The 10 Yard Line of Virtual Goods….

I read an interesting article today on some innovations, as well as some reservations, around virtual goods in Japan.

We are all pretty aware of how virtual goods work in games by now. Whether it is Farmville or an MMOG, the basic idea is you can purchase, with real money, some kind of virtual “object” that increases your enjoyment in playing the game. This object can be something that you “use” up in the game play, something you can express yourself with thru customization, or something that adds some unique element to the game play that you would otherwise not have access to. There are other types of virtual goods, but these are the 3 main buckets they fall into.

Well in Japan, creative business thinkers have thought up the idea of “Kompu gacha” (or complete gacha), which is a system that incentivies gamers to buy a group of virtual items (one by one) based on the premise that they could win a ‘grand prize’, or rare item, for getting them all. On the surface it looks like a very creative idea to drive virtual goods sales, essentially virtual merchandising.

Kind of like “collect them all and get a bonus”. The complete article is here if you want to read it.

The problem arises fundamentally because a virtual good has REAL value. It is worth something. I know that is still debatable if you cannot cash them out and get that value into something liquid, like cash. But in general they are worth something since people are paying for them. The problem in this specific case in Japan is that people think this “combining items to win prizes” smells like a lottery, which in Japan is illegal. From the article linked to above there is not enough information to really decipher those details, since there is no mention of “chance”, which is fundamental to the lottery model.

But regardless of that detail, the article represents two interesting phenomenon for the new era of the games business that is now in full bloom. First, that we are on the 10 yard line and we have 90 yards of innovation to go in creativity around virtual goods and the free to play business model in general. Anyone that tells you it is all figured out and everything is known is all wet. This is just one single creative idea around combining purchases and it has had a significant impact on revenues and value creation in some very big companies (like GREE and DeNA in Japan). And secondly, there are going to be instances where similar innovations yet to be discovered will be used for both good and bad relative to the gamers’ best interests. Sometimes it will work and be kosher and sometimes it will raise eyebrows.

It will definitely be an interesting evolution of ideas and decisions as we as an industry move from the 10 yard line towards midfield and onwards.

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