What Was The First Microtransaction? (Also DLC, Expansion Pack, Pay2Win and Lootbox)
Do you guys remember gamespy.com? It was a gaming news site with reviews and previews and so on. Had a lot of gaming humor with web comics and comedy articles. This one in particular is where I want to begin today. In 2002, they posted a joke interview article titled speaking with an online RPG visionary where this fictional game designer explains his new idea for game monetization. He explains his online RPG would forego the traditional paid subscription model and instead simply allow players to directly buy better equipment and extra skill points with real money. Now, the joke 20 years ago was that this was a ridiculous, crazy idea. And of course, no one would ever play a game that did this. Oh, how far we’ve come. I’ve had a few questions about microtransactions. When did they start? Who did them first? How did they come about? To start, we need to define and separate a few different terms. Microtransactions, DLC, loot boxes, pay to win, battle passes. These concepts tend to get jumbled together, and some of them get used interchangeably. They all mean slightly different things, but it’s kind of hard to talk about one without talking about the others. So, let’s start with downloadable content or DLC. This is additional content created for an already released video game by the developers. It’s given to players either for free or for an additional fee. This content includes things like new levels, weapons, enemies, cosmetic items, and so on. But I want to wind the clock back a bit. Before we had the downloadable part of downloadable content, we had something similar. Older gamers may recall that in the time before fast, reliable internet, we had expansion packs. They worked a lot like the DLC of today, but they came on physical storage and you probably bought them in a store. They usually required that you already had the base game installed and would have new missions, weapons, enemies, etc. They could be limited to a few extras or they could be basically a small sequel to the base game. Now, expansion packs technically predate video games. Even in the 70s, it was fairly common for board games to get some sort of expansion with new rules and mechanics. Like, how many different expansions are there for Settlers of Katan at this point? Tabletop RPGs also had all manner of additional content, modules, splatbooks, things of new races, new classes, new items that players could bring into their existing games. But let’s keep the focus on video games. The first widely recognized expansion pack for a video game is Dungeon Quest: Upper Reaches of Appshy, released in 1981. This was an expansion of the game Temple of Appshy, which was released 2 years earlier in 1979. It came with new dungeons, environments, and enemies. This was a box product sold at retail and required the original game to play. Expansion packs became more popular into the 80s and ’90s. It was a way for gamers to get some more life out of a pricey game they’d already finished and for developers to make a little money off an old game that wasn’t really selling that many copies anymore. Most expansions didn’t make a huge impact, but there’s a few that had some real influence. For example, Brood Wars, released in 1999, was an expansion for the first Starcraft. It had new missions that continued the first game story, but the real impact was new units and subtle tweaks that rebalanced the gameplay between the three factions. Starcraft was extremely popular in Korea and was the first game to have a real esports scene. Some people say that without the balancing provided by Brew Wars, the game might not have had the necessary lasting appeal for tournament play, and esports as we know them could have taken much longer to develop. For the most part, expansion packs were confined to computer games where it was easy to install and run different software packages, but there were a few similar console games. Sonic and Knuckles was a game on the Sega Genesis, but it was also a sort of expansion pack for Sonic 2 and 3. The cartridge was designed so that other games could be fit into it. When you ran Sonic 2 or 3 within the Sonic and Knuckles cartridge, it allowed the player to play through the game using the new character Knuckles. The very first Grand Theft Auto had an expansion pack called London 1969. It was released on both PC and the PlayStation. PlayStation players had to run the regular GTA disc and then swap it out for the expansion, making it one of the rare computer style expansion packs to make it onto a console. As the internet became faster and more widespread, online downloadable content began to take the place of physical expansion packs. On computers, fan-made hacks and mods and other content was available online pretty much from the beginning, but official releases from the developers was a lot more rare. I remember in the early ’90s, a lot of shareware games would have a screen with like a phone number you could call to order the rest of the game or like a physical address that you could mail a check to, then they would ship the game out to you on a disc. In 1997, developers for the real-time strategy game Total Annihilation began offering new units and maps for free online. You’ll sometimes see this cited as one of the first examples of modern DLC, but I was surprised at just how much earlier some people had tried to implement alternate forms of distributing games. During the days of the Atari 2600, a company called Zante tried selling generic rewritable game cartridges. The idea was that when players got tired of a game, they could take it to a special kiosk and have a different game burned onto it. Not exactly DLC, but you could see the spark of the idea there. The video game market crashed before this idea really had a chance to get off the ground. Today, these game cartridges are quite rare, and they are a sought-after collector’s item. Nintendo in Japan had something similar. The Famicom Disc System was released in 1986. It also allowed players to visit kiosk and burn games onto reusable floppy style discs. Players could also mail in these discs to have games copied over and returned. Some games like Legend of Zelda and Metroid were actually released on the disc system first since the storage capacity on these discs was so much higher than the early cartridges that were available at the time. In 1995, Nintendo released the Satella View, an add-on for the Super Famicom. It worked off technology similar to satellite radio. Content was broadcast at specific times and users could connect to download new games or new content for existing games. Sega had a similar system called the Sega Channel, which allowed users to download Sega Genesis games online. It looks like the Sega Dreamcast in 1998 was the first console to support online connectivity, including DLC, without any expensive extra hardware. The PlayStation 2 and the Xbox help standardize this. This would probably also be a good time to talk about Steam. When Steam was released in 2003, it was mostly just to distribute game updates. Younger gamers might not remember what a pain it was to update games at the time. You’d hop online to play some Team Fortress Classic or Counterstrike and you’d get a message that your game was out of date. So you’d go on the internet to download the new patch and sometimes it was kind of confusing what file you wanted and pretty often the site was swamped with everyone else who was also trying to get the same files. So you have to wait in these long cues until a slot opened up and then the download would take forever and if it got interrupted you had to restart the whole process all over again. A system that automatically downloaded and installed the correct file for you was a pretty cool idea. In 2004, Valve released Halfife 2 and allowed people to just buy it right through Steam. But they also required a Steam account to play it, even if you bought a physical disc. This was an extremely unpopular decision at the time. But complaints lessened as Steam became more useful, brought on more developers, and eventually became the standard place to buy PC games online. So, at this point, all the pieces are in place. By the early 2000s, the hardware and software for downloading games and game add-ons was pretty much everywhere. So, let’s talk about a specific type of downloadable content, the microtransaction. Expansion packs and early DLC weren’t exactly expensive, but they weren’t really that cheap either. A big expansion pack with all sorts of new contents could sometimes get pretty close to being the price of just a regular small game. But what if there was a cheaper option to buy smaller items individually? It looks like the term microtransaction starts popping up in the early 2000s referring to cheaper DLC items offered on Xbox, but the concept has been around for a while. When microtransactions for content and cosmetics began really sort of depends on your definition. There’s been cheaper content offered here and there for a while, but there’s a specific example I want to talk about. It it’s definitely not the first one ever, but for many gamers, the era of microtransactions begins in 2006. [Music] This was the year that the fourth Elder Scrolls game, Oblivion, allowed players to purchase horse armor. For $2.50, players could equip their horse with shiny armor. Now, today that probably doesn’t seem very special, but I cannot stress enough just how stupid everyone seemed to think this was at the time. It was mocked on message boards. People wrote articles about what a bad idea it was. It just it was this nearly useless item mechanically. It was a cosmetic upgrade in a single player game where nobody else could see the cool thing that you just bought. At a time when most DLC was new levels or game modes, horse armor just seemed so dumb. $2.50 is not a lot of money, but really it just felt like who would want to spend any money on this. Well, apparently quite a few people because it actually sold quite well. But almost 20 years later and people still point to this as a flash point that started the system that we have today. and we are calling it iPhone. In 2007, one year after Horse Armor, the first iPhone was released. Game developers working in the rapidly growing mobile game market quickly discovered a problem. While there was a demand for fun, innovative games on smartphones, it seemed that very few gamers were actually willing to pay for them. Even charging a measly 99 would keep a huge part of the market from trying your game. So most developers switched to offering the games for free and making money either on ads or in app purchases. In 2009, popular Valve game Team Fortress 2 began selling different hats. The game became free to play a few years later, remaining profitable purely on incoming hat money. In the early 2010s, we started seeing complaints about Day One DLC. Players were paying for a new game, turning it on for the first time, and immediately being given the option to purchase additional content for more money. In some cases, the downloadable content didn’t even need to be downloaded. It was already on the game disc, but required a payment to unlock it. This led to many players feeling like parts of the finished game had been cut out just so that they could be sold separately for extra money. In 2011, LA Noir became the first major game to release a season pass. Players could pre- purchase all the upcoming DLC and receive a discount for buying in bulk. Other developers quickly got on board and offering a season pass became a common practice. But companies started running into issues when they canled planned DLC or otherwise had trouble delivering on promises they made at the time of the game’s release. Players eventually became wary of paying for content that far in advance. In 2013, Dota 2 offered the compendium, the first example of a paid battle pass. Similar to a season pass, battle passes offered multiple tiers of DLC, usually a wide variety of smaller cosmetics, but the rewards are locked behind various challenges the player must complete in order to get them. Over time, battle passes mostly took the place of season passes, and they’re still popular in games like Fortnite and Call of Duty. In 2017, players of Star Wars Battlefront 2 complained about paying $80 for the game only to have all the coolest characters locked away. Players technically could very slowly unlock them over time, but were encouraged to pay more money and get them immediately. When a player posted his complaints to Reddit, a reply from one of the developers said, “The intent is to provide players with a sense of pride and accomplishment for unlocking different heroes.” This reply was so unpopular that it became the most downvoted comment in Reddit history. Like, it’s even in the Guinness Book of World Records. Not long after, Fortnite was released. Completely free to play, but with the option to buy cosmetic add-ons, such as different skins and dances characters could perform. It went on to become one of the most successful games ever made. At this point, some sort of cosmetic DLC is pretty much a given for almost any online game. So, why was the Star Wars game so hated while Fortnite was so successful? The first reason is that people obviously are more forgiving when a free game tries to get a little more money than when a full price game does it, but the other reason is the nature of the purchases. Cosmetics and dances in Fortnite are fun, but they don’t really do anything differently in game. Indiana Jones plays exactly the same as Spider-Man or Lady Gaga. They’re purely cosmetic. In Star Wars Battlefront, different characters have different abilities, and it sure seemed like the best characters were also the most expensive. Pay to win describes purchases that give a real in-game boost to the player. It could be extra in-game money, something that helps you level up faster, or more powerful weapon or character. For many gamers, this is just unacceptable, especially in what’s otherwise a game of skill. It’s pretty annoying to feel like you should have won a match but then lost only because the other player had paid out more money. But despite how unpopular it is as a general concept, it is also very successful. So, where did this idea start? We’re going to need to jump back a few decades and look at a few different arcade games. Now, technically speaking, almost any arcade game has pay to- win microtransactions. You put a quarter in, you get more lives. And if you keep dropping more quarters into an arcade machine, you will eventually beat the game. But let’s examine a few specific arcade games. When looking into this, I found a lot of sources pointing to the 1990 arcade game, Double Dragon 3: The Rosetta Stone. This was a standard beat him up like others in the series, except you occasionally come across in-game shops. These shops allow players to buy health, attack upgrades, weapons, and so on by inserting actual real life quarters into the machine. But there’s actually at least one earlier example. Lost Tomb in 1982 had an Indiana Jones style explorer searching for treasures in an ancient pyramid. The player had a limited number of whips that could fend off enemies and destroy walls. Occasionally between levels, the player would get a message advertising a word from our sponsor and they would get the opportunity to buy more whips with real money. I believe this is the first real pay to- win microtransaction. This concept mostly stayed pretty quiet for the next few decades. It was until the rise of the internet and online play that we really saw it come back in force in the late 1990s and early 2000s. Online games in Asia, such as Quiz Quiz in 1999 and Maple Story in 2003, contained microtransactions, allowing players to buy virtual items and currency for real money. These purchases were often cosmetic, but sometimes provided gameplay advantages. The success of these games led to the rise of the payto-in model in online gaming. When mobile game developers realized they were going to need to make their games free to play, this was something of a road map to follow. Games like Farmville in 2009, Candy Crush Saga in 2012 popularized this premium model. They allowed users to play the regular game, but also offered paid items to make the game easier or just to speed up progress. Games like Clash of Clans pit players against each other, making it even more necessary to spend money to succeed in the game. We could probably do a whole separate video just on the psychology behind getting people to spend more money in free video games. The fast version is that these games use various psychological tricks to encourage spending. And it turns out that a small number of people are especially susceptible to this. These people are known as whales, a term borrowed from the casino industry. Whales might make up as little as 1% of the player base of the game, but can provide up to 50% of the incoming money. For now, the practice of pay to win items has mostly stayed confined to phone games and free online games, but it still rears its head from time to time. The last version of this that I want to talk about is loot boxes. These are an in-game item that has one of several randomly selected prizes inside. They can usually be found as an in-game reward, but then of course can also be bought directly with real money. They often appear in place of a system for buying items directly, forcing players who want a specific prize to potentially get many loot boxes, each with a very small chance of finding it inside. Again, this definitely has some outofame equivalents. For example, games like Magic the Gathering, where players assemble a deck of cards, usually sell cards in random packs, but there’s often a secondary market to buy individual cards directly. In video games, it looks like again this started in 2004 with Maple Story. It offered Gachapon tickets, which could be redeemed for random items. Gachapon is the Japanese word for those vending machines that spit out little random capsules of toys. Games that make heavy use of this mechanic are still called gacha games to this day. ZT Online, a Chinese MMO RPG released in 2006, is usually credited as the game with the first real loot box. It had virtual treasure boxes which could show the possible items that might be inside. Very highlevel items were often shown, even if the chance of winning them was basically zero. The system was massively profitable and saw widespread adoption by other free online games developed in Asia. For many Western gamers, the first introduction to this concept was Team Fortress 2. As we said before, came out in 2007, but by 2010, it had a healthy collection of hats and alternate weapons for players to collect. Players were randomly awarded crates during play containing a mystery item, but the crates required keys to open. And it turned out you always just seemed to have more crates than keys. But of course, more keys could be purchased for real money. Over the next few years, loot boxes became pretty common in online games. Both mobile games and big budget titles start using this general practice as a way to give out reward items. But it seems like the random nature of loot boxes may have finally pushed things a little bit too far. Most countries have pretty extensive laws regulating the operation of casinos and other forms of gambling. And once players started spending real money for a chance to win a prize that kind of has a real value, the system starts looking a lot more like just a regular slot machine, which is an extra serious problem when a lot of children are playing these games. It’s kind of all over the place now, but different countries have begun banning, regulating, or investigating the practice of loot boxes. Belgium has straight up banned them unless the company has a gambling license. Many other countries have made laws requiring better transparency or warning on games that contain these sorts of mechanics. There’s been a few legal battles and lawsuits against game companies, but a lot of those are still up in the air. The overall effect is that many companies have stepped back from loot boxes to avoid these issues. Other forms of microtransactions haven’t really been affected that much, but there’s an increased scrutiny on them, and I don’t know, it might change. And I think that about covers it. Some of the more predatory types of monetization may end as laws and regulations catch up to the industry, but I don’t really see microtransactions in general going anywhere. There was a time when many gamers saw the rise of microtransactions as foretelling the death of the game industry. Some people might still feel that way, but I think most people have accepted for better or worse that it’s here to stay. Personally speaking, I’ve generally been on the side that most DLC is kind of a waste of money, and I just won’t play a game if it has pay to- win mechanics, but I’ve grabbed a battle pass or two in my time, and I couldn’t help paying a little extra cash to get a Donatello skin when they added the Ninja Turtles to Fortnite. But what do you guys think? Is DLC a fun way to get a little more content for a game, or just another way to squeeze a little more money out of your wallet? Are there any other topics you’d like to see me cover? Let me know in the comments and thanks for watching.
Love them or hate them, microtranstions and DLC have become an inescapable part of the gaming industry. But who did them first? And how did we get from there, to where we are today?
Chapters:
0:00 Intro
1:13 DLC
8:24 Microtransactions
11:43 Season Pass and Battle Pass
13:41 Pay 2 Win
18:03 Loot Boxes
20:14 Backlash