(These subtitles should have a lot of mistakes in them)
In the game industry, microtransactions and
progression systems have become more and more important even for AAA titles. Not only for the developers, but also for
the players, because those systems, if done right, work extremely well. In discussions we usually focus on the real
money aspect of those systems, but today in this mini episode I want to have a closer
look at the play time related in-game currencies. I came up with this topic, because Riot Games,
the League of Legends Developer, recently changed its system for the new preseason. [Ofc Heroes of the Storm 2.0 also revamped
this system, but for this episode I will focus on League.] I also noticed a lot of discussion about this
topic and it seems a bit controversial, esp. in case of League of Legends. But I try to approach it quite objective and
from a different angle. I want to talk about what the ideas behind
those systems are using the example of League of Legends, not if it’s good or bad. Still this includes my opinion and thoughts,
feel free to disagree. Also note, that I like League’s business
model and I think it’s fair. The content of this video is also for many
people quite obvious. But let’s start with some basic definitions. What is currency or what is money? This is a really complex question, that I
can’t fully cover here, so we have to remain at a surface level of a definition for this
video, but that is not a problem, because most games have a closed economy or an environment
only the developer has access to, which excludes many special cases and interactions anyway. The first definition is quite general: money
is an item or a concept, that abstracts “value” and can be used for exchanging goods and services. So instead of sending 1600 eggs and 900 apples
to you business partner, you can send him money. These days even electronically or virtually,
so exchanges are very fast and easy. Currency is a sub term and describes money
in a specific area of an economy, e.g. a nation and has a conversion rate to other currencies,
that are economically connected to it. In this context I should also mention “value”. When at least one person sees value in pretty
much anything and is willing to exchange or trade for it, it has value. Everything physical has probably some kind
of value. But also virtual things can have value. Demand and supply is a very important concept
here. And that’s the boring definition part. Let’s straight jump into in-game currencies
at the example of League of Legends. We first look at leagues old system excluding
loot boxes. Loot boxes are just there to randomize progress
and increase the probability of a player to play the game, until he reaches satisfaction
– a state you want a player to reach as late as possible from an economical perspective. Most free2play games including League have
several different currencies. A free in-game currency, in League called
Influence Points, short IP. They are now called Blue Essence in the new
system. This currency allows you to unlock new champions
and other important and not so important things for the game. You can earn it by playing the game – so it’s
time related. I would argue it’s an abstraction of your
progress. League of legends also had a limited – now
it’s somewhat unlimited – 2nd free currency too: Experience Points and levels for your
account. This also represents your progression and
it is also time related. In the old system it unlocked things, that
the other currency did not unlock. Then we have Riot Points, short RP. This is the real money currency. You convert real money into these points. But in League and many other games you can
only convert specific amounts and the numbers are chosen in a way, that you will have points
left for a very long time. You can argue, that’s not fair, but it’s
a free to play game and this is one tactic of the developer to get a little bit extra
money out of you. And the last one is actual real money. Riot as a company does need real money to
pay their employees, the bills, invest and make a profit. Riot as a company only wants this currency. And here we are at a very important point. If Riot only wants real money, why are they
not simply put a price at everything or make it a box and let the people pay for it directly? Why bother with all those currencies? Control. They want a system they control and they make
the rules for, that would be not the case with real money. It also obscures value with an additional
layer of economic complexity. If I would ask you: do you know out of your
head, what the conversion rate of your favourite f2p games’ real money currency to real money
is, would you know the exact answer without looking it up? Or the exact price of a new champion in League? If I would ask you how much the last game
you have bought was or your MMO subscription, your answer would be most likely quite accurate. That is what I mean with “obscure”. You know it approximately, but not for sure,
which helps the developer to get away with some tricks and lowers the awareness of how
much you actually have spent over time. That is why parts of the free 2 play business
model is so attractive for many publishers and developers right now and not the classic
full price game – alone – because even full price games start to include this model, because
it works. In case of League it is just free 2 play. You don’t have to pay a single Dollar for
it, which generates some kind of attraction marketing wise too. Just download it, try it, and see if you like
it, you don’t lose money only some time. It’s like a demo, that you can upgrade by
playing it. I would argue it’s better than a demo. For this model to work well League of Legends
is in constant development, which costs money. In classical business models for games or
games distribution it becomes harder and harder to sell your game e.g. in stores at some point
– without dropping the price significantly. If the PR efforts or the hype decreases, the
interest of potential customers decreases too. Minor updates a new hero unit and some skins
do not offer enough for PR to hype up a game every month for years. That is why initial sales on release are often
the most important for full price games and alike. That is also why f2p is such a good model
for League. It’s a pay what and when ever you want model
and through the partially monetized new content, that gets released every month, the game generates
a constant revenue stream. With those updates and the games core design
the replay value is very high and a player base becomes invested,
which leads into the player base promoting the game constantly plus the developers’
own PR efforts, so it’s hard for it to lose relevancy over time and Riot is very good
at this, else League would not have been so successful over the last 8 years. So it’s a perfect fit for a model and a
development concept, aiming at never stopping development. But we still haven’t fully answered the
question: why is there a free in-game currency? Why is it needed? The answer is quite interesting. Time and again Control. The in-game currency is so to say crowd control
for the players’ progress. It offers a developer options or tools to
manipulate the players behaviour a little bit. Riot games can control to a certain degree,
how a player progresses, what the player does and how likely it is for him to spent real
money, depending on how invested he is into the game. Ofc they can’t overdo it, because that will
annoy people. It has to be carefully balanced. So what League of Legends does, is implementing
reasons for players to invest this free currency in things, that are not really causing the
highest development costs, like icons. The biggest example are runes before Preseason
2017. Esp. around Season 1 to Season 4 or maybe
5. When your account hits level 30, you unlocked
all 30 rune slots. Runes are account items, that if equipped
give your champion in game a little stat boost for each rune, so that they can complement
your play style and give you an advantage. Runes can only be purchased with IP – the
free currency. It’s not possible to buy them with real
money. For Preseason 2017 this system was totally
changed, but we come later to that. This little stat boost was not only a nice
addition, but a core game play mechanic. Some champion roles would be very limited
without runes, like jungling and you would also have a noticeable disadvantage against
players with runes, should you decide to not use them in competitive play. This was not an option. So at some point you had to make this huge
in-game currency investment, else you were playing at a constant disadvantage. Usually you started buying them, when your
account was level 20 or close to 30, because back in the day you could only equip the best
runes – the Tier 3 Runes – with account level 20, if I recall correctly. I think they changed it at some point. So you waited with runes until Level 20 and
then started to buy the Tier 3 runes not wasting much IP on lower Tier runes. It was like an unwritten law. This is important, because I mentioned player
investment. On account level 20 you have invested quite
some time into the game already and now you are close to buying runes, which definitely
will enhance your gameplay experience. This rune investment in league for the most
common standard builds was about 15000 to 20000 in-game currency and you probably needed
several builds or rune pages, which ofc also cost currency, if you wanted more than 2 rune
pages for convenience. So one or more rune builds for most roles
and champions could cost you up to 100000 to 150000 IP. I would say I have spent that much or even
more on my runes over the years and I’m probably no exception. Now if we think about how many champions you
could have unlocked with this, that are about 3 to 24 champions for 6300 IP each, which
are the most expensive ones. So your in-game progress for unlocking that
many champions, which are the main releases of content for League of Legends and were
released every 2 weeks back in the day, is just gone into a necessary game mechanic. But ofc you have probably invested 100h or
far more worth of playtime already. And here we are at another crucial point. Because of that the probability of a player
for spending real money increases at exactly this point. At least that was the case for me. I knew I would continue playing and the new
champion or a new skin looked nice, I had no IP left to spend so why not spending a
bit of money. It was justified and also well earned by Riot
Games. That’s how free 2 play games work. I didn’t need to spent money on it. I decided to do so, but it was also not a
coincidence, because the business model is designed that way, that the probability will
spike exactly here. With every hour played the inhibition threshold
for the player spending real money is also lowered and with a bit of “crowed control”
through the in-game currency, over time, it becomes quite likely, that players will spent
money, else Riot Games would be bankrupt. With this said, it slowly becomes clear, that
Influence Points, the name is quite fitting, are not actually free. They have a value. A value through time, which is connected to
your money spent, because when it comes to in-game progression, like unlocking new champions,
there is a short-cut. Just buy champions with real money. Remember the currency definition? Currency describes money in a specific area
of an economy, e.g. a nation and has a conversion rate to other currencies, that are economically
connected to it. Influence Points have a conversion rate, because
the game strictly defines: Newer Champions cost 6300 IP or 975 RP. That is the conversion rate. And both currencies are also money: money is an item or concept, that abstracts
“value” and can be used for exchanging goods and services. and When at least one person sees value in pretty
much anything and is willing to exchange or trade for it, it has value. I exchange my time related money – the Influence
Points – for a virtual good, that has a value to me. So this applies to League’s currencies,
even the free ones. And this is actually a little surprise. But if you think about it. Let’s imagine IP could be gifted to other
players (which is not possible and never will be), I claim, that people would start selling
IP on ebay or other platforms. Initially they would orient at Riot’s own
defined exchange rate: 6300 IP to the real money value of 975 RP. Ofc they would sell it a bit cheaper than
Riot. That would be bad news for the company. As mentioned Riot Points can only be bought
in specific amounts, so after spending RP, there is always a certain amount left, benefiting
Riot Games. With this, people would use only ebay IP for
buying champions and other things, because it would – except for sales – always be cheaper. Those IP have value. If it would be possible, even real money value
as long as the price is low enough. That is also why, it will be never possible
to gift IP, because Riot would give up the full power of their crowd control and sell
less RP. This also adds to the value of IP. While you earned those IP, you were part of
League’s carefully designed economic system. This system is solely about probabilities,
created to make Riot Games money and it works. So IP definitely have value for Riot Games
and with all this and your time investment into the game also a value for you, which
directly implies, that even though you have not spent any real money on the game, you
still have earned something of value and generated real money for a company, even if you haven’t
spend anything. With playing the game you were part of the
game’s economy. You have allowed matchmaking and the game
to function, allowed for a good or bad experience for others, presented content to other players,
maybe created desire for buyable content. And if you told your friends about it, you
have promoted the game. All things of actual value, you just did by
playing and investing your time. As said it’s about probabilities. At some point someone will buy something for
real money influenced by those Influence Points, be it their own or that of others. If you think IP are free and worthless anyway,
you are selling yourself and your time short. Your time is valuable. Now at the end, we finally come to the original
story. Riot has changed this system. In Preseason 2017 IP will be now called Blue
Essence, prices for Champions won’t change and runes will be removed. The new Rune system is totally free, even
new players have complete access to it, no IP grind required. We come to why the do this in a moment. Now what happens to all those IP spent on
runes? Players get a refund in form of the “new”
Blue Essence currency. And here is something interesting: Players who bought runes between December
2016 and September 2017 get a 1:1 conversion. It is important to note, that rune prices
were changed several times over the course of the last 3 years and got much cheaper lately. All runes bought before that date get depending
on the rune and the amount of IP spent a worse conversion rate. In my worst case I get 1 Blue Essence for
8 IP spent. So 1 eighth of what I spent originally. Usually it’s around a third or a quarter
I guess. And because the prices for e.g. champions
did not change this means a purposeful devaluation of the free currency spent in the past. I’m a bit surprised, that the outcry is
so small to be honest. They just collected the progress of a lot
of players, divided it by a number and still kept all the money they earned through it. But I guess IP were already very inflated,
so people did not know on what to spent them anyway, so it actually doesn’t matter. Still it’s a massive devaluation of old
currency, but why did Riot do this? My theory is, that they are scared of inflation. Or something similar to it. This is actually a very strange effect, I’m
not sure if it’s described correctly by the term inflation. Inflation is basically a devaluation of money. I have a better definition, but that would
go to far. So what would be devalued, if the prices are
set into stone by Riot games anyway and pretty much never change? The Crowd Control effect would inflate. The inflation would happen to the blue essence,
but the Riot Points would be mainly affected, because Champions are still 6300 Blue Essence
and 975 RP. The prices are still the same and exist in
a closed economic system, so the devaluation somehow moves to another layer. The purchase probability through spending
Blue Essence increases and the purchase probability for RP decreases for a while, because RP would
devalue in relation to real money outside of skins. That means Blue Essence is cheap and plenty,
but the value is artificially kept at the same level, so Blue Essence does not lose
buying power. RP are now too expansive and for purchases
possible with Blue Essence a waste, which actually makes RP less valuable in league’s
in-game economy. Some People would use their additional 30000
to 150000 Blue Essence to unlock stunning 5 to 24 Champions. That is a ton of content and people would
be very happy and probably satisfied with this, testing all the new champs or not, which
could still lead to increased skin sales, which is a nice side effect. As mentioned satisfaction is a state, that
is not always good for Riot Point sells, so Riot has to artificially decrease the amount
of IP or Blue Essence existing in the game’s economy. And older players, have probably the hugest
amount, so they start cutting there. They probably have unlocked everything they
need anyway. In addition Riot will also allow to purchase
other things for all that converted Blue Essence, like some rare skins, icons, emotes and so
on. Ofc to very high conversion rates, so these
high Blue Essence amounts get burned and they can decrease the inflation and increase the
probability again for all players to buy new champions with real money from time to time,
securing and maybe increasing their revenue stream for days to come. Also the assumption has to be made, that Riot
built a new system to control the crowed more efficient or as efficient as the old system,
because everything else would make Riot lose money and be with that a stupid business decision. So in my opinion they want to get rid of some
satisfaction, by bringing something new in form of a big update, they also try to invite
new players, removing the grind for runes, they carefully reduce the high
amounts of IP older players are sitting on and they focus more on their loot box system. Because loot boxes add an rng based shortcut,
that can lead to players spending their in-game currency for elements they probably find interesting,
but not necessarily want and still buy the elements they want, but don’t get for real
money, while the player still feels rewarded. But why is Riot going through all this trouble? A big update like this, causes a lot of attention. it also removes the level grind which took
up to probably 90 hours and more to fully access a basic game play mechanic, which seems
like an overwhelming hurdle for new players trying to get into the game. From this perspective, they can market this
update big, get exposure and invite new players to try their game, now without that grind. In addition the new system plus loot boxes
obscures all of this quite well and gives access to some free stuff, which can make
it easier for new players to become invested. That is also why PR is focused on mentioning,
that the new update will benefit new players. From my perspective a smart business move,
executed well. You can also transfer this to almost all other
similar F2P like business models. But never forget: there is always a company
behind it, that needs and wants to earn money and it wants this money from their player
base. Thank you for watching.