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(Original link: cointelegraph.com)
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For the past decade, the dominant business model in the gaming industry has been Free2Play.
This model entails giving the game’s base experience away for free and then monetizing the player base through ads and in-app purchases, referred to as “microtransactions”. These transactions are a combination of purchasing game content, loot boxes, and currency packages.
Over time, this model has become increasingly adversarial towards players, employing predatory monetization schemes and catering to “whales” instead of the average user. Despite its voracious nature, this business model has been enormously successful, helping to build a $159 billion dollar industry that’s now more than twice the size of the global movie and music industries combined.
This tremendous growth really took off in 2007, when the iPhone was released and smartphones started to become ubiquitous. Today, mobile gaming alone is a $77 billion industry, representing 48% of the total gaming market. Predatory monetization
Mobile games in particular apply certain monetization tactics to psychologically manipulate players into buying “bundles” of game items. Players are given a selection of purchase options, usually ranging from $1.99 to $99.99, which include loot boxes, character boosts, and in-game currency that will help them progress faster and stand out more in-game.
Despite prices being arbitrarily set by the developer, the larger bundles are typically advertised as providing three-to-five times the value for purchasing in bulk. They are marketed aggressively through push notifications and at strategic points during character progression.
This model eventually devolves into a “Pay2Win” environment where those with the most disposable income, called “whales”, will have an objective advantage by buying their way to superior gear and faster progression time. The best items are usually only available through randomized purchasing via loot boxes (with a <1% chance to drop), which lends itself to whales acquiring them immediately.
That leaves the majority of players disadvantaged, as they either cannot afford or are unwilling to pay for that luxury, and will require several weeks or months of grinding to get the same gear for free.
According to a Facebook Gaming report , 61% of gamers say they have felt post-purchase regret after making an in-game purchase. While Free2Play has proved to be successful in helping propel the industry forward the past decade, we’re entering a new era where gamers will increasingly reject predatory monetization and start to insist that top grossing game developers deliver some of that value back to the players.
A new business model called Play2Earn aims to directly address this spending disparity. In this model, open market dynamics allow game assets to retain value, better aligning incentives with players. Savvy developers are choosing to empower players to trade their assets, giving them a superior sense of ownership and control. All monetization is not created equal
It’s not accurate to paint all Free2Play games with the same brush, and certainly some games approach monetization far better than others. PC games that serve the esports market are not immune from this , but they certainly are better than mobile-first games, in that the purchases are usually cosmetic in nature only.
Overall though, this is a huge problem that has gotten worse as the industry has grown. While the typical game studio maintains a limited profit margin, monetizing ads and the in-app purchases, the most successful ones don’t even need ads as they are wildly profitable with the bundle-style monetization alone.
Games like Call of Duty, Clash Royale and PUBG MOBILE are generating tens of millions of dollars in revenue each quarter. Most games fail to ever achieve this level of breakout success, but the ones that do become cash cows for many years. It’s common for them to release content quarterly, giving players enough content to consume to keep them minimally engaged and continuously spending, but the experience doesn’t change in any material way. (Looking at you Pokémon Go).
There’s certainly nothing wrong with wanting to create an extremely profitable game company, but there’s a big opportunity for top grossing games to experiment with new business models. Of these tens of millions of dollars each quarter it’s reasonable to have some of that value flow back into the game’s economy where it can work its way back into the hands of the players that helped generate the most value.
At the same time this could create deeper layers of engagement, as players are directly incentivized to crank out daily quests and build up an account for the long term. Rewarding users who create a lot of value will pay dividends in the long run.
Creating earnings opportunities for players in addition to just spending opportunities can help to establish more sustainable digital worlds that have flourishing auction houses and robust secondary marketplac...