Game Makers to Try Pay-as-You-Go Model

Computer game designer Jeff Strain describes his latest creation as a fantastical online world of castles, monsters, swords and magic spells that players explore and experience bit by bit.

That’s also how Strain wants players to pay for “Guild Wars,” one of a new breed of pay-as-you-go video games that publishers hope will keep revenue rolling in long after a title’s initial sale.

After “Guild Wars” debuts later this year, Strain’s ArenaNet Inc. will offer new levels that players can pay to download.

“Once you purchase a chapter, you can play it online as long as you want,” said Strain, who declined to say how much chapters would cost. “Then every six months, we’ll offer a new chapter that’s a whole new experience.”

The $11-billion video game industry has long puzzled over how to squeeze more money out of players over a longer period. Much like how movie producers relied primarily on box-office receipts before videotapes and DVDs, video game publishers make virtually all their money from initial retail sales.

Online games such as Sony Corp.’s “EverQuest” and Microsoft Corp.’s “Asheron’s Call” charge players by the month, but the audience for such titles is limited to several hundred thousand die-hard fans.

At this week’s Electronic Entertainment Expo in Los Angeles, publishers big and small buzzed about how the proliferation of game consoles and PCs with high-speed Internet connections opened up new opportunities for selling extras such as additional levels and exotic digital weaponry.

A video game can cost $4 million to $8 million and take two to three years to develop. Titles sell for an average of $50.

Once a game is designed, add-ons are relatively cheap.

“A new level of the game might cost only $200,000,” said P.J. McNealy, who tracks the video game industry for American Technology Research in San Francisco. So if 1 million people buy a game when it’s released and a publisher can sell a “new level for $10 to only 10% of those who own the game, that’s an extra $1 million revenue.”

Kazuo Hirai, president of Sony’s U.S. video game division, said the company planned to sell digital add-ons to games played on its PlayStation consoles.

“We view a future where mini-transactions are the norm,” Hirai said.

Sony will start selling add-ons -- such as weapons for an adventure character or a souped-up car for a racing game -- next year, said Andrew House, executive vice president of Sony Computer Entertainment America.

Some of the add-ons will be items normally earned by long hours of play; novice players could pay to equip themselves with the same gear as more experienced competitors.

The inspiration for the Sony initiative, said House, came from participants in online subscription games who sell virtual goodies they’ve earned in the game on EBay Inc.’s auction site, sometimes for thousands of dollars.

“It showed that the customer was willing to pay for online, downloadable content,” House said.

Mini-transaction payments might not come directly from consumers. “It could be a promotion that uses a code in a bottle cap or comes with a Happy Meal,” said analyst Richard Doherty of Envisioneering Group, a technology consulting firm in New York. “There are all kinds of ways to extend the revenue rather than, ‘Just buy the disc and we never hear from you again.’ ”

Downloads are by far the cheapest way to deliver add-ons. Before its initiative kicks off, Sony is trying to entice its players to get online via their consoles by packaging a high-speed modem free with PlayStation 2.

“There is a strategic advantage to get those adaptors out there,” House said.

By the end of the year, Sony executives said, more than 100 of the company’s titles will have an online component.

For third-party PlayStation games, House said Sony might help publishers sell add-ons. “We could do some of the heavy lifting for them -- billing, the actual downloading -- and the revenue from it would be shared,” he said.

In private meetings at the games expo, Electronic Arts Inc. hinted that it, too, would offer downloadable add-ons for some of its most popular games. EA is the world’s largest independent game publisher.

Analyst Michael Pachter of Wedbush Morgan Securities said the strategy was mentioned by EA’s chief financial officer, Warren Jenson, when talking about the “NCAA Football” game. “He said that if you were playing as Notre Dame against USC, maybe for a buck you could wear the green jerseys.”

It was a reference to a famed 1977 game in which Notre Dame switched to green uniforms and beat favored USC.

Chip Lange, head of marketing for EA’s online games, said the company had been giving free development kits to online players so they could create their own levels.

EA also is considering using its in-house development staff to create levels it can sell. But the company has to be careful not to anger current players.

“We can invest to make a new entertainment experience for the players, but only if the online community around a game sees value in it,” Lange said. “We will not just gouge them for dollars.”

Many in the industry will be watching “Guild Wars,” which is the first title from Strain’s Seattle-based ArenaNet.

Previous episodic games caused little stir, but Strain said his experience working on the popular strategy game “StarCraft” convinced him that the strategy was worth trying.

“We would release ‘StarCraft’ and then later offer an expansion pack,” he said. “The overwhelming majority of those who bought the pack didn’t play the original anymore.”