2009/06/27

Forging a New Deal for Flash

I just wrote a comment on my blog that was longer than the original blog post! :p I thought it deserved a blog post of its own, so here it is.

I have been involved in a lot of discussion about Flash micropayment systems lately. It's exciting. A lot of things are happening at once, with the announcement of so many new payment systems for Flash games in such a short amount of time.

I was delighted to see that Daniel James, CEO of Three Rings, the creator of Puzzle Pirates and Whirled, somehow found my blog and took the time to respond to my latest post, in which I somewhat dogmatically urged developers to Demand More Money.

Comment by Daniel James:

"I feel that you're ignoring the considerable costs involved in operating a platform. If all you are doing is a payment system for credit card/paypal, then I agree entirely that a high revenue share to the developer is appropriate.

I'm not sure what Mochi is exactly offering, but stored value, brand and cross-game network adds a lot of value, and some costs. They are probably sharing some of their revenue back to portals, which I think is good news in general.

On Whirled we offer a lower-yet revenue share; a three way split between developer, affiliate (sometimes the developer, sometimes a player, sometimes a portal) and us... and we give 10% to charity! Maybe we'll have to change that in the price war you talk of, but in the end I don't think the revenue share percentage is the thing, it's getting players to pay.

That will require a complex platform that rewards everyone in the ecosystem -- which means money has to be split.

Bear in mind also that a lot of the payment methods most popular with the younger (e.g. Flash) audience take ~50% of the transaction (Mobile, pre-paid cards, etc.) So if you don't want to cut off these potential significant sources, you're going to have to drop the developer %."

Thanks, first of all, for the detailed reply! It's an honor.

I will admit that I'm not aware of the costs of operating a Flash micropayment system, but I'm assuming something fairly light, basically aggregating various payment providers such as PayPal or Super Rewards.

I have heard that mobile and prepaid cards do take a significant cut, as you mention. So maybe exceptions will have to be made for those, or they could be somehow subsidized by profits from the other providers or advertising. I wouldn't use those expensive methods as the baseline though.

I think it is inevitable that developer cuts will increase, and most likely stabilize to similar amounts across all the competing Flash virtual currencies. With ten different competing systems, I don't see how it could not. I can't imagine how all of these systems could coexist, in the long run, given the trend in the in-game advertising space with GameJacket dropping out recently, leaving MochiAds as by far the dominant player. Though perhaps it would be a good exercise in creativity to try to visualize such a situation. ;)

I don't see Whirled as on the same playing field as the others, really. You have your own little island, distinct from the general Flash games space. I wouldn't imagine that the revenue split would be the biggest item of consideration for developers on your platform. And who would be so heartless as to resent your 10% set aside for charity? :)

Kongregate's system might also be less affected, though I think Nonoba is spreading itself too thin between trying to reinforce its portal's brand and also become some sort of universal Flash currency. What I'm mainly talking about are the systems vying to be *the* universal Flash currency, like Andrograde, GamerSafe, Heyzap, and MochiCoins. The trend seems to be toward expansion and dominance. Because as you know, the more universal it is, the easier it is to get players to buy in and the more money you can make.

And this brings us to what I thought was your strongest point. Thank you for bringing it up. As you imply, the big issue now is not the percentage you get from the pie, but the size of that pie. Right now the pie is very small, and I would agree that there is more to be gained in growing that pie than there is in fighting over shares (like startup equity?). This will of course require cooperation from portals and developers, and plenty of resources for the payment providers, to make the whole deal enticing to players in the first place.

But I think we're already headed that way. The momentum is there. But I don't see enough momentum toward ensuring a good deal for developers. I see developers just jumping onto this new trend without in any way trying to steer it based on their own judgment.

Maybe it's just too early. Maybe once these systems are out and in use developers will start to respond, and critique. But I don't want to wait until it's too late. I want to at least start the discussion now, before the portals and providers set the tone of the conversation on their own terms.

We need developers talking about this. Not just providers telling everyone how great they are and portals complaining about their revenue share. We need developers complaining too. Because it is really the developers who will have the most influence in whether microtransactions succeed or fail in the Flash games space. Good games will carry a platform, just like in the console space. That is my opinion, at least.

And we also need players talking. I'm sure that they will complain mightily once this really gets going, but why not get them in the discussion now? The players will make this whole new movement possible.

The main objection I've heard is that players don't know what they want, if it's new, like this. They only know what they've already experienced. I suppose the same could be said of developers. Or even portals. In this sort of situation the best response is usually to prototype and test, build something to demonstrate and learn, to bootstrap some concrete understanding based on real products and real responses. How do we do that here?

Is it simply a matter of taking an experimental attitude to this whole deal for the first few months? Should payment providers pay some high-profile developers to experiment with their system and try to come up with something that works? How do we get the players involved in a way that will be constructive?

Any ideas? I'm very curious what you think. All of you. Let me know.

2 comments:

MegaManSE said...

Another important aspect that needs to be considered (and I believe this is partially why so many companies are just now getting into the game) is that why would a player pay for stuff in one game when they can go play another game for free; that game selling stuff has to be considerably better than your run of the mill flash game to warrant people actually buying stuff for it unless the industry as a whole changes all at the same time and everyone starts charging for virtual goods.
In regards to revenue splits, there are plenty of ways to offset the costs of the infrastructure; how do you think all of the ad based flash sites with free highscore apis were able to keep themselves running?
Aside from that, security is a major issue with accepting payments in Flash (ironic considering Adobe tries so hard to lock down security with Flash), this is why almost all of the platforms bring you off to another webpage to do the payment.

axcho said...

I totally agree. That's what I was referring to when I said "it is really the developers who will have the most influence in whether microtransactions succeed or fail" - because making this happen will require a big change in the way Flash games are made and designed. That change is going to have to come from the developers, not the portals or the providers. Though of course it will help a lot to have everyone change at once, with support from the portals.

It's a good point about using ads to offset costs of more expensive payment providers. I would advocate doing that as much as possible.

I don't think it will matter much whether the payment happens in the Flash game or in a separate web page. It seems like security is enough of an issue that a separate web page is the only way to go.