Microtransaction
Microtransactions (mtx) is a business model where users can purchase in-game virtual goods with micropayments. Microtransactions are often used in free-to-play games to provide a revenue source for the developers. While microtransactions are a staple of the mobile app market, they are also seen on PC software such as Valve's Steam digital distribution platform, as well as console gaming.[1][2]
Free-to-play games that include a microtransaction model are sometimes referred to as "freemium". Another term, "pay-to-win", is sometimes used pejoratively to refer to games where buying items in-game can give a player an advantage over other players, particularly if the items cannot be obtained through free means.[3] The objective with a free-to-play microtransaction model is to involve more players in the game by providing desirable items or features that players can purchase if they lack the skill or available time to earn these through regular game play. Also, presumably the game developer's marketing strategy is that in the long term, the revenue from a micro transaction system will outweigh the revenue from a one-time-purchase game.
Loot boxes are another form of microtransactions. Through purchasing a loot box, the player acquires a seemingly random assortment of items. Loot boxes result in high revenues because instead of a one-time purchase for the desired item, users may have to buy multiple boxes. This method has also been called a form of underage gambling. Items and features available by microtransaction can range from cosmetic (such as decorative character attire) to functional (such as weapons and items). Some games allow players to purchase items that can be acquired through normal means, but some games include items that can only be obtained through microtransaction. Some developers[4] ensure that only cosmetic items are available this way to keep gameplay fair and balanced.
The reasons why people, especially children, continue to pay for microtransactions are embedded in human psychology.[5] There has been considerable discussion over microtransactions and their effects on children, as well as regulation and legislation efforts. Microtransactions are most commonly provided through a custom store interface placed inside the app for which the items are being sold. Apple and Google both provide frameworks for initiating and processing transactions, and both take 30 percent of all revenue generated by microtransactions sold through in-app purchases in their respective app stores.[6][7]
Impact[edit]
Mobile web analytics company Flurry reported on July 7, 2011, that based on its research, the revenue from free-to-play games had overtaken revenue from premium games that earn revenue through traditional means in Apple's App Store, for the top 100 grossing games when comparing the results for the months of January and June 2011. It used data that it analyzed through 90,000 apps that installed the company's software in order to roughly determine the amount of revenue generated by other popular apps. They discovered that free games represented 39% of the total revenue from January, and that the number jumped to 65% by June, helped in part by the fact that over 75% of the 100 top grossing apps are games. This makes free-to-play the single most dominant business model in the mobile apps industry. They also learned that the number of people that spend money on in-game items in free-to-play games ranges from 0.5% to 6%, depending on a game's quality and mechanics. Even though this means that a large number of people will never spend money in a game, it also means that the people that do spend money could amount to a sizeable number because the game was given away for free.[40]
A later study found that over 92% of revenue generated on Android and iOS in 2013 came from free-to-play games such as Candy Crush Saga.[41]
Electronic Arts Corporate Vice-President Peter Moore speculated in June 2012 that within 5 to 10 years, all games will have transitioned to the microtransaction model.[42] Tommy Palm of King (Candy Crush Saga) expressed in 2014 his belief that all games will eventually be free-to-play.[41] According to Ex-BioWare developer Manveer Heir in a 2017 interview, microtransactions have become a factor in what types of games are planned for production.[43]
Free-to-play coupled with microtransactions may be used as a response to piracy. An example of this is the mobile game Dead Trigger switching to a free-to-play model due to a high rate of piracy.[44] While microtransactions are considered a more robust and difficult to circumnavigate than digital rights management, in some cases they can be circumvented. In 2012, a server was created by a Russian developer, which provided falsified authentication for iOS in-app purchases. This allowed users to obtain features requiring a microtransaction without paying.[45]
Consumer organizations have criticized that some video games do not describe adequately that these purchases are made with real currency rather than virtual currency. Also, some platforms do not require passwords to finalize a microtransaction. This has resulted in consumers getting unexpectedly high bills, often referred to as a "bill shock".[46]