Insert $0.25 to continue

On the latest Christmas episode of the 4 Guys 1 UP podcast (iTunes link), @JWHDavidson and @DavidEllis had an interesting discussion on video game downloadable content (DLC) during their 2010 predictions segment. This got me thinking of how the iPhone 3GS and it’s adoption by mainstream culture will help push microtranactions, like video game DLC, into almost every type of media we consume.

One of the subtle features of iPhone OS 3.0 software update was the ability for developers to include in-app transactions. Now when you’re playing a game, or using a new application, a “friendly” pop-up message could tell you that that next level/weapon upgrade/app feature can be yours for just a mere $1-2. Just click to charge your credit and continue.

This payment strategy is currently used on a few iPhone games but it’s no where near ubiquitous…yet. Give this time.

The iPhone app ecosystem has evolved into a demo culture. Without a FREE demo (maybe $0.99), the barrier of entry for many people is too great to even try your product. The “try before you buy” mentality is one of my favourite aspects of the iPhone app store. And if the app/game is good enough, like most people, I will pay to continue.

One of the smartest thing the iTunes store did was have 1-click credit card payments. It’s so easy to click yes that the toonies practically jump out of my virtual wallet.

Facebook games are eating people's souls... and their free time.

Currently, DLC/microtransactions are used by plenty of game developers allowing users to:

• Unlock new character clothes; this is lame
• Download new multiplayer maps/vehicles/weapons/missions
• Reveal epilogue story content; Prince of Persia and Tomb Raider both did this last year
• Rock Band and Guitar Hero $1.99/song downloads, and
• Facebook’s Farmville and Mafia Wars items (I’m not linking to these games because you already know what they are. I’m sure you have 3 sad cow requests sitting in your FB inbox right now)

That last bullet point is the big one, that’s why it in bold. There are literally hundreds of millions of people playing Flash games on Facebook everyday. That’s waaaay more than the amount of PS3s, Xbox 360s and Wiis sitting in living rooms today. And Zynga, the largest developer of social games on Facebook, is raking it in.

In fact, Farmville is bigger than Twitter. It’s more than twice the population of Canada.

I guess people really care about their fake farm pets. It’s becoming so popular that many gaming insiders are predicting that Facebook games could kill console gaming.

Now this all comes back to my prediction that we’ll be seeing a lot more microtransactions in the near future. As people get more use to the idea of paying for Farmville and Mafia Wars upgrades, they’ll slowly start understanding that concept for everything else

This means in the not too distant future we could be seeing:

• On-demand video rentals, now with upgrades: pay $5 for the movie, and an extra $2 for all of the extra DVD content (e.g. behind-the-scenes, director commentarty, blooper reels, etc.)
• TV a-la carte instead of monthly cable subscription: Apple is supposedly working on this, but chances are it won’t come to Canada for a long time, and it still won’t work well for me unless they simulcast live sports
• Supersized movies: Avatar really paved the way for the 3D movie upgrade. Pay $3 more for more awesomeness for your eyeballs? ABSOLUTELY!
• Bitesize gaming: eventually the entire game will be DLC level by level. Instead of paying $60 for a full game, download the game demo for free and only pay a prorated cost for each level you play. This will open the doors for people to actually try games outside their usual bubble because it will be cheaper to try. AND you can at least feel like you’re saving money when you stop playing crappy games.
• Subscription based gaming: Rock Band is the perfect example of the next-generation platform “game”.  Instead of buying a physical disc every year, you can simply download new tracks as they’ll released. I’m sure we’ll be seeing a lot more annual games moving to this model… I’m looking at your roster updates EA Sports and 2K Sports games. Oh yeah, and a little game called WoW is doing okay using this model too.
• Everything will work on your phone: as more stuff moves inside the browser, it’ll also move into your pocket.

Get your credit card ready.