Video games have always been in a constant state of flux. As a medium, it has always evolved, perhaps even more than any other, in entertainment and storytelling. What began as a lab experiment by German inventor Ralph Baer has blossomed into the largest entertainment industry sector. From ‘Brown Box’ – the first invention in gaming to arcades, consoles, and computer-powered gadgetry, the video games industry has also set new benchmarks in yearly revenue expectations. In context, the global revenue for games has risen from $128 billion in 2018 to $287 billion in 2023 (Statista). That’s more than double the growth in a span of less than 5 years. And by 2027, it is projected to reach $540 billion with ease.
Back in the day of arcade gaming, popular titles such as Pacman used to sell hundreds and thousands of cabinets. Today, exclusives like ‘God of War’ or ‘The Last of Us’ sell millions of PlayStation Consoles. But while other giants in the entertainment industry, such as sports and movies, have more or less followed the same routes of generating revenue and business models, video games have seen significant changes in how gaming content is monetized. New digital technologies and gaming platforms have empowered video game developers with many new methods of generating revenue from the titles they create. And they have changed the user experience for millions of gamers globally.
Popular Monetization Models in the Video Game Industry:
Monetization in video games refers to the methods used by the game’s developers to generate revenue from their project or published title. Over the years, we have seen various models used by publishers that helped them convert the value of their games into financial returns. Let’s take a look at some of the more popular ones:
- In-App Purchases: In-app purchases allow players to buy additional content within the game. Loyal users and even new players can buy all sorts of virtual goods within a game in this way, ranging from skins to costumes, cosmetic upgrades, new DLCs, and even unlocking new levels. Depending on the game’s developer, they can either allow players to pay directly for these digital assets or use an in-game currency that can be separately earned in-game and purchased.
- Advertising: Advertisements are another important source of generating revenue for video games. For instance, a mobile game development company can include full-screen ads to be shown between each session on their free game. Other developers might opt for optional ads that can be incentivized with in-game rewards and bonus points. Depending on the publisher, they can also include native ads for their sponsors and donors that integrate seamlessly into the game.
- Subscriptions: Subscriptions in video games allow game developers to offer players exclusive content, benefits, and game features while charging them a recurring fee. It can be seen in games in various ways, such as season passes, early access, multiplayer passes, tournament tickets, etc. For example, gamers in Dota 2 can buy ‘Battle Passes,’ which open them up to special in-game rewards and bonus features that are tied to the past, such as role-based matchmaking, online tickets to tournaments, and more.
- Free-to-play: As an extension of the freemium model, free-to-play monetization sees gamers play mobile games, PC titles, and even AAA video games for free after downloading them. However, certain features or content may be locked and offered as optional player purchases. This enables developers to entice users with a free gameplay experience and incentivizes them to spend money on their game once they want to keep playing it. Popular F2P games include Fortnite, Dota 2, and CSGO.
These are some of the more common monetization models that are prevalent amongst video games in the gaming industry. Depending on the title and the publisher, we can see some games even combining these models in order to optimize revenue generation and gaming experience. Or even used in titles created by a blockchain or NFT game development company.
How can Game Developers Optimize Monetization Strategies?
With the rise in global revenue, video game monetization has become increasingly important for the industry. Especially today, where we have free-to-play games and topics like in-app purchases and microtransactions attract a lot of debate within the gaming community. Here are some strategies on how game developers can improve monetization:
Value for Players:
Players are more likely to invest in the game they are on and spend money on things like in-app purchases or subscriptions if they are satisfied with it. Therefore, developers must endeavor to offer a high-quality experience constantly, often met through details such as gameplay, content updates, bug fixes, and customer support.
Balanced Monetization Model:
Developers should strive to implement a monetization model in their games that are balanced or at least doesn’t hamper the player’s experiences. This means there should be less of intrusive monetization techniques used, along with the developers creating meaningful purchase opportunities. Publishers can focus on techniques that enhance the gameplay or provides cosmetic benefits instead of being important for progressing in their game.
Incentives and Rewards:
Another way developers can strategize in implementing monetization is by ensuring that there are ample opportunities to receive rewards or achievements within their games. This may come as daily login bonuses, limited-time events, reward systems based on weekly points earned, etc., and eventually encourage players to invest in the game.
Regardless of the game or platform for which it is made, developers need to consider their target audience, the gaming experience, and the video game title’s genre – when selecting the right monetization model for their game. They should provide a fair value for loyal fans and users and prioritize the gaming experience while also generating revenue. And include a player-centric monetization model that will allow developers to maintain a healthy player base and hold their long-term trust and faith.