Feature: Will Kwedit's Play Now, Pay Later Model Work?

Author: by Staff

Developers of free-to-play games have a problem: a lot of of gamers want to play them for free. That is, while some gamers are active parts of a game's community, the majority are not spending any money on virtual items, the main revenue stream of many of these games. But with the new pricing model provided by Kwedit, gamers will be able to essentially borrow money to buy virtual items, and pay later. "One of the reasons why the typical conversion rate is 2 percent or lower isn't because the gamers don't have the resources or aren't willing to pay," says Danny Shader, Kwedit's CEO in a new Gamasutra feature. "There is a group of people who just lack the mechanism to do so." Shader thinks that Kwedit provides that mechanism. While there were reservations of essentially providing credit to young gamers, Shader explains that the Kwedit system is "a completely virtual simulation of credit in a completely safe environment." Instead of a collector knocking on a 12-year-old's door demanding that he pay back his Kwedit, delinquent customers just receive a dock in their Kwedit score. Lower Kwedit scores limit the player's ability to use the system in the future. On the other hand, the amount they can "promise" in the future grows, as previous promises are paid up. One company trying out Kwedit is Three Rings Design, whose games include Bang! Howdy. "I'll tell you very honestly that our average conversion rate for someone turning into a paying customer is about 5 percent," says CEO Daniel James. "So we've got a large population of players who are enthusiastically enjoying our game who have not transacted with us which is, of course, part of the free-to-play business model." James says that there was some hesitation about using Kwedit until he determined that it was safe for users. "There's no enforcement. No one is going to show up at your house and say, 'Hey, give us the money, kid!' But since they weren't going to spend money with you anyway, the risk is minimal. On the other hand, if they do pay, the upside could be very large." If James is able to move his conversion rate from 5 percent to, say, 7.5 percent, he says, that would make a huge material difference to his business. "It is worth taking a risk in order to see if we can do that," he adds. What enables him to shrug off non-payments, of course, is that the cost of creating the virtual goods that he sells is essentially zero. "We are like the Fed," he explains. "When they need more money, they print it. We do the same."