For as long as I can remember, offline subscription billing models have been dynamic. Consumers pay one flat rate for the service they are subscribing to and are given only what the fee includes – nothing more – at least not without a hefty price. While it may have taken some time, the online world has finally caught up with the offline world. Online vendors, most successfully social game developers, are now offering dynamic billing models online.

Let me explain dynamic subscription billing in a bit more detail, using an offline subscription we know so well, our monthly cell phone plan. Each month you pay a flat rate of $50 a month for 400 weekday minutes. This means that 12 times per year, the carrier is guaranteed at least $50.00 from your wallet, $600 total in a calendar year. However, given the dynamic subscription billing, you never pay the base rate.

In order to get SMS text messaging and emails on your phone you’ll need to pay extra each month, which adds to the bill. And should you happen to talk more than 400 minutes in a month, you will be charged a premium fee for each additional minute. That’s how carriers have been able to capitalize on dynamic billing subscriptions and reap additional revenues from their subscribers.

Yet, times have changed. Offline subscription billing that we’re accustomed to has now moved online.  How, you say? I thought you’d never ask.

Retailers of virtual goods are now offering dynamic subscriptions to users opening their business models up to unique revenue streams. Instead of a flat monthly rate, small, independent game developers are increasingly offering zero to low on-boarding costs to game players. The philosophy of this business model is that the lower startup cost will engage more users and help build a broader customer base. Additionally, once the player has been activated, payment for services within the game are issued as they are consumed. Gamers do not need to leave the current page they are playing to buy the magical sword that will defeat the dragon; instead, they can buy it instantly in the game. Yes, it might cost the gamer a premium to get the sword, but without it they can’t move forward and win the game thereby earning themselves bragging rights the next time they hang out with their friends or as they’re playing with their friends online, as the case may be. And who doesn’t like winning and bragging?!

Game developers are now catering to their customers by offering pay as you play pricing, instead of paying for unlimited online gameplay for $19.99 a month. This is a winning subscription offering that Plimus has seen executed successfully by several of its customers. The revenue growth is much higher for the vendors leaving gamers equally satisfied because of their instant access to additional purchases within the game.

While casual game developers are leading the pack on billing model  innovation, I’m also seeing larger gaming powerhouses turning to a dynamic model.  For example, the next release of the Lord of the Rings video game will be sold to gamers through this new model. This release will be the industry’s first massively multiplayer online (MMO) game that’s completely free for gamers. Any gamer can download the game for free and any additional activation, tools, weapons, etc. that he or she wants to buy can be purchased within the game for a premium. The cost of these premium purchases is up to the game developer and varies depending on the accessibility and value to the gamer.

This new model is here to stay. By the end of 2011, Plimus believes that dynamic billing subscriptions will outpace traditional billing models and there will no longer be monthly fees.

If you’re still looking to learn more, check out Plimus’ new whitepaper, “The New Monetization of e-Commerce 3.0” that we proudly announced today. Click here to read the entire whitepaper.

Charlie Born, Plimus Head of Marketing

Charles Born,

VP and Head of Marketing

 

 

 

Photo credit: http://www.flickr.com/photos/shareski/2703624033/