One of the more interesting things about the Xenon key note at the GDC earlier this year was the announcement that Microsoft is adding micro-transactions to Xbox Live. If you’re not familiar with the term, micro-transactions are usually financial transactions between two parties with a very low dollar amount, say less than one dollar or so. That’s a bit of an over simplification but you get the point.

Micro-transactions (sometimes called micro-payments) are not a new concept. Scott McCloud raised a ruckus a while ago in the online comic community by advocating a micro-payment system for online comics. A system called Bitpass was even developed to allow the handling of these transactions but it never really caught on. Entire companies during the dot Com boom were built around the concept.

Let me state for the record that I’m not naïve enough to think that Microsoft has any kind of altruistic reasons behind developing this system (Bill Gates didn’t get to be the richest man in the world by giving away things for free) but I think there’s a huge potential for the law of unintended consequences to strike by including micro-transactions in the next version of Xbox Live. This is something I’ll cover in a bit but first I want to address the biggest concern, how the game publishers are going to abuse/use it.

Much of the initial reaction to the announcement was dread in thinking that gaming companies are going to use this as a way wrest additional dollars away from gamers or provide a mechanism for rich gamers to cheat the system and buy their way to higher levels without doing any of the grunt work. While this is something that has shown up in some PC games (*cough*Everquest*cough*), it has yet to show up in console gaming.

This is something we might from the larger companies with established franchises. For example, I think we can fully expect EA to start charging for Madden online leagues in the near future. If you remember the fine print from last year, the fee for premium online play was paid off by a sponsorship. I would guess that sometime in the near future that cost will be passed on to gamers. With a micro-transaction system, EA might start charging small fees for these premium services or for things like updated rosters.

For the most part, though, I think companies will charge for items that directly impact the game play. Why you ask? It’s simple. It’s something I call the “Douchebag factor” (DF). ...