Microtransactions Video Game Model – Long-Term Analysis and Implications

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In the realm of the happy and joyful products that most games are, one lingering business practice has haunted gamers, publishers, and journalists alike: microtransactions. Whether those microtransactions be defined in the mobile gaming market, downloadable content (henceforth, DLC), or loot boxes, bringing up the mere concept elicits opinions and passion from anyone. Jump into an online forum of recent, and the overwhelming backlash against microtransactions and the dishing out of downloadable content would lead to the assumption developers ought to stray from the practice. Yet, as a business practice, microtransactions could not be more successful. There are too many subtle nuances in the world of marketing, pricing, and psychology that make microtransactions a loot box of confusion and depth. Boxing in the concepts and fundamentals of such video game practices does a disservice to the depth the conversation truly needs to go. The microtransactions video game model is a practice and method which needs a long-term, sweeping, and micro analysis.

Microtransactions Video Game Model – Long-Term Analysis and Implications

History and Concepts

Microtransactions, DLC, and loot boxes will all be mentioned in a general lump sum throughout, but in functionality, are also different. The meta reasoning for lumping them into one fancy idea is, despite each concept being an own unique approach, the concept addressed is developing companies charging game players extra to unlock additional or aiding content. Instead of charging the buyer upfront for everything, there is a perceived hidden cost that comes to ‘experience’ the full game.

Experiencing the full imagination of the developers is an ideal that gamers wish to have upon the launch of the game. In the early days of DLC, most recognized the practice as straightforward. DLC, for example, was a late developed ‘Map Pack’ to a Call of Duty game; the developer was not charging the gamer to purchase the full experience down the road.

However, as time has gone on each microtransaction and DLC item has derived a new outlook as companies have pushed the boundaries of what is tolerated among game purchasers. DLC is no longer a bonus for those who want it, rather a core component of a game system.

One of the central arguments against DLC in multiplayer games, even the innocent map packs, is online fracturing. DLC to a franchise such as Battlefield or Call of Duty results in half of the community buying the maps, and the other half not. When online matchmaking, servers then split those who purchase, and those who do not purchase the extra maps.

The split, however, may be largely overblown – upon the first pack, it may only be 25 percent of a community who does not purchase content. Yet, upon the second and third pack, those strides grow. Eventually a game devolves to those who have not purchased any additional content (25 percent) those with all map packs (50 percent) and then the remaining 25 percent disarrayed between the other two map packs.

However, where DLC gets extremely nuanced and irritating is when a single player game receives extra content shortly after launch. The implication is a full experience, or the broader experience, is locked behind a pay wall.

That DLC may be simply a bonus story tacked onto an already large game – Final Fantasy XV or Skyrim are games that have received genuine content tacked onto an already 40 plus hour adventure. Yet, other games, such as Assassins Creed have featured a full story, but of recent has locked additional story behind DLC pay wall.

No matter, DLC in single player games is generally treated fair enough to the point those who enjoy the story can extend it. In some regards, the concept is a great idea; the Nintendo 64 would not have the capability to build upon a story. On the flip side, the concept is a methodology to milk money out of consumers by issuing poorly done DLC.

Conceptually poor DLC now trends into the world of microtransactions. Microtransaction have a dual nature. In the mobile market, microtransactions are used on free-to-play games as a way of rapidly advancing through a game. A cool-down might come up which prevents the player from progressing for an hour. However, that hour can be jumped over as a player can pay for resources that enable the player to advance.

The other realm of microtransactions, and the realm which occurs on single-player console games, is micro cosmetic items. In the afore mentioned Battlefield, guns can be equipped with skins, Overwatch offers different costumes, and Forza 7 may offer powerups to get additional experience points to rapidly advance.

The final, and most egregious milking of DLC and microtransactions, is loot boxes. Loot boxes are straight forward: they absorb microtransactions, then randomize them within boxes that can be bought with in-game or real currency. Loot boxes are gambling.

Purchasing and Revenue

Abundant addiction has resulted in the overwhelming success of microtransactions and loot boxes in games. Despite the overwhelming discontent among gamers, there are three subtle factors that have befallen to favor the ongoing sale of microtransactions. Unfortunately, overwhelming success have made the above concepts a staple among developers; staples that will only continue to become a part of games in the future. (The long-term implications are addressed in the next section).

The first is a highly cited research article from the mobile marketing company Swerve. In mobile games Swerve marketed toward, data from January 2014 found .15 percent of users generated 50 percent of the revenue for their games. Furthermore, the aptly termed ‘whales’ who make up this large percentage of revenue often made their second purchase within one hour and forty minutes.

The study goes on to state purchases within one to five dollars made up 67 percent of the purchases, but only 27 percent of revenue. Meanwhile, purchases over 50 dollars made up .7 percent of purchases, but nine percent of the revenue. The straightforward implication, albeit a hasty generalization, the simple solution of not buying games which incorporate microtransactions does not negate the profit generated by microtransactions. A small portion (the whales) of a playing base will generate the most revenue.

For context, Clash of Clans made $168,000 in January of 2014.

The second consolidating factor is the largest complainers about DLC, are the smallest voices. A survey study conducted by the NPD Group in 2016 established that, “Price is the governing factor for gamers considering a microtransaction and/or DLC purchase.” However, the more devastating takeaway from the survey was although 77 percent stated enjoyment of the microtransactions or DLC, 68 percent hold to the theme of “pay-to-win” being unfortunate.

Developers have put out too much of a good thing; the content within microtransactions is enjoyable, although, buyer’s remorse may set in. Yet, why are DLC and microtransactions still bought? Back to the overt takeaway from the survey; pricing is everything. Should the second DLC or microtransaction presented be less than the first, 50 percent stated they would complete the purchase.

Furthermore, peer pressure and societal conforming are the death knell of gamers, especially young gamers. Among those who continue to buy DLC, wanting to have a “complete” game, the “best” version, and purchasing it to play with friends drove purchases.

Dominoes pave the path for developers in DLC. No matter if a product is not worth buying, among the younger user base, if one of their friends purchases a “golden” skin, then they must have the “golden” skin. The same is even more true of multiplayer packages; harken back to the split community factor, no gamer friend wants to be split from their friends due to map selection.

To capitalize on the entire procedure, add in multiple additions of varied value. Assassins Creed and Ubisoft have epitomized this business model – one game will have three versions with varying amounts of DLC and microtransactions built in. Although the gamer does not need the top tier, the lower cost completes the sale.

Finally, the nail in the coffin is the overt success and capitulation of microtransaction from the year 2010 until now have escalated gamers into the loot box mindset. In 2010, EA Sports took Madden and Fifa into uncharted territories with the wave of online gaming. For the first time, a game mode in Madden 10 and Fifa was introduced called “My team”. This featured the acquisition of players via card packages who made up the roster.

The catch was not all player cards were good – many underwhelmed, several were great. In order to entice players to spend small sums of money, one, two, up to ten dollars, players could purchase different tiers of packs in which the ‘chance’ to unlock a player card of the top tier was randomized.

EA hit the model out of the park, welcoming loot boxes to a growing model each year. In the most recent iteration of Madden and Fifa, early purchases or different tiers of the game (spending $80 instead of $60) would give the player access to coins to which the sole purchase is for buying ultimate team cards.

DLC and microtransactions have spawned victory for mobile gaming companies such as Zynga, the harvest is just beginning on console, “traditional” games.

Implications of Microtransactions

Implications of the above business practices are where the ‘fun’ and speculation truly begins. Retrospectively, a mere six years ago companies were building side games around microtransactions. Now, entire launch calendars have been created for the launch of DLC.

Stuffing a loot box or microtransaction into a game is now a check mark on the developmental cycle. Forza 7, Star Wars Battlefront 2, and Middle Earth Shadow of War now all feature a very abusive use of loot boxes. Instead of merely being an add on, loot boxes are now an intrinsic part of game play.

Battle Front 2 is the most abusive; any hope of getting boosts or level up powers comes solely through loot boxes. No loot box, no power-up. Thus, hours can be spent grinding wasting away in battle without the boosts to unlock the additional loot boxes for the mere chance of getting star cards, or the gamer can simply purchase a loot box with a higher chance of getting the weapon.

Those who choose not to purchase loot boxes are subsequently left with fewer power-ups, weapons, and overall, less advantages. Therefore, they will be more enticed to purchase said advantages via loot boxes as they are killed by those with the power-ups.

Forza 7 took the single player microtransaction to a new level with the impending launch of a system that allows players to purchase their way to ranking up. Shadow of War followed the mobile concept by introducing cool down timers into the system.

No matter the game, DLC and microtransactions are exponentially getting worse while revenue only increases. A far more impactful implication is the death of the single-player genre. From EA shutting down their Visceral developmental studio (notorious for single-player titles) to games such as Mass Effect: Andromeda being built around an open-world concept for microtransactions, or even the death of some genres that cost too much to make and offer no reverberation for loot boxes (Hideo Kojima’s Metal Gear Solid or Keiichiro Toyama’s Silent Hill), the very shape of single player AAA titles is fundamentally being reformatted.

Hideo Kojima’s Metal Gear Solid is a fantastic early death example. Konami, the publishing studio, opted to fundamentally change the way the series operated. Metal Gear Solid V: The Phantom Pain not only had a mobile tie in, but also featured multiplayer. The core gameplay stayed intact, but fans of the series noticed the subtle shifts.

Kojima is now no longer at Konami, having created his own studio to make a new game, Death Stranding. Meanwhile, Konami has shifted to a mobile and gambling game focus, while allegedly practicing less than scrupulous black-listing techniques.

Konami’s behavior may be the extreme example now. Yet, consider the long-term exponential growth in microtransactions for the last six years; project forward six years. The impact at studios may just be beginning.

Shutting down Visceral Studios was just the beginning for EA. In an interview, Zach Wilson, a former senior level designer at Visceral, maintains the death of the single-player AAA titles is a “Totally absurd” line. In fact, he argues that instead of shoe-horning single player titles into the market, fewer will be released, but those will be higher quality games.

Essentially, making a AAA single player game is a financial risk now. Without the ability to recuperate money on DLC and microtransactions, the financial prospects are limited. Thus, each company needs to put their best forward; no room for error will exist. Wilson brought up the newly released Wolfenstein: The New Colossus, a game which scrapped multiplayer to maintain a pure single-player experience.

Market wise, this may indicate a shift in who produces the single-player AAA titles. If the move to making retroactively profitable games is a trend for fighter reasons, then the companies that need to focus on that shift are publicly traded companies.

Recall that risk in what games or marketing techniques are implemented have a direct influence in the minds of market analysts (Cowen downgrading Activision Blizzard due to the Overwatch League). To be blunt, the investor has more impact on EA, Activision, et al than the consumer does. More opportunity to make money instead of riskier, high-priced titles, means the approval for funding will flow to multiplayer, retroactively profitable games.

Thus, more games such as Hat in Time, Yooka-Laylee, run of the mill average indie horror titles, will be the normal launch window for the single player experience. To get the full budgeted, traditional experience, companies such as Nintendo, Atlus, Rockstar Studios or Capcom will be relied upon to launch their one or two major titles – and even then, those companies cannot be relied upon to maintain a pure, non-DLC intrusive experience. Even Mario Kart and The Legend of Zelda Breath of the Wild had DLC of which the merits can be debated.

Scarier than horror games, however, is the long-lasting implication certain genres may be disappearing sooner than later. Manveer Heir, a seven-year veteran at EA who worked on Mass Effect 3’s multiplayer, offered insight into the manipulation of Mass Effect: Andromeda to make it more profitable.

The first three Mass Effect titles offered multiple endings and the player to craft their own decisions. Aside from a few pivot points to collect resources, the worlds were strictly linear. Andromeda, however, expanded to the open-world genre in a bad sense. According to Heir, the open-world model forced the player to spend more time wandering aimlessly for the sake of building in microtransaction into the experience. Instead of moving quickly on in the adventure, the boredom of the time exploring would entice players to purchase more microtransactions to either pass or advance themselves efficiently through the lull.

And that is the long-term implication of microtransactions: horror games, linear games, closed-adventures inspired by the deep imagination of minds such as Kojima are in the past. Gaming is a business after all, and business will design that which makes the most money.

Disdain, disapproval, voicing opinion is one thing: the money, however, tells the developer they can keep looting the gaming world.

Psychology and End User Effect

With the full-term implications of microtransactions on the business understood, other than what the user will be buying, what are the psychological impacts of the social interaction of microtransactions?

First off, there are those afore mentioned whales – the .15 percent who make up 50 percent of the revenue. Eurogamer conducted a timely interview with David Pietz, a 34-year old who claims to have spent $20,000 in the past five-years on microtransaction in the mobile gaming world.

Although this is one interview with one man, there are several takeaways on the mentality those who conduct such purchases have. Foremost, companies tie in players to make purchases using social influence and the enjoyment of the game. Pietz discussed the factor of leaderboards being a feature in many mobile games. The top of the leaderboard features players who are using microtransactions, thus the only way to reach those players are to use microtransaction.

Market research has been conducted in which mobile companies will intertwine in-game events and player behavior with targeted adds, a la the leaderboard. While Pietz says not all players fall to the social pressure, the other element is to fully experience the game (the intended nature) microtransactions need to be purchased to progress faster.

Pietz, almost surprisingly, is against loot boxes himself and recognizes the disdain they bring. He ended the interview with a warning not to tie a credit card to the playing account as loot boxes are an addicting form of gambling. Despite his high spending, he claims to be financially stable and not deviating from a personal plan.

Which brings to the latter factor; loot boxes do not offer tangible items, a dual natured beast. As Pietz mentioned, a cogitative dissonance is derived from the digital purchase. Famously, research has pointed out spending cash or handing over a gift-card to a clerk triggers the area of the brain in which pain is triggered. Even buying lottery tickets trigger ‘risk’ in the brain.

Juxtaposed, digital purchases are emotionless and can be repeated with little cognitive association to the implication. Everyone can infer the results of such action are devastating.

Lastly, there is another social downside to conducting such purchases. In a study from the International Journal of Internet Science, surveys concluded players who purchase microtransactions to increase their ability are viewed as “lower skilled” and have a negative overall outlook.

Theoretically, however, the discussion moved on to parlay the impact upon the players who do not purchase the microtransactions. The frustration derived build an insular circle and encourage the player’s who do not buy the microtransactions to either leave the game or purchase the microtransaction themselves. The players who grinded for the loot were discouraged from grinding, and dropped out.

No matter, the societal impacts of buying microtransactions in the gaming world are overall negative. There is an intrinsic hope such behaviors only lead to failure. However, the insular circle is only rebuilt, and the end goal is to remove negative societal consequences. Even the negative side effects will derive a way for the money to keep coming in.

Regardless of the societal impacts or negative attributes, loot boxes derive money, money derives habits, and gaming companies have now established a habit of looting with thy loot box.

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