News, research and discussion on virtual goods, currencies and economies globally.

MMORPGs and the item payment revenue model at DiGRA 2007

DiGRA Japan logo Digital Game Research Association DiGRA is the main global organisation for ludologists and other scholars studying digital games. Last September I attended the DiGRA 2007: Situated Play conference in Tokyo. It was a surprisingly large and well-organised conference, and featured over a hundred paper presentations on a very diverse set of topics, including some related to virtual economies. The papers are now available in DiGRA’s free digital library. I’ve added the relevant ones to VERN’s online bibliography and written an introduction below.

Nojima focuses on virtual item sales as a revenue model for MMORPGs, comparing it with subscription fees and selling packaged software. Item based pricing comes close to price discrimination, where each user pays according to their value experienced as opposed to paying a fixed rate. In theory, this boosts revenues by enabling the seller to harvest what would otherwise be consumer surplus.

Using surveys, Nojima examines relationships between the revenue models and players’ motivations for play. The motivations are based on the oft-cited model by Yee. Nojima finds that players who buy items report higher levels of immersion in a game (though the robustness of the study perhaps leaves something to hope for). One explanation offered is that it takes a certain amount of immersion before virtual objects begin to feel desirable enough to purchase. In September 2005, 32% of game titles surveyed by Nojima in Japan used virtual item sales as their main revenue model. In October 2006, the share had grown to 60%.

In Korea, virtual item sales are even more common. Oh and Ryu use a case study of two Korean online games, Kart Rider and Special Force, to examine ways in which game design can successfully accommodate and enhance virtual item sales. The study is not theoretically very ambitious, but it documents something that could be considered “best practices” in the successful Korean online game industry, and will no doubt be valuable to Western game developers planning to implement item sales. Indeed, a version of the paper was published in the December 2007 issue of the Game Developer magazine, and now Ryu told me he will give a presentation at GDC next month!

The item payment revenue model introduces cash payments as a factor that may affect in-game events, so it is not surprising that it is controversial among players. Lin and Sun study Taiwanese players’ attitudes towards the model using data collected from discussion forums. This is a start at understanding how different players needs and attitudes differ on the matter, and how these differences can be structured or segmented (similar to some of my own early work).

Finally, there are two papers not related to virtual item sales. Alves and Roque talked about the “Hollywood effect” in MMORPGs: as budgets go up, creativity goes down. Ström and Ernkvist presented a rather theoretical paper on the entaglements between the MMORPG industry, government, society and players, with an empirical part about the Chinese market. They have a nice set of data they went and collected in China.

Our objective is to keep the VERN bibliography as comprehensive as possible, but as scholarship on these topics has increased recently, I know there is some stuff missing. Feel free to create an account and add entries yourself. They will appear in the bibliography after being checked for spam by a moderator.

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