The Elder Scrolls IV: Oblivion (or simply Oblivion) released for PCs and the Xbox 360 console in March 2006—over 20 years ago now. One of its most controversial aspects is a downloadable addon called the Horse Armor Pack. For US$2.49, players could add to the game two sets of equippable armor for their horses—a feature not present in the base game.
Because we're now 20 years in the future, I feel I must clarify.
For a price of US$2.49, players could permanently add the ability to equip armor to their horses in Oblivion.
That kind of purchase would rightly seem alien to today's players, where the most common form of a US$2.49 in-game purchase would maybe give an extra life or a small amount of in-game currency that is spent all too quickly. In competitive multiplayer games, these purchases allow a player to gain an advantage over others. In a single-player game, often these micro-transactions remove time-gates that block further gameplay. This type of purchase may alternatively yield a "loot box"—a completely random in-game resource that a player might not even be able to meaningfully use.
Let's think about 2006 for a moment. The 7th generation of game consoles (among which was the aforementioned Xbox 360) was very new at the time. The iPhone had yet to be revealed. The US housing bubble had yet to collapse. The Da Vinci Code was a movie.
In 2006, most video games were one-time purchases. This included games for mobile phones as well. The only significant exceptions to this were massively multiplayer online games such as World of Warcraft. 7th generation consoles launched with newfound internet connectivity abilities compared to their predecessors, at a time when a large number of households were gaining access to broadband Internet connectivity for the first time.
The simple idea that a game could be updated after its launch was new to players of console-based video games in 2006; Prior to the Xbox 360, games needed to be released fully finished and bug-free because there were no technological means to get update data into players' hands.
Faced with the new ability to ship additional game content directly to players for the first time, developers willing to do so largely lacked any templates on how to best take advantage of this. One curious exception was Bethesda Game Studios—developer of Oblivion—with their 2003 game The Elder Scrolls III: Morrowind.
Morrowind had two large expansions with additional spaces to explore, quests to do, etc. These expansions were paid addons for the game's PC version and were shipped as CD-ROMs which installed the content. Along these expansions, Bethesda also released a handful of Morrowind plugins for free. These plugins were tiny in scope; One added a new dungeon focused on combat, another added some feminine armor equippable by the player's character, yet another adds a new helmet specifically equippable by all playable races with a unique quality to help power up the player character.
As released in 2006, Oblivion's Horse Armor Pack addon has of a similar gameplay scope to Morrowind's free plugins while still being of substantially increased production value. New 3D models and textures were made for it. As all of Oblivion's dialogue is voiced, more lines needed to be recorded for the Horse Armor quests. By being available directly from the on-console store, it would be easier for players to access. This meant that the content of the Horse Armor Pack would need to be tested much more thoroughly than what was needed for a simple plugin hosted on a website which would only be played by dedicated fans. Lastly—and as mentioned before—the Horse Armor Pack woud permanently add a new feature to the game, remaining available to players indefinitely after the initial purchase.
At the time, the Horse Armor Pack was not well-received by players. The prevailing opinion seems to have been that Bethesda were overcharging for a feature that added very little to the game. Lots of players and non-players alike voiced complaints about it, claiming it to be a cash grab. I believe that players who do not value something inessential to the experience ought simply to abstain from purchasing it, but I'm a bit of an oddball.
Today, popular games like Fortnite and Roblox have in-game currencies purchaseable with real-world money. Most mobile games make use of similar systems where a few taps of the screen is all it takes to charge your credit card and gain more play time, or more power, or some frivolous goodies. Console games often release with critical bugs which must be fixed with downloadable patches. Grand Theft Auto Online earns its publisher an untold amount of money from microtransactions. EA FC Ultimate Team—whatever that is—is something that exists.
In the 20 years since the Horse Armor Pack, unscrupulous games have gotten very good at separating unsuspecting players from truly astounding amounts of money. Yet, it is Oblivion's inagural addon that is often blamed as the start of this trend. The theory goes that due to its low price point, it was the first "microtransaction" in games. The actual relationship between Horse Armor and Ultimate Team is never clearly laid out, and in my opinion the relationship is not there. The alleged link between the two simply doesn't exist.
Current skeevy practices in video game monetization are much more readily traceable to free-to-play (or "freemium") titles on available on the smartphones. Users of the first generation of iPhones would largely have been unfamiliar with premium video game monetization, and seemed generally reticent to pay money for premium games even if they wanted something to play. To fill the growing interactive entertainment niche on smartphones, enterprising game developers took inspiration from browser-based MMOs like MapleStory and delivered game experiences that were nominally free to play but which offered players many opportunities to spend their money for certain in-game benefits.
Compared to premium console games, some fremium mobile games were much more financially lucrative. Publishers of console-based games would have seen the reported income of big early mobile games and pushed for similar mechanics to be implemented in their own titles.
Oblivion's Horse Armor Pack released alongside a handful of other small DLCs made for the Xbox Live Marketplace. Microsoft stated at the time that these small DLCs were part of their strategy for the Xbox 360 console. The theory was that by leveraging the console's new capabilities to deliver fresh content over time, developers could continue engaging players. The initial phase of this strategy was unsuccessful; Most players did not buy these small downloadable content packs. Of Oblivion's 10 downloadable content packs, Horse Armor was the second least downloaded.
If Horse Armor was so unsuccessful, and was not the model for later introduction of microtransactions in later premium console games, why do gamers cite it as the instigator of microtransactions in premium games? I think the reason is that it was the first instance among core players of a small transaction which, to seasoned players, was obviously of little gameplay value. As gamers are so often wont to do, they threw a fit online and the backlash became part of the story. Following this, Horse Armor gained a memetic status in online spaces frequented by this audience, and memetic inertia is simply more powerful than a basic examination of the facts at hand. People think it's true because everyone says it is. From this, it continues to get scapegoated in conversations of the gaming landscape's increasingly predatory monetization.
Here's my take: Oblivion's Horse Armor Pack was always innocuous. Nowadays, it's practically quaint. A small one-time transaction to add an extra feature not originally present in the game. A very straightforward exchange.
There is no reason to blame Bethesda for lootboxes and whatever a "V-buck" is. They have effectively zero responsibility for the current microtransaction landscape. The only lesson other games learned was that core, premium game enthusiasts are not the right target audience for low-value microtransactions. Once an audience unfamiliar with the monetary value of premium games had formed with arrival of the iPhone, developers employed behaviouralists to make their games as addictive as possible with interfaces which instill urgency all in order to compel players to keep spending without asking questions. Loot box mechanics—which are so bad that they have been regulated in certain juristictions—are effectively slot machines that have been jammed into a video game, with all the consequences that statement implies. Horse Armor didn't do any of this.
If there's one idea I want to communicate today, it's that I would prefer if players tried a little harder to analyse the history of how their hobby has become what it is today instead of simply repeating that which they read elsewhere. Yes, it is widely understood that Horse Armor is a contributor to the introduction of predatory microtransactions, but that doesn't make it true.