Examining Chargebacks and Other Risks for Video Game Developers
The video game industry is one of the largest in the world, generating roughly $385 billion in revenue. Tens of thousands are people are employed in the video game industry, and it’s estimated that more than 3 billion people play video games. Unfortunately, however, video game developers and other companies operating in the industry face myriad challenges, such as higher processing fees, chargebacks, and fickle customers.
Let’s take a closer look at the challenges video game developers face. We’ll also consider some steps companies can take to mitigate risks.
Microtransactions and Subscriptions Result in Disputes
In the early years of video gaming, customers would buy a video game and there’d be only a single transaction. These days, many games feature built-in “microtransactions.” Gamers can purchase skins, weapons, loot boxes, and other things within the game. As such, buying a video game is often only the first of many transactions. In fact, sometimes you can play a base game completely for free, with developers generating their revenues through in-game sales.
For better or worse, microtransactions can result in more disputes between customers and gaming companies. For example, in the past, a parent would buy their child a video game and that’d be it. Now, a child may be playing a game and they then make an in-game purchase with their parents’ credit cards. If the parent didn’t approve of this transaction, it could result in a dispute. Back in 2014, the FTC sued Apple, Google, and other companies over microtransactions made by kids. Besides fining them, the FTC also made the companies update their terms of payment. Still, chargebacks and disputes with customers remain an issue for video game developers.
Subscriptions can also be a source of disputes. Many games now operate on subscription models, with gamers paying a fee perhaps every month or year. If the gamer means to cancel the subscription but forgets to do so, they might file a chargeback.
Wondering how you might reduce chargebacks? If a customer contacts you because a child made an unauthorized purchase or because they forgot to cancel their subscription and want a refund, you should consider honoring their request. Even if you’re technically in the right, if the customer files a chargeback, you’ll have to pay chargeback fees, your chargeback ratio will rise (which could result in higher payment processing fees), and if you lose the dispute, you’ll also lose the revenues.
Loot Boxes Result in a “Gambler’s Dilemma”
One of the most popular microtransactions is buying a loot box. These function as mystery boxes and when a customer buys a loot box, they don’t know what they’ll get. In some cases, the loot box might contain valuable (digital) items. In other cases, the goods might not be worth much at all. While loot boxes can be a great source of revenue, they can also result in disputes.
If a customer buys a loot box and doesn’t get anything valuable, they may try to file a chargeback to recoup their money. The gambling industry itself is considered “high-risk” owing to high chargeback rates (among other factors). With loot boxes, video game companies end up exposed to similarly high risks.
Incomplete Games Can Result in Dissatisfied Customers
Many developers are operating on tight timelines, and sometimes, they launch a game that isn’t quite finished. The game may be buggy and not perform well, among other things. Many developers correct problems via patches, but buggy games could result in dissatisfied customers demanding a refund.
While delays can annoy some customers, it’s often better to improve your game before launching it, even if you have to push back the launch date. If bugs crop up after launch, it’s best to acknowledge and address the issue as quickly as possible. If customers are upset enough to ask for a refund owing to a buggy game, you may want to grant their request to ward off potential chargebacks.
Stay Proactive When Managing Risks
The video game industry is intensively competitive, and unfortunately, developing a great game is sometimes not enough, on its own, to ensure success. Ultimately, any video game developer who is serious about success must also be serious about managing risks. Offering great customer service, astutely managing finances, and minimizing various risks can prove crucial. With chargebacks, you can also use a variety of tools such as dispute management platforms like Chargeback Help, to mitigate risks.
This article has been published in accordance with Socialnomics’ disclosure policy.
