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"It is complex, and that's really why we're here"

"It is complex, and that's really why we're here"

Tue 20 May 2014 6:51am GMT / 2:51am EDT / 11:51pm PDT
Financial

Worldpay's Colin Murray on the challenges of payment-processing for the industry

International payment-processing company Worldpay is confident about the opportunity the video game industry represents. They've just announced a promising partnership with InnoGames, the developer and publisher whose online games (including Tribal Wars and Grepolis) have to date drawn over 120 million registered users. It's the latest in a long line of strides into the market. GamesIndustry International spoke to Colin Murray, Worldpay's VP of Video Games, about what makes games so important to them as a business, the unique challenge they represent, and his perspective on the market.

"Video games are one of the newer industries that Worldpay is supporting. It's growing significantly year-on-year...from not a particularly small base," he said. "In terms of the opportunities and the size of the market, it's a very exciting place to play!"

Worldpay's service includes processing of micro-transactions, one-off payments and subscriptions, covers a huge range of payment options, and operates across almost every video game platform. All of that has to be brought together and presented to publishers and developers as one unified system. For Murray, it's about taking care of complexity so that his clients can " focus on creating and distributing great content".

Murray added: "Processing a monthly subscription, it's a different type of payment experience compared to, say, 69p ten times in an hour in in-game payments, buying virtual content. So advising merchants how to do this on a global scale, across multiple countries, multiple time-zones, it is complex and that's really why we're here. To not only process the payments, but to advise and help them set up in the right way, and make sure that they're performing at the optimum."

"There's no better way of creating brand loyalty than by getting people creating content for the game, and actually earning money out of it too"

One of the things that makes the video game industry so complex from the perspective of a payment-processing company is the constant innovation in business models. As more and more methods of monetising gaming content are conceived, and existing methods refined and modified, it falls to companies like Worldpay to keep up and look after the financial realities.

Murray pointed to the trend of user-generated-content as an example of a unique challenge. This model involves giving players the ability to create and upload digital content for a game - usually an in-game item, such as a piece of clothing or a weapon - and allowing other players to buy that item as a micro-transaction. The creator then gets a share of the profit on each sale.

"There's no better way of creating brand loyalty than by getting people creating content for the game, and actually earning money out of it too," Murray said in praise of the concept. "I can only see it getting bigger and bigger."

The real pioneer in this space is Valve, who employ the concept in monetising their flagship games Dota 2 and Team Fortress 2, as part of a larger free-to-play business model. With Dota 2 reportedly accounting for over 20 per cent of all play-time on the Steam platform, it would appear to be paying dividends.

The challenge it presents to Worldpay is due to the unusual nature of the payments involved. It's about rapid, tiny payments being made on a global scale.

"You need to not only accept payments internationally, servicing Visa, Mastercard and the alternative payment types, but you also need to pay out globally as well, to the people who are actually creating the content, their royalties on that particular item," Murray explained. "If the item's only 69p (and typically these transactions are going to be as small as that) and there are 100 or 200 downloads, that's typically a fairly small value paid out at the end of the month. So you need to find cost-effective ways to move those amounts of money internationally."

"you need to find cost-effective ways to move those amounts of money internationally"

Challenges such as this must also be dealt with across a broad number of platforms - platforms which, increasingly, must be seamlessly connected. Worldpay's own reports have revealed that 81 per cent of consumers surveyed felt that all digital content they purchase should be accessible across all systems they own, with over half willing to pay extra for the privilege.

"People like to play on a console, but they can't take their console on the underground, it's not practical. So then they'll switch to a tablet or to their smart phone and they'll want to continue their gameplay there," said Murray. "I think the key for WorldPay is to make that payment consistent and seamless regardless of the device people choose to play on."

The report found, too, that 59 per cent of gamers play on both PC and one or more consoles, suggesting that on the whole people are "device-agnostic", not committed to gaming only on one specific system - fuelling the desire for systems to integrate with each other more completely.

As the industry has changed and evolved, so too have the means of payment. 'Alternative payments', particularly e-wallets such as Paypal, are uniquely suited to the purchase of digital content and free-to-play business models, and globally they're more popular than ever. Worldpay's research suggests that alternative payments now account for over half of all video game transactions, overtaking traditional credit and debit card payments.

"There's always going to be a hard core of fans that will spend a disproportionate amount compared to the rest of the base"

In the case of e-wallets, the driving factor seems to be convenience. Consumers surveyed described them as easier and more reliable than card payments and other methods. "They're particularly well-suited for micro-transactions, because you can top up your wallet and then you can do really small transactions from that wallet," explained Murray.

Although free-to-play has been at the forefront in recent years of pushing change and upheaval in the video games industry, at its core the business model appears to be itself relying on a stable constant: the principle that, for any given free-to-play customer base, a very small percentage will make a disproportionately large number of the expected purchases. These 'whales', who, according to recent remarks from World of Tanks boss Victor Kislyi may make up as little as 5-10 per cent of players, essentially fund the majority who play for free.

With their behind-the-scenes perspective, Worldpay is in a rare position to comment on the realities of the free-to-play model. I asked Murray whether or not he sees change coming any time soon to this aspect of the market.

"I do still believe that for any game with micro-transactions, whether it's a casual game on a mobile or a Call of Duty on a console, there's always going to be a hard core of fans that will spend a disproportionate amount compared to the rest of the base," replied Murray. "I can't necessarily see that model changing a huge amount. I think there will still be a reliance on a hardcore few who will fund the game and future developments."

He didn't, however, rule out the possibility of a gradual change, and perhaps a blurring of the line between 'casual' and 'hardcore' gamers.

"As people get more involved in games, particularly where there are opportunities to advance in the game - so for example when you're stuck on level 57 of Candy Crush, you've played it a hundred times, and it gives you the opportunity to skip to level 58 for 69p - that may make people migrate into the paying community, as opposed to just being a free-to-play, non-paying customer," Murray said.

It's clear that the video games industry is not a simple space to operate in, but it's one in which Worldpay sees huge potential.

"I think that video game companies need to partner with the people who truly understand and have the right expertise and knowledge"

"It's becoming increasingly important," said Murray. "Particularly, as you can imagine, with the launch of some of the new consoles and new online platforms and the fact that video games are becoming more socially accepted and widely available.

"With the discussion that we've just had you can start to understand the complexity of the payment environment that actually underpins the video game space, and I think that Worldpay is one of the few companies who have actually spent a lot of time and created a specific team to look after the sector.

"As the market becomes more complex, more sophisticated, I think that video game companies need to partner with the people who truly understand and have the right expertise and knowledge, and the systems to support where they want to go."

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