Monetization & Incentives (Part 1): Paid Games
One of my biggest areas of expertise is game design and the business of gaming. As I also enjoy playing games, dealing with monetization methods becomes very central. It is an awful feeling playing a game and enjoying it, just to notice predatory monetization strategies. At that point it simply feels as if the developer is trying to squeeze players dry. It is no longer about the game and gaming experience, as the studio has shown that money takes precedence over the quality of the game.
Don’t get me wrong, I don’t mind monetization. Games need to earn money to sustain development. I don’t even blame companies which over-monetize. But I won’t play games which sacrifice the game itself to earn money. I believe studios can do both.
When we’re building paid games (called “premium”-games in the F2P space), we are usually dealing with three ways of monetization.
- Buy the game upfront
- Content microtransactions (DLCs)
- Subscriptions
- Xbox Game Pass (Bonus)
In this part 1 article we’ll look at paid games. In part 2 we’ll look at free-to-play game monetization, which is a topic of its own. Later in part 2, we’ll talk free-to-play methods:
- Cosmetics
- Buy progress
- Pay to win
- Battlepasses
- Ads
Incentives
What we will focus on here is incentives. When you monetize something, you forever create an incentive for the game studio. An organization will always change based on how they monetize, even if it is a slow change. Long term, decisions will be made based on how they grow and sustain themselves, no matter what they want on an individual level. One day someone (owners, leaderships, producers) will ask or be asked to make more money. It’s a reality. At that point, if you have the wrong monetization method, your game will begin to die. Objectives trickle down, people listen to their managers and leads, and decisions are made. Here I really want to look at the different ways to sustain a game studio, how they affect strategic decisions and change the game design itself.
Throughout this article, always think about what incentives the monetization leads to.
Buy the game upfront
The classic method of buying a game is still popular. Pay once, have the game forever. It’s great, it always worked well, and is still one of the most common monetization strategies today. Numerous examples.
These days players (for better or worse) don’t just expect the game to be released. They expect updates, events, liveOps, customer support, free updates. Buying a game once and expecting a live-service lasting for all of eternity is sadly not a viable reality.
Incentive
Monetization with an upfront purchase leads to the incentive to drop the game post-release. Create a game which sells upfront, has a good game length for the price, and gets great reviews. But studio incentive is to release this high quality game, and then never again touch it. This isn’t a problem - all games do not need to be live service - but teams will quickly move over to the next project as 80% of money will be made in the initial launch.
Content microtransactions
Monetize your game by not just releasing it once, but also selling additional features and content in microtransactions in the form of DLCs. This can mean releasing once DLC to extend the game’s development viability, or selling hundreds. An example of this strategy is Paradox Interactive games such as Europa Universalis IV, or Fatshark’s Warhammer Action games.
Mass DLC monetization is quite player friendly. They can themselves decide how much they want to spend, and get a great chance to try the game without mass buying DLCs. It extends the lifetime of single-release games, giving them the resources to be refined and improved. It does come with the drawback that a sequel cannot live up to the content and refinement of a game with 80 DLCs and 100s of polishing patches.
Incentive
Mass DLCs and content microtransactions are quite good long-term for the studio. However, as sequels can never live up to the expectations of the first game with 10s of DLCs, there is a large incentive to half-ass the core game. It’ll be mediocre anyway, and they’ll be able to fix problems and lack of content with paid DLCs. But the incentive at its core is good; create a high quality fun game to get players to yearn for new content and DLCs.
Subscription
The third way to monetize a paid (premium) game is to create a subscription model. This can be done through a service (Netflix offering games, Microsoft/Xbox Game Pass), or directly through the game (World of Warcraft, Runescape). It especially makes sense with online games which have A LOT of maintenance and ongoing development. New content releases, leagues, balancing patches, ongoing server costs. The revenue of hosting the game must scale with players for the math to make sense, and recurring revenue is needed for the development team to exist.
Incentive
Luckily, subscription models encourage some truly great things for games. If a game requires ongoing costs (servers, customer support) and ongoing development (new updates, patches, in-game events), subscriptions incentives the studio to build a game that lasts. You want a game where players do not want to unsubscribe, as they want to return to the game consistently. It even allows (and encourages) live operations teams whose sole purpose is to make players excited over and over again. To grow as a subscription-monetized studio, you must build a game which engages the player for massive amounts of time, and where content/gameplay does not run out. The only way to exploit players while on a subscription model is getting them to bring their friends, or by making the game so engaging they don’t unsubscribe for years.
You build a great game which stands the test of time, even when other exciting releases happen in the market. This makes subscription models one of the best monetization methods for game-studio incentives and longevity.
Launch on Xbox Game Pass
A fresh-new way to launch games is on a subscription service. Instead of having a subscription of your own, you go live on a distribution channel with a subscription, such as Xbox Game Pass.
This is quite new, and we’ll have to wait and see how effective it is. We are already seeing horror stories of games such as Lords of the Fallen go live, get millions of players, but still not recoup their initial development costs. Without more transparency on the games, the numbers, the contracts it’s difficult to say how it will shake out, but as a monetization method it’s quite interesting.
Incentive
When launching as one of many games on a paid subscription page, your incentive is similar to that of a free-to-play game: click-through rate, engagement, and retention. As a whole with no other monetization, this is quite positive as an incentive to go. Make a game which looks good, engages the player quickly, and retains the player for a long time.
The question is just if you’ll be paid enough after cannibalizing your direct one-time-unit-sales. It’s not viable monetization unless that little bitty wrinkle is settled.
Conclusion
As you can see, all three methods are fine. I actually believe these are all great methods to sell your game and sustain your studio. However, with the rise of the true modern commercial game industry, this isn’t where the greedy executives and game product leads will find themselves.
No, no. Somehow, by monetizing well, we 5x’d our game revenue by doing something crazy.
We made the games free. That’s where the real money was.
Crazy.
Read: Monetization & Incentives (Part 2): Free-to-play Games