Well Blizzard has finally done it. After charging only for out-of-game services like faction changes and character customization, with the release of in-game pets on the Blizzard store, they've finally moved on to selling virtual items for real money. And there's a word, dirty in the mouths of some, that's floating around that some of you may not have heard or understood before: microtransactions. We wouldn't blame you -- some of our own staff didn't even know what they were just a little while ago. But with the decision to sell in-game items for straight cash, Blizzard has entered the fascinating and treacherous world of microtransactions. And if you're going to follow them off into this world, you might as well at least know what they're all about.

And so, we're here to help. Whether you've never heard of microtransactions before, you're convinced that they're the devil and that Blizzard has grown too greedy for their own good, or you can't wait to open up your wallet and get a Pandaren Monk to follow you around, let's take a second and look at the history of the microtransaction model, what it means that Blizzard made this decision, and what might happen to the game in the future.

Microtransactions, or micropayments, are exactly what they sound like -- tiny (or relatively tiny) payments for goods and services. Back when salesmen were selling vacuum cleaners, you either wanted a vacuum or you didn't, and thus you either paid a chunk of cash and got one or you didn't. The salesman walked away with your money or his vaccum. But nowadays, with digital distribution, online content vendors are looking at all kinds of ways to sell their wares, from direct sales to subscription models to microtransactions.

"Subscription model" might sound familiar -- that's how Blizzard has made most of their money on this game so far. You paid $40 for the original game (a direct sale -- for many games, that's where it ends), and since then, you've paid $15 a month to play it. That's the traditional model for MMOs -- it allows content creators like Blizzard to release some content (like patches and updates) for "free," and obviously it helps out immensely with their production and upkeep -- they have a large amount of money coming in every month. Subscription models work great when you have 12 million players -- the money rolls in, the content goes out (as quickly as it can -- soonTM), and everybody's happy.

But some MMOs (all of them, actually) don't have 12 million subscribers a month, and so they've started turning to other models to make money. Microtransactions is one of these -- instead of paying a monthly fee and getting all the content released, you can make smaller payments and get only the content that you want. Xbox Live has done this beautifully (you can buy "points" that allow you to buy DLC or even movies or music) , and there are lots of "episodic games" that do the same thing -- you pay for one chapter, play it, and if you want the next chapter, you pay for that and then play that. Apple's App Store (the software system for the iPhone and iPod touch) recently made headlines for allowing developers there to release their content via microtransactions, and iPhone users saw (and are still seeing) a wave of software that you get for free, with lots and lots of addons and extra content that you have to pay for, picking and choosing which ones you want.

So microtransactions themselves aren't a bad thing -- they're just another model for content creators to make money (and in fact, some microtransaction systems are better for customers, because you only need buy the content you want instead of subscribing to the whole thing). But microtransactions in MMOs and games in general are a little more sticky situation -- our sister blog Massively explains this well. Some MMOs, instead of just providing content (like more instances to run or extra levels of progression) for real money payments, started providing in-game items for real money. And not just in-game vanity items, like the pets Blizzard is selling. Some companies sell in-game gold, high-level gear and items, or even things like health potions, for real money. Want to heal your character? You can do it, but it'll cost you.

And of course the problem players have with that is that it takes the game from being balanced around player skill to being balanced around who can spend the most money. When a game company starts equating in-game merit to how much real-life money a player has spent on their character, then it stops being fun for a lot of people (mostly everybody besides the guy with the most money). Those kinds of microtransactions are more or less scorned in the MMO community, and the games that put them into play don't tend to do very well (though they do tend to attract a small core audience, usually of people willing to spend the money for the good items).

That's not to say that microtransactions can't be done right -- Turbine is a company that famously changed their game D&D Online from a subscription model to a free-to-play model, and then made money and did well with it. And because microtransactions done right are so popular among devs and consumers (remember, devs get paid directly for released content, while consumers only have to pay for the content they want), they're showing up in online games more and more. Facebook is one place where microtransaction-based games are taking off like a rocket. In fact, if there's a new MMO that you're planning to play, from Champions Online to the Star Wars MMO, chances are that the game is including microtransactions in some way.

Which brings us back to Blizzard. Tom Chilton has talked about microtransactions before, and he and Blizzard have never ruled microtransactions out. Blizzard is of course owned by Activision, and Activision is notorious these days for "exploiting" their properties, but before people blame the big bad corporation for moving to microtransactions, we'll be clear: Blizzard's core designers have never been against the idea. They've always left it on the table.

And as microtransactions go, admittedly, these in-game pets are pretty tame. They're vanity items, which means they have no affect on gameplay at all. Half of the proceeds (through December 31st) from the Pandaren Monk pet are going to charity. And let's not forget that these are two of the most impressive pets we've seen -- they do animations, they interact with players and NPCs, and they're really cool. As a few players have said, these are basically just like the loot card pets, except that you don't have to buy a bunch of card packs or sift through offers of up to a few hundred dollars on eBay. When you consider them that way, they're not so bad.

Still, Blizzard has crossed a line here (by selling actual in-game pixels directly for real money) that a lot of people thought they would never cross. It's a fallacy to say this is a sliding slope and that it'll eventually move towards them selling Tier 10 gear or in-game gold for money (that certainly would rub many more players the wrong way, not to mention throw off the balance and progression that Blizzard's devs have worked so hard to put in place), but certainly a lot of players never expected Blizzard to ever break the line between in-game possessions and real ones. That's why people are so upset about this -- the whole market seems to be moving towards this microtransaction model, there are lots and lots of bad examples of how to do it out there, and people thought that Blizzard, with all of their subscription money and popularity, would be immune from the temptation of selling virtual goods for real cash. They are, apparently, not.

So where do we go from here? It's not a stretch at all to say that this is only the beginning of the items that Blizzard will be selling on the store. While they should (and probably will) stick to vanity items and noncombat pets (for the same reasons they said a while ago that achievements shouldn't give tangible rewards), we'll probably see them release items on the store at least as regularly as they did with the TCG loot rewards, every few months or so. And it's likely also that it won't just be noncombat pets -- mounts, tabards, one-use items, and special vendor pets all seem like fair game as vanity items that won't affect gameplay.

But again, that's all in the future. If, right now, you do not think Blizzard should be selling virtual goods for real money, then the way to vote is with your wallet -- don't buy them. Companies only move to microtransaction models because they work, and if you choose not to give your money to them, then companies won't use them. It may be hard to miss out on the Pandaren Monk, but if you legitimately think this is the wrong decision for Blizzard, the wrong thing to do is give them money for it.

And on the other hand, if you're for it, you better believe Blizzard will be watching how these sell in the store. It's not likely they'll release actual numbers for sales of these items, but if we see more and more pop up soon, it won't be a stretch to think they're selling well. The faction change service certainly made plenty of money, according to our unofficial survey. It's been a long time coming, but Blizzard has officially adopted a microtransaction model, and for better or worse, if it's as popular as they probably expect it to be, they'll stick with it.

Tags: blizzard, blizzard-store, business-model, champions-online, content, content-patches, customers, episodic-games, history, in-game-pets, iphone, massively, microtransactions, model, oney, payments, star-wars-the-old-republic, tom-chilton, updates, wow, xbox-live

Filed under: Items, Analysis / Opinion, Virtual selves, Odds and ends, Blizzard, Economy, Making money