[Virtual items are the subject of much contention. Are free-to-play games devaluing retail products? Are they changing the industry? In an editorial originally published in the December 2009 issue of Game Developer magazine, editor in chief Brandon Sheffield weighs in.]

Early this month, I was having a discussion about free-to-play games and virtual items with Raigan Burns of Metanet Software. He was arguing that virtual items represent the equivalent of digital snake oil -- you’re paying for a few altered lines of code.

It’s a question of degrees, because all games are lines of code after all, whether they be many or few. And in fact Metanet’s latest game, N+, is primarily sold via digital distribution on Xbox Live Arcade. In many ways it's a larger, more involved virtual item.

But I understand his point very well. The idea of paying money for something that a designer maybe spent an hour tweaking, or which an artist only adjusted the colors on, just doesn’t sit well with me.

This is rooted in our consumer-oriented society. Ultimately all value is perceived. Why is a diamond more valuable than cubic zirconia? Mostly because we say so. As a society we’ve decided that between these two similar subjects (though the latter is synthetic), one is worth more, and the other less. Meanwhile both are worth more than food, which we actually need to survive.

Food, air, and water have intrinsic value, because we can’t live without them. Aside from those stand-out examples, our entire value system is fabricated -- so depending on one's desire to have these things, they're worth as much as or more than anything else. It’s quite relative, and in a society in which most of us actually do pay for the water we drink, this perception of value is very important to a lot of people, including, I’m dismayed to say, myself.

Dr. Sheffield’s Cure-All

For me, if there’s an object I can own versus a digital version, I’ll go the ownership route every time. I still buy CDs, DVDs, and records, and prefer physical copies of games I really enjoy over digital ones. Over time I’m letting go of this -- after all, my enjoyment of these media is not based on their physicality, but rather the data contained on them. Still, I find much more value in a full game I can purchase that has physical weight than I do in a game that must be purchased in bits and bytes.

For a lot of people, that need for the physical simply isn’t there, and that’s why the individual is the most important part of perceived value. For someone playing MapleStory who really wants that purple sword because it matches their outfit, that sword is possibly one of the most important things that person could buy.

Raigan’s point was this: "Goods like a paperback novel, a pen, or a shovel might have a resale value that's close to zero, but they still have some sort of ‘functional’ value in that they can be used for some purpose. For example, I can read or write or dig a hole.

"In comparison, most virtual goods are purely useless. Of course, I'm referring to Animal Crossing 'cool yellow shirt'-type goods; something like a really good sword in WoW would actually be useful, because it will allow the owner to farm gold more effectively and then sell the gold on the black market or whatever. But even that is a contrivance, the developer could easily modify a variable to let the player do a lot more damage, they don't 'need' the sword -- it's an artificial constraint imposed by the developer."

"This is typically benign in ‘normal’ games because it's done in the service of gameplay, but once you enter virtual goods land though, the rules are designed to extract more money out of people rather than to provide people with an enjoyable experience. This seems very different and possibly awful."

A book or a physical version of a game may lose its value after it’s completed once, unless you plan to go through it again, much like a virtual item. Still, I do agree with Raigan mostly, and my discussion of perceived value was partially to be contrary. But perceived value is also exactly the reason this model is working. There are people for whom the physical element of the purchase isn’t important. They’re paying for added fun, and if that fun is in the form of a yellow shirt, so be it.

That’s perhaps the most important part: For those who play these games, these items aren’t perceived as designed to extract money, they’re part of a fun experience. For instance, I’m not a religious person -- but what seems to me to be a method of controlling a populace appears to others as a way to approach the divine and achieve personal fulfillment. It’s all a question of perception.

Gimme That Olde-Tyme Religion

While the concept of paying for something so virtual initially seemed alien to me and my experience, I thought back to good old La Val’s Pizza in Berkeley, where I grew up. How many quarters did I scam out of my parents so that I could get a few more lives in Final Fight, or another go at Rampart? In essence I was renting time with the game -- the virtual items I was paying for were lives. In practice, these free-to-play games that run on microtransactions (even moreso subscription or pay-per-play games), which many core or old-school players decry, extrapolate from a revenue stream that comes from the very source of electronic games.

Anyone who’s been reading my editorials and interviews for some time (more the fool, you) will note that I’ve covered the free to play space, especially in Korea, rather extensively. In the two years since I wrote my editorial titled "Why You Should Care About Korea," that country and its business models for games have been more and more on the minds and lips of game developers around the world. One might presume I would be happy to see this model continue to gain traction among consumers, as microtransactions bleed into Facebook’s social games, and iPhone apps. I am not.

Like Raigan, I am curmudgeonly reluctant to admit the value of the piecemeal experience over the whole, finished one. But the fact is that more and more people see that free-to-play experience not as piecemeal, not as incomplete, but rather a living experience that can grow and change. Or perhaps a new kind of experience with a low required investment and barrier of entry.

And some of us fogeys may do well to recall that this model is not so different from that on which we were raised, or for the fogey-er amongst us, the games we created. The trick is how to make these virtual items actually worth what the users pay for them. But that’s a yarn for another day.