the video games economy, growing cent by cent


While working at BHWG (now Proximity London) on a web-site re-design project in 1995/96 for Barclaycard, I remember a discussion with Jeff Harris. The idea Jeff introduced me to was micro-transactions; ones where the consumer pays tiny charges for (digital) goods or services – with each perhaps only being valued at a few cents. The idea being that if enough consumers bought services with regular micro-transactions, the amount combined could be a tidy sum for a business to operate on.

The idea of course was desperately in search of a business model that required frequent small transactions from a significantly sized loyal base of users. While iTunes charges 79p in the U.K. per track (typically £7.99 per album) the idea hasn’t really caught on beyond digital music or web-TV programming. But you can hardly call these transactions ‘micro’ in size and ‘all-you-can-eat’ bundles seem to be increasingly popular for digital music and DVD subscription businesses. However, there are clear signs of micro-transactions now taking a grip in the video gaming market.

While games such as Diablo (Blizzard) led to furious hacking, duplicating and trading of digital game content amongst players nearly a decade ago – using e-bay to transact outside of the game and computer code emailed to buyers as patches and item upgrades. Computer game designers appeared keener to limit transactions than encourage them within their games in the early Noughties.

However, games have come a long way since then. Products such as Eve and Warcraft have millions of players and trading is now a keen, if sometimes illegal, facet of play – creating basic digital economies.

With the development of virtual worlds, such as Second Life and Entropia, true virtual economies have now become established with game designer support and endorsement. Importantly these two examples not only allow players to buy local currency and make purchases in-world (in-game), but also receive payments from other players and exchange the virtual currency back into hard currency through electronic payments and Paypal.

There have been questions about the exchange rates operated by game owners, which penalise the extraction of virtual currency back into real $/£ etc. But in principal players are able to shop, trade and donate within clear rules which support micro-transactions and, for some, significant regular payments.

While I’m aware of 3 designers who make over $10,000 per year by selling objects they have designed for virtual worlds. The larger transactions are usually reserved for unique items, protected (with varying degrees of success) from being digitally copied and sold on by their new owners.

I believe the many avid video game players, who spend many hours each week playing a game and hanging out with other players online, are open to in-game transactions; paid with real cash or credits purchased from the game designers. The search for better equipment, personalised skills or unique options is capable of sustaining a small economy of several dollars a month from regular players.

However a currently untapped opportunity, from my perspective, exists in one commodity that games don’t regularly commercialise – speed – or game performance. In many game genres, such as FPS and racing sims, speed provides an edge; it helps you win or loose.

While consoles are commonly sealed standard units, offering a standardised game experience, the PC offers differing levels of game performance, based on initial hardware options, followed by any upgrades, software modifications (some legal, some not so) and broadband connection speed. So the player with the most expensive kit gains the advantage and may dominate gameplay. This often determines which player wins – or at least has a respectable score amongst their peers.

With Gamer-orientated PC’s costing double or treble the amount of everyday PC’s, many players simply can’t afford the extra $600 – $1,200 for hardware, plus $20-$40 per month for the fastest broadband, in order to access a speed advantage; which helps avoid an uncompetitive and unsatisfying lame play experience.

So imagine if games capped the speed of play for all players to acheive an acceptable average level of game performance. But then allowed players to pay the game devleoper online for a speed increase (lowering ping rate or unlocking a faster frame-per-second refresh rate) for, say, a micro-transaction of 25 cents per day. This would suddenly transform your game to the level you would normally need to spend another $1,000 on hardware to achieve. The bias would be toward supporting the game developer, rather than the hardware manufacturer.

And if the game developer was smart, they’d even let new players have free access to the speed for their first 7 days of play – so they may play alongside gamers familiar with maps, gameplay and tactics without being fried unfairly.

One company is now offering to provide an out-source service for in-game economies, check out Fat FooGoo

Perhaps its time to say ‘game over’ to online video games which fail to let the consumers participate, trade, pay and earn hard currency in a virtual economy?

Jeff Harris is a great creative; when I worked with him, he was about to join the digital exodus for Web 1.0. I recall he moved to set-up Lime, the first digital shop for Tequila in London, amongst other roles, before emigrating. He is now the Interactive Creative Director of FCB in Auckland NZ.

2 Responses to “the video games economy, growing cent by cent”

  1. 1 Alcohol Posts » the video games economy, growing cent by cent
  2. 2 2 flash gamez

Leave a Reply

Fill in your details below or click an icon to log in: Logo

You are commenting using your account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s

%d bloggers like this: