Mainstream Games Companies Buying More Virtual Goods

Digital_Goods_By_GenreFounder of both Electronic Arts and a relatively new mobile start up, Digital Chocolate, Trip Hawkins has said that the way to monetize iPhone games was with virtual goods. However, if recent data has taught us anything, growth isn’t just limited to the mobile space. On the contrary, free to play virtual goods revenue models are being seen more and more across the board; be it iPhone, PC, Xbox, mainstream, or casual. Of course, we have covered many of these before, but what we haven’t looked at closely is just how many mainstream developers are going this route.

Virtual goods in the US were worth roughly $265 million this year, according to Piper Jaffray (an estimate we think is very low) but around $5 billion in Asia, according to +8* | Plus Eight Star. So the concept is proven elsewhere and growing here.

Electronic Arts has been one of the most prominent behemoths to slowly lumber its way into the virtual goods realm.

iphone_sims3The EA Mobile release of the Sims 3 marked a small step into the social space for the company, but greater plans are still in store for the high quality iPhone title (which according to EA was classified as a mere “test” to see if high production value for a social iPhone game was worth it). Well, with over 1.4 million sales within one week, it is probably safe to assume the game did well, but shortly thereafter came virtual goods that were purchasable using a virtual currency called SimPoints. Supporting both PayPal and major credit cards, the virtual goods store for Sims 3 would mark one of the earlier renditions of mainstream virtual goods.

Another PC game from EA, the real-time strategy (RTS) and collectible card game (CCG) hybrid BattleForge was a project intended to test the waters of virtual goods in a full price game, forcing players to purchase virtual cards to further grow their fantasy-like armies. Initially, the game cost about $50, but even after a $20 price drop, the game still sold less than 100,000 copies. Developed by Phenomic, the RTS/CCG creation was bombing.

battleforgeBattleForge was not a sinking ship yet, though. To EA’s surprise, the virtual goods – card booster packs – were selling amongst users like wildfire. Noticing this, EA Games President Frank Gibeau made a curious call. BattleForge would go freemium, granting access to all of the game’s content, but offering fewer cards to start out with (originally, players began with 16). To Gibeau’s elation, the unorthodox move (from EA’s perspective) would lead to “record sales.” Unfortunately for us, Gibeau has not revealed average revenue per user (ARPU) metrics specifically, but he has stated that some freemium players were spending over $100 for virtual goods.

According to the LA Times, the freemium change may have single handedly saved Phenomic from a rather expensive failure. To that end, Gibeau also stated to the Times that EA did, indeed, have “four or five” new freemium projects in development. This was at the start of June.

battlefield heroesPerhaps one of the aforementioned projects was Battlefield Heroes, as about a month later it appeared on the scene. This online, freemium, and multiplayer shooter announced, shortly after release, that it had over 1 million registered players. With two forms of virtual currency to purchase items for a player’s avatar, Valor Points for playing and excelling, and purchased Battlefunds, the game offered two very viable options for advancement. But, with a matchmaking system that was designed around skill levels, EA kept players from advancing strictly because they had a lot of money to spend.

As Virtual Goods News noted in July, “industry standards suggest that less than half of Battlefield Heroes’ 1 million registered players will be active and that fewer than 10% of the active players will ever purchase anything.” This is a common sort of revenue distribution in freemium games. EA is actually expecting around $80 million dollars in revenue, from digital sales (which includes virtual goods transactions) for 2009.