The limits of microtransactions

In the battle of business models for MMORPGs the monthly flat fee subscription model has one decisive advantage: It is extremely simple to understand, and has only one variable, cost per month. A statement that a particular game is going to be Free2Play and financed by microtransactions is not really telling you much; there are lots of parameters on what exactly is for sale, and how much it costs.

Much of the instinctive dislike of microtransactions from some people is caused by unfamiliarity and mistrust. I would argue that there are both "good" and "bad" microtransaction systems, and everything in between. I don't share the instinctive dislike, because I'm very, very familiar with the microtransaction model. In the decade before I played MMOs, I played Magic the Gathering, which is fundamentally a microtransaction game. It is Free2Play after the initial investment. But from having one deck to having a collection of thousands of cards there is a huge range. Every booster you buy increases your chance of being able to build a good deck, but the more you spend, the more you suffer from diminishing returns. I did have that famous suitcase full with over 10,000 cards, and I did spend thousands of dollars on that game. I got out, and a decade later, with disposable income having gone up and the microtransactions proposed by a typical MMO being a lot cheaper than Magic cards, I have a rather serene view on the possibilities, advantages, and disadvantages of microtransaction system.

The key questions when looking at a microtransaction system are how much the items for sale cost, and how much of an advantage they give you in the game. If the items are too expensive, or don't give the potential buyer any advantage, there won't be enough sales to support the game. But if the items for sale give the player too much of an advantage, and actually make large parts of the game obsolete by allowing you to skip them for cash, players will become bored or disgusted and leave.

Useless items have the advantage that you can always add them to a game's catalogue of items for sale without much risk. Maybe only very few people will buy that special costume or flaming effect for the weapon, but at least very few players are going to be too annoyed if somebody else bought those. For example that flaming weapon effect costs an outrageous $11 in Free Realms, but if you don't want to spend it, it doesn't hurt you in any way.

The other end of the scale is where the bigger risk is. Another Free Realms example are the level 1 weapons you can buy for $2.50 (or $5 for the same stats plus fancier graphics), which are better than the best level 20 weapon you can either find or craft in the game. Having first leveled up a blacksmith to the level cap of 20, and struggled with a Free2Play combat class, the brawler, I tested this out by playing the member's only warrior class with a $5 weapon. After easily killing monsters with the thus armed warrior at level 3 that my level 10 brawler had problems with, I haven't touched Free Realms since. Having the class and the weapon you have to pay for being so much better than the Free2Play content really turned me off. And I felt that the effort I put into blacksmithing was completely wasted. It is not that I couldn't afford the $2.50 or even the $5, or the $5 per month for the membership. But I feel as if both possible choices, of either paying or not paying, are equally bad: If you don't pay you are blocked from the membership content, but if you take the membership content and buy a weapon on top, the Free2Play part of the game becomes comparatively so unattractive, that it might as well not be there.

But fluff and overpowered stuff are the extreme cases, and most items you can buy in most games are somewhere in the middle. If all goes well, Luminary is opening the item mall Wednesday in the open beta. As characters aren't wiped for release, this is the last step of beta testing before official release of the game around the end of the month. I'll give a detailed review of that item mall in a future post, but what I saw up to now is a system which can be best described as "items of convenience". A typical example are teleport tickets, where you can either buy a bundle of tickets, each of which allows you to teleport once, or one ticket for one month of unlimited teleports. Note that even without those tickets you always have the option to teleport to the central city for a low amount of in-game currency, or for free to the town of which you are resident. A teleport thus never saves more than 5 minutes of your time. So it would be very convenient to effectively pay a monthly subscription and always teleport directly to the town or dungeon you want to go. But if you decide not to do so, you aren't at a horrible disadvantage.

The theory behind that is that if you make a graph with one point for each player, listing how much time he can spend on the game on the X-axis, and how much money he is willing to spend on the Y-axis, the large majority of players will be concentrated in two quadrants: The time-rich-but-money-poor, and the time-poor-but-money-rich. Items of convenience allow the money-rich to trade their money for time, but allow the time-rich to arrive at exactly the same result by spending time. As long as the money-rich aren't able to buy advancement past the point which is possible to reach purely by spending time, this system is actually better balanced than a monthly subscription MMO, where the time-poor always lose out.

In the same vein, the time-rich are usually better informed about the game, and less prone to gimp themselves, so it makes sense to have items like status and skill reset tickets, for those who missed the free resets at level 10 and 30 in Luminary. And of course the clearest example is the perennial favorite of microtransaction games: The item which for a limited time allows a player to gather xp at a faster rate. It completely fulfills the criteria for a good and useful microtransaction item: Allowing you to trade money for time, without enabling you to completely skip content, or get to a point where somebody who only spends time can't get to.

Besides the question of how much of an advantage microtransaction items give you, there is also the difficult question of how much these items are pushed onto the user. With Asian companies having a much longer experience with microtransaction games, it comes to no surprise that it is again the US game Free Realms which serves as the bad example: Quite a lot of players complained how constantly in-your-face the in-game advertising for Free Realms membership is, especially in view of the game being marketed to pre-teen children. It is an essential feature of a good Free2Play game that you are actually able to play it for free, without constantly getting rubbed in what you are missing out on. While it does offer an opportunity for good parenting, giving an allowance and teaching the value of money, Free Realms is likely to make life hell for parents who decide their child should only play the free part of the game.

The final point of discussion on the limits of microtransactions is about the amount of money a player can spend on them, and the possibility of spending "too much" money on the game, whatever amount "too much" might be. Having seen both trading card games and microtransaction MMOs, I must say that trading card games are by far the worst offenders. I spent several thousand dollars on Magic the Gathering, but never spent more than $200 on a MMO. In cost per month there are two very different numbers to consider: Average Revenue Per User (ARPU), which tends to be less than $15 per month for most microtransaction games, and Average Revenue Per Paying User (ARPPU), which often is higher than $15 per month. In other words, the typically around 5% of users who do spend money on a microtransaction game are subsidizing those who just use the Free2Play part. No wonder they want *some* advantage out of that deal.

If spending a different combination of money and time to achieve the same result in a game strikes you as unfair, maybe you should remember that $1 or 1 hour does not have the same value for everyone. No, the person who spent more money in all likelihood wasn't screwed, he probably chose to do so out of his own free will, because having to spend more time and less money would have "cost" him more in his personal reference system. Spending $50 or $100 per month on a game might appear outlandishly expensive to some, but cheap compared to other hobbies to others. It is possible to buy something via microtransactions and later regret it, but a game which constantly makes players regret their purchases isn't going to last long. For many people, having the choice of how much money to spend and how much time is actually the better deal than a flat rate. Even for people with little self-control, microtransactions might be the better choice; I'm pretty sure that ultimately the economic damage dealt by World of Warcraft through people neglecting their studies or job is higher than that of any microtransaction MMORPG.

In summary, there are both good and bad forms of microtransactions, and players need to look carefully at what is on offer. Being able to trade money for time, without enabling you to completely skip content, or get to a point where somebody who only spends time can't get to, is not only acceptable, but can actually be a better deal than a flat rate for the time-poor-but-money-rich. In return they finance the game for those who choose to not pay anything, creating a win-win situation. But if paying to play becomes absolutely necessary, is constantly advertised, and makes you much more powerful than you could ever become by just playing, the game risks to turn players off. Players aren't that stupid, so ultimately the game with the better and more voluntary microtransaction system makes more money than the game that tries to push the player too hard.
- posted by Tobold @ 4:30 PM Permanent Link