Nick Gibson considers the financial reality of gaming's bolder business models
This month, I want to talk about a subject that many developers find deeply uncomfortable: the use of aggressive monetisation strategies, and in particular those involving microtransactions.
As this is a business column, I am not going to talk about the undoubtedly valid ethical debate around this issue, but instead use facts and experiences gleaned directly from developers to investigate whether more aggressive monetisation tactics actually work commercially, or whether they simply drive players away and are unsustainable in the long-term.
Whenever we talk to developers experienced in the deployment of sophisticated microtransaction models, we repeatedly hear that every games community has a vocal minority that will object to any implementation of alternative monetisation techniques. They often give the impression that they speak for the majority of a player base.
In practice, they never do. Most player bases are highly fluid with the majority of users seemingly indifferent to even some of the most egregious of commercial model tactics.
One of the most illuminating examples of this was Battlefield Heroes, when EA decided to start selling gameplay advantage not only long after it had launched and had some three million registered users, but also after it had expressly promised it would not do so.
Predictably, the announcement triggered an eruption of online rage, petitions, boycotts and predictions of the game’s quick demise.
What actually happened was surprising. Both churn and new registrations remained unaffected while pay conversion rates and revenues leapt upwards as soon as the switch was made. Since then, the game has more than tripled its registered user base.
Even the vocal minority failed to follow up on their threats and, ironically, became among the game’s biggest spenders.
Star Wars: The Old Republic is another example. Its transition to what was seen as a particularly aggressive freemium microtransaction/subscription hybrid model with heavy restrictions on free play was again accompanied by a fervid and clamorous outcry and similar predictions of doom.
However, BioWare recently revealed that the player base has actually blossomed since the switch, and its subscriber base has grown back to half-a-million. The adoption of this ‘unpopular’ model not only rescued a dying game, but has also resulted in monthly revenues doubling from its pre-switch levels.
But how far can developers go with their models? Based on what I have seen, it is likely to be far further than most developers think.
To illustrate this I would like to turn to one of the biggest Western games studios you have probably never heard of, Aeria Games.
Aeria Games is a 600-person US-headquartered MMO publisher specialising in bringing Asian MMOs to the West. What makes Aeria relevant to this discussion is the sophistication and expansiveness of a microtransaction monetisation strategy that has a particular focus on chance, artificial scarcity and selling gameplay advantage.
Aeria deeply ties this monetisation into gameplay for example with game modes that feature character perma-death that is only reversible with hard currency-bought resurrection potions. Most of its games are overtly and unabashedly pay-to-win and some of its in-game items can cost upwards of $150 in hard currency.
Conventional industry wisdom would suggest that these techniques are unsustainable in anything other than the short term, preventing any long-term player loyalty and erecting major barriers to new players.
The truth is far from this. Its leading title, Shaiya, a PvP MMO in which a pay-to-win arms race is actively engendered, has an ARPPU of $130-$150 per month and contributes significantly to Aeria’s annual revenues in the West of over $150 million.
Even more counter-intuitively, Shaiya was launched seven years ago, around a fifth of its players have been active since 2009 and its revenues are still growing, proving that even its extreme pay-to-win monetisation techniques can be sustained in the long-term.
Aeria’s games certainly have their detractors but, as with other games, their vocal indignation appears to have no material sway over the majority of players.
It is difficult to escape the fact that numerous freemium developers have failed because they employed overly conservative or tentative models while almost all of the top grossing freemium developers have flourished using pay to win and other comparatively aggressive monetisation strategies. This does not mean that great commercial success cannot be achieved with gentler models. Nor am I suggesting that aggressive models would work with all genres and audiences (children being the most obvious no-go area, something, lamentably, some developers ignore).
However, there are plenty of game types for which these models are suitable and I would simply urge developers to overcome their discomfort, look beyond the vocal minority and investigate the commercial practices of the top grossing developers.