A brief history of game monetisation – Part 1

The way that games have been monetised has changed drastically over the years, and we’re actually in the middle of a period of change now. 

The mobile game market is being shaken up by an immense amount of new users (we’re up to over 2 billion gamers globally), and the emergence of new gaming tech like VR that are speeding through monetisation phases already. 

Predicting the future of monetisation is difficult, but possible. It just requires some insight into what the industry is doing now, and a lot of insight into the history of monetisation to see how trends develop.

Let’s start at the beginning,

The Arcade Age

Photo of Four Quarters, modern arcade bar. Nostalgia is a powerful thing when it can create awesome businesses like this.

Both a social experience and a gaming one, rooms full of machines that people would flock to to play and compete. Games were simple, minimalist, pushed the available tech as far as they could and had addictive core experiences. They were highly profitable and the modern gaming landscape learned a lot from these games in terms of design, which we’ll talk about later.

It isn’t news for us to tell you that each ‘play’ was monetised, usually for some small change amount. There was a personal motivation for putting down that cost (fun) and a social motivation (being with/competing with friends).

The gaming landscape was just finding its feet and this monetisation model was perfect for the addictive, skill based experiences of the time. You could even think of them as casual or hypercasual games in the modern sense which, as we know from mobile gaming, are some of the most downloaded gaming experiences around.

Ultimately, the arcade experience declined as games moved into our homes and grew more complex, and this monetisation model was left in the dust.

Complex games, simple monetisation

Image from user manmademan at ResetEra

There was a healthy amount of crossover when the transition to console games happened. While console games as we think of them now are more complex than arcade games, there were dedicated home consoles for simple ball and paddle games (Pong on the Magnavox Odyssey) and there were complex arcade games (Dragon’s Lair’s amazing visuals (and not-amazing gameplay)).

As such, it’s a little unfair of us to say that the change in monetisation in this era was due to a game’s complexity BUT, as computers grew smaller and people spent more time playing them, developers stretched their legs and did amazing things. Long narratives. Open worlds. 3D models. It was the dawn of a new age…

And a transition to people “owning” the console, the game, and the whole experience. A pay-per-play model became impossible so a premium one-off purchase became commonplace. That made sense, but had a lot of teething problems.

The biggest was just how darn expensive games were. The N64 as one example was notorious for it, with games usually costing around ￡50 (~￡75 today). People started trading cartridges and discs instead of buying them, which reintroduced the social aspect of gaming.

The other core issue compared to arcades was profitability. 

An arcade addict with deep pockets is a potential never-ending revenue stream from one game, whereas a home gamer who physically owns everything pays once. The price of games was high, but it was an inherently limited monetisation model.

So how, games companies asked themselves, can we generate more income per user?

Games as modules

Wikia image of Oblivion’s horse armour

Why sell a game once when you can extend that game with downloadable content (DLC) and sell it many times? Or sell added peripherals like a unique controller? 

At the start there were some free experiments with DLC, then – in 2005 – the Xbox 360 introduced the model that we’re familiar with today. They started out with smaller in-game content packs for a few titles, believing that players could pick and choose more freely which would create greater value for players and for publishers. 

They also introduced a unique currency, Microsoft Points, which seems arbitrary but is actually a powerful monetisation tactic called ‘currency distancing’. By converting your real money to fake money, it doesn’t psychologically feel like you’ve spent anything when you buy things so you’re likely to buy more.

DLC as a monetisation tactic in general was initially laughed at, especially as devs didn’t know what to charge. Infamously, horse armour in Oblivion was considered an overpriced cash grab, yet it sold so much that publishers scrambled to try it too.

And here is a graph from Capcom showing the power of DLC:

But for most games creating functional content or story DLC requires man hours that are not profitable for a studio to invest in, so a solution was needed. That solution was two fold: cosmetics, and randomisation. What’s more thrilling than buying a hat? Buying a box that might have a super rare hat in it! Lootboxes were thus born and prove to be a wildly addictive and profitable monetisation strategy to this day.

That isn’t quite the end of console’s monetisation history, but to reach the next step we need to visit the world of mobile gaming… 

Join us next week for the second half of A Brief History of Game Monetisation where we’ll cover the mobile age, the present of game monetisation, and… the future.

Header image adapted from image of the amazing 17 Below arcade bar in Manchester