If you go to a game conference about MMOs, you’ll hear about how awesome microtransactions are and how they’re the key to the future. They have several huge benefits:
- Low barrier to entry for new players because the game is free.
- Although most players don’t pay anything, a small number of players pay a ton. These customers are so valuable that they more than subsidize the free players.
But before we toss out subscriptions and jump onto the micropayment bandwagon, let’s look at the down sides:
- In order to have enough payers, you need a larger number of players. If your goal is to earn a million bucks a month, you need 66,000 subscribers paying $15 each… or 300,000 free-players who might buy items.
- In order to appeal to enough people, you probably need to homogenize your game somewhat. (There are some weird and wondrous outliers like the micropayment-based text MUDs from Iron Realms, but those are developers who understand a very shallow niche very well. That’s not the norm.)
- Your profits rest on such a small percentage of players that losing a few of them can really hurt your revenue. You end up needing to make two games at once: a game that keeps your payers happy, and a game that keeps your non-payers happy… and often those two games don’t have as much in common as you’d hope.
- The new economy makes this model much scarier than it was a few years ago. Multiple mini-transactions are more susceptible to penny pinching. “Is this cool hat worth $5? No, clearly I can do without it.” vs. “Is playing this game worth $15 a month? Clearly yes!” That $15 subscription works out to 19 cents an hour if you play the game 20 hours a week.
Game Designers Are Not Marketers
Let me put it another way. Everybody in the industry “knows” that microtransactions are the future… just like they “knew” that all successful MMOs had to require forced grouping like EQ did. That is, until WoW came out and proved them all dead wrong. As an industry, we’re really terrible at predicting trends. Sad but true.
Instead of talking to game designers, how about we talk to marketers? What do they think? Here’s what marketing guru Seth Godin has to say about micropayments versus subscriptions:
Whenever possible, sell subscriptions
Few businesses can successfully sell subscriptions (magazines being the very best example), but when you can, the whole world changes. HBO, for example, is able to spend its money making shows for its viewers rather than working to find viewers for every show.
How about entrepreneurs? What would they say? Why not drop a line to a successful entrepreneur and ask them which is easier: making a cheap product for a massive market, or making an expensive product for a niche audience. I guarantee they’ll say the latter, by far! The cost of appealing to the masses is humongous. The safe entrepreneur money is in targeted products. And subscription games can be more targeted than free games, because they need appeal to a smaller audience than free games.
Is The Secret Micropayments, or Just Web Play?
One thing does seem certain if you study the market: boxed MMO titles are rapidly becoming obsolete (unless you’re Blizzard or EA, and even in that case you probably realize that the boxed model won’t last forever). The model for a boxed MMO is: spend three years making a game, put boxes on the store shelf to much hoopla, sell a million boxes, then watch your player base slowly dwindle away. Put out expansions a few times to temporarily juice your populations up again, but eventually watch it become a tiny game.
The web-distribution model is different: create your initial web game as fast as humanly possible, put it up to start getting an audience for your product, and then slowly improve the game and increase your audience over time. This is great because:
- You don’t need to fight for shelf space at Wal-Mart — you can spend your marketing money on campaigns to pull people right to your website.
- By removing the box, you make it easy for people to get their friends involved.
- If you use emerging browser technology, you can have gamers playing your game within 30 seconds.
This is the model that, for instance, EVE Online has used so successfully, showing year-over-year growth instead of watching populations dwindle. But EVE isn’t a microtransaction game: it’s a free-trial game. After the free trial, you have to pay a subscription.
It’s true that a lot of the web-distributed games have used microtransactions. But that doesn’t mean they have to. As the number of web-distribution games gets larger, I think microtransaction-based games are going to get harder and harder to pull off successfully.
There are lots of decisions in here: is your game a boxed product or a web distribution? If the latter, is it a downloaded program or a browser-based game using a plug-in like Unity? Do you make money by subscriptions, or by micropayments?
Unfortunately, most developers don’t see these subtleties. They see “Boxed games are out! Microtransactions are in!” Maybe they look at the fact that some free games rival Warcraft in number of players, and don’t completely consciously grok the distinction between population and profit. But like I said, the MMO industry (and the gaming industry in general) isn’t exactly known for understanding trends — they’re better known for blindly parroting what other people did in the hopes that they can be successful too. That doesn’t work very well. If you pick apart what’s going on, you can get a better view of how to make a successful game.
More Questions Than Answers
“Great, Eric, thanks, that’s completely unhelpful. So there are lots of questions that need answering? No crap. How do I answer them?!” I can tell you that … after you tell me who your game is for and what tools you have to reach them.
For instance, if you’re making an MMO for kids, you’ll need to get parents involved in the spending process. This may mean the parent buys “game money” for their kid to spend, or it may mean the parent pays the kid’s monthly subscription. If you’ve got no other sorts of leverage to reach parents, then micropayments probably work best — that way the kid can get hooked on the game and then bug their parents for cash.
On the other hand, if you’ve got other ways to reach parents (say you’re Disney with your own TV channel, monthly magazine, and fliers in every DVD box), then marketing straight to parents as well as kids will be very effective.
So you need to figure out who you’re aiming for, and how you’re going to reach them.
One Possible Game Plan
Now, if I had a few million dollars in VC money, I know what I’d do. I’d target the “boxed-MMO game runoff”. Those are users who’ve played several boxed titles before, are adventurous enough to leave their favorite game, but are clearly not sticking to one game. Although this doesn’t nail down the audience completely yet, we can already start to see important facts about our demographic. For instance, these are players who don’t need or want hand-holding about MMO basics like movement, combat, or banking. They want to get in and play ASAP.
This audience is also comfortable enough with the concept of an MMO that they are willing to pay to play them, but at the same time, they have the attention span of a gnat. I’d be pretty worried that they would visit the game website but not manage to even get started with the game, so I’d use a web-browser-based engine to get them in and playing as fast as humanly possible. Starting play within 30 seconds would be the goal. Let them play for free up to level 20, say, and then require a modest monthly fee to continue.
I’d put out the first version of the game in a year. It’d be crummy at first, but that’s okay, because it wouldn’t launch with any fanfare anyway. There’d be improvements every single week. As we started to get paying users, I’d choose the development focus based on what the players say they want, fleshing out the game in the direction these people need, so that they feel more comfortable bringing in their friends, and those people’s friends, and so on, growing virally every year.
If this sounds like the model that web 2.0 companies use, that’s not an accident. It’s cheap, effective, and frankly more satisfying for the developer, too. The nifty part is that the people playing the game will feel that the game is slowly being tailored specifically to them. And I can say from experience that adding features to a live game is a lot more fun than working on an unshipped behemoth.
In short, everybody wins.