There’s a commonly-shared belief in the gaming marketplace that games with no monthly fee that are microtransaction-supported are unpalatable to the “serious” MMO gamer. Microtransactions, which offer an alternate (or additional) form of payment to the traditional subscription model, have been looked down upon for a long time, the general sentiment being that they encourage spammers, gold farming and sales, real-money trading (RMT), and pretty much every negative activity in the MMO book.

Now, I’ve written about microtransactions and real-money trading in MMOs before, but from a different vantage point. This time around, I’d like to explore a couple of options that I see as viable ways to monetize an MMO with microtransactions (and in turn, dropping costly subscription fees) in a way that doesn’t anger the majority of the player base and get a rise out of half the gaming bloggers out there. Obviously, this has been expounded upon by any number of gaming industry professionals and many people much smarter than myself, but I figured I’d take a stab at the concept coming from a the perspective of someone who develops web-based communities, as opposed to coming from a game developer’s mindset.

Challenging the misconceptions

The way I see it, MMOs are at their core simply online communities like any other format, be they social networks, message forums, etc. They engage and involve the user to an extraordinary extent, and provide a much richer user experience and interface, but they function based on the same principles that power most communities. And there are a few things you can do to encourage good (and bad) behaviour in most online communities.

The problem with the way microtransactions have been implemented in online games to date is two-pronged:

1. They remove the barrier to entry to the game, introducing undesirable users into the game. These users would then spoil the community via abuse of the system like gold sales, spamming, etc., encouraging negative behaviour in the process.
2. They alienate the actual gamers themselves by preventing them from growing their characters without spending money.

I’d argue that most or all of the worries people have about microtransactions are either unfounded or based on discrete examples of how they’ve been integrated into games in the past. MMOs have evolved, so why can’t the way payment is handled evolve along with them?

Microtransactions remove a necessary barrier to entry

The first misconception to challenge here is that moving from a subscription-based model to a microtransaction-based one will remove the primary barrier to entry to most MMOs. In most communities, strategically-placed barriers to entry are a good way to encourage good behaviour, and keep out the chaff. They’re used everywhere, in varying degrees and different flavours.

To take a page out of Derek Powazek’s classic book of the early social web, Design for Community, barriers to entry come in three distinct strengths: informal, formal, and extreme. Being interested in playing an online game would be an example of an informal barrier: if you have no interest in MMOs, why would you play Warhammer Online or World of Warcraft? That step already weeds out a good chunk of disinterested folk. Registering for a web site in order to be able to participate is definitely a formal barrier, although a weak one. Requiring a driver’s license is a slightly more formal barrier to driving a car. Being ultra-rich and having to be invited by someone else ultra-rich is a rather extreme measure that you see used in various closed-circle social networks like ASmallWorld.

However, take a look at YouTube. How many of you actually register for YouTube? What percentage of people actually rate videos, add favourites, or subscribe to other users’ video streams? How many people actually contribute content to YouTube versus the lurkers who just come to watch? That percentage is undoubtedly quite low compared to, say, active players of an online game. The moral of the YouTube example is that barriers to entry vary in their level of requirement. Some situations dictate harsher or more serious barriers, and some don’t, such as in YouTube’s case. They get what they need from the site without requiring users to register or participate, for the most part.

In the case of MMOs, the majority of triple-A North American titles charge a monthly subscription fee. In fact, the definition of a massively multiplayer online role-playing game often coincides directly with the term “subscription-based”. There are a lot of influential folks out there who decry microtransaction-based games as everything from unethical to evil, a cash-cow, and generally as an epic fail on the part of game developers.

That’s not always the case. As an oft-stated example of non-subscription games, Guild Wars was a game without a subscription model that succeeded both critically and financially, and had a pretty solid community to back it up. Of course, it didn’t use microtransactions, either. It had an alternate business model that depended on regularly-released expansion packs, which weren’t required to play, but were a viable way of producing additional content at cost to the players.

However, moving to microtransactions does not necessarily mean you’re completely removing that fiscal barrier to entry. While most examples of games monetized using micropayments, such as the majority of Nexon’s games, are free-to-download and free-to-play until you want to shell out real cash for armour, items, virtual pet, or ability upgrades, there’s nothing preventing game publishers and developers from still requiring that up-front investment from gamers. Buying the game box on the store shelf is an experience in itself, and Guild Wars did an excellent job of getting users to repeat that experience every six months. There’s no reason a micropayment-funded game couldn’t still require you to purchase a retail box, and not require a subscription. In fact, that’s what most of the subscription-haters out there gripe about; finding an alternate way to monetize that doesn’t require them to drop coin every month. Instead, make the gamers buy the box — and then charge them to promote good behaviour in the game, not bad.

Microtransactions alienate gamers and promote bad behaviour

This one is the easiest to quash. The main argument here is that most games that run entirely on micropayments are riddled with gold sellers, spammers, RMT, and are generally unsavoury places that “real” MMO players don’t want to be. Microtransactions themselves don’t promote bad behaviour. Bad design and implementation of microtransactions does that quite handily, though. If you build a system that encourages this kind of behaviour, it’s bound to happen. It’s all a matter of looking at alternate ways of monetizing gamers’ activities.

I look at games that run on micropayments as an extension of the freemium business model commonly found on the web these days. You get your basic package for free (or in the case of some games, with a one-time cost when you buy the game off the shelf), with a good set of features and tasks you can accomplish with the tools provided. If you want more, you pay for it in different increments. While most web sites that use the freemium model are subscription-based, there are plenty that require one-off costs to perform specific actions, which are undoubtedly forms of micropayment.

A good example of this methodology of how micropayments can be applied in the web world is Freshbooks. Freshbooks is a site for individual freelancers or small businesses that lets you track time and invoice your clients. The basic service is free of charge, or if you require additional services, or have a larger staff, you can upgrade for a monthly charge to a more performant account. Now, I’ve used Freshbooks myself and I’ve been quite impressed with it. One nifty trick they have up their sleeve is their invoicing system; if you want to send out an invoice via email, it’s free. However, they also offer the ability to send that invoice via traditional letter mail. In that case, they charge you a small fee, usually the cost of the stamp with a very slight markup. That definitely falls into the micropayment category and it works quite well.

In the console gaming world, take a look at the incredibly successful Rock Band and Guitar Hero franchises (or hell, even an online service like Xbox Live.) Both games offer downloadable content (DLC) available via micropayments that allows users to continue enjoying the game after they’ve completed the basic content. Even popular console titles like Rockstar Games‘ Grand Theft Auto are expanding into the DLC arena with available-online-only expansions like GTA4: The Lost and the Damned. None of these micropayment-based systems are harming gameplay or hindering gamers’ enjoyment of the game, so why can’t the same be said for applying similar principles to MMOs?

Microtransactions aren’t evil; they’re just misunderstood

Seriously, folks. It should be obvious that there are other ways to implement micropayments properly, without pissing off the entire gaming community at large. It doesn’t all need to be about character customization and advancement. It should be possible to run a game on micropayments without resorting to cheap tactics like item purchases, character upgrades, or explicitly paying for XP. There are other features of MMOs that could be monetized, or at least work off of a freemium-style model, and wouldn’t disrupt the games’ ecosystems quite so much.

Here are a couple of examples, off the top of my head.

• Charge users to operate (or participate in) micro-communities.
  What does this mean? It means that you buy the game off the store shelf, sign up without paying a monthly fee, and then if you want to start a guild, you pay a small chunk of change to do so, potentially on a monthly basis. It’s even possible that you could create a sub-economy within the game where guildmasters could charge their own players to be part of a guild, recuperating some of the money they’ve invested in forming the guild, and developing a bit of a reseller mentality. All of the financial dealings could be handled via the game’s interface and be one-clickable; the best micropayment systems are the ones that are totally transparent and easy to use —Apple has recently become the master of this: think iPhone App Store, or iTunes, or even the new features being built into iPhone OS 3.0. Not only would this approach create a formal barrier to entry for guild creators (and/or members) and limit the amount of bogus guilds and dead micro-communities in MMOs, it would increase the responsibility (and potentially, respect) granted to the role of guildmaster, and really make gamers think twice before joining a guild, or guild-hopping at a later date. Financial investment tends to create a sense of attachment that you don’t really get otherwise. This would be beneficial to both people operating guilds and to the guilds as a whole.
• Charge users for premium services within the game.
  Instead of charging gamers for shiny new armour or to buy yet another virtual pet, why not charge for premium services within the game? Here’s an example of a common MMO feature that could be revamped using this notion: auction houses. Now, I’ve complained in the past about the simplicity of WAR’s auction house, and how it could use additional features to bring it up to par, or surpass, existing auction house systems in other games. How about if instead, some of those features were only available if you were to shell out a little cash to subsidize their operation? You’d still get all of the basic features of the auction house, but if you want to be a real pro auctioneer, or just streamline your user experience by adding a bunch of additional ways to utilize the system, you’d have to pay a small amount. Let’s say you want to re-sell your own services as crafter on the auction house. You could pay a small fee to list yourself via a paid advertisement, and in turn, you might be compensated by other users who want to request your services, who could be charged a small sum to find out your in-game contact info or place an order. This would allow the game publishers to makes some money off both parties, and would allow you to re-coup a little (or all) of your investment/costs, and eventually maybe even make a profit. This would only apply to the subset of gamers who really want to use the auction house to its full potential, and wouldn’t interfere with others who just want to play the game and not bother with getting that involved in these more specialty-oriented features.

I realize that the examples I’ve presented are small and probably wouldn’t come near compensating for the loss of subscription revenues, but they’re only two options to consider. There are any number of other ways you could monetize MMOs and forego subscription fees in addition to what I’ve suggested above — and to do it in such a way as to not alienate gamers or make them think they’re being ripped off. These are alternatives to the present implementation of microtransactions that provide additional services to those who require them, but don’t hinder gameplay or allow only people who can afford financial investment to succeed in the game. They don’t interfere with game mechanics and even could go so far as to improve or extend MMOs’ economies in ways that aren’t really being attempted yet.

Apologies for the wall of text, but I’ve been thinking about this for a while and I couldn’t decide whether to post it here or on my personal blog. I think I’ll probably end up cross-posting it. :)

Are microtransactions really the end of the MMO world? Or are they just poorly implemented right now? What other in-game services could be monetized without breaking gameplay and hindering users who don’t want to pay, or don’t have the resources to do so? I’d love to hear what you guys think.

Photo courtesy of waɪ.tiː on Flickr.

This article, combined with recent unconfirmed rumours that Bioware’s new Star Wars MMORPG may be (at least partially) microtransaction based, got me thinking about all of the negativity surrounding RMT and microtransactions in the North American and European MMO marketplace. For the layman, microtransactions are basically for-cash transations inside online games of any kind, be they free-to-play or subscription-based systems. The common model amongst these games is to allow anyone to play for free by downloading the client online, effectively lowering the barrier to entry to nothing for Joe Gamer, but then requiring real money transactions, though small (think anywhere from a few pennies to a few dollars), to acquire appealing in-game items, skills, or anything that strikes the game developers’ collective fancies.

This stuff works, you know

Along these lines, I watched an interesting and thought-provoking talk by I’mInLikeWithYou’s founder and lead developer, Charles Forman, at the Web 2.0 Expo in New York this past September (you can read my recap over here.) Foreman spoke at length about a variety of aspects of bringing the gaming mindset — especially of the collaborative/multiplayer genre — over to the web (be it in the business world or in a web-based gaming environment) from the traditional thick-client game development industry. He also discussed building applications to support and feed this mentality. He touched on microtransaction systems and their popularity in Korea and other parts of Asia, which I listened to with interest. Huge microtransaction-based game publishers like Nexon and NetGame are supremely popular in Asia, but haven’t really picked up traction in North America thus far.

There are other business models for MMOs out there too, from Guild Wars’ free-to-play but pay for expansion packs model, to adver-gaming, etc. I played TCGs like Chron X and Sanctum back in the late ’90s while I was in university (as did, surprisingly, IGE’s Brock Pierce), and they worked relatively well on microtransaction models (though slightly larger, in the $5-$20 range per transaction, although one could argue that the materials purchased were somewhat more valuable than items in MMOs) prior to their popularization in Asia later on. For the time being I’m going to stick to discussing subscriptions versus microtransactions.

So why doesn’t it work here?

The reasons for this are pretty nebulous to an industry outsider like myself, but it looks as though most of it just has to do with the existing comfort level with the subscription model. Monthly subscriptions have been the norm for the western world, dating back to the early MMORPGs like Ultima Online in the mid-1990s and moving well into the current generation of MMOs, ranging from World of Warcraft’s massive 11 million subscribers to Age of Conan and Warhammer Online.

Maybe it’s a Western culture thing, but games like NetGame’s Holic Online and Nexon’s MapleStory have created player bases substantially larger than many of the biggest North American (and European) MMOs (we’re talking in the several million accounts, here) have subscribers. Obviously, having a half-million monthly, paying subscribers versus 5 million non-paying accounts is a pretty easy win for the subscription model.

Hey, wait a minute… maybe it does?

But wait: if we consider your traditional internet sales funnel, let’s say 10% of your registered accounts start making microtransaction-based payments for in-game items, upgrades, pets, etc. That’s a half-million of your 5 million accounts creating revenue, but you still have the traction of 5 million players spreading the word and virally marketing your product. Now it’s not so easy to judge what’s better, right? My fiancée plays Holic and enjoys it tremendously. I can see why: she’s a student with no income to drop on a monthly fee, and although she enjoys games like World of Warcraft, she can’t afford to play it on her non-existant income. She’d much prefer to play Holic for free, and she’s willing to accept a slight quality drop in order to play an MMORPG.

So, what of these RMT-based games were higher quality, produced by a company with a notable track record in North America and Europe, and attracted a little more discerning user base?

Star Wars: The Old Microtransaction Fallout

I read gaming blogs quite regularly and noticed quite a backlash against the possibility of Bioware’s upcoming MMO, Star Wars: The Old Republic, potentially going with a microtransaction-based model. While the whole kerfuffle was temporarily cleared up as a misunderstanding (as reported over at Broken Toys), Keen over at keenandgraev.com had a post last week fundamentally denouncing the entire model and refusing to play the game if it ended up going that way. As both a gamer and someone who works in enterprise software development for a living, I find that I can distance myself from the emotional “allowing and legitimizing RMT is bad and microtransactions will ruin the game” mentality because I see the value gained by going with an alternate business model. It’s really nothing new, at least in the world-wide marketplace. But I also feel a little bit of a common bond with Keen in that I don’t want to see what could potentially be an awesome next-gen MMO turn to shit because of money-related “business” issues. But we have to remember an important fact here: all MMOs are still businesses and not charities, and if they lose money and close their doors like so many have in recent years (Richard Garriot’s Tabula Rasa being the latest notable fatality), it not only hurts the industry, but the consumer — including you and I — in the end. Less competition out there for games like WoW mean less innovation and less of a drive to be the best, and less innovation means that we have to wait another year, or two, or five, before we see something that’ll knock it out of that top MMO slot.

Cutting out the middle-man

Back to the IGE and real-money transaction issue. The other benefit here is that moving to a microtransaction model effectively cuts out the middle man. Companies like IGE made money off gold farmers’ backs, and sold in-game items and currency for real cash. Allowing the gamer to make these transactions legitimately, in-game, using systems built by the game developers to do as such, drops the hammer on these grey-market middle-men and puts the power back in both the gamer’s and the developers’ hands. And money in our hands is much better than money in theirs, don’t you think?

At the end of the day, I still find it comical that many in the western world complain about “yet another pay-to-play MMO” and shell out what many would consider a hefty (and slowly increasing, as we move to more complex, richer MMO experiences) monthly fee, yet were willing to pay tens, hundreds or even thousands of dollars on eBay or IGE for an in-game item. It seems ridiculous, doesn’t it?

So, is it so wrong to capitalize on that mentality? Will it ruin the industry, or more importantly, your gameplay? Food for thought.