What Do Microtransactions Mean for the Future of Gaming?
Microtransactional models have emerged in part with the rising popularity of online gaming and connectivity, promising ongoing revenue streams that offer new ways to structure game design and monetization. The initial conception of this strategy projected small amounts of income being generated from a wide range of participants; however, applications of the model returned a different result.
The vast majority of users spend nothing, while a small fraction of dedicated enthusiasts (often referred to as "whales") consistently spend large sums. Companies like Electronic Arts , Take-Two Interactive , Microsoft , and Sony have begun the push to make microtransactions a gaming staple. Will these efforts pay off, or do they risk fundamentally damaging the value perception of triple-A software?
It's in the game
Electronic Arts has long been one of the industry's most vocal and active proponents of microtransactions. Reacting to controversy surrounding the implementation of microtransactions in its full-priced retail release Dead Space 3, the company's CFO Blake Jorgenson stated that all future titles would incorporate the new way to pay and play. Amidst the additional outcry generated by this stated plan, Jorgenson later amended his comments, suggesting that they only applied to the company's slate of free-to-play mobile games.
The company released more than 60 mobile games in 2013, pushing substantial digital revenue growth, with Apple as the company's biggest retail partner in its first fiscal quarter. Electronic Arts has an obvious short-term incentive to further normalize the revenue model it says consumers are "enjoying and embracing."
Nickel and dime packages
One of the biggest problems with microtransactions is that they either throw off the balance of a game or create situations in which players are aggressively steered toward paying for content that would otherwise be free or more easily unlocked through game-play. NBA 2K14 from Take Two is a title that has generated substantial push-back due to the structuring of its in-game economy.
Performing basic actions such as trading players or firing coaches requires players to spend in-game currency and, wouldn't you know it, this currency just so happens to be purchasable with real world dollars. That the vast majority of reviews for the game have no mention of its surreptitiously demanding economy is not evidence that such practice has been accepted by the consumer base. The big software publishers enjoy notoriously cushy relationships with review outlets when it comes to major titles. There is no doubt that Take-Two will catch a few whales if it insists on casting this sort of net with its console titles. Whether the haul is worth the risk of driving away the core consumer is the pertinent question.
Looking for whales in all the wrong places
Microsoft's Forza Motorsport 5 is one of the premier launch titles for the company's Xbox One and the latest entry in a critically acclaimed series. The game was also released with some of the most egregious microtransaction implementation to date. The game's economy required near ludicrous hours to unlock certain cars and features. Again, this issue went largely un-addressed in published reviews, but fan outcry prompted an apology from the game's developer, Turn 10.
The studio has recently released an update that lowers prices across the game's economy, but it is likely that damage has been done to the series and the move suggests a conceptual misunderstanding of "whales" that appears to be common among publishers eager to push the microtransaction game.
The people pouring large sums of money into mobile games like Candy Crush are, by and large, not the same people who are gaming on consoles. There is a fundamental difference between a "free" game played on a smartphone and a $60 game played on a $400-plus gaming system that is typically connected to a similarly expensive television or monitor. So, even when a game like Sony's Gran Turismo 6 does not drastically alter the series' established in-game economy, the fact that it includes microtransactions throws the value of the game into question. Purchasing the game's most expensive car will cost the equivalent of approximately $196 in game currency.
The "whales" who play games like "Forza" and "Gran Turismo" are the type who spend hundreds of dollars on racing-wheel controllers that offer force feedback, then sink hundreds of hours into mastering the game and unlocking its content. The expectation that console gamers should pay $60 to own a game only to fork over additional cash to have the privilege of not playing it is fundamentally flawed.
Is there a breaking point?
With EA, Take Two, Microsoft, and, to a lesser extent, Sony establishing microtransactions as part of console-gaming's future, the value of software is in flux. How this will affect Xbox One, PlayStation 4, and the long-term viability of the traditional console industry remains to be seen. However, the reason why arcades no longer thrive is worth remembering. Better products with better value were offered elsewhere.
So who's going to take over your TV?
Television, as we know it, is on the verge of a transformation. The companies that prevail in this epic disruption could go on to earn their shareholders untold sums of money. And the companies that lose could very well end up in bankruptcy court within a matter of years. With this in mind, our top technology analysts created a groundbreaking free report that sorts out the likely winners from the losers. In doing so, they reveal the handful of companies that are best positioned to make their shareholders exceptionally rich over the next few decades. To download this invaluable free report before the rest of the market catches on, simply click here now.
The article What Do Microtransactions Mean for the Future of Gaming? originally appeared on Fool.com.Keith Noonan has no position in any stocks mentioned. The Motley Fool recommends Take-Two Interactive. The Motley Fool owns shares of Microsoft. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.