Remember when games came out complete with no strings attached? We do. The rise of mobile gaming and its inevitable muse, the freemium model, marked the end of those days. One of the things we have to thank for this is Microtransactions.
Microtransactions, a word that now evokes a dark tower silhouetted by a lightning bolt and backed by the mad laughter of an evil game developer. It all started innocently enough.
Coming to prominence in the age of free-to-play MMOs, profits that came from the purchases of cosmetics and in-game currency became the bread and butter of the genre. Over the years, this freemium business model has moved into the mobile sphere, most notably with King’s ubiquitous Candy Crush whose in-game microtransactions made up 92% of the game’s generated revenue in 2013.
These days, it’s not just mobile games and MMOs. The microtransaction model has crawled its way up the corporate ladder, reaching the ears of big names in the videogame industry, like EpicGames with the viral dances of Fortnite, to the more controversial loot boxes of Blizzard and Electronic Arts.
So what are the different kinds?
Of course, for a phenomenon that's grown more and more pervasive every year, Microtransactions come in many forms. We’ll focus on three main types and these are:
1. In-game Currencies
It's not surprising that each game has its own very special kind of currency. These, however, refer to currencies you can purchase with real-life cash. Whether its diamonds, gems, or coins, buying these usually grant players access to in-game conveniences for a price.
These are most common in mobile games. For example in Clash of Clans where you have to wait a certain amount of time to complete a given task or structure, players can opt out of the wait with a certain number of gems.
While you can earn these through battles and random prizes, it may take a very long time to accumulate enough for more or less continuous gameplay.
There is a psychological element at play here, too, which will be explained further in the next part.
2. In-game Items or Purchases
Who hasn't gone virtual window-shopping for cute-looking armor, pets, and mounts? Whether its merely for cosmetics or for a certain advantage, in-game items are basically things you can purchase and use within the game itself.
It would like the epic-looking stuff at the RPG shopkeeper's inn, but we could also broaden its scope to include the next chapters of an episodic game.
Random Chance Purchases
The type of microtransaction that will push you to roll the dice against lady luck for the slim chance of receiving that legendary item you've been dreaming of. Most of the time though, all you get is spare change. But that's not stopping you from trying again.
Random Chance Purchases (RCP) usually come in the form of crates, loot box, or bags. Their main similarity is that they hide their contents from the player and are decided less by individual fortune and more by whatever algorithm the developers choose (depending on how generous they are.)
Literally named after the vending machine capsule toys commonly found in Japan, gacha games are the most guilty of these types. Games like Final Fantasy: Brave Exvius, Fire Emblem Heroes, and Puzzle & Dragons might come to mind, but these days you might also remember them from Overwatch, FIFA, and many of EAs titles.
More often than not, these loot boxes and treasure chests are offered free. But, that's when you have to be careful since you're a getting a taste of the thrill and the choice to get more is always dangled right in front of you. I mean, who doesn't like opening gifts, right? And that’s exactly what makes RCPs so controversial.
In fact, with such stark similarities to gambling, there are already movements for its regulation across the globe. In the US, there’s a proposed bill that bans selling loot boxes to minors and a scheduled hearing with the FTC; and in Europe, several countries are planning to officially declare them as gambling.
AAA Microtransactions are Evil! Why are they in my games?
Short answer? Because they work. And for the long answer, we have VOX doing some pretty good explaining, as always:
Using the viral popularity Pokemon Go as a jumpoff point, Vox explains how games exploit human psychology to get people to break out their wallets.
Cash vs Credit
Remember in-game currency? Well, apparently there's a reason they come in convoluted forms. VOX cites Candy Crush's credit to gold bar to lollipop exchange rate.
Because there are three layers of disconnect between your hard earned cash and the game's in-game currency, it separates you from the money you're spending compared to spending the same amount in cold hard cash. And, since these exchange rates are never, it makes it even harder to imagine how much you're actually spending.
People tend to experience unexpected losses more intensely than comparable gains.
Nobody likes pain. But with the freemium model, inconvenience is embedded everywhere you look, and getting out of them is easy enough, for the right price, VOX cites another game, Puzzle & Dragons, which prompts players at the crucial moment of dungeon death where you choose to either lose all your progress, and spend a magic stone to keep going. This also counts for the wait time mechanic in Clash of Clans (and maybe all the things we do on mobile MMOs to avoid the long grind.)
If you’re reading this with a big smirk on, pleased with the fact that you’ve never spent a penny on your games, you can wipe that straight off--you’re actually the majority. According to VOX, only 1.9 percent of mobile users make these in-app purchases and the few who do are called whales. They make up only 10 percent of the tiny percentage of mobile spenders but, like gambling addicts, they manage to dole upwards of a hundred dollars on the games they play.
So there you go. Whether or not you're a whale microtransactions have become an annoying part of the videogame world we live in. Now that they're there though, at least you know the kind of tricks they'll try to pull on you. Look out for those in-app purchases, and remember to keep your wallet (and credit card) safe!
Economics of Microtransactions in Video Games
How Loot Boxes Hooked Gamers and Left Regulators Spinning
US Senator Introduces Bill to Ban Loot Boxes and Pay-To-Win Microtransactions