Paid content in games - Part 1: Changing pricing models

Why the way we pay for our gaming content, and what we're even paying for, is changing.

Earlier this week, a press preview of Diablo 3 revealed a number of controversial features that are to be included in the upcoming title. One that’s causing a particular stir online is the planned presence of an in-game facility to trade virtual goods for real-world cash.

Diablo 3, upcoming from Blizzard. via Blizzard.com

This raises a number of concerns—some of which are undoubtedly valid— but we shouldn’t be surprised that this is happening. The way that games are monetised is changing and, whilst there are better and worse examples to be found, there’s no reason that this trend can’t ultimately be a good thing for both the industry and us gamers who are putting down the cash for the end product.

There are however two parts to this discussion, and it will be split amongst two posts. The first, below, is about the changing monetisation of games—that is, how we pay for them. The second, to follow, will be about content and the concept of virtual ownership—that is, what are we paying for? We’ll come back to Diablo 3 more specifically in the second part.

A changing economic landscape

The last few years have seen some fascinating developments in retail models within the games industry. The first real surprise for many was the ‘free-to-play’ concept having such an enormous amount of success, particularly for Turbine Inc, who kick-started the trend with Dungeons and Dragons Online. Previously charging customers $15 a month, in 2009 DDO went free-to-play, opening up instead an in-game store with a 'micro-transaction' model. Players could pay small amounts of real cash for items to make their experience a little smoother; new content and quests; pure vanity features; or simply pay nothing and experience the basic game at their own pace for zero cost.

In the months following the transition to free-to-play, DDO saw a five-hundred percent increase in revenue. Later, Turbine switched another major MMO, Lord of the Rings Online, to free-to-play. That game saw revenues triple in a short space of time.

Lord of the Rings Online from Turbine. via lotro.com

The casual market has also seen explosive earnings using more-or-less the exact same model. Games like Farmville offer free entry to anybody, with the option to pay for various content (usually to speed up progression) always available. And now Valve's online shooter, Team Fortress 2, has also gone free-to-play; an in-game store sells items that would otherwise take time to find and unlock. With other online shooters following the same model, as well as strategy games, racing games, or sports sims all having free-to-play (with micro-transaction income stream) titles, it doesn't look like there's any kind of game that can't be sold this way.

The analysis of why all of this has worked so well is probably itself worthy of discussion, but I'm not really going to touch on it here. I'm more interested in the reaction to this amongst the wider gaming community.

A distrust of monetised content

Despite the obvious popularity of this sales model with many paying customers, a significant number of people maintain a negative outlook on these new ways of paying for games. For some, the micro-transaction concept is an anathema to gaming. For some, even the concept of paid DLC is treated with suspicion and scorn.

Probably the biggest reason for this view is that paid content (beyond the initial outlay) often seems deceitful in some way, as if the publisher is trying to trick us somehow or rip us off. This is sometimes valid. Doubtless there are games available that obscure their pricing model behind a web of virtual currencies, arbitrary limits, and confusing payment options. There are also increasingly transparent DLC packages where a feature-complete game has been artificially butchered to keep something back for the download market a few months later.

Underpinning all of this is the worry that we don’t know the total cost at the point of sale. When I bought a traditional game in the past it cost me forty quid—and I knew that I would never pay another penny. There was something satisfying about having everything I needed in my hands; the sense of value in the product, the feeling of ownership. The same game, which now has four later upgrades that cost five pounds each, just doesn’t seem as tidy. It’s not just a question of price, it’s a question of knowing that I don't have everything when I first hand over my cash. It’s not exactly rational, but then consumer spending rarely is.

But is there any real reason to dislike DLC or in-game stores that use real money, just by virtue of what they are? I don't think so. If what's on offer represents a good value proposition, then great. And if not, I simply won't buy it. That's just the same as with any purchase; and it doesn't require me to get angry about it.

Problems creep in where consumers don't feel that they have a genuine choice about whether to buy something or not. For example: a paid upgrade that forces customers to buy it or be prohibited from playing equally with those that do. There's a perfectly rational reason to dislike that sort of thing. But we’re getting into evaluating content; more on this in Part 2.

Call of Duty: Black Ops. Can I really play this online properly without buying the ongoing DLC?

For now, I think it's enough to say that we shouldn't be afraid of games that ask us to pay in different ways. We should evaluate each purchase on its own merits, and try to understand what the asking price really is when we pick up a new game. If that's confusing and vague, or we don't see a good reason to dip into our wallets for more content, then the developer has failed. But when games do this right, they can represent value to a range of different players. If the price ticket versus what's on offer represents good value to you, there's nothing wrong with paying for it. Again, we'll talk about what sorts of things you are actually buying and whether these are sensible purchases later.

Let's see it from their perspective

The other facet to this debate is that games increasingly have to work like this. From a developer's point of view, it’s just not ideal any more to charge everybody the same price in a single hit, then have sales go quiet. Games have such a short tail in the retail market that eking out returns on a title (which can cost millions to produce and span multiple fiscal years) is important to long-term stability for the company that produces it.

Let's also think about the consumers themselves. We are a diverse bunch. Some of us like certain games, and some of us like different ones. Critically, this divergence in taste has a direct feed into our wallets. What I will happily pay for a given game is not necessarily the same as what somebody else will.

As a developer, when you have one customer over here who would only pay twenty pounds for your game, and one over here who would fall in love with it and spend hundreds, charging them both forty pounds is a thorny proposition. One probably won’t buy it at all or will buy it pre-owned—resulting in the same money (i.e. none) in your pocket. And you’ve lost some potential revenue from the other.

Some players have spent more on Farmville than any premium retail game.

The free-to-play, micro-transaction model instead lets those who want to invest endlessly in your product do exactly that, and at the same time you might even entice in plenty of curious others, some of whom will end up spending a little anyway. There are of course difficulties here (mostly around quickly gaining a critical mass of paying customers to cover development cost) but I think that many developers are starting to see the appeal in this way of doing things.

Which brings us back around to Blizzard, and Diablo 3. Blizzard know all about selling their games in different ways. They release huge-selling retail products (like Starcraft 2 – moving 1.5m copies during its first two days on sale) and run the worlds most successful MMORPG (World of Warcraft) on a subscription model. They sell virtual content (such as vanity pets for your online WOW character) online in their web store. They have recently made World of Warcraft free-to-play up to a certain level. And now they plan to monetise the trading of items in Diablo 3.

I’ll talk about the issues around buying these different types of content, and more importantly, what exactly I think the changing way we pay for it all actually means to us gamers, in Part 2.