Microtransactions in Gaming
I. INTRODUCTION
What Are Microtransactions?
In the gaming marketing agency over the past few years, many of the video game publishers have been pushing for higher revenues and returns from their investments in games. This has been proven to be the norm from smaller, free-to-play titles, all the way to the largest game developers on the market. For many developers, this means more advertisement promotion of their games on the internet and on television or to try and improve their game to add more content for the buyers. As the case is for many other developers however, their solution in recent years seems to consist of using the tactic of microtransactions. As one may assume, this has led to many problems in the video game industry.
Microtransactions are defined as, “A very small financial transaction conducted online” (Microtransactions, 2016). Since the term “microtransaction” is a relatively modern term, there is no true price range that has been established yet to define it by price. Typically, microtransactions are located inside of in-game shops that require either real money, or some kind of in-game currency. For smaller studios that do not have enough money to promote their game to be able to sell it for a fee and still become popular, microtransactions are one of their main sources of revenue from the game. By relying on these transactions as the main source of income however, this tempts many studios to become greedy and exploit the
However, GameStop is still at a disadvantage, because there are such a large number of competitors in the industry. Buyer’s bargaining power are high, since there is no brand loyalty in the industry. Customers are very well aware of the market price of a product and will look for the best deals they can find. Suppliers have high bargaining power since suppliers can choose to integrate forward and sell their products themselves. The success of the retail gaming industry is very dependent on the availability of supplier’s goods. Additionally, since there are low barriers of entrance, substitute products and new entrants often appear in the market. Since most competitors in the industry do not have a strong presence, the expected retaliation towards new entrants is low. An increasing popularity of smartphone games and social media games such as Farmville on Facebook, allows customers to play against friends. Although these social media games do not offer the same experience as a video game, the fact that virtually no switching cost is associated with switching to a competitor’s game and since they are so cheap compared to video game disk and consoles, can easily drive customers from video gaming to online gaming. (Exhibit 2)
• To enter the game industry is difficult because new entry should possess high technology skill, high capital and well distribution, it’s not easy to new entry.
The lifestyle of a hardcore gamer is to be antisocial around human beings, but through the connectivity of the Internet to be social and build friendships and relationships through video games. Xbox has created a live chat while playing video games to verbally speak to the gamers or instantly chat. The social class gamer is divided by the income category that they fall on. Upper and middle class have the ability to spend money on new consoles in the gaming industry, while the lower class does not have the funds to invest in all of the new consoles that are released. The most important key point of the demographic component is the behavior of a gamer. It is important to have a strategic target plan for any new consoles; however, behavior gamers are the marketing targets to any new innovation. Behavior gamers are the most loyal consumers and it has a significant amount of the profitability to the company. As a result, the three different components makes up the target market and is very crucial to be strategic with the plan and know the potential
The mainstream gamer enjoys games but may not finish every game they buy and doesn't have time for long MMO (Massive Multiplayer Online) quests. The mainstream gamer represents approx. 15% of the gaming market.
In game purchase refer to items that a player can buy for uses on different types of games. Clash of Clans is the top grossing game on the play store applications. The play store application is Google’s online store for downloading music, games, movies, e-books, and variety of android applications. Candy Crush Saga is the top in-game purchase for the Apple. The Apple store is for the IOS applications. The revenue from in-game purchases provide incentive for the developers to update a game frequently as well as the products available. Google is consider is an advertising company. Google sells advertisement. Google is so successful at selling advertising because of the Google search engine. The spam emailed on advertising is one way
Microeconomics analyzes economic decisions on the micro or small level. This includes how a household or consumer will spend their money. One of the crucial aspects of microeconomics is that a business owner needs to have the basic understanding of demand. Demand seems to be the most basic and yet a necessity for small business to be familiar with. The basic concept of demand is that if a consumer sees the price of something rising, they will look for substitutes. Quality demanded is an important aspect of understanding demand as a whole. The quantity demanded on a market depends on many factors. Some of which quantity demanded plays a role in is the price of a good, the price of competitive goods, consumer income, consumer's preferences, and the length of time period. Having knowledge about quantity demanded allows one to one to really understand the relationship between a price and the
This consulting report concerns CanGo’s attempt to establish new business ventures to enhance the vitality of the organization through entering the enormous electronic gaming industry that is rapidly expanding. There is a significant amount of demographics that will embrace the virtual world of On-Line Gaming, since electronic entertainment has been revolutionized through increasing access to interactive online gaming with access to high-speed internet. Thus more, global games industry revenues were at 60.4 billion in 2009 and expected to rise to 70.1 billion in 2015. The value of this proposition is to increase revenues, increase speed, expand
The video game industry is the economic sector involved with the development, marketing and sale of video and computer games. It includes video game consoles, game software, handheld devices, mobile games and online games. The video gaming industry has been growing exponentially in recent years with Sony, Microsoft and Nintendo competing for the higher profits in the market. This essay will analyze each of the five forces acting on the industry: threat of new entrants, threat of substitute products or services, bargaining power of buyers, bargaining power of suppliers, and the competitive rivalry among existing firms. Then it will be determined if the video game industry is still an
Future growth expectations for the Video Games industry have been significantly moderated, as the picture of the market for gaming on mobile platforms becomes clearer. Since mobile games are sold at much lower prices compared to traditional console and PC games, their rise may foretell a slowdown of the video game market in the United States. While the recent launch of the next generation video game consoles is expected to rekindle interest in the more expensive console gaming market, the rise of low-cost, low-margin mobile gaming market may weigh on the overall gaming market. Consequently, this is expected to pull revenue downward as consumers pay less per hour for gaming entertainment. Revenue is expected to reach $47.4 billion in 2019 as a result of the expanding population and an increased percentage of Americans
Sometimes it seems like the computer game industry is dying, crushed to death by its own bulk. Every year more and more gaming companies get gobbled up into huge conglomerates like Electronic Arts, companies that mostly put out trash that is technically and visually impressive, but devoid of concept and content. However, there are some small gaming companies that buck the trend. While mostly just small groups of programmers and artists, some are huge unions of fans who, irritated with the dropping quality of computer games, have decided to use the power of the internet to get together and to produce games tailor-made to their personal preferences.
EPOC will gain more profit if it is console-enabled only, when compared with PC-enabled only. The retail sales console game is almost five times more than PC game as we can see from Exhibit 8 in this case. The retail sales of console software game is 6.6 billions of dollars, but PC is only 0.9 billions of dollars in 2007. Moreover, from this exhibit, we can see that the number of PC software game retail sale is decreasing year by year, from 1 billions of dollars to 0.7 billions of dollars in 4 years. Most of consumer purchases a
Video games in today’s society have become very popular. Every new game that comes out to be played and conquered by the average gamer has its own category. There are several other types of genres of games that people play but because of big hit titles and the new popular game systems like the Xbox 360 and Playstation 3, people become more interested in a game that is well known than a game they have never even heard of before. Every game has its own storyline and own way of how it unfolds and where the game ends according to game play. Some of the biggest reasons people sway to certain genres of games is because of the game titles released under them and the demand of people who want a good game under that category. The top three most
So what exactly are microtransactions? Microtransactions can be defined as the exchange of real money for virtual goods. It is a system where “users can purchase virtual goods via micropayments.” hence the term microtransaction (“Microtransaction” 2017.) This type of business model is common in free to play games and is typically used to speed up progression within the game itself. However, some developers have decided to incorporate microtransactions despite customers already paying the full price for the game. While this is not necessarily an issue if the goods are cosmetic and have no effect on the core gameplay, it is an issue if it provides users who pay for offered goods with an unfair advantage over free to play players. One might
The legal issues faced by the video game industry include trademarks, copyrights, licensing, online ownership, revenue recognition and demands of
Finally new online companies are creating new games that do not need a console so they can be played easily, anytime and anywhere. This factor affects our sales dramatically because our product might be seen as old fashion.