Saturday, July 30, 2005

Space Crack: Financial Mechanics

Introduction
This is part 13 of an ongoing game design document written as a blog. Be sure to catch up on previous posts. In the last installment, we talked about the benefits of plot. This time we'll look at what it takes to design money making capabilities into an online game.

Your kind isn't welcome here
In the various financial scenarios I’ve put together, the most glorious TBS game ever concieved (aka Space Crack) reaches break even at 8000 subscribers paying $5 a month. We reach an expansion state at which we can begin building a second title at 13,000 subscribers. To put these numbers in perspective, here are one analyst’s predictions of comparable break even numbers for the mainstream game industry.
“A game on all three consoles would have to sell around 600,000 in its first year, plus another 600,000 over the next couple of years just to break even. A million unit seller isn’t what it used to be.”
- Analyst Michael Pachter, Wedbush Morgan (EGM, September 2005)
Ah, such different universes and a rather good summary of why most big publishers will never invest in games like Space Crack. The moment you state “I want to make a casual TBS game that I’m hoping will sell over 13,000 subscriptions!” you’ve effectively killed your title before it even reaches the starting gate.

In order to make a friendly title like Space Crack, we can’t rely on the old “Sell a million copies” business practices. We’ll need to forge new business ground in order to make Space Crack a viable enterprise.

In the spirit of launching a new financial adventure, we’ll dig into practical options for making money with the Space Crack game design. There are several viable mechanisms including pay-to-play, micro payments for new content, subscriptions and retail-style pricing. I’m going to tweak and judge these various mechanics in light on two major criteria
  • Market Needs: Do the financial mechanics fit with the requirements outlined in game anthropology exercise I went through at the beginning of the design? Are these mechanics, as game mechanics, fun?
  • Financial Needs: Do the financial mechanics allow me to build a viable business?
Balance, Grasshopper
The intelligent balance between these two items should result in a game that people enjoy spending money on. It is important to realize that proper mix of financial success and player fun is not an ‘either / or’ situation. You can do both and you can do both well, but it takes a conscious effort.

You cannot simply focus on the art of game design and hope that that miraculous thing called ‘genius’ gains you financial success. Many indie game developers are caught in this trap. Nor can you focus on the financial mechanics and hope that cold-hearted process will yield a critically successful title. Many publishers are caught in this trap (Tomb Raider comes to mind). Hone both skills and success will be yours.

Market Factors
The market factors involved in using financial game mechanics are numerous and difficult to navigate. Money has complex social and cultural connotations and even small missteps can result in a dangerous poisoning of Space Crack’s gaming community. Ultimately, a game must provide a fair psychological value to the player in order for them to keep playing and keep purchasing our virtual goods.

Here are some rough guidelines to keep in mind:
  • Good fit with the game anthropology: Space Crack is a game about spending time with friends. Any mechanics that break this core value proposition hurts the game community. As such, the financial mechanics lean more toward team-based system like “signing up for a bowling league together”, rather than individual mechanics like “buying lots of cards so I can kill the other teenage nerds.”
  • Meets user expectation of standard features: Given the open-endedness of Financial Mechanics, it is easy to imagine systems like “every time you want to save, pay me $2.” Talk about an instant player rebellion. Focus your efforts on value added features, not expected features.
  • Fairness (aka Game Balancing): No one likes to play a game that is impossible to win. If you build financial mechanics that give one player a substantial advantage over another, you’ll end up with some frustrated players. This is game balancing 101, but too often game designers let people who spend the most money ruin the game for paying majority. Balance financial mechanics just like you would any other mechanics.
Financial Factors
On the other side of the coin are the financial factors.
  • Viable economic model: The game has to pay for its upkeep and provide the game developers with a reasonable profit. Game developers need to eat and if they make something great, they deserve to be own luxury yachts much like Gene Autry, Cake or other powerful rock stars of yore.
  • Moral financial practices: I’m a great believer in the power of games to effect human psychology for both good and for ill. Creating a game that ties into a player’s finances increases the potential for harm. In online titles, the game developer is morally obligated to take on the roll of a bartender for those who are obviously over indulging. “Sir, I’m afraid you’ve been investing a bit too much in Space Crack. I’m going to have to cut you off for the night.”
Financial Mechanics are similar to Game mechanics
The concept of financial mechanics is based on the risk / reward sequences we have discussed in the past.
  • Action: The player performs an action in the context of the game. However, this action results in the direct or indirect transfer of money to the developer.
  • Reward: The player gets some in-game reward
  • Penalty: The player doesn’t get some in-game reward
The wonderful thing about these mechanics is that they are almost completely open-ended. Any existing game mechanic can be turned into a financial mechanic. All it takes is a bit of imagination and knowing when to stop.

In-game currency
A useful method for unleashing the potential of financial game mechanics is to create an alternative in-game currency that behaves like a standard in-game resource. Space Crack users will be able to buy new power ups and other items using ‘Stars.’ This currency is completely artificial and its value is controlled by the game developer.
  • Players can buy Stars by purchasing them with real world cash. 10 stars might cost $5
  • Players can earn Stars by performing in game actions such as winning battles, being rated well by other players, etc.
  • Stars cannot be transferred to other players (except perhaps in the form of gift certificates)
The result is a very simple 'one-way' economy. Players generate Stars by either buying them or earning them. The stars are spent on in-game items. As soon as they are spent, they are effectively removed from the economy. In many ways, this system is not so different than the token system used by casinos and arcades.

Benefits of an in-game currency
There are some rather substantial benefits here:
  • Additional control of use in-game mechanics: Authorizing payments, entering credit card numbers, etc is slow and irritating. It breaks the flow of the game. By having an in-game currency account for each player, you avoid this problem. Everything is pre-purchased so Stars can be treated by the game designer much like any other resource.
  • Players don’t treat in-game currency like real money: The player is psychologically distanced from the act of spending real money. Since Stars come from a variety of sources it is difficult to evaluate the opportunity cost of making a purchase. This disconnects results in less hesitation when snap purchasing opportunities are made available to the player.
  • The game developer can print money: Stars become a valuable reward that can be used as part of the standard game play. This can be a powerful incentive that helps the designer guide the player’s actions.
  • Sunk costs result in more active players: If a player has a bank account of Stars, they feel obligated to play. They’ve paid their cash and it seems a waste to simply ignore the Stars sitting in their account.
Potential Financial Systems in Space Crack
The following are potential systems that can be used in Space Crack to bring money into the game. These will have to be play tested extensively before they are implemented.

All financial systems have two stages. The first is a trial stage in which the player gains an appreciation of the mechanic. The second is the purchase stage in which the player spends money in order to take fuller advantage of the mechanic. This two stage approach is important since game mechanics are ultimately a rather abstract systems that are on the surface valueless. We need to get past the learning curve, addict the player and then hit them up for money.

The following systems are all interlinked and offer three paths to encouraging players to spend money on the game.
  • Purchasing Game Sessions
  • Purchasing Stars
  • Purchasing Powerups
  • Purchasing through Retail
Purchasing game sessions

Trial: Customers get a fixed number of game sessions. Each user gets 5 free games session by signing up for the trial.

Paid: If they want to play more than 5 games, they can purchase additional games for a fee. A single game is rather inexpensive at 5 stars, but a pack of 5 games might cost 20 Stars. There are a variety of promotional packages that can be put together using this system
  • Single game session: If they only want to purchase a single game, they can spend 5 stars
  • Unlimited game sessions per month: 10 Stars. If they want to play an unlimited number of games, they can purchase a package that gives them unlimited games for a set period of time period of time. This purchase acts as a subscription and auto-renews at the end of each month.
  • Purchase game for a friend: 5 stars
The idea here is that if someone is invited to a game, they can easily sign up for a trial. Or they can make a small one time purchase. Or they can invest heavily in the game and not worry about pricing.

The interface is very important here since complicated sales processes ruin the momentum of the purchase. Items to be purchased are displayed much like a traditional in-game shop keeper. You have:
  • A list of items to be purchased
  • The cost of each item in Stars
  • The number of Stars in your bank account.
  • A big happy button that says “Buy more Stars?”
When you are out of stars, it is a simple trip to the Star Store to gain some more. Ideally, you never even have to leave the in-game store screen.

Purchasing Stars
Trial
: During the trial stage, the player is given 10 stars that can be spent on pretty much anything. If they spend their 10 stars, they are given the opportunity to put a credit card on file. Couching the request in a non-threatening manner is critical, since getting the credit card on file allows for streamlined purchasing in the future.

Paid: In order to purchase Stars, click on the ‘Buy more Stars” button on any purchasing screen. A small in-game dialog will pop up with several packaged options
  • 5 stars for $2.49
  • 10 stars for $4.99
  • 25 stars for $9.99 (20% off Sale)
  • 50 stars for $19.99 (20% off Sale!)
  • 100 stars for $34.99 (30% off Sale!)
The credit card is stored online much like how Amazon.com does it. As soon as you select the amount of stars you want, you can select ‘purchase’ using the stored credit card. You can also select a new credit card at this point and tweak your various account options. In general however, purchasing new stars is an in-game activity that happens in two simple clicks.

There is some fun sales psychology that going on here.
  • With one basic system, we can hit the player at several different price points. Some players will only want to dip their toes in the water. Paying $2.49 is rather painless. Other players are driven by discounts and will go for the bigger packages.
  • By having smaller purchases, people are less likely to get upset when they review their bank statements. A $4.99 reoccurring cost is likely to go unnoticed.
  • The money is transferred to the developer as soon as the stars are purchased. Getting cash upfront is an important financial factor for a new business.
Power ups: A brief description
Now we come to Power ups, the most risky and potentially the most financially profitable portion of the system. So far, the subscription based system I’ve described has a built in revenue cap per user of $4.99 per month. In order to make a profitable business out of that, I would need 8,000 subscriptions to pay for a staff of 3. (I have a little financial model I used for these calculations that I’ll share in future posts).

This may be a small number for a retail title, but it is large amount for an independent title. The more money I can get per user, easier it will be to break even with a lower number of users. This is where the power up system comes in handy by providing an additional uncapped incremental revenue source.

Power ups are simple tokens that change the game in some way
  • Aesthetic Power up: These can change the color of your ships, replace the head of your avatar, make flowers come out the exhaust instead of flame, etc. In general they do not affect the game mechanics, but instead act as a social statement by the player.
  • Meta-game Power up: These change the rules of the game in some fashion. Typically they give players more power or the power to do new things that were previous not possible. Ideally, the player sees value in these because they offer him a strategic advantage. An example of a power up might be a Nuke, which automatically wins one battle, but destroys both the attacking and defending ships.
Purchasing Power Ups
Trial
: Power ups in Space Crack are somewhat unique in that each player shares their power ups with all the other players in a game session. Remember, we are trying to promote spending time with friends, not competition. The user’s collection of power ups is spread throughout the map (with a higher concentration of their collection located closest to their home planet). Any player in the game may stumble upon another player’s power up and use it if they own that planet. All power ups are tagged with a notice of whose collection it came from.

Thus, even a relatively new player can play a rousing game with even an advanced player. In fact, the system encourages newbies to play with high level players since they get to play with all the various cool toys that the advanced players possess.

Power ups are divided into two categories: Trial and Advanced. If the user is still in the first few games of their trial account and does not have a credit card on record, they can only use the trial power ups. However, as soon as they get make a commitment to the game, they gain access to the universe of advanced power ups.

Paid: Paid power ups are purchased at a store and added to the player’s collection. Power ups can range in cost from a few Stars to several hundreds Stars. We have a variety of ways to increase the joy of buying new power ups
  • Rarity: Some power ups are rarer than others. How much would you pay for a nuke that you can use twice instead of once? Only 20 exist in the entire game and you friends will be in awe if they find out you own one. Be aware that it will cost you.
  • Intermittent rewards: Some “mystery power ups” are unlabeled in the store. You only get to see what they are after you purchase. But the joy of paying a small amount for a great item is hard to beat. In short, players can gamble. Also, the store has only certain power ups available for purchase each day. Unless you check in daily, you never know what you might be missing.
  • Volume discounts: Players who purchase multiple power ups in a day get bonus discounts. Heck, if you spend enough, we might even toss in a couple of uncommon power ups just for fun.
  • Bundling: Want to buy a 5 pack with one guaranteed rare? Want to buy a pack of fire upgrades? By bundling, we create packages that capture more customer value and increase the unit price of each purchase.
  • Cost increases with popularity: Costs of power ups increase with their popularity. If everyone and their mother are using nukes, the price of nukes rises proportionately. This way, we make more money from popular items.
  • Periodic expansion packs: Interest in the game can be renewed by releasing periodic expansion packs that include new sets of power ups.
Purchasing through Retail
Most distribution channels still sell packaged goods. In order to reach a large number of potential players, Space Crack will need to form relationships with both online and retail distributors. Both groups expect an executable that provides a valuable experience for a fixed price.

Trial: We provide the online retailers with promotional code and an exe just like any other retail package. They can wrap it in their trial software as desired.

Paid: The promotional codes can only be used once and automatically give an account two months of game play for free and include 25 stars.

Of course, this isn’t just any other retail package. As soon as the Space Crack file is launched, it hooks up to the internet and acts as a full online account. This hybrid model is similar what is used by MMOs and will continue to be a necessity for many years.

Miscellaneous financial systems
We are scratching the surface of the purchasing opportunities that can be included in the game.
  • Bonus purchase opportunities: You can also move purchasing systems directly into the game. For example, some planets could be littered with rare power ups that take Stars to purchase instead of Crack. Not only do you get to add a rare item to your collection, but you also are guaranteed to use it in your current game. These “once in a life time opportunities” play the part of spur of the moment purchases. This isn’t quite as bad as raising the price of Coke on hot days, but the economic theory behind it is similar.
  • Match Making: Players can purchase advertisements on a central website with a ‘dance card’ that give their vital player statistics and the type of games that they like to play. There would be a standard listing of players, but if you wanted top billing or you wanted to promote a tournament, you could pay a small fee to get a better ad. This may fall under ‘expected’ features and not be a valid financial game mechanic.
  • In-game advertising: This is another one I’m staying away from. I want to provide a wonderful experience. Being a shill for someone else could easily cheapen the Space Crack experience.
Infrastructure
Naturally, none of these systems can be created without first investing in considerable infrastructure. Several core technology elements come to mind:
  • Maintaining customer data: Customer data is king. Players may not be purchasing physical goods, but they are purchasing electronic goods that are stored on your servers. If you screw up and delete their data, trust with the community is critically damaged. In the worst case scenario, the community will punish you by leaving in droves. An effective and reliable backup system is a must.
  • Cost of building online store: The whole ecommerce backend must also be in place. This is another large infrastructural item that needs to be budgeted for.
  • Metrics System: I’m a huge fan of investing in metrics so that you can measure your success or failure in concrete terms. Adding financial mechanics is a very labor intensive activity. As I build out new systems, tracking key metrics helps me figure out if they are feasible or not. Some decent items worth tracking include the total number of active users, the amount of money that each system generates, and the number of players partaking in each system.
Conclusion
Goodness, what a brain dump…I apologize for the overuse of bulleted lists. :-) By now you should have a good idea of how multiple financial game mechanics interact to provide the money making structure for an online title.

We are dealing with a far more complex transaction system than you find in packaged goods sales, or even simple subscription models. We are moving away from the “one price for one product” model that has been common with current games and are instead moving towards a flexible gaming experience that provides players with multiple opportunities to purchase additional game play value.

The results are good for both the players and the game developers.
  • Lower entry barriers: You don’t have to pay $50 up front to play the game
  • Payment for value: If you like the game a lot, the developer gets a bit more money from you. If you don’t like all that much, they only get a little.
  • Niche titles are financially viable: A relatively small population of users worldwide can support a niche title. This means that instead of lamenting the loss of dead TBS games of eras long past, gamers get a constantly updated thriving game that suits their highly specialized desires. Developers, in turn get a dedicated community that will financially support their efforts for years, not mere weeks like they must deal with in the retail world.
Till next time,
Danc.

PS: Longer posts, such as this one, take longer to write. Feel free to let me know if these would be more palatable split up into multiple essays and posted more frequently.