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Micro transactions on console "a distant horizon"

Tue 28 Jun 2011 1:49pm GMT / 9:49am EDT / 6:49am PDT
Business

Nintendo a "dead end", "great resistance" from Microsoft; Only Sony accepting growth of new economic models

Two of the big three console manufacturers aren't likely to adopt micro transactions anytime soon, and are missing out on a market that has changed the games business in social, PC and mobile markets.

That's according to highly-regarded consultancy Games Investor Consulting, which said that Nintendo's social plans are a "dead end", Microsoft is busy knocking back ideas for freemium content and itís only Sony that has opened up to the micro transaction space.

"It's a pretty distant horizon, sadly, apart from one of the platforms" said Rick Gibson, speaking at the Game Horizon conference in Newcastle today.

When you can monetise that user base, that core male demographic, you're looking at somewhere between $20 and $30 of average revenue per paying user

Rick Gibson, Games Investor Consulting

"There are good reasons but I'm going to throw some easy brickbats at people like Nintendo. While they talk about social and how their platforms are going to be improved in the online front it's probably a dead end and Iwata-san has very clearly 'no freemium' on our platform."

"Although micro transactions do exist in a very limited form on Microsoft [Xbox 360] there's certainly great resistance to freemium," he added. "We've seen several announcements that have been countermanded by senior management."

Leading console micro transactions is Sony, said Gibson, with 100 developers working on content and services for Home, for an audience of 20 million users. He also pointed to CCP's forthcoming Dust 514 which will be add micro transactions on top of the release for PlayStation 3.

"The pathfinder in all of this is Sony. Home is the first commercially viable hub on console," commented Gibson. "You can use micro transactions to pay for goods and services around games and non-games and branded items."

With the games market not likely to reach peaks previously seen for sales of boxed product, format holders are missing out on a potentially huge untapped market.

"There are good and bad reasons why the consoles haven't yet adopted freemium or micro transactions and there is clearly a vast and largely untapped audience waiting to play games and buy them in a different way."

"Xbox Live Arcade has a network that typically converts ten times as many players to payers," he detailed. "And when they start to spend, they spend heavily. That same demographic is spending very heavily on PC. 65 per cent of MMOGs live in the West today rely on micro transactions. When you can monetise that user base, that core male demographic, you're looking at somewhere between $20 and $30 of average revenue per paying user. For some reason it's not actually being exploited on consoles."

He added: "Peak oil is the point in global oil production where it reaches the crest and goes into terminal decline. Now, I'm not suggesting that we've reached peak console in terms of a terminal decline, but certainly it's unlikely that the boxed industry is ever going to reach the same heights that it has before. We think micro transactions are increasingly attractive to a vast chunk of users."

11 Comments

James Verity

132 25 0.2
the problem for the end user is that Micro Transactions have little to no value... most console gamers still prefer to own a CD with Box... they also dont like to be scammed with DLC, they prefer it if the content was on the disk and just pay a little more for it from the start...

Posted:3 years ago

#1

Corey Fong
Director of Marketing

5 0 0.0
I think also while microtransactions are a valid business model, the article doesn't take into account that 1st parties besides Sony aren't setup internally to handle this type of business model. You need human resources and an infastructure to failitate and manage these types of transactions. It's much more than just approving freemium titles.

Also, eventhough Sony has chosen to create this virtual world in HOME, it's a bit ad odds with the core of their business of selling consoles and console games IMO. A virtual world is it's own seperate business entity that generates revenue via virtual goods, not game content. For the majority of 3rd party publishers it's a headscratcher on what to utilize the space for. Yes, you can create "branded areas" within HOME which Sony heavily endorses, but to what end?...publishers can spend the same money and resources on other effective marketing initiatives that reach out to a larger audience beyond the core PS3 market.

Posted:3 years ago

#2

Clemens Wangerin
Co-Founder & Managing Director

8 0 0.0
To me microtransactions = Free 2 Play and to truly make F2P work on console, the platform holders have to make concerted efforts to enable developers to deliver their games in a vastly different way to before. And a lot of console developers are simply not ready or unwilling to make games that way in any event.

It's great that Sony has been leading the way in that respect with Home but even on PS3 it's not yet possible to update and change your game as frequently as you would like when operating a F2P model. It'll be interesting to see how Dust 514 will handle this and how often new content and changes to the game will actually be made.

No excuse for MS though ... with their PC heritage you'd think they would have found a way to leverage that business model on XBLA by now. There's always the next generation I suppose.

Posted:3 years ago

#3

Barrie Tingle
Live Producer

374 148 0.4
Isn't this the thing Microsoft are actually working on now?
http://www.develop-online.net/news/38108...

Wouldn't call that resistance, more "work in progress" probably with discussions around Team Fortress 2 perhaps?

Also didn't it change from Free 2 Play to Freemium? :)

Edited 1 times. Last edit by Barrie Tingle on 28th June 2011 7:29pm

Posted:3 years ago

#4

Francis Elphick
Game Designer

3 0 0.0
"Peak oil is the point in global oil production where it reaches the crest and goes into terminal decline. Now, I'm not suggesting that we've reached peak console in terms of a terminal decline, but certainly it's unlikely that the boxed industry is ever going to reach the same heights that it has before. We think micro transactions are increasingly attractive to a vast chunk of users."

This quote puts a great deal of emphasis on micro transactions replacing the boxed industry. However, it gives little credit to the same boxed products being sold using digital distribution methods.

Interesting read though.

Posted:3 years ago

#5

Brandon Jaquez

12 2 0.2
It seems they are putting money in front of quality. Every time it is mentioned, it's all about "profit". I understand, it's a business. But seeing the mention of "profitprofitFree2Playprofit" is somewhat concerning.

And Nintendo isn't entirely against "Free" content. They are just not going to give away a premium game for Free and make money off of tacky microtransactions that doesn't necessarily add much value to the game. There are few developers and publishers who do this right. However, there are some that misuse it.

Posted:3 years ago

#6

Haven Tso
Web-based Game Reviewer

255 8 0.0
Does anyone know whether there are any recent studies on how much people are spending on micro-transactions in games?

For me it seems the comment is kind of induced by self-interest

Posted:3 years ago

#7

Max Priddy

64 12 0.2
Not sure if it's just me but I've always considered (up until Firefall's announcement, as well as Arma 2's and TF2's free-to-play announcements) as lesser quality, perhaps it's from signing up to countless Korean/Chinese quick-translated grindfest 9000 MMOs and just feeling burnt off from them, quickly returning back to WoW/Guild Wars for my MMO fix.

That's not to say all of them are bad but not all of them are totally great either, not to mention sometime's I'd rather play a solid single-player game sometimes because well, you know what they say about people on the internet...;)

Posted:3 years ago

#8

Max Priddy

64 12 0.2
Not sure if it's just me but I've always considered (up until Firefall's announcement, as well as Arma 2's and TF2's free-to-play announcements) as lesser quality, perhaps it's from signing up to countless Korean/Chinese quick-translated grindfest 9000 MMOs and just feeling burnt off from them, quickly returning back to WoW/Guild Wars for my MMO fix.

That's not to say all of them are bad but not all of them are totally great either, not to mention sometime's I'd rather play a solid single-player game sometimes because well, you know what they say about people on the internet...;)

Posted:3 years ago

#9

Tony Johns

520 12 0.0
I think it is more about what companies perceive what a game is meant to be and how it is an asset to their company.

I think games like Solitare and Minesweep are perfect for free to play games as well as electronic games of Poker that are in such abundance that it is pointless trying to attract the profits.

If a game is unique or if it takes a long time to play to reach the ending, then it is less likely to be made a free to play game.

But if it is short and does not go for a long time and it can be similar to other games out there, then I think it will be safe for a free to play market.

But Nintendo and Microsoft are smart enough to know what games to give away for free and what games need to be sold at a price in order to make a profit.

I often believe that nothing ever does come for free.

Posted:3 years ago

#10

Tony Johns

520 12 0.0
I often think that the best Free to play games are the Flash games on Newgrounds that have been programed by amature hobbyists who are just starting to step into game programming.

Posted:3 years ago

#11

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