Virtual goods for single use, e.g. potions and spells, are accounted for as one-time sale.
Virtual durable goods are continually available to the player. E.g. superhero character or tractor, depending on game. These are accounted for like services or club memberships. Companies book part of payment upfront, but defer rest until end of average period in which item will be used—whether 4 days or 14 months.
If people lose interest in a game and play for shorter periods, it drives faster revenue recognition. Shorter playing period is negative for business, but drives higher revenue.
Game makers base their estimates on historical data, but playing periods can change substantially each year, especially for newest and more popular games as players are fickle. 6 of top 10 revenue generating games in September 20914 were not on last year’s list, according to data tracker App Annie. And a mall percentage of players account for bulk of purchases (as expected using Pareto's 20-80 rule).
Companies making similar games might make different choices in booking sales and costs, which can make it difficult for investors to compare.
Ironically, analysts get around confusion by looking to performance benchmarks that do not follow US GAAP accounting rules. Analysts at bookings more than revenue. Bookings include all cash paid for any virtual item, consumable or durable, and independently of whether those items have been used or not. Bookings are realized right away, and people really focused on that metric as measure of health of the business.
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