It’s something that Apple has known for some time: In increasing numbers, consumers are more willing to pay for digital objects in incremental payments rather than shell out large sums for subscriptions.
Take, for example, MMOGs (massively multi-player online games). A report on MMOG trends by IHS Inc. released this past week revealed games that have adopted micropayment systems for virtual items have fared well against games that are only offered in subscription form, and those same games with micropayment systems are expected to do much better in the years ahead.
Online games like Facebook’s Farmville have helped publisher Zynga bank more than $830 milion from microtransactions in 2010 (that according to the San Francisco company’s SEC filing in anticipation of going public later this year). On the console gaming front, Xbox Live and Nintendo have already adopted micropayment strategies.
It’s no surprise, really. Gamers buy virtual items as a short cut to empowering their character instead of spending hours grinding away on a quest. Smart game publishers like Zynga also realize that users typically spend more (in some cases, hundreds of dollars) buying virtual goods, than signing up for a $10 to $15 a month subscription fee. Gamers’ tastes are fickle; why commit to a game when you can hop into (and hop onto) something else a few months later?
Subscriptions and revenue for online games like World of Warcraft dipped in 2010 and are expected to fall more over the next few years. IHS senior analyst Piers Harding-Rolls called it, “an inflection point for the industry.” Microtransactions in general are a hot topic for both current and future online and video game developers. Revenues for 2010 micropayments totalled $1.13 billion. That’s a 24 percent increase from 2009 when micropayments made up $909 million in revenue. And those dollars really add up. As a former U.S. Senator was once quoted during budget negotiations: “A billion here. A billion there. Pretty soon, you’re talking real money.”
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