World of Warcraft at Ten Ton Hammer

Digital Download

Ten Ton Hammer Editor-in-Chief Jeff “Ethec” Woleslagle believes digital distribution is the future of gaming. Ethec cites no disc swapping, no DRM hassles, no trips to the retailer, and no inventory shortfalls among the reasons he likes digital download as a consumer. One aspect he did not address is the potential savings for the developer. It costs money to print a box, make a DVD, and ship a game to retailers. Going with an entirely digital distribution model would allow companies to eliminate those costs while still selling the product.

Selling a title exclusively via download for the same price as retail stores would permit a company to reap the current benefit of box pricing while reducing production costs. The benefit here is avoiding a price increase that could scare off customers while still freeing up cash. The drawbacks of the digital distribution model include a lack of advertising in retail stores that boxes bring now, as I noted recently. Another shortfall of this plan is that consumers must burn DVDs for themselves or find other storage solutions for games they obtain digitally. Every gamer is just one nasty virus away from a reformat, and no one wants to endure a six hour download for each game he has purchased digitally after rebuilding his machine. Because this method of combating the dip in the economy does not increase cost to the consumer, expect to see more companies explore it in 2009.

The “M” Word

Microtransactions. There. I said it. Somebody had to. The microtransaction model has been wildly successful in the East, and it’s slowly working its way into the Western market. MMOG behemoth World of Warcraft offers microtransactions to change the appearance of characters (and their gender, too!). Sony Online Entertainment has introduced Station Cash, bringing microtransactions to EverQuest and EverQuest 2. In both cases, the services offered by Blizzard and SOE are intended to be purely optional; they are a convenience and primarily give cosmetic changes. Nevertheless, many fans have revolted.

Most free-to-play (F2P) games depend on microtransactions as their only source of revenue. While I love F2P games, I’ll be the first to admit that they usually do not share the production value of subscription-based titles. As a result, the word microtransaction has become synonymous with poor quality and fleecing in the West. To ever win over the Western player base and make microtransactions work, it will take a company willing to commit to a high quality product that uses a popular intellectual property.

The benefit of using microtransactions is that companies can often offer the basic game for free and use the revenue generated from item mall sales to finance additional content and fixes for bugs. Most Western consumers don’t see it in the extant implementation, but microtransactions can also allow them to experience a game for free in tight financial times and make only small purchases when their discretionary cash allows. This model may face the path of strongest resistance in the West.

Parting Thoughts

If the estimated cost to produce the average AAA MMOG is in the neighborhood of $30 million US, gamers need not doubt that developers will continue to seek methods to increase revenue. It’s not milking the consumer; it’s defraying costs and ensuring the hardworking employees actually get paid. Investors want to know how they will yield profit prior to forking over the cash, so pressure is greater than ever for developers to show a lucrative business model. Charging for closed beta access or raising the prices of retail boxes and subscriptions contributes to a system of inflation that causes backlash from the consumers. Until the economy recovers, it might not be the best time to go with those plans. Digital downloading reduces overhead but reduces exposure to impulse buyers. It’s a better solution than raising prices from a public relations standpoint, but it creates its own problems. Finally, microtransactions are demonized in the West, creating a huge barrier until a big name takes a risk and delivers a great product that can be free for the majority while a minority finances further development.

In short, expect some changes to the way things are done in 2009. Be ready for companies to display trends toward one of these solutions at minimum and a combination of them in all likelihood. None of the strategies solves all problems, but something has to give. Be glad your only problem is figuring out how to fit in all the gaming you want to do.