Monday, September 30, 2013

Payment Plans: A brief overview of some of the pricing models used in gaming

The increasing number of free-to-play games being released in recent years is good news for those with big gaming appetites and little disposable cash. While some games are happy to give pretty much everything away for free, others offer a taste before asking you to pay for the best content. As such, the free-to-play pricing model, can vary quite a bit in terms of exactly what you can get for nothing. Today I briefly examine some of the different pricing models employed in gaming to extract cash consumers.

I think I should set out by explaining that I do not carry a sense of entitlement where I feel that I should get everything for nothing. Gaming is entertainment and is thus fairly due a share of my entertainment budget. Developing a game costs money and I doubt that any major release ever gets made without someone at some point considering ‘How will we make money on this?’. That said, as a consumer I am entitled to spend my money as I see fit and will certainly perceive better value in certain transactions over others. My general philosophy is to consider the amount of entertainment relevant to amount of real money investment. Consequently, a free-to-play game is worthless if I derive no entertainment from it; being free is not a virtue in and of itself.

Need to Pay Models

Pay me now (the traditional model)
The traditional pricing model for games is one even non-gamers can relate to as it is fairly ubiquitous across goods and services. You buy a game and get the entire product to do with as you please; the full amount is paid for upfront and you needn't pay more to fully enjoy the product. The risk here is that you have limited options if you simply don’t like the product you have paid for. Thus, the onus to the consumer is to inform themselves prior to the purchase so that they maximize the likelihood that they will enjoy the product (reviews, recommendations and limited trial versions all facilitate this). On the developer side, the goal is to create a product that will justify the price to the consumer and will generally profile well to those methods that the consumer uses to shield themselves from buying junk.

While the extremes create fairly easy purchase decisions (both the great and truly awful games are usually easy enough to spot), the grey areas can lead to a conundrum for buyers and developers. If a game is receiving mixed reviews the consumer needs to make the decision to either shell out the full value to see if the experience is a personal fit to them. This model is an all-or-none setup that doesn’t allow for a consumer to pay a reduced price a mediocre product (at least until the game goes on sale later). A further hazard here is that a developer might be incentivized to spend less money in development; rather than spending more and making the best game they may divert extra capital to advertising or other forms of promotion. The flip side of this hazard is that a consumer is privy to a developer track record and may opt not to buy a second game by that developer feeling that they will not be getting the best game possible.

Pay me now and pay me again (the pay and subscribe model)
This model has the consumer paying full price up front for the product, getting a month of ‘free’ time on the game servers and then must continue to pay a monthly fee to continue playing after that. Probably the best example of this model is World of Warcraft. Developers justify the upfront cost as floating the initial development and the ongoing subscription citing that they maintain servers and infrastructure and further reinvest this subscription income into constantly refining and upgrading the initial game. The obvious problem here is that a consumer still has all of the risks associated with the ‘pay me now’ model but is also expected to continue paying to play. The consumer upshot with this model is that the developers continue to receive monetary support and thus improve the game that the player has paid for.

I think the biggest trap of the pay and subscribe model is that games that rely on it ultimately resort to a carrot on a stick mentality. Each month players keep paying to reach a carrot that is no more closer than last month while developers continuously find ways to hide the stick. This isn't to say that the chase can't be appealing but it can be a disheartening realization that all of the seemingly made progress of the past month was an illusion. Worse still are the handful of unscrupulous developers who pocket the vast majority of the subscription fee and only make incremental adjustments to the gameplay. While these developers are eventually discovered, they have usually already raked in a ton of cash from initial purchases and a few months worth of subscriptions. 

Free to Play Models

Pay me if you want a bit more (the straight subscription model)
Closely linked to the pay and subscribe model, more recently, some games have been scrapping the initial purchase cost altogether and offering subscription packages. Generally, the main game is available more or less in tact with subscription players being offered a bevy of convenience and cosmetic features. While each game differs, it is typical for subscription players to have the ability to create multiple characters, carry more in game currency, and have access to better technical support. I like this model a lot because it gives players a large sampling of gameplay and, generally, the features offered through subscription are enticing but not necessary to enjoy the product.

Pay me if you want a lot more (the cash shop/microtransaction model)
The other end of the free-to-play spectrum forgoes subscriptions in favor of an in-game shop where real-money can be exchanged for virtual goods. Here players are given a swathe of free full-fledged content with specific items being available only through purchase. While, in theory, this model sounds okay, in practice it usually means that the best stuff is locked away. Want to play as your favourite class, wield the coolest looking weapon, or have access to otherwise unobtainable content? be prepared to pay. Exacerbating this is that cash shop games are often designed with pay for power in mind where ostensibly any item is available to be obtained for free but to do so would take weeks or months of normal play instead of just spending a few dollars to buy it now. In these cases, the player is enticed to pay to get stronger because the time investment to otherwise increase in strength is egregiously high. In MMORPGs, where players often need the best gear to tackle top tier content, this setup effectively guarantees that real money will need to be exchanged for virtual goods in order to progress. I should note that not all uses of this model are malicious, but the overwhelming majority are.

It should be noted that many free-to-play games offer a combination of the above two models. Further, the straight subscription model is not immune to the same trappings as the cash shop model (although the current release of games using this model do not seem intent on gouging the consumer at every turn). I think that, by and large, free to play games can offer up quite a bit of decent gaming for those on the cheap though the quality is on average a bit lower than what you see released under the traditional model.

Ultimately, the implementation of any payment model can be to the benefit or detriment of the consumer based on the actual content on offer. The traditional model can offer huge value for money if the game is great but can also end up with the consumer feeling ripped off of the game is bad. On the other hand, free to play models do not always guarantee good value in that they can often be designed so that only those who pony up real cash can get the most out of the game. Whatever model a game uses, it is the consumer's duty to inform themselves and make the purchase decision that is best for them.