The gaming market has expanded rapidly over the course of the last decade, driven in part by the rise of mobile gaming, which brings casual titles to a wider audience. With this explosion in popularity, developers and game companies have sought to monetize their products in various new and novel ways.
This has led to several different methods for monetizing games. Although players may favour some ways of paying over others, generally speaking, the consumer has more options.
Here are the main monetization methods used in gaming:
Retail and Digital Distribution
Premium titles are still bought and sold in the traditional way. Players pay a one-off fee for the title and then own it for life. This is usually the way to go for developers who make premium games or indie games for popular platforms.
For the consumer, the transaction is simple: you pay a set amount, and the game is yours. The price of A-tier video games has gone up in recent years, but this reflects the production value. Games now can be likened to sophisticated movies that last for around 100 hours or can even put players in a unique virtual world.
Another difference in modern times is that the purchase of premium games often happens entirely digitally. The player buys the game on a platform’s store, such as Playstation or Steam, and then can download a digital copy from their library.
Taking Rake or House Edge
This monetization method is used by iGaming companies such as online casinos, which offer a particular type of game based on wagering real money. The player places a wager on games, be it via traditional payment methods or cryptocurrencies, and is paid based on the outcome of the bets.
The monetization method here might not seem immediately obvious, but it has to do with the house edge. Each game has a return-to-player (RTP) percentage that states how big this edge is. The online casino typically stands to win less when a game has a lower house edge.
Let’s use an example to clarify this: if a game has an RTP of 97 percent, then the house edge is only three percent. Thus, for every $100 wagered, the casino stands to gain an average of $3 in profit. So, you stand to have a higher chance of gaining a profit when the RTP is higher.
When it comes to games that don’t have a house edge, the monetization is slightly different. For example, if you play poker online, it will be against other human players, not against the odds of the house. Instead, the poker site will take a rake for hosting games and events like the Knockout Tournaments.
These include both traditional variants of poker, such as Caribbean Hold’em, and more innovative ones, like Pai Gow Poker. The same concept applies to the live version of the game, where you play with a human dealer streamed through live audio and video feeds.
While the monetization method in question is typically exclusive to the casino sector, it can also be found outside of it. For instance, platforms like marketplaces favour it, as they get a percentage from hosting the services and/or products and the sales that go through.
Subscription Models
As has happened with other media, such as TV, gaming companies are increasingly likely to offer subscription services. The player pays a monthly or annual fee for access to the full game or, as is the case with the “season pass” model, pays for additional content and access to rewards.
It’s not often that you’ll see a single title use the subscription fee model, although this has happened, as is the case with World of Warcraft, which has charged the same subscription fees for the last 20 years.
Usually, though, the player will pay for access to a gaming library, such as PlayStation Plus or EA, with many titles to choose from each month.
Advertising
Advertising is an indirect way to monetize video games and mobile games. It can be annoying for the player, especially if the ads are badly placed or frequent enough to be intrusive. It’s important that developers find the balance so as not to ruin the game.
The plus side is that games that utilize this model are often free to play. The player is forced to watch a certain number of ads and may be able to watch additional ads in exchange for small rewards. If done right, it’s not a bad way to go.
Microtransactions
This way of monetizing games often divides opinion and has even been the subject of controversy. Microtransactions are small purchases in exchange for in-game currency, items, aesthetic upgrades like skins, bonus unlocks, or even access to content.
If done tastefully, microtransactions aren’t as jarring. They give players access to the game for free, while those who really enjoy it can pay a little for additional features.
The main problem comes when developers block the main game and make it practically unplayable without paying. This has become known as pay-to-play and is not desirable for the gamer. Other issues involve loot boxes, which are randomized rewards akin to gambling, where you aren’t aware of what you’ll get and may sometimes lose out.
The Current Trend
Despite the potential abuse of the model, microtransactions are an increasingly popular way to go, especially for developers of casual mobile games. They are arguably the most accessible due to the player not having to pay anything upfront.
Developers are also realizing how valuable it is to merge the monetization approaches. For example, releasing a full game for a set purchase fee and then releasing DLC content as a microtransactional add-on, or selling a game as well as including it on a subscription platform.
This is the trend that is most likely to continue in the coming years, although a lot depends on the type of game. Online casinos will continue to make money from the house edge, mobile developers will use microtransactions, and major console game developers will charge a one-off premium.
