Microtransactions: An Important Aspect of the Gaming Industry and Business
By: Darshan. K, Asia Business Outlook
The gaming industry has cemented itself as a lucrative business opportunity yielding tremendous ROI. The industry went from barely having a billion in revenue 60 years ago to $197 Billion in 2022. Originally the only way for a video game to make revenue was to sell physical copies of the game, and it stayed that way for a few decades, but with the advancement of tech giving birth to more software, the quality of the gaming industry skyrocketed. The industry found more ways to make money, and the most prominent way was microtransactions.
A Extraordinary Phenomenon where you pay for additional content
A microtransaction is a phenomenon where you pay for additional content of a game which you already purchased; this can range from simple cosmetics for your character to a full-on purchase of an item which will help you complete the game with relative ease. This trend observed a high uptick in the early years of Facebook gaming with Farmville, where you could purchase farm coins (in-game currency) with real-world money which helped you to achieve your in-game goals faster compared to those who played for free. This implementation opened up an additional income source for gaming companies and in today’s gaming world; this became a core income source and has even surpassed game sale revenue. This occurrence incentivized game developers to move from offline single-player games to online games which can be developed over time with the game being still accessible to play and it eases the creative pressure to come up with new games all the time, and with more users gaining access to the internet and the casual nature of games, this online gaming trend kept on rising penetrating games from console only users to casual PC and smartphone gamers. This momentum has made android the dominant platform for gamers and is the most profitable compared to the rest.
A Worthwhile Experience just by paying a little more
This move for a while was acceptable to new gamers as they couldn’t put a time like the other players who had adapted to difficult games but could experience a good time by paying a little more extra money, the level of difficulty in these games was relatively simple, it was hyper-casual. But this increased adoption hurt the gaming spirit and ecosystem as the games increasingly became paywalled, the games couldn’t be progressed without paying real-world money. This gradually bled to games where people were paying full price but were still pay-walled (blocked unless you were to pay money). This further spiralled into gambling where game developers made mechanisms called lootboxes, where you pay to get a box and you don’t know its contents, but you still have to pay money for those unknown contents. And it escalated to a whole new level where key in-game items were locked behind this lottery mechanism, which resulted in a lawsuit which went to various courts.
Role of Micro Transactions in Gaming businesses
In today’s gaming world, in-game transactions have become the main source of revenue for major game development studios, GTA Online by Rockstar Games makes half a billion dollars in microtransactions, Fate/Grand Order by Delightworks and Lasengle crossed $6B in revenue in 2022, PUBG makes around $2B annually, and the most recent addition, Genshin Impact by MiHoYo(now hoyoverse) made nearly $4B in sales in just 2 years of its release, The development to maintenance cost to profit generated margins are extremely huge. This goes to show how far the gaming industry has progressed in the past 2 decades. Some games have adopted the SaaS model, where the game is accessible for a monthly fee which is similar to the monthly bills we pay, Final Fantasy XIV uses this business model, and another variation of this is done by Xbox called game pass where we pay a fixed sum a month to access the entire catalogue of their games, many platforms offer lucrative deals to game developers to market their games on their platforms.
However, this monetary-driven venture by the gaming industry has made the once simple fun experience into a “pay for fun” which has made gaming feel like another chore where you have to pay to get things done. Single-player offline games are becoming scarce and the developers are increasingly forced to adopt the online model to keep up with the competition and stay relevant, and of course, appeal to the various parties involved in the production process. Times are changing, and the changes can either be good or bad, adapting is the key to moving forward.