Monday, February 22, 2010
Ultimately, if enough MMO gamers support the Microtransaction model by voting with their wallet, then developers will see the model validated and successful enough to emulate.
That’s bad. Really bad.
Price to Maximize Profit
Allods Online recently set item prices with their cash shop well above what the majority of players would pay. In economics, we call this line the Demand Curve because it depicts the amount that consumers are willing and able to purchase at a given price. Since supply is completely controlled by the MMO developer at no cost, this means that demand is the only factor to consider when determining price.
The formula is simple: Price * Demand = Revenue at Price. Selling one unit at $1000 nets me the same revenue as 1000 units at $1. But selling 500 units at $5 nets me a $2500 or a 250% higher revenue. So, the trick is finding the price at which demand for that price provides the highest revenue.
OK. That’s all great from a developer standpoint, but what if you are one of the 500 that was willing to pay $1 but not $5? From your perspective, it’s just like the recent Allods Online fiasco. Prices are higher than you are willing to pay or can afford, so the model sucks for you.
So that’s the first reason that you should hate Microtransactions. The pricing is based on what will maximize profits.
And as far as we know, this is exactly what is happening with the cash shop in Allods Online right now. It may be that Allod will change prices, but if not – then it’s because they believe they can make more money off the fewer people willing to pay higher prices.
The number one reason you should hate the Microtransaction model like I do is because it benefits developers to create demand for Microtransaction products.
This is critical, so it’s worth repeating. Developers benefit by creating demand in-game for Microtransaction products. That means that even if YOU don’t purchase Microtransactions, you feel the impact of the demand that developers are attempting to create for Microtransactions.
What do I mean by creating demand? I mean, throwing up subtle roadblocks that you would rather pay to avoid. Things like not traveling fast enough, not having enough bag space, not having the right weapon or skills, not leveling fast enough and so on.
The more inconvenient they make it for players who haven’t purchased Microtransactions, the more demand is created for them in-game. The more people who pay to avoid these things, the more the developer is encouraged to include such things in the game to create demand.
Now combine this with what I stated earlier about the magic revenue number. If you are outside the targeted paying customer (which may be a small group), then you are pretty much going to get screwed over by every single roadblock and obstacle that the developer throws up to inconvenience you into buying the Microtransaction.
I’ll never understand why people would willingly support a model that actively encourages the developer to exploit them.
And before I hear the obvious “they’ll lose customers” argument, let me be clear that they obviously know they can’t over-exploit players or they are going to lose customers. It’s a balancing act in which they look to exploit players as much as they think players will allow them to exploit them before quitting in frustration.
Validating the model
That’s why I want you to hate this model. I want you to show the MMO development community that players are not going to willingly allow themselves to get robbed blind in an exploitive manner.
Because if you don’t hate this model like I do, then you are only validating the model. You are saying that it’s OK to exploit us as long as they developer is subtle enough about it that you don’t know you are getting exploited.
At the end of the day, I’m not terribly concerned about Allods Online. I’m concerned about the impact Microtransaction success will have on the rest of the industry. I’m concerned about how companies like Blizzard will continue to experiment with Microtransactions and value added services.
Posted by sid67 at 9:54 AM