Kim Kardashian has a new free game in the iTunes app store, and it’s expected to make her $85 million this year.
Let me repeat that. This free game is expected to make $85 million within an approximately 6-month period.
Less obvious: how much of that money will be spent by unsuspecting kids, simply because a credit card was attached to their iTunes account?
Freemium, Microtransactions, and Modern Gaming
With the rise of the Internet over the last 20 years, the concept of “Freemium” has exploded. The general concept is to offer something for free, with the idea of encouraging users to fall in love with a product and eventually pay for it.
Remember those ubiquitous “free trial” AOL CDs that came packaged with everything? That was freemium. More recently, you may have encountered “paywalls” on various sites, especially the news industry. Denied the revenue stream from printed subscriptions, many newspapers set an online limit of 10 articles a month, requiring a subscription to read more.
Gaming has taken this concept and transformed it into a revenue-generating art. On the console side of things, games that are already $60 will often offer multiple packages of downloadable content (DLC) for an additional fee. This concept may be as inexpensive as an extra weapon for the game for $2, or it might be an addition to the story for $10. For some of the most popular titles, the cost of these add-ons could easily amount to the cost of an entirely new game.
On consoles, at least, it is clear when you are paying for an addition to the game, and as a rule you are only rewarded for paying extra money, never punished. These additional transactions are generally available only outside the game; you must sign into the console’s store to make those purchases.
More insidious are “microtransactions,” small purchases usually costing $1-2, which are often built directly into the game itself. While the player can usually continue on with the game without making these purchases, they can offer a significant boost to the player’s success.
Take “Kim Kardashian: Hollywood,” which allows the player to go from a complete unknown to an A-list celebrity in Virtual Hollywood. How? By partying with or dating virtual celebrities (of course)…and also by updating your look, wardrobe, apartment, or whatever using virtual money or virtual clout (“K-Stars”). Both accrue naturally over the course of the game, or you can hasten this by buying K-Stars with real-life currency, paying $5 for 50 (10 per dollar spent) or $99 for 1250 (about 12.5 per dollar spent). One blogger for the highly feminist blog Jezebel (intentionally unlinked) reportedly spent untold hours and $494.50 in real money to become an A-list celebrity.
The point of this is not to bash on Kim Kardashian’s game (although many parents will want to question whether their children should explore the lifestyle illustrated in such a game). Rather, this one “fun little game” (as Kardashian herself described it) is indicative of the larger trend in gaming: you don’t have to pay to play, but the developers are going to make it very easy and enticing to do so.
The Virtual Skinner Box
So why does this work? Why do people choose to pay when they can eventually get similar functionality for free? The answer is that these games condition you to want more functionality sooner.
B.F. Skinner, professor of psychology at Harvard, demonstrated this idea using his now famous “Skinner box.” Game researcher Nick Yee explains Skinner’s research:
Skinner boxes are small glass or plexi-glass boxes equipped with a combination of levers, food pellets, and drinking tubes. Laboratory rats are placed into Skinner boxes and conditioned to perform elaborate tasks. At first, the rat is rewarded with a food pellet for facing the lever. Then it is rewarded if it gets closer to the lever. Eventually, the rat is shaped to press the lever. Once the rat learns that pressing the lever is rewarded, a food pellet does not need to be dropped every time and the rat will still continue pressing the lever.
Like Skinner boxes, most games have a very quick rewards cycle at the beginning of a game (level up and gain additional powers multiple times within the first few hours). Eventually this basic rewards-structure will slow down, but by that point most well-designed games will have additional goals in place to keep you pressing the lever—goals like leveling up in a certain skill (by performing a certain action a certain number of times), or like defeating a certain monster who only shows up at a certain time to gain a certain piece of equipment.
Microtransactions feed on this—and, literally, on your wallet—by offering a way to hasten the gratification cycle.
- It may take months (or years) of playing to accrue enough K-Stars to become an A-list celebrity in “Kim Kardashian: Hollywood,” or you can drop almost $500 to reach that status in a number of days. (Unfortunately, your character will live in an empty virtual apartment, putting your celebrity status in a tenuous position, thereby encouraging you to pay more.)
- You can build defenses for a virtual city in “Clash of Clans” over several days, or you can spend real money to speed up the construction process.
- “Candy Crush Saga” limits the number of lives you have to solve puzzles on a given day…or you can pay for extra lives to keep playing.
- Even Angry Birds allows you to pay a dollar to skip a level.
Kids and Cash
Now, there’s nothing wrong with this. There is absolutely nothing illegal about a company wanting to make money, and a discerning adult can look at a microtransaction in an app and make an informed decision about whether or not it’s worth the real-life cash. In fact, if it’s a game you truly enjoy, I’d argue that making a $5 payment or two is good; it supports the game’s developers and enables them to continue to improve it.
The problem comes when kids are offered the opportunity to pay to play. Some kids may overemphasize the value of a game, especially if their friends are playing it, and insist it’s totally worth it to pay for a one-time benefit for a game they’ll stop playing in two weeks. Others may not even realize they’re spending real money, or think they’re spending from an allowance with an automatic limit when they’re actually charging their in-game purchases to high-limit credit card accounts.
This was the case with author Ayelet Waldman’s son (warning: some language at that link), who thought he was making purchases from a $20-per-month iTunes allowance, but actually charged $120 to his parents’ linked credit card over a two-day period. Apple supplied a full refund and the child learned a valuable lesson…but he wasn’t the only child to overpay without parental permissions. In January, in fact, Apple reached a settlement with the Federal Trade Commission to provide refunds to parents whose children unwittingly paid for in-app purchases that they assumed were simply another free part of the game. These refunds are expected to reach $32.5 million, if not exceed that amount.
What Parents Can Do
Apple has since made strides to minimize these unauthorized in-app purchases, but theirs is not a perfect system, as Waldman’s son recently proved. Parents need to monitor the apps their kids use, not just for the safety of their own bank accounts, but as teachable moments for their kids about wise app use and wise spending.
1. Hold kids accountable for app use.
The first thing parents need to do is to simply be aware of what apps their kids use, and hold their kids accountable for them. For Covenant Eyes users whose kids use Android devices (including Kindle Fire), this is easy.
On iPhone, you can set app restrictions, and block your kids from downloading apps without your permission, and from making in-app purchases. (Additionally, you may want to set purchases to require a password every time they go to make a purchase, instead of every 15 minutes.)
Regardless of the device, make sure you do a periodic app review, and make sure you know what apps they have installed.
Of course, your kids may be resistant to the idea of parental monitoring, especially if you haven’t been holding them accountable for Internet and app use in the past.
2. Set allowances and remove credit cards.
We’ve mentioned setting restrictions above. On the iPhone, simply restricting in-app purchases may solve all your financial concerns. But what if you want your kids to make these financial decisions themselves? How can you let them do that without giving them free reign over your credit card?
For iPhone, iPod touch, and iPad, you can actually set a monthly allowance for your kids (or yourself) in iTunes. It’s important to note that this is not a foolproof system; as in the case of Waldman’s son, he had an allowance, but the app deferred to the credit card attached to the account. You will want to give your kids unique iTunes accounts with no credit cards attached, or check the iTunes account they currently use and remove any credit cards from there.
Android does not appear to have any allowance settings, so to limit spending, we recommend making sure no credit card is attached to your child’s Google Play account, then giving them gift cards for in-app spending. (You may also purchase gift cards for iTunes, if you don’t want to give your kids an allowance.)
3. Play the games.
For a more hands-on approach, download any games your kids want to play and play them yourself before you let them play it. You don’t have to play them for long. A few levels will suffice. Look for content concerns (like inappropriate outfits and/or morals in “Kim Kardashian: Hollywood”), but also look for microtransactions. Then, assuming you are okay with your child using the app (which, in many cases, you will be), make sure you talk about some of the things you noticed. The discussion may be as simple as saying something like, “You’ll be able to buy extra K-Stars in the game. Remember, these K-Stars cost real-world money. You have an allowance in iTunes, but you only have $20 for the whole month, so if you choose to spend it all on K-Stars, you won’t be able to buy any other apps or music this month.”
Of course, sometimes you may decide you don’t want your child to play the game. Make sure you don’t turn those conversations into a lecture, but keep them as a two-way street. For example, if you forbid your child from playing “Kim Kardashian: Hollywood,” your child may feel left out if all of his or her friends are playing it, and they may feel like you’re punishing them or aren’t being fair. Explain why you don’t want them to play the game (or download the social app), listen to their concerns, then try to come up with a solution together.
4. Teach them about money.
Ideally, you have been teaching your kids about making wise financial choices for a long time. Microtransactions allow you to help your kids put some principles into practice. More specifically, remind them that if they choose to spend their allowance on in-app purchases, that’s their choice. However, once that money is spent, that money is gone. Instead of frittering away money a dollar or two at a time, they can put it aside for that $100 LEGO set they want.
There are plenty of other blogs or programs that cover teaching your kids about finances (Dave Ramsey comes to mind), so I won’t belabor the point. But remember what Jesus said in Matthew 6:21: “Where your treasure is, there your heart will be also.” Whether you choose to spend your money on clothes or church or Internet protection for your family or technology upgrades or books or “Kim Kardashian: Hollywood,” that’s where your heart will be.
