Online Gaming – Winning the Payments Battle
As the video game industry shifts from minerlock retail to a rapidly expanding online market, previously inaccessible segments are opening up to publishers and developers. The online gaming market is experiencing explosive growth – players are no longer tied down by games that require a certain console or level of connectivity. Mobile games have upped the ante even further by increasing the geographic range of a game and its potential player base. No longer viewed as a pastime primarily enjoyed by adolescents and younger children, the video game industry has firmly implanted itself into the economy and lives of almost all geographic areas and spans the breadth of socioeconomic factions. According to research conducted for ESA, the actual average age of a gamer is 30, and the division between the sexes is almost even, with 55% male and 45% female. From the female boomer who spends a few minutes playing bejeweled after dinner, to the 30 something game designer who supports a family in the burbs -the video game industry is a burgeoning entity.
Beyond the retail sphere, where packaged games are purchased for a set price to be played on a console at home – online video games fall into two categories: pay to play and free to play. With pay to play, users opt to pay a monthly subscription, usually via credit card, which maintains their account within the game. The most widely known pay to play game is World of Warcraft (WOW) – which is purported to have a 7+ million monthly subscriber base. Pay to play games garner revenue from their subscriber base, so developing a strong band of followers early on is key to their success.
Free to play games have a somewhat more complicated reputation and means to generating revenue. While it’s been predicted that free to play games are set to overtake pay to play models in the next few years, it remains to be seen whether or not diehard fans of a certain pay to play game will be ready to take that leap. Free to play games are just that: free to play. However, they do generate revenue by ads, and making items available for purchase throughout the course of the game (generally they will offer to get rid of the ads once a player has spent a specified amount, such as $3). These items are normally small items that enhance a character or game play – a mightier sword for a warrior character, for instance, or a new colour shade for use in a drawing game. These items are for sale for a nominal fee, normally less than a dollar and most certainly less than five dollars. These low value transactions are aptly named microtransactions or micropayments due to their size. It’s an exchange of real world money for game goods or services.
Free to play games have been widely criticized by followers of pay to play models due to perceived lack of quality and a somewhat transient game experience. Pay to play games generally provide a more satisfying social experience for players as users seek out and form groups meant to assist their character in advancing further in the game. Free to play proponents relish the ability to pick up and leave off whenever they please, and to not be indebted to the game by fear of losing their monthly ‘investment’. Another factor is time, while many players comment that they time commitment required to do well in a pay to play model is impractical for anyone who needs to devote time to a balanced lifestyle.
While subscription payments for pay to play games are relatively straightforward in that they normally only require access to a credit card, micropayments are more complicated as they are normally too low value to fit well within a card scheme set up. Because of the excessive per charge fees, it often does not make good business sense to use a typical credit card charge for each micropayment. Some alternatives include charging an amount to a player’s account, which the player is then free to use up as they proceed through the game. Another option is to take the cardholder’s information and bill out once the amount reaches a certain threshold, say 10 or 15 dollars. For those markets where cash is king, the use of an ewallet enables gamers to take part in both models of online games.
Some games develop a virtual economy and virtual currencies also exist. While the crypto currency of Bitcoin has made inroads into the industry, it remains to be seen whether or not this could be a valid solution to the logistical issue presented by micropayments in free to play games.
Once a company makes the move to online gaming, it becomes necessary to understand and accommodate for the different payment needs. Super Data compiled research to show the most popular payment types in markets around the world. Just as international ecommerce gurus will attest, once you understand local payment preferences, you will set yourself up to capture the largest market share – at home or around the globe. According to the research, gamers in the US, UK, Mexico, France, India and Japan prefer credit card, while in Germany credit card ranks number 5, after direct debit, prepaid card and ewallet. In Brazil bank transfer is the first choice of payment. It follows then, that “Based on the wide variety in both the different used payment methods and the difference in volume from one country to the next, the suggestion emerges that publishers with a global strategy are best served by a multi-facetted monetization strategy” (The Gamer is Always Right – Super Data Research, March 2012).
When selecting a payment processor for online gaming payments, it’s clear that the most important criteria include an international capability along with the capacity to offer a wide range of alternative payment options, to capture the largest market share. Ask potential processors if they handle micropayments, and what type of access they have to country specific knowledge of payment preferences for online gamers, as preferences are divided along country borders.