How Mobile-Game Makers A... - The CFO Report - WSJ.pdf - How Mobile-Game Makers Account for Magic-Wand Sales The CFO Report WSJ 3:34 AM ET How

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9/5/2015 How Mobile-Game Makers Account for Magic-Wand Sales - The CFO Report - WSJ 1/5 November 11, 2014, 3:34 AM ET Natalie Keyssar for The Wall Street Journal Lucia Rubin, 9 years old, played ‘Candy Crush Saga’ and ‘Virtual Families 2’ for just a few months. How Mobile-Game Makers Account for Magic-Wand Sales
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9/5/2015 How Mobile-Game Makers Account for Magic-Wand Sales - The CFO Report - WSJ 2/5 By EMILY CHASAN, NOELLE KNOX and TIZIANA BARGHINI Lucia Rubin was an avid player of “Candy Crush Saga” for a few months last year. She spent about $5 buying extra life candies and more playing time for the mobile videogame. Then, she switched to “Virtual Families 2,” a game that lets players build their dream home and adopt children. She accidentally bought $50 in virtual coins—oops, instead of $5—to spend on food, furniture, gardeners and maids. Again she lost interest after a couple of months. “I don’t play anymore because it’s kind of boring if you don’t have that much money,” in the game, said the 9­year­old New Yorker. Anticipating when players like Lucia will move on is an essential part of recording revenue in the mobile­game industry, where the sale of “virtual durable goods,” such as cows and tractors in “FarmVille” or cannons and dark barracks in “Clash of Clans” is a major source of income. When game companies change their assumptions it can skew their short­term results. Some virtual goods, like potions and spells, are good for a single use, and are accounted for as a one­time sale. Virtual durable goods are those that are continually available to the player. They might include a superhero character or a tractor, depending on the game. These goods are accounted for like services or club memberships. Companies book part of the player’s payment upfront, but defer the rest until the end of the average period in which the item will be used—whether four days or 14 months.
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