11/07/2013 09:52 BST | Updated 09/09/2013 06:12 BST

Monetising Digital and Video Game Content - The Evolution of Payment Models

As an industry largely born out of a high propensity of 'free' content, converting users into paying customers is a continual challenge facing digital content and video game merchants. While digital content merchants such as Spotify, which has built a successful business offering subscription-based services for music streaming, are making headway, other types of content providers, such as newspapers and magazines are in the earlier stages of exploring paywalls and monetisation strategies - for example, The Sun's paywall goes live on 1st August. From a video game perspective, paying for features within the game experience is growing in popularity and subsequently shaping the payment models offered by merchants.

With the area of monetisation developing rapidly, now is the time for merchants to consider the most appropriate strategy for their business model. However, merchants first have to explore which model is best. The starting point is identifying consumer demands and expectations and how these trends differ globally.

The Download on Digital report - a global study of over 11,400 global consumers commissioned by WorldPay - identified the consumer trends for purchasing digital content and video games.

Convenience appears to hold the key to successful monetisation - while many operators prefer ad-supported models, consumers generally prefer uninterrupted access to content.

When it comes to payment model preferences, the research found that generally, one-off payments are preferred over subscriptions for most forms of digital and video gaming content, except for magazines (43%) where a subscription is more common. For example, in Russia 73% of consumers would prefer to use one-off payments to pay for e-books and in the US 77% will purchase music using a one-off payment.

The majority of respondents (73%) are willing to buy goods by subscription if it is cheaper than one-off payments. In some markets the preference for subscription based payments is rising: in South Korea, 37% pay for music using a subscription; in Brazil, 49% pay for magazines and newspapers using a subscription.

When it comes to video games, one-off purchases are favoured for app store and console games, whereas massively multiplayer online games and console-related games content top the list for subscription based purchases (30% and 24% respectively). This could tie back to the consumer demand to ensure the payment process doesn't interrupt the game experience, particularly when playing with a group of others.

So which payment model is best?

Deciding whether to offer subscriptions versus one-off payments can be determined by the frequency that different kinds of content are bought online. As movies are the most frequent purchases made by respondents, it would suggest they could be more likely candidates for subscriptions. Yet, at the other end of the scale are paid online classes (25%) and software files (24%). The market for online classes could be much smaller than music, but its audience might be interested in making relatively regular purchases, meriting a subscription model.

Global trends also have to be taken into consideration - subscriptions can be a harder up-front sell in some markets. They require a customer to buy into a range of content, not just a single item. However, once in place, they create a more assured revenue stream. One-off purchases offer more direct gratification but do not guarantee a longer-term purchasing relationship. Understanding the local preferences for payment models by type of content and game helps to determine the most appropriate payment strategy.

Ultimately consumer appetite for all types of digital content and video games is on the rise and now is the perfect opportunity for merchants to explore the best models for monetisation to capture consumer loyalty and turn them into longer-term paying customers.