The Psychology Behind Why You Spend Money on Games

The gaming industry is a booming giant, the expansion is expected to make the global gaming industry worth $321 billion by 2026, according to PwC’s Global Entertainment and Media Outlook 2022-26. But how exactly do game developers turn those pixels into profit?  

The Evolution of Monetization
The Major Players in Monetization
The Psychology of Player Spending
Finding the Right Balance
The Future of Game Monetization
The Ethical Considerations

The Evolution of Monetization

Traditionally, games were sold as a one-time purchase. Players paid upfront for the complete experience. However, the digital age ushered in a new era of monetization models. The internet facilitated online stores, downloadable content (DLC), and microtransactions, fundamentally changing how developers earn money.

"The concept of game monetization refers to earning revenue from games, often through in-game purchases, ads, or subscription models," explains Kevin Burg of Kevuru Games. This shift has created a complex ecosystem where developers must carefully choose the right strategy for their target audience and game genre.

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The Major Players in Monetization

There are several key methods developers use to turn a profit:

• Upfront Purchase: This is the classic model where players pay a fixed price to buy the entire game. While seemingly straightforward, variations exist. Some games may offer a base experience with additional content available as paid DLC.
• Free-to-play (F2P) with Microtransactions: This model has become hugely popular, particularly in mobile gaming. Players download the game for free but can spend real money on in-game items like cosmetic upgrades, power-ups, or virtual currency used for further purchases. According to Statista, in 2021, microtransactions and DLC generated more revenue than game sales themselves for industry giant Activision Blizzard. The key to success here is offering a satisfying core gameplay experience that isn't crippled by a paywall.
• Subscriptions: This model allows players to access a game or a library of games for a recurring monthly or yearly fee. This is common for online multiplayer games (MMOs) and online services like Xbox Game Pass or Sony's PlayStation Plus. Subscriptions often come with additional benefits like exclusive content, early access to new releases, or discounts on in-game purchases.
• In-Game Advertising:  This involves placing ads within the game itself. These can be banner ads displayed on the screen, video ads that play between levels, or even product placements within the game world. While not as prevalent as other methods, in-game advertising can be a revenue stream for certain types of games, especially free-to-play titles.

The Psychology of Player Spending

Understanding player psychology is crucial for developers to effectively monetize their games.

• The Desire for Uniqueness: Players often crave ways to stand out from the crowd. This is where cosmetic microtransactions for character skins, weapon modifications, or other visual customizations come in. "Gamers are willing to spend money on in-app purchases to personalize their avatars and showcase their achievements to other players," says an EY report.
• The Gacha Mechanic:  This system, popularized in Japanese games, involves players spending in-game currency or real money on random loot boxes containing virtual items. The thrill of the unknown and the potential to score rare items fuels player spending. However, gacha mechanics have faced criticism for potentially resembling gambling, particularly when it can lead to excessive spending to acquire coveted items.
• The Completionist Mindset: Some players have a strong desire to "complete" a game by collecting all available items or achieving all possible goals. Developers can leverage this by offering completionist rewards that can only be obtained through in-game purchases.

Finding the Right Balance

Monetization strategies need to be implemented carefully. An overly aggressive approach with intrusive ads or excessive microtransactions can quickly sour the player experience and lead to churn (players leaving the game).

"Maintaining the correct balance while leveraging the different models based on game genres is the key," emphasizes the EY report. For example, a narrative-driven single-player game might rely solely on an upfront purchase, while a free-to-play multiplayer game might utilize a combination of microtransactions and cosmetic DLC.

The Future of Game Monetization

The gaming industry is constantly evolving, and so too are monetization models. Here are some trends to watch:

• The Rise of Cloud Gaming:  Cloud gaming services like Google Stadia and Microsoft xCloud allow players to stream games without needing powerful hardware. This opens up possibilities for subscription-based models offering access to vast libraries of games.
• The Power of Subscriptions: Subscription models are expected to continue growing, offering players access to multiple games, exclusive content, and early access opportunities. This model fosters a recurring revenue stream for developers and encourages player retention.
• The Impact of Blockchain and NFTs: Blockchain technology and Non-Fungible Tokens (NFTs) have the potential to revolutionize game ownership and monetization. NFTs can represent unique in-game items like weapons, skins, or even virtual land. Players can then own and trade these items outside the game, potentially creating a valuable secondary market. However, the implementation of NFTs needs to be done carefully, ensuring it enhances the gameplay experience and avoids exploitative practices.
• The Focus on Player Value: With competition fierce, developers are increasingly prioritizing player value. This means offering fair monetization practices that don't hinder gameplay and providing players with a sense of progression and reward even without spending extra money. Building a strong community around the game and fostering positive player interactions will be key for long-term success.

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The Ethical Considerations

Monetization strategies must be balanced with ethical considerations. Here are some important points:

• Transparency: Developers should be transparent about their monetization practices, clearly outlining what players can expect from in-game purchases and how microtransactions impact gameplay. Loot boxes, for instance, should disclose drop rates for high-value items.
• Protecting Children:  Games with microtransactions should have safeguards in place to prevent excessive spending by children. This could include requiring parental approval for purchases or setting spending limits.
• Fairness and Balance: Monetization elements shouldn't create an unfair advantage for players who spend more money. Everyone should have a fair chance to succeed based on skill and effort.

Conclusion

The monetization of games is a complex and ever-evolving landscape. Developers need to strike a delicate balance between generating revenue and ensuring a fun and engaging experience for players. By understanding player psychology, embracing new technologies, and prioritizing ethical practices, developers can build sustainable models that foster a thriving gaming ecosystem for everyone involved.

FAQs

What are the major monetization models used in the gaming industry?

The major models include upfront purchase, free-to-play with microtransactions, subscriptions, and in-game advertising.

How do game developers leverage player psychology to monetize their games?

Developers leverage the desire for uniqueness, the gacha mechanic, and the completionist mindset to encourage player spending on cosmetics, loot boxes, and exclusive rewards.

What are some ethical considerations that game developers should keep in mind when implementing monetization strategies?

Developers should ensure transparency, protect children from excessive spending, and maintain fairness by avoiding pay-to-win mechanics.

What are some emerging trends in game monetization?

Trends include the rise of cloud gaming subscriptions, the growing power of subscription models, the impact of blockchain and NFTs, and a focus on providing players with value beyond just monetization.