Overview of Various Methods Used to Generate Revenue in the Video Game Industry
World of Games, World of Money: Mastering Game Monetization
Game monetization is a critical aspect for every game, shaping a game's success or failure for its developers and offering players an array of gaming experiences. Here, we're diving into the modern ways video games generate revenue and offering advice to pick the perfect monetization model.
Discovering the Cash Inflows of Games
For developers, a well-executed monetization strategy can mean the difference between a profitable triumph and a flop. For players, it shapes the game's enjoyment or serves as an intrusive irritant.
In today's gaming landscape, monetization is no longer as straightforward as it once was. Various methods can coexist in a single title, making the landscape more complex but offering numerous opportunities to generate revenue while keeping gamers entertained.
Below, we'll explore how games rake in cash, followed by tips on selecting the top monetization model.
Modern Cash Machines: Game's Monetization Strategies
The Timeless Premium Model
The premium model represents the "old school" approach to selling games. Players purchase the entire game upfront, guaranteeing developers a substantial payday. However, striking the right value proposition is essential to ensure players feel their investment is justified.
Historically, these transactions would take place in brick-and-mortar stores, but digital marketplaces like Steam have made their presence felt. An upfront purchase means developers earn an equal revenue from all players. Nevertheless, this initial payment can be a significant hurdle compared to other methods we'll discuss.
There's another challenge: everyone pays the same price, leaving no room for owners who wish to invest more in the game to do so. Some games counter this by offering limited editions or similar at the time of purchase, providing the most passionate fans with additional content and boosting publishers' earnings.
Digital Loot Baggies: Downloaded Content Packages (DLCs)
With the premium model, once a game is sold, the transaction ends. However, many developers introduce DLCs, additional content available for purchase after the base game has been bought. These DLCs are a great fit for games that enjoy a positive reception, capitalizing on gamers' eagerness for more content. In many cases, they are cheaper than the game itself and offer less content, making them a safe bet for developers as long as the price matches the amount of content added.
Microtransactions: Bit by Bit Profit
Microtransactions represent a successful and prevalent approach to generating revenue, with small, in-game purchases frequently unlocking minor amounts of content or features. These purchases allow those who wish to spend more to do so. Properly implemented microtransactions enhance the gaming experience while avoiding a "Pay-to-Win" scenario.
Microtransactions can be purely cosmetic (e.g., skins or emotes) or significantly affect the gameplay (e.g., boosts, special items, or lessened cooldowns). They are often found in free-to-play mobile and console games, although they can also appear in premium titles bought upfront.
However, microtransactions can stir debate around finding the balance between profitability and fairness. Criticism arises when non-cosmetic microtransactions in multiplayer games offer an unfair advantage to those willing to pay. This dilemma becomes a "Pay-to-Win" scenario for non-paying players, who may feel the game is rigged in favor of those with deeper pockets. Wise microtransaction implementation involves giving players the option to pay for conveniences without disadvantaging those who decline.
The Controversial Loot Boxes
Loot boxes are a variant of microtransactions with a twist: players don't know what they will receive when they open them, making them somewhat comparable to slot machines. This uncertainty raises ethical questions and regulatory concerns.
Most commonly, developers sell loot boxes using real money. Some games, however, allow players to acquire loot boxes through in-game progress or currency, in an attempt to make the process feel more fair. To entice players to open more loot boxes, developers create scarcity by making highly desirable items rare, prompting players to open countless loot boxes in hopes of unlocking them.
While loot boxes can yield a great deal of revenue, their prevalence has led to discussions on their gambling-like nature. This culminated in EA's Star Wars Battlefront II in 2017, which used loot boxes extensively, requiring players to either spend real money or grind excessively to unlock all the content. This controversy led to a ban on loot boxes in certain countries, necessitating developers to adhere to local regulations when implementing them.
The Subscription Model: Regular Doses of Entertainment
This model demands a subscription to play the game or parts of it, offering developers a steady stream of recurring revenue. Subscriptions foster a loyal player base when executed thoughtfully. Well-known examples of subscription-based games are World of Warcraft, initially launched in 2004. However, subscriptions are gradually being replaced by battle passes and season passes.
Battle Passes and Season Passes: Victorious Victories
These passes provide paying players additional rewards for accomplishing specific goals. Battle passes have gained popularity for their capacity to maintain player engagement over a more extended period, with tangible objectives and rewards. These passes are often accessible to non-paying players as well, but the benefits are more easily obtained and more significant through premium access. Unlike subscriptions, players must purchase a battle or season pass to play the game. This approach was popularized by Dota 2 and Fortnite in 2018.
The Ad-Venture: Game's In-Game Advertising
In free-to-play mobile games, ads reign supreme as a monetization method. These can utilize banner ads, loading screen ads, pop-ups, and more to capitalize on players' focus. Ads in free-to-play games must be carefully integrated to avoid overpowering the player experience.
Rewarded ads,where players receive in-game currency in exchange for viewing a video ad, are the most effective and lucrative type. However, they may limit the incentive for users to purchase microtransactions. Some developers offer microtransactions or even subscriptions to remove all ads temporarily or permanently.
The Blockchain Revolution: Play-to-Earn Games
Play-to-Earn games harness blockchain technology and NFTs to form an in-game economy with tradeable assets. In Play-to-Earn, proper monetization involves ensuring the game economy is sustainable and rewarding for all participants. These games usually require players to purchase a certain quantity of crypto currency before they can play (some call these Play-to-Earn). It is a polarizing topic, with strong advocates and critics.
Charity Begins at Launch: Crowdfunding
Crowdfunding involves offering the gaming concept to potential players and soliciting their financial support for development. Players pay upfront before the game is released, with varying rewards depending on the amount invested.
Although reward distribution can take some time, especially in the case of delays, numerous games have successfully raised funds through crowdfunding. The primary challenge lies in attracting significant funds through marketing efforts.
Early Access: Jumping the Gun
Early Access means players can purchase a game before its final release, providing developers with additional income during development while receiving valuable player feedback. Developers typically price these games according to their current state, with future updates increasing the price.
The Trend: Multifaceted Models
Many successful modern games utilize hybrid monetization models, incorporating several strategies to cater to various players with different spending habits. Mobile games frequently adopt the free-to-play model, using ads, microtransactions, or a blend of both. In the console and PC world, free-to-play games like Fortnite and Apex Legends offer an accessible entry point for newcomers while generating income through microtransactions and battle/season passes.
It's also increasingly common to see AAA games with an upfront cost that are regularly updated with new content. Access to this content can be provided for free or obtained through a mix of microtransactions, loot boxes, battle passes, and DLCs. premium players gain easy access to a constant stream of fresh content, whereas non-paying players still enjoy a satisfying foundational experience. In some instances, non-paying players can unlock premium content through effort and time, preserving a sense of fairness.
Selecting a Monetization Model
The optimal monetization model for each game depends on the expectations of its players regarding the type of game. Generally speaking, if players have already paid an upfront fee, the monetization approach should be discreet, avoiding a perception of being short-changed or unduly pressured. Intrusive banner ads on a Premium model game, for example, would alienate most players.
In contrast, a more aggressive approach is acceptable in Free-to-Play titles (within reason), as players haven't initially invested money in playing them. When it comes to in-game purchases (microtransactions, loot boxes, battle/season passes), players enjoy a more fulfilling experience when achieving similar results whether they pay or not. The ideal monetization model inspires players to support their favorite game without feeling frustrated. Instead, it entices them to become more active in an already enjoyable experience.
The effectiveness of the chosen monetization model depends on how well it resonates with the game itself. Monetization strategies should be established early in the development process, integrating seamlessly with the overall experience. Lastly, developers should remain aware that as player expectations evolve, so do successful monetization strategies. Models that are currently successful could become outdated in a few years, making it crucial to stay updated on industry trends.
Targeting the Perfect Monetization Model
Finding the most suitable monetization model for a game requires an understanding of the expectations and spending habits of its players. Developers must carefully consider factors such as initial investment, in-game content, and player experience when selecting a strategy.
Inquisitive Approaches: Mixed Monetization Models
Some games benefit from employing a hybrid monetization model, blending strategies like free-to-play, ads, microtransactions, and DLCs. This approach caters to various player spending habits and keeps games up-to-date with engaged content. In this ever-evolving gaming landscape, developers must stay informed about emerging trends to ensure their monetization methods remain effective and engaging.
