Features

1-ups for Sale: Korea's Item-based Game Model

By Charles Forman
March 9, 2005

Seoul, Korea, 6:30 PM. Just after getting out of school, two 14 year-old girls walk into a cafe filled with computer workstations. On the screen are tons of icons for different Korean online games. Looking over the shoulders of other people in the room, everyone is playing online games. At first glance, the quality of each of the games is amazing and the people seem to be having a lot of fun.

However, the most interesting thing here is not the games themselves; it is the revenue model that the games are built around.

Although Korea is known for the popularity of MMORPGs, the majority of the online games played by casual gamers in Korea are much simpler and more light hearted. They are essentially party games. Imagine some of the best multiplayer console games like: Bomberman, MarioKart, or Tetris. Now imagine them completely copied so that they can be played over the internet. These are incredibly fun. An average round of any game only lasts about 5 minutes. So the games don't require a large time investment. The games are simple and easy to start playing, so they attract everyone from young girls to middle aged men.

What's so interesting about this? These Korean game companies just copy existing game models and apply them in a slightly different way. Some might say these companies just "rip-off" other people's creativity. This is very true. Korea, creativity, and originality are words rarely in the same sentence. When you look at Korean mobile phones, automobile designs, pop music, advertising, and especially videogames, in many cases, they are almost direct "rip-offs" of Japanese, American, or European originals.

Business-wise (and in many other respects), Korea is a very conservative country. When a product of creativity has been done and proven elsewhere, it is much less risky to copy that product and apply it to the Korean market. Korean companies rarely take creative risks because the probability of success has not been determined by someone willing to lose. This thinking is almost machine-like and surgical.

This isn't such a bad thing. This means that Korea will always experience slow and steady growth in a particular industry as long as their decisions to copy are effective for their market. It also means the implementation of these ideas can be completed much faster than their originators. The problem is that there isn't much room for radical new ideas.

However, producing and technically progressing at such a rapid speed has put Korea in a position where it is better than any other country in the world in specific areas. The most notable is internet use, ubiquity, speed, and exploitation. As a result of being ahead of the world, there has been somewhat of a natural progression of online game business models here that are very interesting and now have the attention of all the world's game companies.

How do these Korean party games make money? The games are completely free to create an account and start playing. Originally, these game sites had a subscription base revenue model. However, subscription's only work for the most popular, high profile, massive online games like Lineage or Everquest. There is no room for second place in subscription based models. So how can you keep a game free, yet still make enough money to keep the business alive? The answer would begin with avatars.

An avatar is a visual online representation of you. When you play a game, other players will see your avatar. As bad things happen to you in the game, your avatar displays human-like emotions that make the games much more identifiable. It is up to you how you customize your avatar so that it looks how you want. However, with a limited number of ways you can change your appearance, many people could easily look like everyone else. People wanted to change their character avatar in such a way that not many other people could. Furthermore, people were willing to pay for it.

Many companies began selling "items" that could be purchased for your avatar. This was extremely interesting because these "items" were just colored pixels. What was the value of colored pixels? Apparently, it was not so much the value of colored pixels, but the value of unique expression. At its peak, people would spend as much as 5 dollars simply for a particular outfit for their character. Backgrounds, outfits, body builds, hairstyles, accessories, etc. all came at a price dictated by the online sites. People were crazy about it. And the online sites were getting rich overnight.

The problem was that how a person's avatar looked had no affect on how they played the game. Therefore, buying items didn't have any affect in the gameplay at all.

This began to change with companies like Nexon. Nexon is one of the most popular game companies of this type in Korea. They currently publish a game called Crazy Arcade BnB. It is essentially an online Bomberman rip-off. Normally in a Bomberman game, players are defeated by coming in contact with the explosion of a bomb. The last person alive wins the round. However in BnB, instead of bombs, water balloons are used. When you touch the water, you are surrounded by a bubble and essentially dead for that round. However, you can purchase a "game item" to help you get around this situation. For around 2 dollars, you can purchase a pack of 5 pins. Each pin can be used to pop the bubble. This essentially gives you an extra life. Actually, it gives you about 5 extra lives over any one in the game who does not have the pins.

With the pins, even if you were not a skilled player, you could consistently win against a very skilled player without the pins. This item gave considerable competitive advantage to unskilled players. The problem became that most people bought the pins. So, if you played the game without the pins, there was really only a very small chance you would win.

Over time, the value and popularity of avatar items began to sink. People no longer cared much about what they looked like in the game, they cared about winning. The in-game items were becoming increasingly popular as it allowed you to buy a competitive edge for a small cost.

When I play an online game, the fun in the game is playing against people on an equal playing field. But what if everyone is better than I am? Would I pay just a little bit of money so that I could win a bit more? How much would I pay? If I'm not willing to pay for the items, is it fair that others can use them against me? It seems a bit like paying to be able to cheat.

Some might argue that the precedent has been set in the US with the trade and sales of online items in games like Everquest. However, I think that the argument fails to satisfy the opinion that: people who are that consumed in Everquest represent average consumers. Furthermore, the business model is different. In Everquest, the trade and sales of items are done person to person. The supply and demand dictate the acceptable value and cost of items. It is simple market economics. However, in Nexon's case, the value of items are dictated by Nexon itself. Nexon acts very much as a monopoly. Without close attention placed to the satisfaction of the comsumer in terms of value of items versus the cost, a business like Nexon could fail miserably in the US.

Nevertheless, in Korea, buying items for use in gameplay is completely accepted and is the main source of revenue for many online game companies like Nexon. This has grabbed the attention of many game publishers looking to export this business model to Japan, China, and the west. There is speculation that currently 3 US companies are trying to buy Nexon, with many others trying to license and partner. The question is: would this work outside of Korea? It is interesting because there are social and cultural requirements for it to work successfully. Furthermore, there are technical requirements.

Let's go back to the two 14 year old girls in the internet cafe. How do they pay for the items they use for their avatars and in the game? They only carry a small amount of cash that their parents give them. Girls that age don't have credit cards or their own bank account. However most girls that age have something that is just about as good as money: a mobile phone.

These companies make it possible for charges to be billed directly to the user's mobile phone bill. Simply make a charge, type in your phone number, approve a message on your phone, and you have successfully bought something on the internet with your mobile phone. It's simpler than using a credit card - and more secure due to the challenge message. Furthermore, the phone allows smaller micro charges to take place whereas credit cards do not.

Clearly, without the use of the mobile phone for billing, collecting money for this type of business model would be a nightmare. Are markets like China and the US ready universally and commonly accept charges through their mobile phone?

The value people place on things differs from person to person. This is never more iconic than the difference between a parent and their child. Every once in a while I hear stories from friends who work in Korean telecoms. Angry parents come to the headquarters to contest the bills that their children rack up. I've heard stories from 500 dollars to 5,000 dollars in charges. They must pay it. There are very little laws that protect minors as consumers. Ultimately, their parents are responsible.

Growing up as an American minor, I enjoyed certain legal protections. Any contract I made as a minor could be completely reversed. As a result however, minors suffer many consumer limitations as a result of these legal restrictions. Very few businesses are willing to make a contract with a minor, if the contract can be reversed - especially if the items are virtual. Korea, in contrast, has few legal protections for minors. When I asked my Korean friend about this issue, he said, "You should control your child, not the state. If your kid becomes out of control, you beat the shit out of him."

The legal, social, technical and cultural climate in Korea has allowed a beautiful bill payment system that businesses and consumers in the US perhaps can only dream about. Currently, this method of payment as a universally and ubiquitously accepted method exists only in Korea. It is beginning to become used in Japan, China, and Europe. However, only time can tell what kind of success this method will have outside of Korea.

What's the difference between a game developer and a game publisher? A game publisher actually makes money off games.

I think the underlying frustration of most "independent" game developers and game players is that the industry is so dictated by the publisher (the money), not the creative developer. I see no reason why so-called "independent" games cannot be wildly successful given the right context, market and business model. I think that with the current business models applied to independent games only sets developers up to miss their full potential. Creatively, what other models, such as item-based sales, can be employed to give both developers and gamers the best possibilities?

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Charles Forman is a game designer and media artist currently living in Seoul, Korea. He maintains a website, Setpixel, that is dedicated to media arts.