She does an excellent job of breaking down the economics.

That’s led to Facebook taking action– in this case, temporarily shutting down the Fishville application, which would seem to be a just punishment if the allegations turn out to be true.

Obviously, this isn’t over yet.

UPDATE: Zynga now says they’re pulling all offers from their games.

It’s an interesting tactic, and one that Penny Arcade has seen fit to comment on in the form of a comic:

There’s an interesting point being made in the last panel; The player isn’t going to be interested in simply doing more of what they’ve already paid for. What makes the content valuable is what distinguishes it from what they already have.

One thing that’s important to remember as the industry pushes forward is that while the actual game is the most obvious content, it’s not necessarily your actual business. In the end what makes your money is the real business that you’re in, and we’re giving the content away.

Newspapers have, for the better part of the last century at least, been using news as an effective way to deliver ads into their reader’s homes.   That’s not to say that the reporting isn’t a key feature of the user experience, but in this article on why newspapers are failing, there’s a very interesting point:

Remember “shoppers,” the poorly designed throwaway publications filled with tacky little ads? Daily newspapers are high-end shoppers. They spent a lot of money on original content to class up the operation and give people a reason to ask for the ads to be delivered. Long before the web displayed the power and leverage of critical mass, newspapers benefited from it; once you got the franchise in your particular locale, you tried not to stir up trouble, because it just distracted you from time better spent cashing checks.

The newspapers had found that the could afford to lose money on distribution by making it up in ad-revenue, along with user subscriptions. Sound familiar?

Luckily for Social Games the user revenue portion of the model looks to be rapidly outpacing advertising as a key factor in monetization. That’s important because, like many things on the internet, the cost of generating a new, and more effectively targeted platform for advertising is so cheap that unless you can deliver a focused demographic in large numbers, ad revenue is always going to be minimal.

Games also have another advantage, which is that our relationship to our community is more explicit. News  media is often disdainful of the fact that they were ever a “social media”. They think that they own their audience, and are pushing hard to get government to enforce what is, at it’s heart, a social relationship between the people who make media and the people who consume it.  And once you think you’re speaking for your audience instead of to them, you’ve already begun to unravel the bond with your customer.

So why is gameplay imoportant? Because while gameplay may not be the core of your business, it is the heart of the relationship with your audience.  The experience you are giving them is the reason that they engage with you each day, and are willing to give you their money.

And because we have such strong methods of tracking our users, we can more effectively streamline that relationship.

That’s clearly an issue for publishers and developers since games aren’t a tiered business like movies, so there is no point in the business that they can be guaranteed a sale, unlike movies.

That said, it’s hard to deny that some of this is the publishers fault. At $60 AAA retail games are probably overpriced compared to actual perceived value, so consumers are going to look for ways to bring down the cost to a level that’s more in line with their expectations.

It’s clear that first-user-free content, such as the extra maps that were provided with Gears of War, are a good way to get your fans to buy your product new. It also creates a sense of value for your content.

But I have to wonder if it wouldn’t make sense to simply decrease the cost of the product at retail and add some of the features a la carte as DLC. Sure, they’d still lose some sales to used copies, but more consumers might also pick up the product at retail. It also means that you might see games appearing in more places than just GameStop, Big Box, and online stores.

Microsoft did end up releasing those Gears of Wars maps as a separate purchasable download. I’m curious how that did for them.

Ultimately DLC helps turning your product from a single event to an ongoing platform that can has some legs beyond the initial sale. And as the flexibility of the type and pricing of downloadable content grows, you can also bundle together that content at a later date for a lower price.

And one day you might even have a tiered business…

There will be ad-based revenue streams. There’s an opportunity to draw those pirate customers into the revenue stream. We want to draw them into the Windows family and maybe there’s an upsell opportunity later.

I’m not sure how you can offer a "pirate version" without upsetting the paying customers, and/or limiting/breaking features when the software becomes aware that its not a legitimate copy, but it may be possible they’ve come up with something original here.

That would be exciting because I’m sure an elegant solution to having multiple versions and revenue streams would be something that a lot of people would be interested in. However, most of the time it ends up being just another flavor of brute force.

Obviously there’s going to need to be a strong integrated web component in the next version, so maybe this somehow ties into that.

Anyone have any other ideas on how this might work?

But it also turns out it’s a huge hit on iTunes and Hulu.

And Joss is thinking that he’ll just quit television entirely.

Looking at his fan base and the kind of work he does it makes a lot sense. He also brings with him an "old school" celebrity that should allow him to have a huge impact on the web, at least initially.

The transition is going to be a bumpy ride across a number of different kinds of media, but television may have the most difficult transition since most people still don’t have an easy way to stream content into the living room, and the broadcasters are terrified of the brave new world.

Such systems solve no problem the user has, and offer no service we want. As a result, conversations about small payments take place entirely among content providers, never involving us, the people who will ostensibly be funding these transactions. The conversation about small payments is also not a normal part of the conversation among publishers. Instead, the word ‘micropayment’ is a trope for desperation, entering the vernacular of a given media market only after threats to older models become visibly dire (as with the failed attempts to adopt small payments for webzines in the late ’90s, or for solo content like web comics and blogs earlier in this decade.)

The invocation of micropayments involves a displaced fantasy that the publishers of digital content can re-assert control over we unruly users in a media environment with low barriers to entry for competition.

It’s worth noting that his issues are distinct from virtual goods, and payments for objects in closed environments. But the idea that paying a little bit here and there fixes problems is just a fantasy.

It may be that the term itself just causes confusion and does more harm than good.