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Innovation 17 Apr 2015

Micropayments in videogames: a (not so) silent revolution

As games evolve, so does the way we access them. We enjoy them on various screens and also pay for such content in other ways. We have gone from a one-off payment for a physical copy to microtransactions that make games more accessible to the masses and opens up new possibilities for monetizing and doing business. They are the future, and many case studies corroborate that this is where the industry is heading.

Videogames have long ceased being a product for which we make a one-off payment. Developers have been seeking new ways to monetize their creations, not only to better suit the market needs (people who want to play without having to make a large investment), but also to adapt to the different screens; we no longer play only on our TV’s, but on our cell phones and tablets as well.

This shift has led to huge changes within the videogame industry over recent years. Not only have companies managed to win over their customers, they have also managed to turn micropayments into one of the trends to follow. They have been around for some time, but the best is yet to come in this niche.

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From subscriptions to micropayments

With the arrival of the Internet, many people addressed the issue of how to market games that were purely digital in nature. There was no justification of the value of a physical copy, which becomes devalued since the important thing was the content rather than the container. Then came monthly subscriptions as business models in which World of Warcraft reigned supreme.

People eventually got tired of paying by monthly subscription. And here’s where a major shift takes place: they don’t want a service, they want goods. Items, digital items, which they can use in the game. Whether to advance more quickly, customize their character or gain a competitive edge over others.

Games like Team Fortress 2 started to switch from being games for which you make a one-off payment, to being free but with the option to buy items for your characters. This also generates a barter economy among users which, when scaled up, turns into a microeconomy within the ecosystem.

It works well, people try it simply because it’s free. It sounds like we’ve found the hen that lays the golden egg and it’s just a question of making it available to everyone, then sit back and wait for them to buy our digital products. If you are too greedy, you can end up with nothing, and you shouldn’t abuse the player’s trust.

The interesting thing about this system is that microtransactions have become not only a new way for developers to make money, but also another way of paying for content. Many channels are arriving on the scene, since these little “tips” of two or three dollars (sometimes more) can be turned into revenue in various ways.

Payment platforms such as those used by Google and Apple on their cell phones, PayPal-style gateways or direct payments by card. This is where there are most business opportunities: offering different ways to manage payments as well as coming up with new models to keep the videogame industry profitable and move beyond paying 60 dollars for a plastic box and a disc.

Profitable and successful

It would be a mistake to think that all of this is a just a kid’s game and that companies are not making money. As a case in point, one of the most popular games of the moment (League of Legends) has created its empire through minitransactions. You can download the game for free, but certain extras in the form of skins for customizing your character cost money.

They have a turnover of millions and it’s one of the most widely played games at professional tournaments. They have managed to strike a perfect balance between offering their creations and getting people to enjoy them by making small payments that do not compromise the gaming experience. Their latest content pack has been a huge success.

Micropayments are the future of videogames and the last few years have been atestbed to find out what works and what doesn’t. There’s still a long way to go and there are all kinds of opportunities opening up for companies to innovate and come up with new ways to make money. From small acorns grow mighty oaks.

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