Xbox Milks the Virtual Goods Cash Cow

When it comes to gaming and micro-transactions, thoughts usually turn to Zynga and it’s wildly popular and highly successful stable of social games including “Farmville” and “Mafia Wars.” Social gamers can spend hours online tending their fields, raising livestock, and most importantly, spending cold hard cash to do so. (In case you’re new to  social gaming, a micro-transaction is when a user buys in-game currency using real money.) Farmville alone raked in $145M in 2009. There are cases of people running into serious financial problems over the game, with of the more dedicated players running up a $1,375 bill.

But quiet as it’s kept, there’s another player in the micro-transaction game. Xbox and their popular online gaming service Xbox Live has been pulling in a pretty penny. Thanks to its approximately 10 million Xbox Live Gold level subscribers, Microsoft has earned an estimated $625 million in virtual goods. So what exactly are Xbox Live folks spending their hard earned cash on? Taking a page out of Zynga’s book, after exchanging real money for Microsoft points, Live subscribers typically buy snazzy new gear for their avatars. Not to be left out, rivals PlayStation and Nintendo are also competing for your virtual good dollars as well, with Nintendo also requesting dollars for Nintendo Points, while Playstation only accepts real world money (versus virtual money).

In the great console war waging for gamer loyalty, Xbox is winning on the micro-transaction front. Aside from buying your avatar a new hairstyle or outfit, Xbox also lets gamers purchase music and movies, not to mention video games via the live service. In fact, as indie games become more popular on Live, it’s like a right of passage to play certain games (seriously, if you haven’t played “Braid,” “Castle Crashers,” “Zombie Estate,” or “P.B. Winterbottom” where have you been?). With Xbox making content deals left and right, the easy money that comes from micro-transaction and the rabid fanbase of dedicated gamers eager for the next set of DLC maps or other form of exclusive content shows no sign of stopping. In fact, According to Forbes.com, virtual goods earnings have actually outpaced money earned from the monthly or annual fees Xbox Live users pony up.

As Xbox and PlayStation encroach on Nintendo’s motion control shtick, it will be interesting to see how both companies leverage their new motion control capabilities on the micro-transaction front.

About the Author
Sherri is a freelance writer that has a love of all things fun and geeky including gadgets, gaming, anime, and comics. When she isn't writing or out on the town living it up, she loves doing 10-12 hour marathon sessions on her Xbox 360 or one of her older consoles. It's not an addiction, it's a way of life!
See all posts by Sherri L. Smith.