one month to a year in advance. This usually means the price points have to be higher.

With micro=transactions, since the company will be acquiring revenue from the user a little bit at a time, the barrier of entry looks to be less since the user is confronted with a time line of usually NOW and a price that is considerably smaller than that of a subscription model. The fact that to get all of the stuff usually costs MORE doesn't matter to the typical user since they can't think that far ahead.

From a company's standpoint, there really aren't too many cons to outweigh the pros of going to a micro-transactional model. The ones that I can think of off the top of my head are 1) user backlash, which can be mitigated if handled with a proper plan laid out by marketing and community managers and 2) development will have to continue at a high rate of speed to keep up with the adoption of items by the user base. If items are bought at a high rate, there will be more pressure to create similar performing items sooner rather than later, this pressure coming from both the company and the user base.

From the looks of it, the gaming community is working well to fight off the adoption of micro-transactions (see EA) but I fear it's going to be an uphill battle here on out. The first protest is always the loudest, but who will protest when it's the 50th time?

Scott said...

I know there are some F2P games where you actually do buy gear that makes you more powerful, but they must be in the minority. All the ones I've tried sell things like potions, resurrection scrolls, etc. in addition to "fluff" items like clothing, cloaks, pets, etc. Granted, usually in the higher levels those potions damn near become required to survive, but there's no "I paid $25 for the Uber Sword of Uberness" garbage.

As long as the finances are balanced, I'm ok with introducting micro-transactions in certain areas to the 'western' audience. EQ2 charges for a couple content packs. Vanguard charges an extra $2 (I think?) monthly for additional info on your page. Guild Wars sells character slots and skill packs.

I'm fine with paying a few dollars per additional character slot over the normal amount. Paying extra for a small downloadable content pack ala EQ2? I dunno... if they're going to create that content anyway, just release it, it's not like all the players ever get to see all the content anyway. If I pay a dollar or few for a cute non-combat pet, whatever. Maybe charge a dollar (something cheap) to learn new crafting recipes when you level up? EQ2 and LOTRO both let you set up "appearances" where you're displaying clothing or armor other than what is actually providing stats -- they could charge a dollar or few for that too.

BUT -- this needs to be established from the first moment in-game. No "you get free skills when you level until Level X." And if a subscription is also involved, it needs to be significantly less than we're paying for our "real" MMO's currently. (Despite the fact WAR seems to think it will get away with raising the fees to a new high)

We complain about the micro-transaction model, but we also complained about the subscription model back in the day. Now we're accustomed to it. We pay monthly for cable or satellite then pay an additional fee for Pay Per View and I never hear any rabid outcry about that. (Then again, I don't hang out on cable/PPV forums...) There are millions of Xbox Live users who do micro-transactions to play new content for games when it's first released. The content goes free (usually) 6 months later but still... a LOT of people pay to play it right now! Xbox Live also rents downloadable movies, that could perhaps be considered a micro-transaction on top of the XBL service itself.

The final issue is quality. Westerners look at all the (eastern) F2P games and say they're crap, therefore the whole F2P system is crap. The eastern audience apparently enjoys the grindathon gameplay the western audience despises, so for us, F2P is indeed crap. It will take a well-designed western game by western developers to pull it off, and I suspect they won't be able to just jump in with both feet and say "our game is micro-transaction only!" They'll likely have to slowly introduce us to the concept -- with a proven, fun, quality game -- before we, as players and consumers, adapt our own mentality to a micro-transaction model.

Mr. Gamer said...

As a gamer, I will fight micro-transactions in games tooth & nail. I will vociferously protest and denouce any such development in any game I care about playing. I will boycott the ones that go ahead with it. No amount of marketing will help. I don't care if Jusus Christ and Buddha team up to create the ultimate gaming nirvana-paradise -- if it uses micro-transtactions, I won't be playing it.

1. One of the reasons I play games is escapism from the real world where the economic and social conditions are extrmely unequal and things can oftem seem stacked against you. I don't want to be 'owned' by someone in the game simply becuase their money grows on trees.

2. Right now, while being commercial products, games are designed by the people primarily interested in creating a fun experience. One micro-transactions take hold, bean-counters will move into design in force. Soulless PHBs will shuffle Powerpoint slides with impossible revenue growth projection graphs around meeting tables. In thier "creative" cretinism, they will force the developers to attach micro-transactions to every vital game aspect until it's more torture than game. This is a road to damnation. Look at what big game publisher consolidation and the corporate induced sequel-itis have already done to gaming!

Mr. Gamer said...

I don't think that a micro-transaction payment model would necessarily generate more revenue than a subscription-based one.

In a subscription model, a customer only has to make the decision to pay once: the subscription will renew itself every pay period unless action is taken to cancel. There is no perception of paying more, no need to force a new sale every time. This results in good cutomer retention and steady, predictable revenues for the game operator. As long as the market for new players is not exhausted, strong customer retention also means growth for the business.

On the other hand, when micro-transaction are introduced to either replace or augment the subscription fee, the customers will evaluate each transaction in terms of whether they really want to play what they've already paid and that much more to continue playing or would it be better to quit. This is likely to result in much poorer customer retention than in the subscription-only scenario, unpredictable revenues, and weaker growth.