Game Economy Grows with Micropayments

— -- LOS ANGELES -- Second Life has its own economy. So do big-ticket games like World of WarCraft, EverQuest, and E.V.E. However, in-game economies are not just limited to the big names anymore; two such games were on display at the E for All expo here this weekend.

One such game, online first-person shooter Combat Arms, was released by Nexon during the summer. The game's economy is based on NX Cash, where 1 million NX= $100. Combat Arms is the latest game released by the American publishing arm of South Korea-based Nexon.

Nexon's revenue model relies solely on in-game microtransactions, as opposed to ads or subscription fees. The company's games, which include Maple Story and Mabinogi (both MMORPGs), are free to play, and marketing manager Meghan Myskowski says the microtransactions don't affect gameplay, but rather "provide customization and personalization of your character. It enhances the experience for the user." And in the game, she adds, everything is assigned value.

The company sells prepaid cards in $10 and $25 increments; they're available at several online and brick-and-mortar retailers. The cash can be used to buy items in the game; the typical item value is $1. However, you can't cash out of the game, unlike some other in-game economies.

Myskowski declines to give details about how usage patterns have evolved over the years since Maple Story was introduced in the United States in 2005. But she says the U.S. market had to get used to the concept of micropayments.

"Now, people are used to paying for virtual items," she adds. "Virtual life has changed substantially." Myskowski also credits games like World of WarCraft and sites like Facebook with growing awareness and use of microtransactions.

The other game on display at E for All that uses a cash economy: MindArk's Entropia Universe. The online MMORPG game launched four years ago (originally as Project Entropia), and counts nearly 800,000 registered users; only about 40 percent of those users are in the U.S. Entropia is free to play, just as Nexon's games are. But here, you'll want to add bucks into the economy, in order to gain skills, possessions, and objects from other players in the game.

A spokesperson for the Swedish-based company said that over $400 million in U.S. funds have changed hands in this virtual world. The exchange rate is 10 PED equals $1; however, objects are not valued as they would be in the outside world. For example, a coat could cost $1700 in the game; one player sold a rare gun in an in-game auction for $17,000.

The company says it expects to be the first MMO to integrate the CryEngine 2, which will enable more photorealistic and immersive game play. The CryEngine update is due in the first quarter of 2009. New planets built using the Entropia Universe platform are also expected next year.

Joseph Olin, president of the Academy of Interactive Arts and Sciences, notes that in-game economies have appeal to both users and game makers. "Most people playing in these persistent world environments are building their character. In E.V.E., third party brokers trade currencies in virtual worlds. Nexon has shown across all of their games that if you have the right balance of in-game economies and real world value, consumers are happy to spend some money there."

Is some of the crossover between online and offline barter on the up-and-up? The translation isn't cut-and-dried--as the case of Blizzard's World of Warcraft showed. There, the company successfully blocked people who were cheating by paying someone money in the real world to up their character's level for them in the virtual world.

In another sense, relative values have changed--and so have what people are willing to pay for in small doses. "Who would have thought ringtones, wallpaper screensavers, and non-game mobile entertainment would be a $250 million business?" muses Olin on the success of mobile carriers promoting such services.

The bottom line in the trend towards micropayments is less about the user experience and more about the game makers' bottom line, though. Olin says, "Interactive entertainment companies are looking for ways to monetize their investment. The changing nature of PC entertainment software distribution, and the advent of console entertainment systems, has changed what software entertainment companies can do. You can't sell boxed entertainment anymore. And people who are playing games aren't always playing them on PCs anymore.

"Downloadable content and microtransactions for console based games are on the rise--look at Guitar Hero and Rock Band, where people anticipate downloadable Tuesdays, and you see huge numbers, half-a-million people downloading a song." Aerosmith's download album for Guitar Hero has outsold the band's albums on CDs over the years.

Microtransactions and in-game economy are among many ways of adding to and growing a game after its initial release. "It's code," Olin says. "Code lives. I went into code lock, but I didn't stop development. Why shouldn't give the benefit of my continued development to my consumers?"

Ultimately, he adds, "consumers have so many different paths and choices to make, that the traditional business model of the consumer buying from a store, those walls are crumbling because everything is in real-time, and everything is connected."

The experiment isn't over, of course. "This is unchartered territory," Olin adds. "Publishers will figure out the fair way of what people are willing to pay. The more choices, the more people benefit."