Microtransactions

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Informatic

Microtransactions also commonly known as MTX is the purchasing of virtual products with real world currencies. Typically these have been implemented as a means of providing developers of free-to-play games with revenue in order to continue development of said games. While they are available on virtually any platform, we have seen a significant increase in their use in the mobile games market. In a study done by Slice Intelligence, we learned that mobile players spent an average of $87 on free-to-play games while PC/Console players spent around $5 on average. Depending on how micro transactions are implemented these games can be called "pay-to-win" in which the purchasing of these virtual currencies are needed to make significant progress in the game, contradicting the whole free-to-play game aspect. Other games provide "loot boxes" in which players purchase these as a means of obtaining more desirable items or features that allow players to save time obtaining these by playing the game. The entire model is based on the idea that providing these virtual currencies will provide more profit than selling the game through a one-time-purchase.

Revenue

Over the years, gaming giants such as Ubisoft have approached micotransactions with caution, however it has seen a notable shift in earnings for many of its biggest sellers. According to SeekingAlpha, Ubisoft's sales were buoyed by South Park: The Fractured But Whole and Assassin's Creed:Origins, however microtransactions have only shot up even further over the years. Over the last year, microtransactions have grown 1.83x as opposed to the growth of video game sales which was 1.57x. Hinting that microtransactions, the release of additional content to complement existing games is fast becoming a larger market than the market for video game sales itself.

Following data from various sources such as SuperData, we can see that microtransactions vastly increase a companies' profits for both mobile and PC games. Mobile games such as Clash Royale, Clash of Clans, and Game of War were all top 5 earners for mobile games in 2016 with microtransactions producing almost all of their revenue. Another popular video game, Grand Theft Auto V was priced at the standard $60 at release and yet it has generated more money through microtransactions than through game sales. The willingness of players to purchase microtransactions is why developers are incorporating them more and more as part of their games.

PC Gaming

Since its inception, revenue from free-to-play PC games has doubled since 2012 according to a recent SuperData report. The report which states EA still "has a ways to go in fully understanding gamer's appetite for micro transactions" shows consumers are spending an increasing large amount on microtransactions. In 2012, PC free-to-play generated $11 billion in revenue and doubled to $22 billion in 2017. It is expected to grow a further $3 billion by 2022.

Mobile Gaming

The combined total of the video games market was worth about $71 billion, that number is expected to rise to $90 billion in 2020. The growth of the video games industry has been anchored by the increase in microtransactions available to gamers. While traditionally games were offered for a set price, the majority of mobile games are offered for free and use ad-revenue and microtransactions to produce revenue. Developers exploit user's impatience by placing ads and other annoyances and encourage players to purchase an ad-free mode or additional lives in order to continue playing without waiting. This has allowed for free-to-play mobile games to produce over $22billion annually.

In-Game Items

In-game purchases allow for purchasers to purchase in game items that are normally acquired through progressing the game. These microtransactions receive the most criticism due to the fact that it allows for newer players to quickly progress through the game while avoiding traditional means of progressing that are oftentimes time consuming.

Players are also allowed to purchase in-game currencies through the developer in order to progress at a faster rate, these are the most common kinds of microtransactions in free-to-play games an account for a large percentage of game revenue.

Downloadable Content

Downloadable content or (DLC) is additional content created for an already released game. It is typically distributed over the internet through the game's publisher. DLC ranges from aesthetic changes to your character, an addition to the existing storyline, or in game enhancements. DLC oftentimes adds new game modes, for example Call of Duty might release new DLC featuring new maps and game modes with all new weapons. These are the most common kinds of microtransactions oftentimes offered through a season pass which allows for you to purchase all the DLC for a onetime, reduced payment which includes all the DLC they release for that particular game.

Loot Boxes

Main Article: Loot Box

Loot boxes are a form of digital wares sold within an online video game. The purchase of loot boxes are a from of microtransaction. Each box can be used once to receive randomized in-game items that either provide cosmetic changes to the game and player, or provide advantages over other players. Depending on the game, loot boxes may also be referred to as packs, bundles, crates or chests. Loot boxes are typically found only in games with a multiplayer aspect, marketed by the visual feedback from opening a loot box as well as the benefit provided by the items. Due to the randomized nature of loot boxes, they can be seen as a form of digital gambling that brings ethical issues into consideration.

Gambling

Loot boxes contain all of the elements required for traditional gambling. The purchase of a loot box represents a transfer of wealth for a future event. This future event is randomly decided and set by the developer, allowing them to tune their model to maximize profit. Younger players experience gambling for the first time with loot boxes. The UK Gambling Commission does not consider loot boxes as a form of gambling, as they claim the items received do not have any monetary value. The only difference between loot boxes and real world gambling is the absence of a true monetary payout, however games with real money marketplaces can be used for payout, and many have made thousands of dollars. The design choices are clearly seen to keep the player buying loot boxes. Often right after opening a loot box, a player is prompted to buy additional loot boxes, building upon the addictive model.

Transparency

One of the leading reasons why players consume loot boxes is the perceived rarity of the items they could win. This rarity is almost never expressly relayed to the player. Some games will indicate which items are rare and which are common but often do not have any hard data or statistics on how likely the player is to win the item. Because of this, regulations are starting to spring up in Japan and China. For example, the mobile game Fire Emblem: Heroes communicates to its players that there a 3% chance that players will be able to summon a five-star character. This number then starts to increase after the player uses multiple summons in a single game. Another example is the popular shooter Overwatch. Due to Chinese gambling laws, the Overwatch developers had to disclose that the loot box crates will doll out a legendary item after opening approximately 13 crates. This number is different for each country as some countries have stricter gambling regulations than others.

Ethical Issues

Exploitation

The growing popularity of mobile games through the iOS and Android Playstore have allowed many smaller developers the opportunity to put out content either paid or free-to-play. The Micro-transactions model is more appealing for developers because of the fact that it allows a player base to develop before they start selling products when compared to an upfront cost that oftentimes drives away players unless the game has an established reputation already. This brings up the paradox in many mobile games being marketed as free-to-play when in fact a lot of the higher level content is made available to newer players through micro transactions. This in the eyes of players who have advanced through the game by traditional means devalues their accomplishments. Many of these free-to-play games are made to be played passively, in which the player comes back periodically to check on the game. This leaves players with two options for progressing, investing a substantial amount of time or advance through purchasing virtual products that allow for speed ups or higher tier items that would normally require lots of grinding to obtain the higher level items.

Microtransactions allow for developers to release content without an upfront cost, as long developers abide by moral guidelines they provide an excellent form of revenue to developers that may lack the resources needed to produce a wide scale game. The issue arises when developers lock high-level content behind hundreds of hours of grinding and making it available for purchase in which buying it through microtransactions it more feasible than progressing through the game.

Collection of Data

Another issue that arises is the collection of data on customers. Most free-to-play video games go through great lengths in order to allow players to easily purchase their in-game goods however it brings up the issue of security with their payment information. These video game companies store users data and although it is legal since you opt into it can be considered unethical because of the fact that you are not told what exactly these video game companies are doing with your information nor can you be sure that it is stored in a secure manner.

Cheating

The addition and purchase of microtransactions could be viewed as a form of cheating. One way of thinking of cheating is finding a way to bypass the time needed to complete a task. In games where players have the option to wait an amount of time or pay to bypass it, people with the money to spend on microtransactions are cheating by that definition of the term. While microtransactions are a part of the game, not everyone is willing to or has the liquidity to make these purchases. Thus, there are populations of the playerbase that have huge advantages over free-to-play gamers. This creates an uneven playing field and often ruins the experience of players who are patient and wait for tasks to complete.

Common Terms and Shortcuts

• Free-to play game - Games made available to all players without an upfront cost
• Grinding - Repetitive actions that allows for substantial progress in a game

External Links

• [Outside link]
• [Example link]

References

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