WHYGAME YOUR COMMERCE NEXT RELEASE ESSENTIALS NEEDS AN IN-GAME STORE WHY YOU SHOULD ADD AN IN-GAME STORE TO YOUR PUBLISHED OR UPCOMING VIDEO GAME The current video game development landscape makes it challenging for both developers and publishers to thrive. Not only have recent development and production costs gone through the proverbial roof, but there is also more competition in the marketplace now than ever before. Ironically, both conditions are a result of gamers' increased quality expectations and all the perpetual tech updates for PCs, consoles, and mobile devices. When a developer or publisher launches a video game into the wild, they're really just taking a leap of faith. Will they become one of the successful few, or will their work disappear into the sea of new releases? Armed with the right game commerce strategy, any studio has the potential to transform a passion project into quite a successful business venture, as well. A cornerstone of such a successful strategy is the in-game store. This is because integrating an in-game economy provides added value to the players and generates additional revenue for the studio. RUN YOUR OWN BRANDED IN-GAME STORE [email protected] xsolla.com 1 WHY YOUR NEXT RELEASE NEEDS AN IN-GAME STORE WHAT IS AN IN-GAME STORE? An in-game store is just what it sounds like: a marketplace within a game where developers and publishers can sell digital items to players. Digital items can be anything, such as: • cosmetic only, like character skins, animated emotes, or pets • unique items, only obtainable through the store • virtual currencies, used only inside the game • XP boosters • battle passes, or season passes • entirely new content, such as DLC and expansions • bundles, which can include a mix of currencies and items • subscriptions RUN YOUR OWN BRANDED IN-GAME STORE [email protected] xsolla.com 2 WHY YOUR NEXT RELEASE NEEDS AN IN-GAME STORE This in-game economy creates a direct relationship between the company behind the game and its players, allowing both casual gamers and fans to support the business. It's also a great way for developers and publishers to boost engagement with their more dedicated players. More importantly, an in-game store is a means for developers to keep making money long after launch. Especially for games as a service (GaaS), audiences expect titles to be supported for a long time, which can be a daunting task. If a specific game isn’t generating enough revenue to support its maintenance or further development, it naturally becomes difficult to justify its continuation. RUN YOUR OWN BRANDED IN-GAME STORE [email protected] xsolla.com 3 WHY YOUR NEXT RELEASE NEEDS AN IN-GAME STORE BUILD FOR YOUR BUSINESS MODEL There are a variety of different ways to make money from games these days. Generally speaking, these are divided into two kinds of business models: premium and free-to-play. Below we explore each of these to show how an in-game store can benefit either model. Premium Simply put, this is when users pay to access the game before they start playing. Most commonly, this involves a single payment up front for content, either buying an experience outright as a physical copy or downloading it from a digital platform. Typically, this means that consumers can play the purchased game with no further barriers. When they part with their money, they know that they will be able to play for a certain period of time or enjoy all the available content, and not have to worry about spending any more cash to do so. This is arguably the most traditional way of paying for video games, and as a result, consumers feel a certain level of comfort with it. Other genres like MMOs often employ a subscription business model whereby players spend a certain amount of real-world currency every month or year to play a game. This gives users a degree of flexibility. If they know they won’t have time to log into the game for a while then they can stop paying, and won’t be able to access the content until they reactivate their subscription. The subscription model is gaining more and more momentum in the video game space, as people are increasingly more comfortable with it thanks to on-demand streaming services like Netflix and Spotify. In this business model, developers and publishers can use in-game stores to sell downloadable content and expansions, such as new areas to explore in the game or new missions to undertake. They can also sell cosmetic items and season passes, which grant access to packs of content. It’s worth noting that price is important here. Unlike their free-to-play counterparts, consumers have already paid money to access the game. RUN YOUR OWN BRANDED IN-GAME STORE [email protected] xsolla.com 4 WHY YOUR NEXT RELEASE NEEDS AN IN-GAME STORE If you charge too much in comparison to the perceived content value, it’s very easy for the audience to think you are greedy and simply just trying to make easy money at their expense. Free-to-Play In contrast to premium titles, free-to-play (F2P) games require no upfront payment to access the game. Historically, this business model was most commonly employed by mobile games, but it’s since been used by games like Fortnite, League of Legends, and Dota 2, all of which boast huge audiences. Other developers choose to support their games with ads, forcing users to watch or interact with marketing materials at regular intervals. Players can usually opt to purchase access to a paid tier that removes the ads. Freemium games, a common type of F2P games, usually offer a majority of their content with no purchase expected. They tend to keep premium features behind a paywall, or require players to spend a lot of time actually playing the game to unlock content, like characters, maps or cosmetics. In-game stores are one way that free-to-play titles make their money. If you have a big enough audience, you only need a small portion of your customers to spend money to keep your business afloat. In the past, companies have observed that only about 5% of users spend real-world money in-game. Yet, that will likely be the source of your most significant revenue stream. A studio's most generous individual financial supporters, often referred to as "whales," typically contribute as much as $100 per month on a single game. Unlike paid-for experiences, with F2P games you can certainly charge a bit more for virtual goods. You can choose to offer cosmetic items, access to additional content — like Hearthstone’s card expansions — as well as random in-game goodies. For singleplayer games, like Candy Crush, you can sell items that give users an advantage or allow them to progress further. However, if your game is multiplayer, like Fortnite, make sure that there are no items for sale that give one player an unfair advantage over everyone else. That will make the overall experience unenjoyable and you will likely face understandable backlash from your player base. RUN YOUR OWN BRANDED IN-GAME STORE [email protected] xsolla.com 5 WHY YOUR NEXT RELEASE NEEDS AN IN-GAME STORE That being said, the digital items you have for sale should act as an advert for your in-game store — a visual signal to other players that there's additional content available for purchase if they're interested. Cosmetics are a great way to accomplish that, as they can be very eye-catching and tempting for players who want a different in-game "look" or simply seek a quick, easy way to financially support the game. RUN YOUR OWN BRANDED IN-GAME STORE [email protected] xsolla.com 6 WHY YOUR NEXT RELEASE NEEDS AN IN-GAME STORE DOING FREE-TO-PLAY RIGHT The F2P business model is one of the most contentious in the games industry right now. Games that operate in that manner are inherently risky. Unlike premium titles, the developers and publishers behind F2P games don’t receive money upfront when people decide to play their game. They have to wait, often quite a while, before their players begin spending money to support their venture. As a result, there are two different kinds of free-to-play commerce methods. The most common means of implementing free-to-play in a game is known as “pay-to-win.” That method often forces players to spend money in a game by locking many stages of content behind paywalls. Alternatively, pay-to-win games reward players that make purchases with significant in-game advantages, like better weapons, over those that don't. Pay-to-win games generally work quickly to squeeze player wallets as hard as possible, so they can extract as much money as they can, while they can. The game studio or publisher might make decent revenue from their players during this time, but the net result is often a customer who feels unsatisfied and taken advantage of. Many microtransactions or in-app purchases in these kinds of experiences come with a very low-cost barrier. That means some players – in the elation of the moment – will buy a lot of those cheap(er) items in a row, only later realizing that they actually spent a lot more money than they intended to. There are many, many examples of how not to implement free-to-play in your game. Those are usually created by companies who are just in it to make a “quick buck.” Our recommendation? Don’t be those companies.