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Virtual Economies: Video Game Debt Is the Real Thing

Oct. 7, 2013
3 mins
Three men laugh and work together at a computer

For some, video games are a hobby. For others, they’re a way of life.

Video games can be a great way to unwind at the end of a gruelling day, but if you’re not careful they can become a new way to get into debt. With video game budgets skyrocketing, developers are looking for new ways to monetize gaming beyond the $60 price tag – that’s where in-game spending comes into play.

The concept has taken off in recent years – an astonishing $3.2 billion has been spent within online virtual world Second Life to date, making it the world's largest virtual economy. Gaming can be as addictive as gambling – here’s how you can keep your in-game spending in check and avoiding spending too much.

Creating a gaming budget

Sean Kavanagh is an avid gamer, and a former video game magazine editor for Beckett Media. When it comes to virtual economies, he likens it to real life spending.

“The approach I use is pretty similar to how I buy things in real life,” says Kavanagh. “I may want something - but do I need it? Of course, the argument can be made that you don't need anything that's virtual. And some items would be considered ‘luxury items’ (like a purely cosmetic character outfit).”

Play time equals money

Kavanagh adds that it's important to consider a number of factors when rationalizing such purchases.

“I look at things from a time-cost perspective. Often, you can get an item in-game or purchase it in the cash shop. How long would it take to get it in-game if it's a very rare drop? How long would it take me in real life to earn the money to buy it in the store?" he adds. "If the activity to earn it in-game is fun, it may be worth spending the time. But if it's a chore, and it's relatively inexpensive, it might be worth spending a few bucks and then using the time I saved in-game to do something I enjoy more.”

Stay frugal with free-to-play games

Kavanagh says it all comes down to creating a gaming budget and monitoring your spending.

“I am also pretty strict about having a game budget, especially with so many games adopting a free to play (F2P) model,” says Kavanagh. “Most F2P games also have a subscription option. If I am able to get most of what I want out of a game in the ‘free’ version, I may not mind spending a little to enhance the gameplay as long as I stay under the monthly subscription price. But if the amount I am spending starts approaching the sub price, I might decide I am better off subscribing for even a month or two and ignoring cash purchase altogether (individual cash purchases).”

Alarming in-game spending behaviours

Controlling in-game spending is easier said than done. Game developers have made spending easier than ever – it’s easy to lose track of how much you’ve spent until you receive a nasty credit card statement in the mail.

“I think everyone has a different threshold, but I think people will get a gut sense when things are crossing the line,” remarks Kavanagh. “I know people who have admitted to being overly invested financially and emotionally in-games. Their experiences were more with casual/social games, such as Facebook games. If you're embarrassed about what you're spending when talking with people, or lying about what you're spending, you're clearly aware there's a problem. I had a friend who basically had to uninstall his game apps and then block the sites because things were getting out of hand.”

Is the game designed for debt?

Some games are designed with one thing in mind - make a profit.

It's important for gamers to assess whether a game really is free.

“One big thing I think is to take a good look at a game's business model. What are they selling? And what are you getting out of it? If the model is stacked against you, the odds you'll overspend goes up. The criticism lobbed at many free-to-play games is that they're really ‘pay-to-win.’

"It's not always a fair accusation, but there's a broad range of ways that publishers try to get money from players and some tactics are questionable. If the cash shop mainly sells convenience, cosmetic items, or vanity items it's probably pretty easy to stay within a budget," says Kavanagh. "If purchased items are required to remain competitive in-game, or if performing core game activities require frequent trips to the cash store, you're probably playing the wrong game. That's why I am not a fan of social games that solely dole out ‘energy’ and keep gameplay gated to a handful of moves.”

MMO money makers

Kavanagh admits he isn’t a big fan of spending in certain massively multiplayer online games (MMOs).

“On the MMO side, the trend of slain foes dropping locked chests which then require a cash-purchased key are another example,” he says.  "They get players to spend money mindlessly, and the payoff is often questionable.”

Top 5 tips to avoid overspending in games

1) Set a budget and stick to it. Treat your game purchases like real life set a budget. Don't buy what you can't afford, and save money from your budget if you want to buy a big-ticket in-game item.

2) Don't buy what you can't afford.

3) Time equals money, so spend both wisely.

4) If a game feels like it's "pay-to-win," find a new game.

5) Remember everything is virtual – one day the servers will go down for good.

Sean Cooper

Sean Cooper is the author of the new book, Burn Your Mortgage. He bought his first house when he was only 27 in Toronto and paid off his mortgage in just 3 years by age 30. An in-demand Personal Financial Journalist, Speaker and Money Coach, his articles and blogs have been featured in publications such as The Toronto Star, Globe and Mail, Financial Post, Tangerine: Forward Thinking blog and TheDot. You can follow him on Twitter @SeanCooperWrite.

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