Sunday, May 31, 2009

My Take on Microtransactions

There's been a lot of buzz about microtransactions recently, as a lot of 'free2play' games are basing their revenue models around the concept, much to the dismay of a bunch of users. I tried to cop out of this article, and mail the general gist of my take on the topic to Tobold, hoping he'd pick up on my general vibe and run with it. He already has a bunch of stuff on the topic under his belt, but he told me to knuckle down and do it myself, so here goes my long winded exploration of the subject.

For those in the audience with ADD: People basically hate microtransactions, and any implementation of them is doomed to fail. What people don't hate (and actually love) are playable demos. I think what we have here is mostly a war of words and preconceptions.

My first memory of microtransactions ever coming up was when Penny Arcade was talking about some guy named Scott McCloud, and how he had this idea about how to make money from his webcomics. He doesn't make funny-ha-ha webcomics like Gabe and Tycho, but big 'serious' webcomics. They're only in the same category as Penny Arcade and Chainsawsuit because they're published on the internet. He basically was exploring the medium of web based delivery, and was fiddling with the idea that a webpage basically has no border. An image can go on forever, and he called this concept the 'infinite canvas'. Needless to say, there was a lot of images on his site. He was an early proponent of microtransactions, and I can only guess that it had to do with the fact that bandwidth (and hosting) wasn't free. He obviously wanted to be compensated for his comics, and recop some of the cost of just 'throwing them out there for the masses'. Penny Arcade doesn't charge to view their own creations, but they run ads on the site. Tycho picked apart the microtransaction model on a few separate occasions, but I think it's summed up pretty well from an article I found from December of 2000 by a man named Clay Shirky, which I'll lean on pretty liberally from here, as all of the points still apply.

The article itself is worth a read, because it clearly illustrates many of the problems facing micropayment acceptance, and was written almost 10 years ago. One of the main problems is that there's a level of anxiety associated with ANY purchase, no matter how small, and micropayments try to make each purchase so small as to be associated with the 'it's basically free' section of our brains, but then another section speaks up saying 'well if it's basically free, why isn't it totally free?'. People are much more comfortable and accustomed to buying a pack of gum on Monday instead of 5 single sticks from Monday to Friday. The newspaper analogy is used as well... I personally find sports completely boring, and find reading box scores to be as exciting as watching paint dry. I'll read world news, and maybe the entertainment section. That's just my style. But the newspaper doesn't sell each section for 5 cents, they sell the whole thing for 50. If you do the crossword, great... it not, whatever. You buy the whole thing, and whether or not you get your 50 cents worth is totally in your hands at that point. Selling each paragraph for a penny, and hoping you read 50 paragraphs is sloppy. It would be a huge headache for the newspaper and the consumer. Simple is better. Chris Rock might argue otherwise.

People prefer to have regular billing cycles, or make flat purchases. There are certain situations where micropayments apply, but you probably don't even think of them in that manner. The electric company. Buying a stamp to mail a single letter. These are all industries which control their markets, though, and the system is so ingrained that we aren't even aware we're conducting a microtransaction when the gas bill arrives. Our gaming habits, on the other hand, have primarily been 'buy the nintendo cart, and play it till the wheels fall off', or 'subscribe to the MMO, and play it till we die in a Korean net cafe'. Getting your peanut butter in our chocolate isn't delicious, it's annoying.

Again, the basic gist is this:

The Short Answer for Why Micropayments Fail: Users hate them.

The Long Answer for Why Micropayments Fail: Why does it matter that users hate micropayments? Because users are the ones with the money, and micropayments do not take user preferences into account.

This is perhaps the most elegant summing up I could find. Who cares why we hate them, we just do. This is the same for in game advertising. When EA expects us to pay for Rainbow Six: Oklahoma, then ALSO expects us to not be pissed when the barns there have full size Dorito ads on the sides of them, they're just burying their heads in the sand and pretending they don't hear us. They're trying to have their cake and eat it too, and as long as we buy the game, they're getting away with it. This isn't about in game advertising though, so let's not get side tracked...

I think one of the main things 'wrong' with microtransactions is that many people have the same negative reaction to them. They feel like the developer is double dipping our funds, because we already bought (or subscribed to) the game. It isn't fair for them to charge us again for new shoulderpads or a fancy flaming sword. The problem with this, though, is when the game in question is supposedly "Free2Play". This is where the war of words comes in, and this is the main point of the article.

Let's take a step back, and think about it again. Look at the following words, and see which one you 'like' better.

1) Free2Play

2) Playable Demo

It's pretty simple right? A demo is free, and allows you to try out a game with no obligation to buy it. Free2Play, however, has a negative connotation... these guys are eventually going to start asking me for money, those scheming bastards.


But that's exactly what a Playable Demo is, too. The company is hoping you'll like the demo, and go buy the full copy. A game like FreeRealms requires no money, no credit card, nothing to set up and get rolling. If you just honestly hate the game, there's nothing forcing you to buy anything in it. But some people still refuse to even try to out because it has the words Free2Play attached to it. I think Free2Play just has a shitty stimga attached to the name. I personally think the "2" is just insulting. Let's take another look at a similar producte category: Shareware.

id software's Doom was essentially Free2Play. You could download the first ten levels for ZOMGFREE, and play the hell out of that content. People loved the game so much they rushed to the computer store to get the full copy. There was no big hooha attached to the 'demo', it was pretty obviously a hook to get you interested, but people loved them for it. When did the perception shift? When did we get pissed at people trying to show us their game for free, and then charge us for the full version later? Tobold's main issue with Freerealms was that the bought items made the game trivially easy. There was no point in trying to earn anything when you could plunk down $2.50 and get a Cuisinart Flamey Royale that would utterly destroy foes. I think that's more of a balance issue, unless they're really trying to ruin the challenge for those that have money. This borders dangerously close on RMT and buying gold. I've said it a few times before, but I really don't give two squats who buys gold. So what they can buy BOE epics off the AH. Big Deal. It's not endangering my enjoyment of the game in any way, but then again I don't stand around inspecting people and crying about what I discover in Trade.

Again, side tangent.

The fact is that at some point, everyone got pissy about developers wanting to be paid for their work. I like MMOs, but I'm pretty stupid. My mind is tiny, and can only focus on so many things at once, so I only subscribe to one game at a time. Right now it's WoW. That's my 15 bucks a month. I was interested in FreeRealms, though, and bought ten bucks worth or Station Whatevers. Using that same currency, I 'bought' one month of (the full, unlocked) game time, a booster pack for the TCG, and a pirate hat. In my own mind, I would see no issue with putting 15 bucks a month into my wallet in FR, and buying the month of play (only 5$), and 10$ worth of 'toys' each month assuming the game entertained me as much as WoW does. It doesn't really, though. I kinda like the mining minigame the best, and that's pretty much it. I also think the mining outfit is horrendously cute, and prefer to run around wearing that anyway. What can I say, I play a pretty girl online. As far as I'm concerned, I could park myself at a tin vein, let my subscription run out, and just fire up FR anytime I wanted to play the mining game. That would never cost me another dime, and I didn't need to steal any software to get it.

I mean, that's a pretty good deal... right?


Mordiceius said...

I don't have a problem with microtransactions as long as everything purchasable is achievable in game without purchase. At that point, you are just spending money to save yourself time.

I could go do Naxx for Betrayer of Humanity, or I could go pay $5. And then everyone is happy.

Tragedyx said...

Battlefield Heroes. I beta tested this game and would repeatedly level up and get awesome new stuff, only to have it repeatedly wiped, only to do it again because it was fun. Then the release hit and the "Game" was free, but to wear clothing you needed to pay real money. Yes, if you didn't pay money you ran around in default clothes. In order to be naked you actually needed to spend money for a naked skin. Also, you needed to "re-earn" everything every month. So it wasn't enough to "Spend money on clothes and spend earned points on weapons". The items had a duration, so you needed to rebuy them every month. It turned the game from "Fun" into "A bigger timesink than WoW". What fucktard ass Dev had the great idea "Let's make them re-earn all the shit they just spent a fucking week worth of playtime getting every fucking month."

Long story short, I made a huge post on their forums detailing how terrible of a mistake they made, not only for the people new to the game (Which was my target audience), but how they had completely not taken anything as far as advice from beta testers and managed to catch the eyes of quite a few people, pulling them out of the money sink that was sure to become, as well as pissing off EA a bit. Needless to say I no longer play.

If it was "Buy this game for $50, play online 'til your head explodes and you develop carpal tunnel" I would have loved it. But it wasn't. Microtransactions seem deceptively greedy.

Rich said...

I played Heros once or twice, and it was fun, but I had no idea everything would wipe. what a horrible system... then again, I imagine in their eyes, they see it as a subscription of sorts, but people don't subscribe to FPSes.

@Mordiceius: so you don't have an issue with gold buying either, then. I honestly don't, because as you mentioned, it's totally obtainable assuming you have the time to dump into it. On the other hand, someone with less time should be able to spend 5$ for flask and repair money, instead of being forced to do dailies. no matter how trivially easy you think they are, it's still TIME, and perhaps Jill only wants to raid with her 4 hours of playtime.

Mordiceius said...

I think that I only hold the pro-microtransactions stance against BOP items. If you go buy a betrayer of humanity for $5, it is not affecting anyone. If you go buy 1000g for $15, you're affecting the economy of the server and infusing more money into the economy than should be there.

I think you should be able to have microtransactions for BOP items but not BOE items or money.

Furthermore, you should only be able to buy those good items after a period of time that they've been obtainable. Lets say give 1-2 months after a new raid has been released before you can buy those items via microtransactions.

Anonymous said...

Well, so far, I'd say microtransactions haven't been a failure. There have been a lot of failed implementations, and attempts where things have been done badly, or simply that the MT aspect was over- or under-balanced (and not worth it either way).

But there *are* a fair number of successful games and such running off the model right now - so it is manifestly currently a success for some (though there are others I might not touch with a very long stick).

Some are breaking even, some are making a profit. A couple seem to be really happy (though its a bit hard to tell, since they don't seem to be able to hear us over the thunderous roar of money being printed).

Doomed to fail in the future? I'm not seeing that at this stage. I'm not suggesting you're *wrong*, necessarily. I don't see why existing successful implementations must necessarily fall-apart in the future.

Anonymous said...

I think you misunderstand the economics of the situation. Comparing free2play to Doom is apples to oranges. In a playable demo, the developer is dealing with sunk costs. Once the game is done, that game is done. Once his cost of production is covered, all additional gamers are simply profit. This is the same reason why airlines can sell some seats much more cheaply than others; once their fixed costs are covered, each additional passenger is pure profit. And $10 profit for filling that seat (or selling that game) is better than none.

On the other hand, in a game that is on-going, developers not only have to cover sunk costs but the on-going costs of bandwidth, servers, as well as additional game development. Rather than filling the seat with a guaranteed profit maker, they are often filling the seat with a net loser. This is the same reason why so many airline went out of business here in the States a few years ago. The ratio of their variable costs to their fixed costs spun out of control due to high oil prices and the couldn't raise fares fast enough to cover.

The net point is that while both shareware and Free2play might be free upfront, the resemblance ends there. In fact, the nature of the business behind the scenes are very different and are thus driven by different economic imperatives. With playable demos, the goal is to cover fixed costs. With Free2play, the goal is to cover variable costs.

Rich said...

yes, but BOTH of their goals is to get you to pony up money in the end.

In that sense, viewing the negative "free2play" game's FREE portion as anything other than a Playable Demo is silly.

Yet people will download a demo without thinking twice, but are leery about diving into a F2P game for whatever reason. Maybe because a demo has a distinct end to it (level 1 is over, please buy the full game!) where a 'demo' of FreeRealms just keeps going on forever, and you just run into the boundaries more often than once, and that creates anxiety.

Larísa said...

I loved your summary why microtransactions fail. We just don't like them.
My reason for not liking it is that it gives me a headache. I'm sick and tired of making choices in real life. I want my gaming to be simple.

It's the same as if you go on holiday if you're just tired and worn out and got small kids and don't fancy finding the perfect restaurant or the perfect place to stay every day. There is a reason why charter and all-inclusive are so popular. It allows us to relax and enjoy without bothering too much about anything.

Nogamara said...

Your reasoning of people not liking imho highly interferes with any game that's billed per hour. When I played Ragnarok Online, the "30h for 6 EUR" was one of the most popular plans.

OK, in the end for the people not playing hardcore it was playing the game for month for a few bucks less than the normal 12-13 EUR/month, but it's still only a microtransaction, when you see the 6 EUR as an account to draw from, much like buying virtual currency in many F2P games.

On a more personal note, I wouldn't give a thing if I had to pay 10* 1,3 EUR instead of 1* 13 EUR for my WoW account - as long as I get the same results and 100% don't spend more than that per month. But that's when I'm going to agree, it would be very hard to control that balancing on a personal level - instead of the "you get everything for your fixed price per month"

Pierre said...

I'm split. I can buy into the concept if a game is released complete at some point, and then release small expansions for it in a MT plan. Like, new artwork, skins, music, vehicles, etc.

But where I start getting annoyed (for some reason) is where money becomes the direct difference. Like, what if you could buy better weapons in TF2 or CoD, hell, WoW?!

Although, time is money, right? (and women are the root of all evil, if i remember my math classes correctly) So, someone spending every day raiding a dungeon to get the UberStaff2.0 the same as someone paying $5 to get the same item? Something inside of me is screaming NO...

Isey said...

The problem with a sub fee is that everybody pays the same, although more get value if they can play more.

Problem with Microtransactions (as currently done) is that many of the items give an advantage to those with more money.

For WOW, as best example, the greatest thing they could do is keep their subs, but give everyone $2000 gold a month for that $15. Everyone would receive equal value for their sub fee. (The payment for the gold, instead of the payment for access) Rest is up to you.

That helps casuals like me, who now need 5000 gold for my third epic mount (altitis) - it would save me my game time (instead of grinding for cash, or wasting away on the AH, I can actually play the parts of the game I want to play). With my casual play, sure, it will take me a couple extra months to get that extra mount, but at least if I can't log in I know I am getting something for my sub fee (that also saves me time in game)

oshin said...

The dlc market is another good example of thing kind of thing, you pay a few bucks for a new skin / level / whatever. Personally im not sold on that at all, mainly because I dont play a non wow game enough to make it worth it.

However some dlc is worth it, like say the the extra level for prince of Persia, which I purchased, simply because its a bit more of the same. Its a win win scenario in that case, I wanted a bit of the same experience, maybe not as much as say the entire game again, or even a conventional expansion pack. For the developer they get a decent amount for a bit more work, and considering most of the art and assets have been developed its probably cost effective.

RMT is a crock of shit, I am glad blizzard have taken the stance they have, it just ruins the experience if in a game where your time is rewarded others can just skip the queue with cash.

Moreover, its sucky business practice, if you want people to keep playing they have to have something to do, you could get 3 moths sub out of somebody, or after 10$ they could quit because they feel hollow after getting the best items, after all the point of the game IS to get the best items, what are you going to do now ?

Khatib said...

RMT sucks.

If they want to increase revenue, why don't they just use adspace more?

I have zero problems with in-game billboards on the walls in any sports game, it adds to the realism. In game billboards in like GTA -- no issue. If it fits the setting, fill it with something that brings in money. In WoW -- you can't really have ads in game that would fit the setting in any way, but you could sure put an ad in the launcher... Patch revision 2.21a brought to you by "So and So" with a nice little ad space. They started doing it on the official forums already. That's another decent spot for modest ad space. And I bet that shit sells pretty good too, what with the chunk of male 16-35 demographic WoW caters to.

You want to lay off sub fees, throw in some advertising, and drop them to $5 a month, not try to make them go away by trivializing the balance of the game by basing in-game items on RL spare cash.

oshin said...

yep, ads are fine when there done right, a coke billboard in a fps, a game where the hero whips out a nokia phone to make a call is fine, as long as its not overbearing.

What would piss me off was if I had to sit through a 15 second ad everytime i booted up a game.

The ironic bit is for movie dvds you are forced to sit through ads and crappy dont pirate this dvd ads.

Its the most ridiculous thing ever, you have actually paid for something and you are forcibly not allowed to use it for a minute or two while you have watch some trailers. it really does feel like your justified in pirating it.

Isey said...

"Moreover, its sucky business practice, if you want people to keep playing they have to have something to do.."

The sticky business practice many complain about are inflated time practices to keep raking in sub dollars.

Can't make content fast enough? Slow down the players so people can only play that instance once a week - figure out the gear drop average, and hey - you know that in order for Shamillian the Shaman to get that t6 drop and move onto the next instance - well that will take him 8 weeks. That's $30 for shareholders. Another 4 weeks for the cape, 3 weeks for the shoes, and as a developer I just forced a player to redo the same content for a quarter of the year - and was paid for it nicely.

Subscription fees do not encourage new and exciting content, just keeping a nice slow pace through the existing content. Other payment systems would encourage developers to keep players based on the quality of their content (not how slow you can make them play through it)

@Khatib: I am like you, I am insulated from advertising. My in game characters could look like Nascar cars and it wouldn't bother me one bit! However, there are a LOT of people who hate ads - especially in games where it kills "immersion". So that does work for some, but not for others.

The best planned RMT systems, as Mordiceius said in the first comment - as long as EVERYTHING you can buy in the RMT store is achievable in game otherwise, it shouldn't be an issue.

oshin said...

"Can't make content fast enough? Slow down the players so people can only play that instance once a week - figure out the gear drop average, and hey - you know that in order for Shamillian the Shaman"

Yeah, but in that case you can make it so people enjoy the challenge of beating the boss. If naxx redux proved anything, its that people want a challenge, they want the rush of beating a challege, and they want to epeen the gear brings.

Brought gear brings no epeen, take the raf zebra, anybody in the epeen circles regards it with shame, even though its pretty nice, simply because its brought.

The point of gear is it allows you to get more gear and move through the areas of the game, if you just brought a whole set of the best gear, then what was the point ? Afking in og will get you ridicule, and your probably too stupid to do the challenge content, and if your not, why do you want to do it ? just to see it ? sure, but you dont see people queueing up to do bwl all day just to see it now.

The areas I can see rmt working are optional areas, like say sex changes in wow.

It could possibly work for gold too, but every time you add something like an epic flyer people would act with a torrent of cynicism about a money grab etc, and theres the risk the developer would design the game around people buying money.

Tesh said...

Ix, nice article, and I like the playable demo analogy...

but I've gotta call you on this:

"People prefer to have regular billing cycles, or make flat purchases."

*Some* people prefer flat rates and regular billing cycles. Others have completely different consumer patterns. That's why a canny system, like that in Wizard 101, will cater to different people, and not make sweeping assumptions about how and why people spend their money. That's the point of market segmentation, and why smart businesses don't overspecialize their revenue streams.

As it happens, I'd argue that the overemphasis on monthly costs over total costs is part of the problem with the psychology behind housing, and a big part of why that market blew up. People just looked at the recurring costs, and totally ignored the long term and price/benefit ratios.

Also, if you repeat something enough (grind?), it becomes mindless. A repeated fee becomes mindless, and some people will defend it to the high heavens *without doing an honest cost/value assessment*, simply because it's what they are used to. (I see it all the time when I write about removing the leveling grind in DIKU games; often, people defend it because it's the *known*, and the *unknown* or the *new* is scary.)

Pzychotix said...

Writing this post, I find my views on the subject are heavily contradictory.

I'll gladly drop a roll of quarters in my local arcade machine on my way home (Windjammers! Google it.), but in any online game, there's pretty much no way I'll ever toss money for microtransactions.

Then again, there's the fact that the majority of all F2P games just lack the replay value to continue to toss money at it. There's just so many issues with cash shop balance that come before human psychology: Is the item worthless? Is the item too powerful? Does it defeat the purpose of the game by participating in RMT? Etcetera, etcetera...

There's also the resistance one feels when you whip out that credit card. Somehow, dumping two dollars worth of quarters into an arcade machine feels much much different than whipping out your credit card to pay two dollars for an extra boost. I'm willing to bet it's the fact that it takes a good minute or two to do the entire credit card transaction while it takes two seconds to jam a quarter into the machine.

Finally, I think the term Free2Play creates upon the game a stigma against actually paying for the game. I mean, seriously: a game calling itself free to play should not require payments in any shape or form, whatsoever. There's a lot of freeware out there, and associating yourself as "free" when it really isn't just sets yourself up for disaster.

Legolasninja said...

With WoW, being able to buy raid-quality equipment would short-circuit the main point of the game, which is to work for your equipment. Even in the case of BoEs, at least you have to work for the gold to buy the equipment.

Right now people do work in game to get stuff. If they do not have to work in game to get stuff, what is the point of getting stuff, since the stuff is only good for helping you work better in game to get better stuff. If that better stuff is also for sale, why not just buy the better stuff? And so on.

I think it would be a seriously seriously seriously seriously risky move by Blizzard. It could mean the end of the world (of warcraft).

Tesh said...

And there, legolasninja has finely illustrated my utter disgust with the DIKU level/loot treadmill. I think you're right, legolasninja, and that's what makes me so sad about it. I originally bought into the MMO hype because I thought they would be fun to *play* the things. When they lean too far to the "get loot to get more loot" paradigm, for me, the fun is drained very quickly.

If a microtransaction game allows for that loot to be purchased outright, they have to rely on the game being fun to *play* to retain customers. I like that underlying philosophical shift.

Khylov said...


Odd question, but were you subscribed to the Mawnstirrs and Rowboughts art show blog? If you were, the old blog was taken down, and I'm trying to backtrack the previous subscribers so as to point them to the new blog.

Anyhow, let me know. Thanks much.


Unknown said...

My kids and wife play wizard 101.

After completing the first few free areas, you need to decide if you want to pay for a subscription which gives you full access or alternatively purchase access to areas by spending "crowns".

I've decided to purchase crowns for my family instead of a subscription. I've been pretty pleased with it.

If I paid for a sub, I'd want to ensure my family played the game, or else I'd feel like I wasted money. With crowns, once they purchase access to an area, they have access for any and all characters on their account.

This way, they can play as little or as much as they want. I'm also able to reward them for real life things - good grades, completed chores, etc by giving them 5 bucks in crowns every once in a while that they can use to spend on fun things like better gear or pets.

It's not a bad system at all. Especially campared to WoW, where I purchase my game time in 3 month chunks so I can "save" money, but I've only played once in the past two months.