The Good and the Evil of Microtransactions

By, Brett Scully

With consumer spending on content more than doubling between 2015 to 2018, large game developers are jumping to the newest trend; the microtransaction model.  With profit chasing plaguing the corporate world, how far are corporations willing to go to squeeze every last penny out of loyal fan bases?

Before we go deeper, let’s start with breaking down the microtransaction model. The microtransaction model is an emerging video game monetization model where game developers offer exclusive in-game purchases that often must be purchased with real money.  The microtransaction model, in theory, isn’t inherently toxic.  Microtransactions were common in both Korean and Chinese massive multiplayer online games (MMOs) where most of the in-game purchasing was purely cosmetic.  As this model moved into the Western world, it took almost every popular game series by storm.  Games like Call of Duty, Battlefield and Gears of War that had originally been a one-time purchase for all content, slowly began to follow this trend.

The company that has most successfully used the microtransaction model is the infamous Epic Games, who most commonly is known for their wildly successful game, Fortnite.  In 2018 alone, Epic Games grossed $3 billion in profit.  This figure isn’t only impressive due to the amount, but the fact the game and all its functional features, are 100% free to play.  Fortnite offers what they call a ‘Battle Pass’ that allows players to complete challenges in order to obtain certain rewards or V-Bucks’. These V-Bucks in turn allow you to change the way your character looks, behaves and dances inside the game.  The beauty of this model is that there is no barrier of entry to play; anyone can download the game and play for free with absolutely no hidden costs or commitments.  This monetization strategy relies heavily on pure volume such that having a huge player base gives you a much higher chance to convert players into customers.  With no initial cost to play the game and no advantages given to players who spend money, Epic Games’ implemented this strategy perfectly.  With many other companies, however, this is not the case.

Back in 2017, Electronic Arts, another massively popular game developer, received immense backlash after the release of their newest game, Star Wars Battlefront II.  Many eager fans were excited to play their favorite franchise characters in this open combat video game.  However, they were met with frustration when they found out that they would either have to pay on average $80 on loot crates or invest 40 hours into the game in order unlock prominent characters such as Luke Skywalker or Darth Vader.  With the inherent randomness in loot crates where a player purchases a mystery reward, many players would have to spend closer to $160 should they be unlucky.  To make matters worse, the game had an initial cost of $80, a price tag that had historically represented a fully unlocked game from the get-go.  With many of EA’s old games offering the standard up-front cost for content, this new model struck customers as a greedy attempt to increase profits.  With a decrease of $76 million in net profits from 2017 compared to 2016, and a decrease in share price of 2.5%,  it’s clear that this model did not resonate well with consumers.

The question still remains… as games become more intricate and expensive to develop, will any new developers be able to sustain a business model without microtransactions? With Fornite’s unprecedented success in their free to play, battle pass monetization structure, it’s expected that many large corporations will follow suit.  Unless consumers are willing to spend upwards of $150-200 upfront for full content, corporately developed games, a future without microtransactions seems slim.

If more large companies begin offering games on a free-to-play basis, completely removing the cost barrier to entry for new users, the boom in video game users could be massive.  With competition ramping up and large game developers planning massive layoffs to meet profit goals, the future of game monetization still remains unclear.

Featured photo by Alex Haney.

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