Microtransactions: A Necessary Evil?

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It’s safe to say the video game market is flourishing. Asides from the flood of gaming systems and software available, the market is experiencing disruption in how consumers pay for gaming content. There is a shift from the traditional one-off upfront payment model to what is known as microtransactions, which are extra payments made within a game after the initial purchase to gain access to even more content - be it levels, characters, costumes or the ability to progress in the game.

Microtransactions are controversial.  These garnered a lot of attention in November last year, coinciding with the launch of EA’s Star Wars: Battlefront II game. EA announced that players had the option to pay extra to instantly potentially unlock main characters and advanced weapons via a ‘lootbox’ or otherwise go the traditional route of grinding to earn such characters. This pay-to-win model proved unpopular amongst the gaming community, consequentially having a detrimental effect on the brand and its shares. On a wider scale, it has also sparked heated discussions on the ethics of in game purchases.

From research we have recently conducted into the habits of young gamers, we found they specifically disliked in-game purchases that impact gameplay or progression of a game. 8 in 10 kids found these disruptions ‘annoying’ and a third of adults would rather pay upfront or even watch an advert in game than make microtransactions. It also causes friction amongst parents and their children. As one parent mentioned:

 I find that my kids get so far with free content, then the game starts asking for payments to continue with the game, which leaves me feeling quite pressured to purchase for them

Though morally grey, microtransactions are undeniably lucrative. FIFA’s Ultimate Team also produced by EA, solely makes money from microtransactions and is singlehandedly responsible for a fifth of the company’s revenue in 2018. Despite its questionable nature, microtransactions are necessary for the gaming business, especially those developed for app stores where the game is provided free of charge. But do they need to be such a pain point for gamers - and the parents that pay for games?

The play-to-win strategy championed by EA is one approach to microtransaction. Other games like Fortnite, Overwatch and Minecraft allow players to spend money on cosmetic items, which do not affect gameplay, such as skins and emotes to personalise characters and settings. This resonates with the values of both parents and children from our study. Parents value games with an element of creativity for their kids, while kids love games where they can express themselves through customisation. On top of this, a recent study by Hamari et al. (2017) found in-game purchases with the highest ROI are ones of social nature (which encompasses customisation and self-expression in game). This may explain Fornite’s profit of $126 million from in-game purchase along earlier this year.

Microtransaction are rewarding for all concerned if they are elegantly utilised but are costly if deployed incorrectly. With that in mind, game companies should not use microtransactions as a ransom, withholding content deemed essential for enjoyable gameplay. Instead they should create content aligned to the player’s values, giving them a choice to cosmetically enhance their in-game experience with solely optional microtransactions.

Nadia Chan, Research Executive

Katie Grundy