Micro-transactions as a business model

I have just read a couple of online pages from http://www.vindicia.com on micro-transactions as a business model and how it is used.

According to this site, most micro-transactions are under a particual amount of money, usually under $1. It as well says that "This business model started to gain prominence around 2005 after an adoption by online gaming and service providers in Asia yielded positive results. However, microtransactions have not reached the same level of success in other regions or vertical markets." it would be worth looking into the sales of micro-transactions in different locations of the world. This could then possible show where its worth explore the different uses and sales of micro-transactions from different locations and how this effect the games made.

The page then explores why micro-transactions, although currently popular in games, may not be as popular as they should be because of the high transfer fee compared to a high priced game/subscription. They show this chart that shows the comparison of a $20 subscription fee compared to a $5.00 ticket. This chart below shows what they have found:



It shows the different of almost double of what the percentage of the transfer cost is between them with the small payment costing so much more. On this site they talk how micro-transactions are still a viable business method and to get better results to use the 'Itunes method'. They describe it as "Aggregating purchases up to a preset amount or time period for a higher average price." but there is a disadvantage with this as according to them "loss of very few valid transactions quickly offsets the savings generated by a higher average transaction price." They also mention that subscription fees are more likely to repeatedly bring in sales rather than smaller micro-transactions. This is more connected to the phycology of sales than micro-transactions but is worth a later visit in research to find out more about how micro-transactions may effect the mind and what ploys are used.

Submodels:

Two submodels mentioned are Virtual Goods and Virtual Currency. Virtual goods are the buyable items in-game which a player has to pay for with real money. This items could then potentially have different game effects. Usually they are more cosmetic that don't effect game play rather makes a players character more recognisable as there own. Others can effect the game play, e.g speed up in game effects leading to more in game items. Choosing these items are difficult and need research and also closely relate to the type of the game, multiplayer games usually don't envolve game enchancing items as they will split non paying customs against with paying customers, but solo games do as it wont upset anyone else just help the player.

Virtual Currency is when a game uses its own money system in game that is used for purchasing items. This means that the player doesn't have to pay real money to earn in game rewards and items. However if a player doesn't want to they can spend real money to gain access to more Virtual currency thus skipping the time in-between playing and earning the needed amount.
They class it as 'dichotomy'

I have found this site very helpful in understand the business side of the micro-transation process and how it can be implemented and how it also is a risk with a higher transfer cost that something with a higher cost. I also have thought of new areas of explore research.

http://www.vindicia.com/Best-Practices/online-business-models/microtransaction-model

Team Fortress 2 - Valve - Micro Transactions

I recently came across a small article on how Valves game Team Fortress 2 has made $2 million through the sales on virtual content in which is usually in micro-transactions in a year. In Team Fortress 2 a update was created in which players could buy or trade virtual goods such as hats in which players could dress their preferred player type in. A year on these sales have made $2 million in profits and although to a large company such as valve this is not huge to any one else this is large for micro-transaction sales.

The most important part of this article is this:

"Equally interesting is the launch of the Steam Workshop, "an improved item submission system" which lets item-creators submit, review and rate Team Fortress 2 items. "Rate items highly and you just might see them become available in-game," Valve says. "If your creation is accepted for distribution in-game, you can even earn a percentage of sales." With Steam Workshop, ou could be a percentage-of-a-millionaire!"

In the recent update players can now design there own virtual items in which then can be rated by other players then maybe put in game. This is a great scheme for micro-transaction sales because before you design an item you need to know that people might buy it and this allows Valve the chance to let its fans tell them what they want and have someone else do it and then are sure to get people to buy them. This means they should make profit.

http://kotaku.com/5849625/valve-celebrates-mann-co-birthday--2-million-in-team-fortress-2-item-sales-with-a-mann+sized-update

Gun Bros is a poplar top down shooter that is currently available for free on the App store. It was released in 2010 as a game to bring hardcore gamers at the age of 9 + on the app-store together in a multiplayer shooter. In December 2010 it has been reported that 2.8 million but currently it has been announced on Pr Newswire that over 6.8 million have been downloaded with 5.5 million being from iOS devices. As a Freemium game Gun Bros has different in game ways of purchasing content, the main method is purchasing 'Warbucks' a type of in game credit. Orginally 'Warbucks' could only be bought using real life money but currently it can be earnt in the game but the idea is that if you pay u can unlock items that might take you weeks or months to unlock.

In game there are various weapons that can be bought either by coins which are the basic in game currency that are collected throughout playing the game as a standard or by 'Warbucks' usually the 'Warbucks' items are better than the once that can be bought with normal currency as the players haven't had to spend money to get the item, e.g. its more beneficial to spend money. Other items work in a similar priceable with armour and power-ups are also available to buy in game.

I have been playing and looking at all the items on the game using my Ipod touch. The game play is relatively simple and its mostly about playing to collect credit to then purchase items to upgrade yourself. This then pushes the want for weapons that are the best to save on time playing as it soon gets repetitive as the gameplay doesn't change. The better the extras the faster you earn credit and the faster you get the next items.

Here are some screenshots of the items:



This image shows different power ups that can be purchased in game.



This shows Armour that can be bought in the game, on screen is currently showing different types of helmets can be bought.



This image shows weapons that can be bought in the game, this is also interesting because currently there on sale to get more players to buy the virtual images. This isn't the only reason why they are interesting because this screen next screen shot will explain why.



'The kraken' is the last weapon on the list and it is also the most expensive costing 3499 Warbucks. Converted into real money the virtual gun would cost £308 or $500. This is crazy due to the fact you could by a new games console with this or a new ipod or iphone for that much money but in this game its the cost of one small piece of virtual data.

http://itunes.apple.com/gb/app/gun-bros/id393404730?mt=8
http://www.glu.com/category/category/gun-bros
http://www.guardian.co.uk/technology/appsblog/2011/aug/04/gun-bros-final-fantasy-tacticshttp://toucharcade.com/2011/08/03/glu-adds-500-unlockable-gun-to-gun-bros/ http://blog.flurry.com/bid/67748/Consumers-Spend-Average-of-14-per-Transaction-in-iOS-and-Android-Freemium-Gameshttp://www.prnewswire.com/news-releases/glu-announces-continued-strong-downloads-of-gun-bros-and-deer-hunter-challenge-at-gdc-2011-117303428.html
http://www.pocketgamer.biz/r/PG.Biz/Glu+Mobile+news/news.asp?c=26023
http://itunes.apple.com/gb/app/gun-bros/id393404730?mt=8
http://gamrreview.vgchartz.com/game/53610/gun-bros/
http://itunes.apple.com/gb/app/gun-bros/id393404730?mt=8
http://www.shacknews.com/article/69571/free-to-play-gun-bros-unleashes-500-kraken

Freemium Games

Freemium Games
The term ‘Freemium’ is a business model that offers goods for free but has premium content that can be bought. This premium content varies depending on what the ‘Freemium’ good’s is and the business strategy. Freemium Games are similar to Free-to-play games but offer more when money is pend on the game.

Freemium is a popular business method for digital goods as programs such as Skype allow people to download the software and talk for free across computers but you pay for computer to phone calls. The popular website Deviantart ( Online forum to post art) uses a Freemium method as you can join for free allowing you to post art and see others but if you purchase the ‘Premium Membership’ you can get access to extra settings and content.

Good Examples include the popular ‘Freemium’ Rune Scape (2001), the game is known for being a subscription based game but the game is free allowing players to play under restrictions. Premium content can be purchased to enhance the game play creating a game that is both available to players that what a simple experience without the cost and those who want to play a continuous game with full dedication.

Freemium games can also be related to Game Demos and trials. These are usually small sections of games made free and downloadable to get people to download the game to play and hopefully get hooked so that the will want to buy the game. In this scenario the Premium content is the full game. Its a marketing method that allows games to draw in a mass audience of all ranges to hopefully get a bunch that would buy the premium content rather than hoping that the advertisements for your game has worked effectively and people are willing to pay for the game.

Thanks to the boom in Micro-Transactions, Freemium games have dominated the games market as all platforms have ways of selling premium content. Micro-transactions have allowed for more variations of premium content of individual items that players can buy. This has increased the amount of games using Freemium business methods.

‘Freemium games on iOS and Android continue to dominate the app economy, now accounting for over 65% of all revenue generated among the Top 100 grossing apps in the App Store alone.’ - Jeferson Valadares.

Freemium games have a made a hugh impact of different areas of the gaming industry as they were the reason why Social games took off as people could play with each other for free and with such a large audience playing for free there will be people who want more and are willing to pay.


Freemium Games info:

http://en.wikipedia.org/wiki/Freemium

http://www.avc.com/a_vc/2006/03/my_favorite_bus.html#c15324948

http://en.wikipedia.org/wiki/RuneScape

www.Deviantart.com

http://blog.flurry.com/bid/71993/Mobile-Freemium-Games-Gen-Y-Plays-but-Gen-X-Pays

http://www.slidetoplay.com/story/the-ten-best-freemium-iphone-and-ipad-games

http://freemium-games.com/

Micro-transactions

Micro-Transactions
I read a article that looks at the questions micro-transactions create like are they creating greedy companies? Is micro-transaction content items that have been held back from the game? and should companies care for the small minority of complaints of micro-transactions when millions still buy them? The article although doesn't pull out any strong evidenced based research it does point out a couple of different areas that effect micro-transactions relating to my research report. There was a interesting point about how EA is seen as a 'greedy' company as they sell content through the use of micro-transactions which can be earnt in the game anyways. To sum this up they are selling you content you already own. This does sound greedy but there are many factors that apply to there side as there are people who don't play enough to get the items they want.

Web link: http://blogcritics.org/gaming/article/microtransactions-in-games/

I watched this video on youtube during my research and thought that its worth mentioning as Guild Wars 2 used micro-transactions rather than using a pay-to-play fee. Games such as world of warcraft use the pay-to-play monthly business model to earn profits but this is directly want Guild Wars doesn't want as they feel that the game itself should have everything in it to begin with. You shouldn't have to pay again for items that should of been in the game. It also talks about how they have created micro-transactions that don't effect the gameplay as again they don't want to people to pay again for something they should get in the game from the start which would hopefully please the audience and keep them playing. It hints at micro-transactions work well creating profit when its only adding personality rather than in game enhancements. The micro-transactions could then be almost a gift in return as they are only buying because they are happy they are not playing to keep up with the game.

Interview originally from g4tv.com with colin johanson.

Video link:http://www.youtube.com/watch?v=6xoKixTkm1I

Another video i viewed was an old episode of the Extra Credits series. Extra Credits is a online based video series that look at teaching and reviewing games as art, game structures and the games industry. Created by Daniel Floyd and written by James Portnow, the show has a large gaming audience and has worked well with the independent games industry. I viewed their episode about 'Micro-transactions'. They discussed everything from how it has been used in the industry and how it should be used to achieve a greater effect. The main focus of this episode was teaching what micro-transactions are in games from the first recognised micro-transaction in the games industry and how do you make good use of micro-transactions in games. they mention about Elderscrolls Oblivion , were you could buy a different coat for your horse, although this didn't effect the game, thousands still bought it. Which lead to many companies taking on the concept. They talk about the effect on the industry how they see it as they mention about how its aiming at the consumers that want to spend little money to the ones willing to spend a lot meaning they are getting the most out of there audience. I found one part of the video very rememberable at that was 'People are Content' in player based games. This means that without people you have no content and that means companys need to remember that when it comes down to micro-transactions.

Video Link: http://penny-arcade.com/patv/episode/microtransactions

Other Websites of interest:
http://profy.com/2008/01/22/micro-transactions-as-a-business-model/ : EA’s website pogo and other game profit statistics using micro transactions.
http://digitalbrandmarketing.wordpress.com/2009/11/12/success-stories-for-the-micro-transaction-business-model/ has great info on zyanga
http://www.gamasutra.com/view/feature/4207/what_gamers_think_about_.php : histroy: what do people think of micro transactions.
http://www.industrygamers.com/news/ea-ceo-consoles-now-only-40-of-games-industry/
http://en.wikipedia.org/wiki/Micropayment