Video game monetization is a type of process that a
video game publisher
A video game publisher is a company that publishes video games that have been developed either internally by the publisher or externally by a video game developer.
They often finance the development, sometimes by paying a video game developer ...
can use to generate revenue from a
video game
A video game or computer game is an electronic game that involves interaction with a user interface or input device (such as a joystick, game controller, controller, computer keyboard, keyboard, or motion sensing device) to generate visual fe ...
product. The methods of monetization may vary between games, especially when they come from different genres or platforms, but they all serve the same purpose to return money to the game developers, copyright owners, and other stakeholders. As the monetization methods continue to diversify, they also affect the game design in a way that sometimes leads to criticism.
Methods
Although there are several business models to monetize
video games
A video game or computer game is an electronic game that involves interaction with a user interface or input device (such as a joystick, game controller, controller, computer keyboard, keyboard, or motion sensing device) to generate visual fe ...
, they can be categorized into six major models.
A video game may use more than one of these models at once.
Retail

Retail purchase is the traditional method by which games are sold from
brick and mortar
Brick and mortar (or B&M) is an organization or business with a physical presence in a building or other structure. The term ''brick-and-mortar business'' is often used to refer to a company that possesses or leases retail shops, factory produc ...
stores or online retailers.
Customers pay for a physical copy of the game and any other game related peripheral devices required for play in-store. Retail purchasing has previously made up the bulk of game-related transactions, but it has been on the decline since the 2010s due to the rise of digital distribution and mobile gaming. However, the importance of brick and mortar game stores as a place for gamers to gather and show their passion still remains. Furthermore, some retail purchases may come with collectible boxes and possible in-game items to attract customers over digital download. The retail market also incorporates the second-hand market, the trading-in and resale of used games, such as through
GameStop
GameStop Corp. is an American video game, consumer electronics, and gaming merchandise retailer, headquartered in Grapevine, Texas (a suburb of Dallas). The brand is the largest video game retailer worldwide. , the company operated 3,203 stor ...
.
Digital distribution
Digital distribution or digital download is similar in practice to retail purchasing, but is different in venue. Instead of acquiring a game through a physical store, customers buy their games online and download the game's data directly to their devices. Many games sold through
digital download are distributed by means of a third-party service that functions in the same way as a physical store, selling a variety of games from many different developers in one location.
Valve
A valve is a device or natural object that regulates, directs or controls the flow of a fluid (gases, liquids, fluidized solids, or Slurry, slurries) by opening, closing, or partially obstructing various passageways. Valves are technically Pip ...
's
Steam
Steam is water vapor, often mixed with air or an aerosol of liquid water droplets. This may occur due to evaporation or due to boiling, where heat is applied until water reaches the enthalpy of vaporization. Saturated or superheated steam is inv ...
is an example of digital distribution platforms for
PC gaming.
Subscription
Subscription model is a business model where a game requires continuous, ongoing payments from customers in order to play the game. Games that utilize subscription often sell access in blocks of one-month increments or in multiples thereof. Once a subscription runs out or is canceled by a customer, their access to the game ceases or is reduced until they re-subscribe. This method is most often associated with games that
require an online connection or services that require capital to operate on the part of the publisher or developer. An example of games that use subscription model is
World of Warcraft
''World of Warcraft'' (''WoW'') is a 2004 massively multiplayer online role-playing (MMORPG) video game developed and published by Blizzard Entertainment for Windows and Mac OS X. Set in the '' Warcraft'' fantasy universe, ''World of War ...
.
Subscription service is, on the other hand, not a direct subscription to a game but a subscription to gaming-related services. These services may include, but not limited to, monthly games such as
Humble Bundle
Humble Bundle, Inc. is a digital storefront for video games, which grew out of its original offering of Humble Bundles, collections of games sold at a price determined by the purchaser and with a portion of the price going towards charity and ...
, temporary access to game library such as
Origin Access, and access to multiplayer online session such as
PlayStation Plus
PlayStation Network (PSN) is a digital media entertainment service provided by Sony Interactive Entertainment. Launched in November 2006, PSN was originally conceived for the PlayStation video game consoles, but soon extended to encompass smartp ...
.
Microtransaction

Microtransaction (MTX) is a business model where aspects of a game's contents can be purchased to enhance the game experience for the player. These aspects may range among new playable contents, in-game currencies, cosmetic options, and otherwise unavailable or restricted gameplay advantages. Traditionally, these purchases tend to be relatively inexpensive but numerous in variety.
Microtransaction
Microtransaction (mtx) refers to a business model where users can purchase in-game virtual goods with micropayments. Microtransactions are often used in free-to-play games to provide a revenue source for the developers. While microtransactions ...
s are often common in social and mobile games where potential customers may be hesitant to purchase a full game, but more at ease with smaller, yet more numerous payments.
Downloadable content (DLC) is a kind of microtransaction that expands the base game by providing additional contents. Depending on the game and publisher, a downloadable content may be a large expansion that greatly impacts the game, or a series of smaller expansions. These expansions can be either skins, maps, story, or even a new game mode based on the main game.
Premium currency is a type of virtual currency used by many free-to-play games to support microtransactions, such as V-bucks used for ''
Fortnite'' or Robux for ''
Roblox
Roblox (, ) is an online game platform and game creation system developed by Roblox Corporation that allows users to program and play games created by themselves or other users. It was created by David Baszucki and Erik Cassel in 200 ...
''. While many games have a virtual currency that is gained while playing the game and can be used to buy items and equipment, premium currency generally is acquired by exchanging real-world money for a fixed quantity of virtual currency, when then is used to purchase in-game items. Developers can opt to reward premium currency for playing the game, such as the ability to recoup the cost of a ''Fortnite'' battle pass by completing it, and can discount in-game store items. Most often, premium currency cannot be redeemed for real-world money, with one notable exception being ''
Second Life
''Second Life'' is a multiplayer virtual world that allows people to create an Avatar (computing), avatar for themselves and then interact with other users and user-created content within a multi-user online environment. Developed for person ...
''. Because of this limitation, premium currencies can be seen as predatory: these currencies are often only provided in packs of specific sizes, so that players cannot purchase the exact amount needed to acquire an in-game item, and thus some of the purchased premium currency will remain unspent.
Loot box is a variation of microtransaction of which the rewards are random. The player has no control over the rewards they receive for paying in-game or real world currencies although the game often shows a list of possible loots that the player may get from the loot box. The content of the loot box may range from purely cosmetic items with no effect on gameplay, such as skins in ''
Overwatch
''Overwatch'' (abbreviated as OW) is a multimedia franchise centered on a series of multiplayer first-person shooter (FPS) video games developed by Blizzard Entertainment. ''Overwatch (video game), Overwatch'' was released in 2016 with a success ...
'', to powerful items with a gameplay advantage that otherwise the player has to grind to achieve. Some games may require the players to rely on loot box system to obtain characters and items more heavily than other games. They are sometimes referred to as a
Gacha game.
Season passes allow players to buy multiple pieces of downloadable content for a game as a single purchase, usually at a discount compared to purchasing each piece of content individually. Season passes may be offered before all piece of DLC that would be included are announced, though consumers are usually told of the general type of content they will get and how many pieces of content they will get. Season passes may be offered on annual or more frequent schedules, and later releases of the game may include all season pass material as part of the package offered at a discounted. A related concept is the
battle pass
In the video game industry, a battle pass or rewards track is a type of monetization approach that provides additional content for a game usually through a tiered system, rewarding the player with in-game items for playing the game and complet ...
which provides access to a number of in-game cosmetics and other items for players as they either complete challenges for it or gain experience within the game.
Player trading
Player trading is a business model where in-game items and digital currencies can be traded between players on the game marketplace that allows the publisher to get a cut on transactions that players made. Most of the times,
The publisher can get a percentage from every transactions, like Steam community market, or from a difference between buying and selling price of the in-game currency, like World of Warcraft. However, player trading can lead to a
gray market where through third-party websites, these virtual items can be bought and sold with real-world currency, which, for games that use gambling-like mechanisms, can violate regional laws. In one specific case, Valve took steps to shut down extensive use of ''
Counter-Strike: Global Offensive'' items that were being used for
skin gambling
In video games, skin gambling (also known as skin betting) is the use of virtual goods, often cosmetic in-game items such as " skins", as virtual currency to bet on the outcome of professional matches or on other games of chance. It is common ...
after it was discovered that these items were being used to wager on
games of chance
A game of chance is in contrast with a game of skill. It is a game whose outcome is strongly influenced by some randomizing device. Common devices used include dice, spinning tops, playing cards, roulette wheels, numbered balls, or in the case ...
by younger players.
Related to player trading is the incorporation of
blockchain
The blockchain is a distributed ledger with growing lists of Record (computer science), records (''blocks'') that are securely linked together via Cryptographic hash function, cryptographic hashes. Each block contains a cryptographic hash of th ...
technology, which purports to provide an encrypted record of ownership and transfer for a digital item. This can be used trade digital items by treating them as
non-fungible token
A non-fungible token (NFT) is a unique digital identifier that is recorded on a blockchain and is used to certify ownership and authenticity. It cannot be copied, substituted, or subdivided. The ownership of an NFT is recorded in the blockchai ...
s (NFTs). These blockchain transactions can also be set up to require that a percentage of the payments in a player-to-player transaction are diverted to the publisher. One of the first examples of a blockchain game was ''
Cryptokitties'' in 2017, a
virtual pet game where unique cartoon cats backed by blockchain (effectively NFTs)could be bred to make new ones that could be traded with others. ''Cryptokitties'' made headlines when one of these virtual cats sold for more than via
Ethereum
Ethereum is a decentralized blockchain with smart contract functionality. Ether (abbreviation: ETH) is the native cryptocurrency of the platform. Among cryptocurrencies, ether is second only to bitcoin in market capitalization. It is open-s ...
cryptocurrency. As of 2021, the use of blockchain and NFT for monetization is limited. Some publishers have expressed interest in increasing their use of blockchain and NFT technology. The intersection of video games and blockchain financing is sometimes referred to as "
GameFi". Because players can earn money from these sales, such games can also be called "
play-to-earn", with limited cases reported of players earning a living salary from participating in these games.
Advertising
Advertising is a form of indirect monetization. Apart from aforementioned methods of monetization, indirect monetization generate revenue from other sources that does not directly come from the player. Most frequently, this is the placement of advertisements within a game; these may take the form of banner advertisements, commercial breaks in play, or product placement in the game.
Games that rely on advertisement for returns usually are free-to-play or are cheaper than other games as their production cost has already been subsidized. Undesirable advertising monetization is when the advertisements are designed to look like something the user might click without realizing it is an advertisement.
Types
The above methods of monetization can be combined in multiple ways to produce various types of monetization schemes. As a result, games may be classified by the overall scheme used by consumers to pay for content in the game.
Upfront-based revenue models
These models are based on where the publisher and developer anticipates the bulk of the revenue to be acquires from upfront purchases of the game's title.
;Premium
:Premium games are those where the consumer buys the game once through retail or digital distribution, and may purchase additional downloadable content for the game, but the game itself has limited content. This typically describes the bulk of games sold at retail prior to the availability of digital distribution or online functionality, and remains a key sales area for console and computer games, but less common for mobile games.
;
Freeware
Freeware is software, often proprietary, that is distributed at no monetary cost to the end user. There is no agreed-upon set of rights, license, or EULA that defines ''freeware'' unambiguously; every publisher defines its own rules for the free ...
:Games that are provided free of charge by their developer or publisher. These should not be confused with
open-source games, which are games developed and released under
open-source
Open source is source code that is made freely available for possible modification and redistribution. Products include permission to use and view the source code, design documents, or content of the product. The open source model is a decentrali ...
or
free-software license
A free-software license is a notice that grants the recipient of a piece of software extensive rights to modify and software distribution, redistribute that software. These actions are usually prohibited by copyright law, but the rights-holde ...
s, regardless of whether the user is charged for playing them. Freeware games, on the other hand, are provided free of charge, but might be released under a
proprietary license.
;
Shareware
Shareware is a type of proprietary software that is initially shared by the owner for trial use at little or no cost. Often the software has limited functionality or incomplete documentation until the user sends payment to the software developer. ...
:Games that typically follow the freemium model, offering a demo of the game and the ability to unlock the rest of the game with purchase of a code or similar unlocking mechanics. The intended use was for the game's files to be shared with other users, a means to distribute games prior to digital distribution.
Ongoing-based revenue model
In these ongoing revenue models, the publisher and developer may offer the game for free with the expectation that they will earn ongoing revenues from various transactions far along the lifetime of the game. This model is very common for many online games and in the mobile game marketplace.
;
Buy-to-play
:Like premium games, the consumer buys the game once to play, but here, the game generally continues to be supported by the developer or publisher by maintaining online servers or producing new content regularly for the title. The player may need to buy access to this new content at times, such as through a season pass.
;
Free-to-play
:Free-to-play games do not require the player to purchase the title to play, though access to some features and content may require purchase of a subscription or via microtransactions.
;
Freemium
Freemium, a portmanteau of the words "free" and "premium", is a pricing strategy by which a basic product or service is provided free of charge, but money (a premium) is charged for additional features, services, or virtual (online) or physical ( ...
:Games that are free to play to start, but limit how far the player can progress before they must purchase the game.
;
Subscription model (Pay-to-play)
:Games that require the player to pay a regular subscription fee to maintain access to all parts of a game. The game is typically free-to-play to allow new users to try the game but full access requires the subscription to be paid.
;
Advertising-based
:Games which are typically free-to-play but require the player to periodically see advertising before they can continue, with the developer or publisher earning revenue from the advertising.
;
Play-to-earn or Pay-to-earn
:Games that typically incorporate blockchain elements such as NFTs. Players are incentivized to use NFTs to improve their value or create new NFTs, with their sale managed by the video game publisher or developer. The player then is paid by the company for their work towards the new and/or upgraded NFT. There is usually an upfront payment required by the player to get started, typically in the purchase of either cryptocurrency used by the game or in-game currency that they can later trade out, thus making these games "pay-to-earn", and have been considered the equivalent of
Ponzi scheme
A Ponzi scheme (, ) is a form of fraud that lures investors and pays Profit (accounting), profits to earlier investors with Funding, funds from more recent investors. Named after Italians, Italian confidence artist Charles Ponzi, this type of s ...
s.
Ownership versus licensing
Games delivered on physical media which do not install content on a user's console or computer, such as most cartridge-based systems as well as earlier optical media games that simply read content directly from the disc, are generally considered to be products owned by the person that bought the game, and thus gives them the ability to give away or sell that game under principles like the
first-sale doctrine of U.S. law; once the person has given away their copy, they generally have no legal means to play it.
As video game grew popular and the second-hand market for video games became popular, the industry began to introduce methods to limit second-hand sales of games that were delivered on installation media.
Such methods included labelling games with "Not for Resale" stickers to simply discourage resale, and using
product key
A product key, also known as a software key, serial key or activation key, is a specific software-based key for a computer program. It certifies that the copy of the program is original.
Product keys consist of a series of numbers and/or letters ...
s that could only be used once (through an online confirmation system), making the installation media valueless without a fresh product key.
The industry has generally settled on using a software license that grants them the ability to install and play the game but restricts them from selling the game again. These licenses typically include
end user license agreement
An end-user license agreement or EULA () is a legal contract between a software supplier and a customer or end-user.
The practice of selling licenses to rather than copies of software predates the recognition of software copyright, which has b ...
s (EULA) that limit what the user can do with the game, such as unlicensed
modifications. License transfers may be possible under the EULA, but typically require the original owner to fully divest themselves of all copies of the game and related materials along with the installation media, and assure that the second-hand recipient agrees to the same EULA terms.
Coupled with increased use of digital distribution, the license approach significantly limited the used game market.
Within the United States, the use of software licenses is considered upheld by case law under the
Ninth Circuit decision of ''
Vernor v. Autodesk, Inc.'', which ruled that consumers of software products with licenses are licensees and bound by the EULA and are not owners of the software, invalidating any first-sale rights.
A subsequent Ninth Circuit case, ''
MDY Industries, LLC v. Blizzard Entertainment, Inc.'', affirmed the ''Vernor'' decision to video games.
The situation is more complicated in Europe; in ''UFC Que Choisir v. Valve Corporation'' in 2015, a French court ruled against Valve for failing to offer the means for users to freely transfer game licenses between users, a requirement of European law.
Impact
The video games industry continues to grow as it is expected to generate $138 billion U.S. dollars in 2018, showing a 13.3% increase in revenue from last year. In 2014, digital download model made up 52% of all game sales and overtook retail purchase, the long-time industry standard. Recently, many video game publishers have adopted the
games as a service model where a game continues to generate revenue after its release. As a result, a game tends to get extended support and more contents post-launch so that it can be monetized via other methods in addition to retails and digital downloads, allowing the consumers to make the most out of their purchase.
However, since the method of monetization must be decided before the game production, it may affect the game's overall design and how players will interact with the game. Monetization trends like games as a service will shape how new games are designed, potentially making genre that are easy to monetize more popular than others. As a result, proper consideration of any strategy must be given during the design process. Improper consideration of balance between good game design and effective monetization can lead to either players feeling extorted by the game and its developers or a failure of the game to produce enough revenue for the game to turn a profit. In both scenarios, a game in question is likely to fail once on the market, the difference being whether it fails critically or financially.
In order to fund themselves, many independent game developers raise money by
crowdfunding
Crowdfunding is the practice of funding a project or venture by raising money from a large number of people, typically via the internet. Crowdfunding is a form of crowdsourcing and Alternative Finance, alternative finance, to fund projects "withou ...
. They can also use
crowdsourcing
Crowdsourcing involves a large group of dispersed participants contributing or producing goods or services—including ideas, votes, micro-tasks, and finances—for payment or as volunteers. Contemporary crowdsourcing often involves digit ...
to break down the cost of development by distributing the workload to self-motivated individuals. Another way for independent developers to fund their games is to release an unfinished game as an
early access
Early access, also known as alpha access, alpha founding, paid alpha, or game preview, is a funding model in the video game industry by which consumers can purchase and play a game in the various pre-release Software release life cycle, developm ...
where the players may purchase the game at a discounted price before it is complete.
Microtransactions have recently become a popular monetization model in
massively multiplayer online (MMO) games. Previous to this development, the majority of MMOs relied on the subscription model, where users paid a monthly fee to the developer for continual access to the game. Some MMOs have had difficulty in turning a profit under this model however, thanks to too few subscriptions to cover operating costs. This has prompted several MMOs to experiment with alternative monetization strategies, ultimately leading to the adoption of microtransactions. While some MMOs continue to operate under the subscription model, many now have moved to microtransactions to ensure financial stability. With this shift, numerous virtual goods and services in MMOs that may have previously been available through normal play under the subscription model now can only be obtained through real currency transactions and it was expected that the microtransaction model would continue to be used under this model. However, overuse or improper application of microtransactions can make the player base feel forced to pay money and discourage them from playing, while the underuse may lead to too few microtransactions taking place to support the game and its developers.
Indirect monetization has undergone a recent surge in popularity as well. Through a combination of the propagation of both
smartphone
A smartphone is a mobile phone with advanced computing capabilities. It typically has a touchscreen interface, allowing users to access a wide range of applications and services, such as web browsing, email, and social media, as well as multi ...
s and Indie developers, the
mobile game
A mobile game is a video game that is typically played on a mobile phone. The term also refers to all games that are played on any Mobile device, portable device, including from mobile phone (feature phone or smartphone), tablet computer, table ...
s market has flourished. Although it had only 18% share of the video games industry in 2012, mobile games account for 51% of the video games market in 2018. Due to generally lower development, marketing, and maintenance costs as well a large target audience of players, mobile games are able to survive on a smaller income than most other varieties of games. The process is risky, however, since mobile games may often be hit or miss in their success. Games that pull in large numbers of players do well thanks to their advertisement model while those that fail to garner wide appeal do not last long on the market.
Some have also criticized games implementing the indirect model as many games are made under it that are of low quality, or are non-user friendly with their monetization methods so as to maximize their income at the expense of player enjoyment.
Criticism
Video game monetization has been criticized by journalists who see it as video game publishers being excessively greedy, in particular with the implementation of microtransactions.
Games such as 2017's ''
Star Wars Battlefront II'' have been criticized for gameplay elements that require extensive
grinding which can otherwise be bypassed through
loot box
In video game terminology, a loot box (also called a loot crate or prize crate) is a consumable virtual item which can be redeemed to receive a randomised selection of further virtual items, or Loot (video gaming), ''loot'', ranging from simpl ...
es. The increasing adoption of loot boxes in gaming has led to some viewing the mechanic as a form of
online gambling
Online gambling (also known as iGaming or iGambling) is any kind of gambling conducted on the internet. This includes virtual poker, casinos, and sports betting. The first online gambling venue opened to the general public was ticketing for th ...
, with many countries revising their laws in response. Predatory monetization models are also criticized since they tend to target minors and may break child privacy laws.
History
Before the 1980s
The tradition of video game monetization can be traced back to the monetization of real life games, before the existence of the computer. A
game
A game is a structured type of play usually undertaken for entertainment or fun, and sometimes used as an educational tool. Many games are also considered to be work (such as professional players of spectator sports or video games) or art ...
is usually constructed with players, tools and rules. The tools for the game were made by skilled craftsman, usually with valuable materials, as described in the
history
History is the systematic study of the past, focusing primarily on the Human history, human past. As an academic discipline, it analyses and interprets evidence to construct narratives about what happened and explain why it happened. Some t ...
. Thus, selling game tools for money became an understandable business long before the development of video games.
The history of video games leads back to the 70's and 80's, when
arcade video games
An arcade video game is an arcade game that takes player input from its controls, processes it through electrical or computerized components, and displays output to an electronic monitor or similar display. All arcade video games are coin-oper ...
become popular worldwide. Following the precedents from the first arcade game to cost a quarter per play,
Periscope (arcade game)
is an electro-mechanical arcade shooting submarine simulator. Two companies developed similar games with the name''.'' The first, initially called ''Torpedo Launcher'', was designed by Nakamura Manufacturing Co. (becoming Namco in 1977) and r ...
, from the 60s, most arcade game machines are coin-operated. Players have to insert coins to play for certain time or certain lives. This can be classified as a type of microtransaction, and was highly successful during the golden years of arcade games. One of the most popular and influential arcade games, Taito's
Space Invaders
is a 1978 shoot 'em up video game developed and published by Taito for Arcade video game, arcades. It was released in Japan in April 1978, with the game being released by Midway Manufacturing overseas. ''Space Invaders'' was the first fixed s ...
was reported to cause a shortage of 100-yen coins in Japan, 1978. By 1982, the game grossed $2 billion in quarters
(equivalent to $7.26 billion in 2015), with a net profit of $450 million.
When the Namco released
Pac-man
''Pac-Man,'' originally called in Japan, is a 1980 maze video game developed and published by Namco for arcades. In North America, the game was released by Midway Manufacturing as part of its licensing agreement with Namco America. The pla ...
in Japan on May 22, 1980, it became immensely popular from its original release to the present day. Later, it became one of the
highest-grossing video games of all time,
having generated more than $2.5 billion in quarters by the 1990s .
1980s
With the development of computer technology, the home computer industry has been packed with competitors from 1980. The home computers started to prove their gaming capability not long after they were introduced to the public, since they are able to run multiple game programs, and release the full potential of the hardware. Compared with arcade machines, people are able to switch between games and play at their homes. Although early computers were weak in compatibility, the IBM PC compatible platform began to take over the fragmented market and ruled the
PC game
A personal computer game, or abbreviated PC game, also known as a computer game, is a video game played on a personal computer (PC). The term ''PC game'' has been popularly used since the 1990s referring specifically to games on "Wintel" (Micr ...
platform. On the other hand, the
Third generation of video game consoles
In the history of video games, the third generation of Video game console, video game consoles, commonly referred to as the 8-bit era, began on July 15, 1983, with the Japanese release of two systems: Nintendo's Family Computer (commonly abbrevi ...
, represented by the
NES console released in 1983, was able to help the North American game console market recover from the
major crash during 1983 to 1985.
From the 1980s, video games on the market were mostly sold in the way of retail purchase. Although the home computers were not specialized in gaming, gaming consoles were. Most games had to be sold in physical mediums, such as a
ROM cartridge
A ROM cartridge, usually referred to in context simply as a cartridge, cart, cassette, or card, is a replaceable part designed to be connected to a consumer electronics device such as a home computer, video game console or, to a lesser extent, ...
, a
floppy disk
A floppy disk or floppy diskette (casually referred to as a floppy, a diskette, or a disk) is a type of disk storage composed of a thin and flexible disk of a magnetic storage medium in a square or nearly square plastic enclosure lined with a ...
or even a
Compact Cassette
The Compact Cassette, also commonly called a cassette tape, audio cassette, or simply tape or cassette, is an analog magnetic tape recording format for audio recording and playback. Invented by Lou Ottens and his team at the Dutch company ...
. For the game console users, buying the hardware costs extra money, but they had more choices on games and suitable input/output device designed for gameplay.
1990s
While old retail selling kept strong at 1990s, new way of game monetization emerged. The
CD-ROM
A CD-ROM (, compact disc read-only memory) is a type of read-only memory consisting of a pre-pressed optical compact disc that contains computer data storage, data computers can read, but not write or erase. Some CDs, called enhanced CDs, hold b ...
and other
optical disc
An optical disc is a flat, usuallyNon-circular optical discs exist for fashion purposes; see shaped compact disc. disc-shaped object that stores information in the form of physical variations on its surface that can be read with the aid o ...
s were taking the place of the cartridge, became the major medium of retail games. The development of web technology and bandwidth in the late 90s made many online games possible. The web based game
Adventure Games Live revealed the possibility of the game running purely on a webpage, ever free of charge.
The handheld gaming devices were invented long before 1990s, but the
Game Boy
The is a handheld game console developed by Nintendo, launched in the Japanese home market on April 21, 1989, followed by North America later that year and other territories from 1990 onwards. Following the success of the Game & Watch single-ga ...
was a milestone on portable game history. The remarkable game innovation
in this decade created a series of game consoles and devices. Handheld game devices with no changeable cartridges were also widely sold. In those cases, buying the hardware and software went together. An example can be the
Tamagotchi
is a brand of handheld digital pets that was created in Japan by Akihiro Yokoi of WiZ and Aki Maita of Bandai. It was released by Bandai on November 23, 1996 in Japan and in the United States on May 1, 1997, quickly becoming one of the bigge ...
sold by
Bandai
is a Japanese multinational corporation, multinational toy manufacturer and distributor headquartered in Taitō, Taitō, Tokyo. Its international branches, Bandai Namco Toys & Collectables America and Bandai UK, are respectively headquartered ...
from 1996.
In the early 1990s, online gaming was only starting to emerge as consumer use of the
Internet
The Internet (or internet) is the Global network, global system of interconnected computer networks that uses the Internet protocol suite (TCP/IP) to communicate between networks and devices. It is a internetworking, network of networks ...
had yet to gain wide traction, and Internet service plans were typically based on time-limited charges. This effectively gated access to online games which were being offered in subscription model form. However, when
America On-Line introduced flat-rate Internet access packages, that gate disappeared, allowing players to play online games indefinitely, which impacted revenue from these titles. One of the first examples of a
massively-multiplayer online game (MMO) was ''
Achaea, Dreams of Divine Lands
''Achaea, Dreams of Divine Lands'' is a roleplay-focused, text-based multi-user dungeon (MUD) released on September 9, 1997. It was published by Achaea LLC, now known as Iron Realms Entertainment. Achaea is operated by collecting the revenue t ...
'', a text-based
multi-user dungeon
A multi-user dungeon (MUD, ), also known as a multi-user dimension or multi-user domain, is a Multiplayer video game, multiplayer Time-keeping systems in games#Real-time, real-time virtual world, usually Text-based game, text-based or storybo ...
(MUD), released in 1997. Instead of launching with subscription fees to cover operating costs, its creator Matt Mihaly sought other ways to earn revenue, and after offering a few high-quality in-game items for real-world money at an auction, realized a way to make additional revenue. From that, Mihaly programmed into ''Achaea'' what is believed to be the first microtransaction, "dual currency" system, where two pools of in-game currency are available, those that are earned in-game, and those that are converted from real-world purchases into the premium currency, which was the only currency that could be used to purchase "virtual goods" in the game.
2000s
In the first decade of the century, the game monetization was affected by the booming of the
e-commerce
E-commerce (electronic commerce) refers to commercial activities including the electronic buying or selling products and services which are conducted on online platforms or over the Internet. E-commerce draws on technologies such as mobile co ...
, as well as hardware, software and other information technology developments. All kinds of online games and multiplayer games were connected through the faster Internet. The craze of
MMORPG
A massively multiplayer online role-playing game (MMORPG) is a video game that combines aspects of a role-playing video game and a massively multiplayer online game.
As in role-playing games (RPGs), the player assumes the role of a Player charac ...
by made the subscription model a profitable way to support the game developers. Many
browser game
A browser game is a video game that is played on the internet using a web browser. They are sometimes referred to more specifically by their format, such as Flash games or HTML5 games. They are generally free-to-play and can be either single-pl ...
s became free to play in order to attract more visits. At the early age of smartphones,
mobile game
A mobile game is a video game that is typically played on a mobile phone. The term also refers to all games that are played on any Mobile device, portable device, including from mobile phone (feature phone or smartphone), tablet computer, table ...
s were paid to download because there was usually no interface for a smartphone to install a physical copy. Standardization and the ubiquity of mobile platforms that allowed for easy purchases by customers, brought on initially by the iPhone App Store and followed closely by the Android Marketplace and other competitors, resulted in a wide spread move towards microtransactions and indirect monetization. After the social network became a big part of the Internet, more games started to take this platform as a way to sell or promote the game.
The 2000s also introduced the concepts of
microtransaction
Microtransaction (mtx) refers to a business model where users can purchase in-game virtual goods with micropayments. Microtransactions are often used in free-to-play games to provide a revenue source for the developers. While microtransactions ...
s and
downloadable content
content (DLC) is additional content created for an already released video game, distributed through the Internet by the game's publisher. It can be added for no extra cost or as a form of video game monetization, enabling the publisher to gain ad ...
(DLC). The late 1990s saw the emergence of the
triple-A industry, video game developed by large studios with multi-million dollar budgets. These games typically were aimed at a core market of gamers with the latest consoles or high-end personal computers, and at the time, these games would only see most sales in the first few months after the game's initial release. DLC was seen as a means to extend the potential revenue from these games. In 2005,
Microsoft
Microsoft Corporation is an American multinational corporation and technology company, technology conglomerate headquartered in Redmond, Washington. Founded in 1975, the company became influential in the History of personal computers#The ear ...
envisioned the ability to buy digital add-ons for
Xbox 360
The Xbox 360 is a home video game console developed by Microsoft. As the successor to the Xbox (console), original Xbox, it is the second console in the Xbox#Consoles, Xbox series. It was officially unveiled on MTV on May 12, 2005, with detail ...
games through the
Xbox Live Marketplace
Xbox Games Store (formerly Xbox Live Marketplace) was a digital distribution platform previously used by Microsoft's Xbox 360 and formerly by the Xbox One. The service allowed users to download or purchase video games (including both Xbox Live Ar ...
, allowing players to purchases specific content they wanted at a low price ($1-$5) rather than having to buy a more expensive complete expansion. Though some content was offered before, this concept was cemented with the release of "horse armor" pack for
Bethesda Softworks
Bethesda Softworks LLC is an American video game publisher based in Rockville, Maryland. The company was founded by Christopher Weaver in 1986 as a Division (business), division of Media Technology Limited. In 1999, it became a subsidiary of Z ...
's ''
The Elder Scrolls IV: Oblivion'' in 2006, and subsequently followed by many similar content packs over the next few years. While many player expressed outrage at the cost of what was decorative elements in-game, the horse armor pack was one of the top ten expansions that Bethesda sold for the game by 2009. ''Oblivion''s microtransaction model was considered extremely successful, and was replicated in many other games that followed,
with the "horse armor" establishing player acceptance of microtransactions in non-mobile games.
2010s
In the second decade of the century, game monetization models using microtransactions and indirect monetization, moved rapidly towards becoming a mature market. Game production moved from focusing purely on monetization models after competition for player attention became more intense. As a result, the industry has widely moved from a direct focus on monetization metrics in game design to focus on metrics such as player retention and daily active users. This can be visibly seen in the decline in valuations of several prominent free-to-play companies, as well as by studying the differences in game design for top free-to-play to games.
This approach is considered "
games as a service", as analysts have found that players put more value in games that provide a regular stream of new content than a title that does not receive updates.
This model helps to assure a long revenue stream from the publisher as well as to allow them to publish fewer games and reduce development costs while still providing new content to players, with the potential to profit twice as fast from the traditional model.
This approach also helps to insulate publishers from impacts of discounts and sales on digital game redemption keys from third-party sellers by requiring additional purchase of content as part of their services to gamers.
Digital River estimated that the industry's value in 2017 had tripled from previous years due to the use of the "games as a service" model.
Take-Two Interactive
Take-Two Interactive Software, Inc. is an American video game holding company based in New York City founded by Ryan Brant in September 1993.
The company owns three major Imprint (trade name), publishing labels, Rockstar Games, Zynga and 2K ...
, in an investor call in November 2017, reported that 42% of their revenues were from "recurrent
consumer spending
Consumer spending is the total money spent on final goods and services by individuals and households.
There are two components of consumer spending: induced consumption (which is affected by the level of income) and autonomous consumption (which ...
" in their latest financial quarter, obtained through the ''
Grand Theft Auto Online'' component of ''
Grand Theft Auto V
''Grand Theft Auto V'' is a 2013 action-adventure game developed by Rockstar North and published by Rockstar Games. It is the seventh main entry in the Grand Theft Auto, ''Grand Theft Auto'' series, following 2008's ''Grand Theft Auto IV'', and ...
'', and the "MyCareer" mode of ''
NBA 2K18'', both which offer players additional content and activities over time. Take-Two anticipates they will be using this model going forward for future games.
Ubisoft
Ubisoft Entertainment SA (; ; formerly Ubi Soft Entertainment SA) is a French video game publisher headquartered in Saint-Mandé with development studios across the world. Its video game franchises include '' Anno'', '' Assassin's Creed'', ' ...
, around the same time, reported that revenue from microtransactions and other in-game sales exceeded their revenue from direct digital sales of games during the first two quarters of their financial year for the first time.
The use of
online passes emerged in 2010, primarily as a means to combat the used game market. While publishers could not prevent players from selling and buying used games such as through the retailer
GameStop
GameStop Corp. is an American video game, consumer electronics, and gaming merchandise retailer, headquartered in Grapevine, Texas (a suburb of Dallas). The brand is the largest video game retailer worldwide. , the company operated 3,203 stor ...
, they discovered that providing a one-time code within a new game that was needed to access online features, they were able to secure more revenue from selling these online passes to players that had bought the game used.
Electronic Arts
Electronic Arts Inc. (EA) is an American video game company headquartered in Redwood City, California. Founded in May 1982 by former Apple Inc., Apple employee Trip Hawkins, the company was a pioneer of the early home computer game industry ...
(EA) had developed the idea of "Project Ten Dollar", attaching content to a code packaged with the game for its upcoming titles for that year, ''
Mass Effect 2'', ''
Dragon Age: Origins'', and ''
Battlefield: Bad Company 2''. Successful in this area, EA transitioned this towards limiting a player from online play without either having purchased the game new or purchasing its online pass for a used copy, adding this into their popular
EA Sports
EA Sports is a division of Electronic Arts that develops and publishes sports video games. Formerly a marketing gimmick of Electronic Arts, in which they imitated real-life sports networks by calling themselves the "EA Sports Network" (EASN) ...
titles, starting with ''
Tiger Woods PGA Tour 11''.
EA justified this as necessary to support their online servers for these titles.
Ubisoft
Ubisoft Entertainment SA (; ; formerly Ubi Soft Entertainment SA) is a French video game publisher headquartered in Saint-Mandé with development studios across the world. Its video game franchises include '' Anno'', '' Assassin's Creed'', ' ...
followed suit with "UPlay Passport" system, followed by several other publishers.
However, due to changes in
digital rights management
Digital rights management (DRM) is the management of legal access to digital content. Various tools or technological protection measures, such as access control technologies, can restrict the use of proprietary hardware and copyrighted works. DRM ...
for the upcoming
eighth generation of video game consoles
The eighth generation of video game consoles began in 2012, and consists of four home video game consoles: the Wii U released in 2012, the PlayStation 4 family in 2013, the Xbox One family in 2013, and the Nintendo Switch family in 2017.
The ge ...
and player complaints, EA ended its online pass program by 2013, with other publishers following within the next few years.
Simultaneously, the use of
season pass
A season ticket, or season pass, is a Ticket (admission), ticket that grants privileges over a defined period of time.
History
The ''Oxford English Dictionary'' has illustrative quotations which show the term ''season ticket'' used in the ...
es to assure access to a large number of downloadable content items that were to be doled out several months after the release of a game become popular. Season passes were priced to offer the items at a total discount than buying them separately, aiming to draw in players to purchase the passes who would unlikely desire to buy all the content separately. This can be seen as equivalent as pre-ordering the downloadable content, often without knowing exactly what that content might be.
Publishers were able to gain another retail revenue by selling "deluxe editions" of games that included the season pass as well as other bonus features.
The first such season passes arose from 2011 with
Rockstar Games
Rockstar Games, Inc. is an American video game publisher based in New York City. The company was established in December 1998 as a subsidiary of Take-Two Interactive, using the assets Take-Two had previously acquired from BMG Interactive. Foun ...
' ''
L.A. Noire'', offering additional cases and costumes, and
Warner Bros.
Warner Bros. Entertainment Inc. (WBEI), commonly known as Warner Bros. (WB), is an American filmed entertainment studio headquartered at the Warner Bros. Studios complex in Burbank, California and the main namesake subsidiary of Warner Bro ...
's ''
Mortal Kombat
''Mortal Kombat'' is an American media franchise centered on a series of fighting game, fighting video games originally developed by Midway Games in 1992.
The original ''Mortal Kombat (1992 video game), Mortal Kombat'' arcade game spawned Lis ...
'', providing access to all fighters to be added to the game. Activision followed a similar approach with its "Call of Duty Elite membership" for ''
Call of Duty: Modern Warfare 3'' that provided access to all of its maps planned for the following year.
Another monetization approach developed in the 2010s was the use of
loot box
In video game terminology, a loot box (also called a loot crate or prize crate) is a consumable virtual item which can be redeemed to receive a randomised selection of further virtual items, or Loot (video gaming), ''loot'', ranging from simpl ...
es. Loot boxes, which go by many different names, are earned by players as part of progressing in a game, can be purchased with in-game money or through real-world funds, or otherwise offered as promotional items; when opened (either freely or by purchase of a special "key"), they contain a fixed number of random in-game items, doled out based on a rarity system, and which may include both cosmetic items as well as gameplay-affecting equipment.
Since loot boxes are designed as part of a
compulsion loop in video game design, some players will be enticed to purchase more loot boxes with real-world funds, providing a further revenue stream to publishers.
While loot boxes had been present in games prior to 2016, specifically from the Chinese game market and introduced to Western audiences through a 2010 update in
Valve
A valve is a device or natural object that regulates, directs or controls the flow of a fluid (gases, liquids, fluidized solids, or Slurry, slurries) by opening, closing, or partially obstructing various passageways. Valves are technically Pip ...
's ''
Team Fortress 2
''Team Fortress 2'' (''TF2'') is a Multiplayer video game, multiplayer first-person shooter game developed and published by Valve Corporation in 2007. It is the sequel to the 1996 ''Team Fortress'' Mod (video gaming), mod for ''Quake (video g ...
'', they were most visible as a result of the popularity and success of
Blizzard
A blizzard is a severe Winter storm, snowstorm characterized by strong sustained winds and low visibility, lasting for a prolonged period of time—typically at least three or four hours. A ground blizzard is a weather condition where snow th ...
's ''
Overwatch
''Overwatch'' (abbreviated as OW) is a multimedia franchise centered on a series of multiplayer first-person shooter (FPS) video games developed by Blizzard Entertainment. ''Overwatch (video game), Overwatch'' was released in 2016 with a success ...
'' in 2016.
Loot boxes started becoming more common in full-price games, leading to several titles released in 2017 to be criticized for egregious implementations of loot boxes that were seen as anti-consumer, including Microsoft's ''
Forza Motorsport 7'', Warner Bros. ''
Middle-earth: Shadow of War'', and EA's ''
Star Wars Battlefront 2''.
Because of their random nature, loot boxes are seen by some as a form of gambling, and several national governments have banned or regulated loot boxes under gambling legislation, or are looking to implement such legislation in wake of the loot box controversy arising from ''Star Wars Battlefront 2''.
The fatigue over loot boxes led to a new monetization approach in the form of
battle pass
In the video game industry, a battle pass or rewards track is a type of monetization approach that provides additional content for a game usually through a tiered system, rewarding the player with in-game items for playing the game and complet ...
es. Initially used by Valve's ''
Dota 2
''Dota 2'' is a 2013 multiplayer online battle arena (MOBA) video game by Valve Corporation, Valve. The game is a sequel to ''Defense of the Ancients'' (''DotA''), a community-created Mod (video gaming), mod for Blizzard Entertainment's ''War ...
'', the battle pass concept was popularized by ''
Fortnite Battle Royale
''Fortnite Battle Royale'' is a 2017 Battle royale game, battle royale video game produced by Epic Games. It was originally developed as a companion game part of the early access version of ''Fortnite: Save the World'', a cooperative survival ...
'' in early 2018 and began to be used in other popular games. Battle passes provide a tiered approach to providing in-game customization options, all visible at the start as to avoid the randomization of the loot box approach, and requiring the player to complete various challenges and early in-game experience to unlock these tiers to gain the rewards; some games also provide means for players to use microtransactions to purchase tiers. Battle passes allow developers to roll in new content, encouraging players to purchase a new battle pass to obtain this content. ''Fortnite'' had proved a successful model, as while the game is free-to-play, microtransactions to purchase battle passes or to directly buy certain items have brought in hundreds of millions of dollars per month in revenue following their introduction.
Historical pricing of games
The pricing of video games historically has not be set by any fixed price point though the markets will tend to average to a common price for a top-end game made by a first-party studio or a
"triple-A" (AAA) developer, with games of lesser quality ("bargain-bin games"), or those made by smaller developers, such as indie games, sold under this point.
Uncommonly, a game may ask for a higher price than the average but typically due to additional hardware or features sold. For example, Sega released ''
Virtua Racing'', originally an arcade game, for its
Sega Genesis
The Sega Genesis, known as the outside North America, is a 16-bit Fourth generation of video game consoles, fourth generation home video game console developed and sold by Sega. It was Sega's third console and the successor to the Master Sys ...
system by including the Virtua Processor used in the arcade machines within the cartridge itself, bringing the cartridge to a
MSRP compared with the average for most Genesis games.
Pricing of games is based on numerous factors beyond development costs. It includes publisher payments including their marketing fees, manufacturing and printing costs, licensing fees for consoles, distribution, and retailer cuts, as well as accounting for possible returned inventory. An estimate from ''
The Los Angeles Times
The ''Los Angeles Times'' is an American daily newspaper that began publishing in Los Angeles, California, in 1881. Based in the Greater Los Angeles city of El Segundo since 2018, it is the sixth-largest newspaper in the U.S. and the larges ...
'' of the costs behind a game in 2010 showed that only of that price, approximately 45%, was based on the publishers' costs which included development costs. Some of these costs remain unchanged over time, but technology improvements can see factors like manufacturing and distribution costs drop due to new media types and distribution, while more advanced game features will require greater development and publisher budgets.
Historically, the pricing of video games follows the trends of the industry. Initial cartridge-based games for the second generation in the early 1980s were around . After the 1983 crash and the rapid technology advance of consoles over the third, fourth, and fifth generation, cartridge costs also rose due to added costs of ROM storage and
coprocessor
A coprocessor is a computer processor used to supplement the functions of the primary processor (the CPU). Operations performed by the coprocessor may be floating-point arithmetic, graphics, signal processing, string processing, cryptography or ...
s within cartridges, bringing prices up to around the late 1990s.
The fifth generation of consoles as well as personal computer games brought the introduction of optical media for game distribution, which was cheaper to produce. Initial games introduced on optical media were often priced comparable with cartridge games at around but after a few years, the price of these games settled to around .
Upon the introduction of the seventh generation of consoles in the mid-'00s, publishers started pushing at a price point for games, corresponding with ongoing economic growth at that time.
The price remained a constant for fifteen years through the seventh- and eighth generations of consoles.
However, these costs represent the initial purchase retail costs, and as described above, since around 2010, post-release monetization through DLC, season passes and other forms have become the common market practice with most AAA games to obtain additional review after the initial sale, in addition to collector's editions for initial sales.
There were industry indicators that another price bump was expected to occur up to with the introduction of the new generation of consoles, the
PlayStation 5
The PlayStation 5 (PS5) is a home video game console developed by Sony Interactive Entertainment. It was announced as the successor to the PlayStation 4 in April 2019, was launched on November 12, 2020, in Australia, Japan, New Zealand, North ...
and
Xbox Series X and Series S
The Xbox Series X and Xbox Series S are the fourth generation of consoles in the Xbox series, succeeding the previous generation's Xbox One. Released on November 10, 2020, the higher-end Xbox Series X and lower-end Xbox Series S are part o ...
in November 2020.
This was primarily due to the more advanced technology that the new consoles offer that can run more impressive games but require greater developer resources to commit to supporting those features. The price bump had also been one that some in the industry believed should have happened sooner, but there had been strong resistance to move off the price point without good reason. The price point was a minimum
resale price maintenance
Resale price maintenance (RPM) or, occasionally, retail price maintenance is the practice whereby a manufacturer and its distribution (marketing), distributors agree that the distributors will sell the manufacturer's product at certain prices (re ...
that distributors of the high-end games set for retailers as it gave distributors and retailers an assurance of how much take of each sale they got and could plan their businesses around that, and moving away from that model without other market forces at play would be risky.
Prior to September 2020, some individual games had been marked at the higher price tag, with
Take-Two Interactive
Take-Two Interactive Software, Inc. is an American video game holding company based in New York City founded by Ryan Brant in September 1993.
The company owns three major Imprint (trade name), publishing labels, Rockstar Games, Zynga and 2K ...
's ''
NBA 2K21'' being the first such game.
Upon announcement of the pricing and release date of the PlayStation 5 in September 2020, Sony confirmed that it was adopting the price point for some of its first party games for the platform. Sony Interactive Entertainment president Jim Ryan said that this increase reflected the entertainment value of the game, stating "If you measure the hours of entertainment provided by a video game, such as ''
Demon's Souls'' compared to any other form of entertainment, I think that's a very straightforward comparison to draw." Tim Stuart, the chief financial officer for Microsoft's Xbox division, also suggested that prices for their first-party games on the Xbox Series X/S will increase from after the console's launch. Ubisoft stated in September 2022 that its AAA games going forward will likely carry the price. By the end of 2022, both Sony and Microsoft had committed to $70 games from their first-party studios, while Nintendo began offering select games at $70 in 2023, making the pricing decision on a case-by-case basis going forward.
Upon announcement of the
Nintendo Switch 2
The is a hybrid video game console developed by Nintendo, released in most regions on June5, 2025. Like the original Nintendo Switch, Switch, it can be used as a Handheld game console, handheld, as a Tablet computer, tablet, or connected via ...
in April 2025, Nintendo said that its first-party games would cost between $70 and $80, an increase from original Switch games that typically cost $60. While these costs are consistent with the rate of inflation,
''Ars Technica'' writer Andrew Cunningham also suggested this reflected the increases costs related to the improved graphics on the Switch 2. However, these costs brought concerns from players that highly-anticipated games on other systems, such as ''
Grand Theft Auto VI'', may be pushed to higher prices, as much as $100, given the lead that Nintendo appeared to have given to go past the $70 game price. Microsoft announced in May 2025 price increases across its hardware and software lines, with new first-party games to be sold for $80.
[https://www.ign.com/articles/microsoft-raises-the-price-of-all-xbox-series-consoles-xbox-games-confirmed-to-hit-80-this-holiday]
See also
*
Data monetization
Data monetization, a form of monetization, may refer to the act of generating measurable economic benefits from available data sources (analytics). Less commonly, it may also refer to the act of monetizing data services. In the case of analytics, ...
*
Software monetization
*
Website monetization
References
{{Video game monetization
Video game industry
Video game marketing
Virtual economies