Mark Denton, Director of Product Management at Valista, argues that in-game pricing is the way to go for mobile games

The world of gaming is changing. Competition for retail space, the ability to play online, and the fact that players are demanding frequent updates to games in order to maintain their attention, are changing the way games are marketed and sold. There are a number of options which are being examined by games vendors. These range from standard subscription models to freemium models, with customers paying within the game as they play. All these models rely on the ability, and desire, of the player to make small, low value payments rather than the traditional large value, one off payment of 39.99 or so.
The best way to understand this growing trend is to use an example. A game producer creates a new adventure game where players roam a virtual world, earning points which entitle them to alternative clothing, weapons, food, tools, pets, etc. Once they have a large number of these add-on items they can journey to the next level of the game where the process repeats.
Rather than being sold in a box on a shelf in a retail store, the game is made available online with a monthly subscription fee of 2.99 to pay for playing the game, and with the first month provided for free. While playing the game, the player can accumulate points which are used to pay for items within the game. But the game producer may choose to allow players to top-up their points to a certain level using a payment of 0.01 per point purchased. Alternatively, the game producer may introduce a new weapon that will be available one month early to players who are willing to pay an extra 1.00 for early access. Both these models allow players faster access to items within the game, in exchange for additional revenue for the game producer.

In-game experience
From a payments perspective, this example has a number of interesting
issues which need to be solved, such as finding a suitable payment
instrument of low enough cost to handle the transactions, or providing
a suitable in-game experience such that the user can easily pay.
There is an issue involving access to an appropriate payment in the
above example. Many gamers are young and do not have access to a credit
or debit card. This locks them out of the game if these are the only
payment methods available. For this model to be successful, a wide
range of payment options must be available for use. One thing most
players do have is a mobile phone which could be used for billing,
especially if the game is mobile device-based. However, this needs to
be done in such a manner as to not interrupt the game flow or incur a
high transaction cost – both of which are distinct possibilities.
The in-game experience is critical. If players have to leave the game
to pay for a new piece of equipment, then they may well leave and not
come back or may choose not to pay for the item but earn it. This means
that the payment must be kept within the game. For mobile games, this
means that the operator must support direct-to-bill charging as
SMS-based payment would break the game-flow. For PC- or console-based
games, there must be a quick method to authorise payment within the
game. This could be via a user name- and password-based method or a
pre-configured, stored payment instrument.
Subscriptions should be automatically collected and use an opt-out
method. Players who have to remember a monthly payment may consider not
paying if the payment is so explicit. Using an opt-out method will
ensure a steady flow of revenue but in exchange, poses a potentially
difficult customer care issue with people forgetting to cancel their
payments and incurring heavy unwanted charges, consequently tarnishing
their experience. It will be up to the game publisher to consider the
use of automated payment carefully based on their target audience.

Low-value payments
In the case of very low-value payments, there is a cost of collection
issue. A low-value payment is typically expensive to process against a
credit or debit card. For example, a debit card transaction may cost
0.50. Using this for a monthly payment of 2.99 is probably not going
to work that well from a cost perspective. One way around this is to
implement a stored value account within the game, where users can
top-up with a much larger amount, thus bringing the costs down and
ensuring the game producer is paid for a couple of months, and that any
additional fees are covered in one payment.
The use of a stored value account allows the game provider to use the
same wallet to hold both real currency and game points, both of which
can be used for purchasing. With the use of automatic top-up of the
stored value account, then the player need not worry about running out
of credit within the game, as the account will always be reloaded.
Along with a comprehensive payment system, a solution is needed to hold
licences which inform the game about what the user has the right to use
within the game. Licences can be earned or purchased. When a licence is
purchased, it is transferred to the users set of licences which are
available for use. Licences which are earned based on what the player
has achieved need to be determined at various points during the game
play, such as at the end of a level. This determination could use a
handful of data items, such as monsters killed, time to complete the
level, etc. but in extreme cases it can take well over 1,000 items of
data about the state of the player and the game. Once it has been
determined that the licence has been earned, then it is transferred to
the users set of licences. Licences can be perpetual. For example, the
player keeps unlocking the next level of the game; or they can be
consumed, in which case, a user might have 21 arrows which can be used
during the game. Licences can also expire. In this scenario, the
cannonball may rust to dust in 21 days.
All this makes for a much more exciting gaming experience, with the
opportunity for a longer playing experience and much more variety
within a single game. For the game publisher, it represents the
opportunity to generate additional revenue streams, while
simultaneously keeping users satisfied and more entertained.