Pricing Models

Castranova discussed the pricing models for suppliers of games. This excerpt will make more sense with some background information on the production to post-production of the games itself. First of all, an individual, group, or company comes up with a plausible idea for a game. After receiving funding and approval from the administration (depends on the scale of the operation), the group of game developers creates a prototype of the game. At this point, we say that the game is at its alpha stage. Game developers then open up the game to a limited amount of individuals for testing, debugging, and suggestions. All this time, the game developers are fixing and updating the game almost in real time. When the game is more refined, the game developers then releases the beta version to a much larger group of players. Games in the beta stages are usually free and offer a way for the game developers to advertise, publicize, and market the game through various channels. “The idea is to get a community of insiders hooked to the game, so that when it goes gold and begins to charge a fee, newcomers will already find an active and vibrant community within the world.” The player communities will slowly take shape and grow over time. If the game makes it to its final and complete version, it will be released into the market.

This whole process usually varies between months to many years. Games like Starcraft II and Diablo III (still developing) took more than six years each to complete. There are numerous pricing models that is used in the market right now.

Two-part pricing system is the most prevalent one. This system requires the player to buy the actual game (a onetime cost) and a subsequent monthly subscription. Games such as World of Warcraft and AION online adopt this system. This system benefits games with a strong membership base because the monthly subscription revenue is staggering.

I have seen games that offer a variation to the Two-part pricing system in Asia. The player is required to pay the onetime price for the game but they have the option of paying their additional charges either by monthly of by the hour. This system is designed for players who do not have a lot of time allocated to games but still wants to play these games. Instead of buying a monthly subscription card, these players buy point cards. In Taiwan, point cards are valued at 150pts, 350pts, 500pts, 1000pts, and 2000pts. Players buy these points through convenient stores or online. After buying these points, the player can use these points to buy the monthly subscription or let the system deduct points by the hour.

The point system is similar to games with in-game shops. To my knowledge, this system started because players are selling game items for real money through unofficial channels. Diablo II had a very big market for in-game items and even pre-leveled characters. New MMO’s that are developed by smaller companies or hosted my game management companies prefer this method because revenues could be more than your monthly subscription system. This system is aimed at players who doesn’t have a lot of time to play these games but wants to excel in the game. This system also benefits hardcore gamers that dedicated a lot of time to the game but wants to excel faster. Players can buy these points online, debited to their accounts and buy special items through the in-game shops. One game that I used to play, Conquer Online, offered this service and it was very popular.

There are also games that are free and do not sell in-game items that causes unfair advantages to players who didn’t spend a cent on their characters. These games make their profit through advertisements. This is by far the most desperate way to make money because game developers really don’t make anything by choosing this method. The margin is way too low and players generally hate anything with advertisements when playing the game.

Castranova discussed about inflation in games. World of Warcraft is now known for “Gold Farmers”. This term refers to players who find the fastest way to make gold (currency in WOW) and sell it to other players for real money through unofficial channels. This disrupts the overall economy and will generally upset the balance of trade. The best way to determine whether or not the economy is healthy, overly inflated or deflated is by checking the Auction House. There are times when items are overpriced or even underpriced. Most of the time, items becomes overpriced or inflated because gold becomes easier to obtain as more players join the server and as high level players population increases. It is amazing to see how economy plays a huge part in a virtual world like WOW. I wonder if Blizzard hires economists to advise them with economic issues in this virtual world. One thing that Blizzard implemented to balance the economy is implementing gold sinks. Gold sinks are items that players can buy that will cost them thousands of gold. By spending gold on items NPC sells, WOW is taking gold out of the circulation; this then will slowly balance the gold economy.

My question is: have you tried to create economic turmoil in any MMORPGS like I did? When I played WOW, there were many times when I reaped profit from monopolizing items in the Auction House.