Understanding Smurfgate

Understanding Smurfgate
Rick Gibson

By Rick Gibson

June 14th 2011 at 12:45PM

It looked innocent, but Capcomâ??s Smurf iPhone game attracted parental scorn for a pay system abused by kids. Games Investor Consulting's Rick Gibson explores the uproar...

When Madison, an eight-year-old from Maryland, purchased nearly £1,000 of Smurf-themed virtual currency in one month on an iPhone game without her mother’s permission, the mother loudly complained, galvanising Apple, legislators and the Federal Trade Commission.

Whose responsibility was ‘Smurfgate’, what are the commercial implications and could this initiate a fractious new argument about the ethics of microtransaction games for kids?

Smurfs’ Village is Capcom’s FarmVille clone on iPhone, with classic sim gameplay and virtual currency bundles ranging up to $99.99. Apparently Madison’s mother downloaded the free game, logged in, and handed the phone to her daughter – who quietly bought wagonloads of Smurfberries, the game’s virtual currency.

This was possible because until recently Apple allowed unlimited in-app purchasing without additional password confirmation for 15 minutes after log-in. Why Apple allowed this is somewhat baffling, as was its long delay in enforcing a password prompt for all in-app purchasing post log-in; an inevitable, potentially costly step could reduce revenue by raising friction in many freemium iOS games.

CAUGHT IN A TRAP

Capcom inadvertently fell into a commercial tank trap well known to seasoned developers of younger-skewed virtual worlds and MMOGs – bill shock triggered by uncontrolled microtransaction-based purchasing by children.

Few online games targeting under-13s use uncapped microtransactions because operators fear parental backlash and credit card chargebacks.

These developers often try to reassure parents by promoting features like safe environments, moderation, restricted player communication and mildly educational content. Commercial model is important; games should appear good value, thus predictable subscriptions work and uncapped microtransactions are problematic.

Microtransactions can work if they are subscription-based (effectively monthly allowances of virtual currency), or allow monthly spending limits. Both models are increasingly popular in tween/teen online games. Capcom uses no caps and only posted warnings that virtual currency costs real money following complaints. It’s debatable whether parents would notice or younger players understand. With the top-nine in-app purchases averaging $22.99, some (whether children or adults) spend significantly in Capcom’s successful, commercially aggressive game.

If Madison’s mother ignored the premium virtual currency and Apple’s complex controls regulating in-app spending, she may have been reassured by Apple’s 4+ rating, mistakenly so because neither PEGI, ESRB nor Apple assess whether business models are appropriate for children. The ratings bodies struggle to certify these products at all.

Even Disney’s Club Penguin, one of the safer kids’ virtual worlds, has no PEGI Online rating. With tens of thousands of online games released every year, PEGI and ESRB are like King Canute trying to hold back the sea and it’s unlikely the contentious area of microtransactions for young children will ever be certified.

SOME MOTHERS…

Many will argue the parent bears most responsibility. She may brand Apple’s inadequate spending controls and Capcom’s absent labelling as accidents waiting to happen, and will feel vindicated after receiving a refund but she clearly shirked her responsibility for regulating her child’s purchasing and understanding what she allowed Madison to play.

That didn’t stop a congressman successfully asking the Federal Trade Commission to investigate in-app purchasing, whose early feedback probably triggered Apple’s pre-emptive policy switch. This investigation could open a real can of worms by examining children’s use of a much larger platform, Facebook.

Here, officially everyone is over the age of 13, but (says ComScore) nearly four million US Facebook accounts are underage.

As social networks usage rises and some games providers blur age limits, massive abuse of minimum ages by children in games risks becoming a headline issue. Again.

Hard commercial reality would have eventually forced Apple to do what Capcom, legislators and ratings would not. Chargebacks demanded by parents of kids splurging on Smurfberries prompt credit card providers to reclaim funds from the payment collector Apple.

Such chargebacks could damage Apple’s vendor status and may inevitably force more changes on content partners.

All parties must share some responsibility for rousing the legislators and the ‘scandal’ may have burnt itself out but this could become an opening salvo in a wider campaign. We may find ourselves in uncomfortable territory discussing new boundaries for child protection.