MARY LOUISE KELLY, HOST:
The first way to make money off video games is obvious - you sell them to players. But another way started gaining popularity a little over a decade ago - in-game purchases. It's a typical part of what is called the live-service model. Our colleagues at The Indicator From Planet Money, Darian Woods and Wailin Wong, explain how it works and why a growing number of players are pushing back.
DARIAN WOODS, BYLINE: In 2012, Rebecca Ford was part of a team that had spent years making a video game. Problem was, they couldn't sell it to a games publisher.
REBECCA FORD: We had to make a paycheck for our team that month. And if we didn't have a way to support ourselves, it was all going to collapse.
WAILIN WONG, BYLINE: Rebecca is a creative director at the games developer Digital Extremes. And the company was like a band that had spent years toiling away on a beautifully orchestrated album, and now no labels wanted to have them. So Digital Extremes went indie. They self-published this game called Warframe.
WOODS: And with this newfound freedom, they released it in a type of way that was gaining steam in the games industry. Instead of selling a one-off game to purchase, this game would be free to download...
FORD: And if you like it, you can buy some in-game currency and, you know, we'll update the game as often as we can to make it worth your investment.
WONG: In 2012, when Rebecca's company decided to release Warframe through this relatively new live-service model, she was scrambling. That meant servers, round-the-clock chat and ways to accept payments inside the game.
WOODS: You're almost, like, building the plane as it's running, like...
FORD: That is exactly what happened.
WOODS: ...To keep people there (laughter).
WONG: And she sought help from players of the game. Rebecca thought that there needed to be a feature for players to give ideas for updates. And this kind of player feedback was critical, especially when dealing with the sensitive issue of money.
WOODS: So in the game, maybe you could pay real dollars for a new sword that gives strange new powers, or you could buy a special character who controls fire. Rebecca thinks back to this one particular purchase option that backfired.
FORD: A player could spend a dollar, let's say, to double the strength of their character, and then players got really mad.
WOODS: Felt unequal, unsportsmanlike. And so they gave players a way to do the same thing, but for free.
WONG: And this ability to change paths is the advantage of a live-service-model game. You can be constantly tweaking and iterating. While adding features, the company noticed one paid category was taking off - changing your appearance.
FORD: We started adding things like scarves or alternate helmets. Those are the types of things that really do impact our ability to be a stable, stable, stable place that can have a payroll department.
WOODS: For a lot of games, cosmetics are one of the biggest sources of revenue.
WONG: And that revenue comes from just a few players. In Warframe's case, only about 10% of Warframe's players pay anything at all. In the gaming community, the top spenders are called whales. They sustain this large ongoing production team, which can be expensive.
WOODS: Warner Brothers Discovery publishes games like Hogwarts Legacy and Mortal Kombat. And this year, its boss said that they want to lean more into live-service games because it reduces volatility for the company. That said, they have one title that is doing particularly poorly at the moment. That is Suicide Squad: Kill The Justice League.
WONG: And that might speak to a growing fatigue with live-service games from gamers.
WOODS: Rebecca says criticisms of the live-service model are fair, especially when these games haven't been done well by companies simply trying to make money. Think about other types of games. You might pay $80, and that's all the company will ever get from you.
FORD: But for a free-to-play game, there is no limit. Like, if I look at my lifetime spend in Warframe - the game I make - I have spent over a thousand dollars in my own game, so...
WONG: And the Federal Trade Commission is sniffing out when that monetization becomes outright predatory. In 2022, the FTC accused Epic Games, the maker of Fortnite, of tricking users into paying money inside the game. Epic Games agreed to pay $245 million in refunds.
WOODS: The lesson seems to be that too much obsession with money can backfire.
WONG: Wailin Wong.
WOODS: Darian Woods, NPR News.
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KELLY: And if you want more stories like this, our colleagues over at The Indicator From Planet Money are doing a whole series this week decoding the economics that fuel the gaming industry.
(SOUNDBITE OF MOTOR CITY DRUM ENSEMBLE'S "DETRIOT") Transcript provided by NPR, Copyright NPR.
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