Monetization is a very sensitive topic, and it has changed over the years, pushing new narratives on how games should monetize on their players.
It’s common sense that a company has to generate some form of revenue to sustain operations and keep the game running. Although, most players don’t like to pay to play any game. That’s why monetization is always evolving and changing.
To better understand nowadays policies and practices, we must learn a bit of history of how gaming companies monetized and generated revenue out of their games.
Let’s go all the way back even before video games existed, we had board games, such as chess or checkers for example. You needed to buy a copy or make one yourself to be able to play the game. You needed to Pay in order to Play.
A very simple monetization strategy: Manufacture Costs + Profit Margin = Final Price
Gaming companies, would monetize based on a margin on top of their costs.
Then we had the golden years of Flipper/Pinball Machines and later the Arcade Video Games, these were worldwide accepted and ruled the gaming category for about 20 years.
The monetization model on these machines were based on Pay to Play. Although one single player would not pay for the whole cost of the machine, but rather a lot of players paying small bits of it over-time, until it begins to generate profits.
As an example, let’s say one Arcade Video Game cost $5K USD to manufacture and it costs $0.50 every time it’s played. It would require at least 10.000 Plays on each Machine (excluding Electricity costs), to only then to start to see a profit margin.
It was an investment, but very lucrative one specially during the years from 1970 to 1990.
As technology evolved we were able to get those Arcade Video Games into our homes, with console gaming.
Either it was Atari, Gameboy, Sega, PlayStation, Xbox, Nintendo, there were a lot of competitors out there delivering gaming consoles that now were played at home. This was the decline of Arcade video Games and Pinball/Flippers, they became more nostalgia memorabilia and collector items than actual platforms to play games.
Although technology advanced, the player still needed to purchase a physical copy of the game in order to play it.
So, first we had Cartridges, Disquetes, then CD’s and DVD’s, but the player required to own those to be able to play.
Gaming companies would produce videogames, then have a distributor that would manufacture them (Cartridges, CD’s, etc) and ship them all over the world to be placed in local stores to be sold.
While Arcade Video Games were in Public locations and they could be used over time by an incredibly high amount of players. Gaming consoles would only sell to individual players, meaning that 1 game would typically played by only 1 player.
The Console Gaming Monetization model now had a new problem called: Unsold Copies.
This was the major reason for most of Gaming companies to fail or close activity during that time period - They launched a game, but failed to sell enough copies to keep the company alive, while not having funds to keep the company alive, it could not produce the next title.
With the surge of the Internet and it’s growing bandwidth power, that companies realized they could cut one of their biggest costs: Physical Manufacturing.
Before games had to be tested thoroughly and exhaustively by Q&A - Imagine launching Mario 64 full of bugs, such as an unplayable level, and it being produced worldwide and with no chance to make a patch to fix it.
With this new distribution model, gaming companies realized that they didn’t need the game to be absolutely perfect at launch, as they were able to give patches to the game through the internet. This made Gaming company costs to reduce substantially.
But there was a flip side, if now gaming companies can update their game forever, how are them going to financially sustain if the game can only be sold once?
This was answered by the Subscription model, a very common monetization model used early MMORPG’s between 2000-2010. This would allow a constant revenue every month, to keep logistics alive and keep delivering more content for the same game.
As technology kept evolving and with the introduction of new programming languages such as Javascript, it made much more accessible to Game Devs to make games, all it took was a browser and a connection to the internet for the game to be played.
Although it started earlier with games such as Runescape, this was the beginning at large of the Free-to-Play and the Indie Dev’s.
Gaming companies now could be as small as 1-3 Dev team, and they knew they couldn’t count on a Subscription model to keep the gaming company alive, they rather make a lot of small games, rather 1 big game - This was the introduction of the Casual/Hyper Casual gaming.
Games like Farmville had a major success as it was Free to Play and it was in the Hyper Casual category, which brought in millions of players that haven’t played a game before.
Along with the introduction of the Casual Games on a Free to Play model, it was when Ingame Sales started to see their full potential as a monetization model.
Gaming companies started to sell game progression through their Ingame Shops. FarmVille which is a Free to Play game, has generated over $1 Billion in Sales through the Ingame Shop. - Pretty incredible, right?
While all of the above was happening, a new gaming platform appeared - Mobile gaming.
While this wasn’t particularly attractive to hardcore gamers, it allowed gaming to become the biggest entertainment industry, surpassing the movie and film industries combined. Now everyone can become a player and it’s distributed digitally directly into our personal phones.
Adding to the mixture of how Casual Games were dominating the market, the Free to Play and Ingame Shops were here to stay.
Gaming companies had already realized themselves as an entertainment service, quickly they understood the power of live-ops, as being a lucrative source of revenue. Gaming companies started to push more and more time limited events, boosting their Ingame Sales during the live-ops activation frame.
Although this new model had a lot of potential, and we saw how MOBA’s and GATCHA games particularly capitalized on this monetization model, the amount of content being produced and distributed got incredibly competitive.
With the growing competition arising, the Free to Play model would require a large player base, so marketing budgets began to arise and make Free to Play games more costly to make.
There was the need again to search for alternative monetization models.
Gaming companies saw what was happening in Social Media platforms, such as Facebook, Instagram, Twitter - Advertisers were paying for reach and audience.
They capitalized that revenue source and began to incorporate Advertisement in games, so they would not depend any longer on the need of Players making Ingame purchases.
Blockchain technology enabled a new gaming genre to appear: Play to Own/Earn.
While this can turn into Free to Play or Pay to Play subcategories, the Play to Own/Earn is still on it’s infancy as a monetization model. There isn’t a right formula/structure, neither it has been long enough to declare a viable option.
Although, it creates enough space to reward Players from all the other monetization models, so there is a good chance that this model is here to stay.
If Play to Own/Reward it needs to give back something to the Players, the funding could come from re-investing Advertising, Subscription Ingame Sales revenue into the ecosystem. It could simply be by rewarding players with assets and due to the game’s success, those assets become valuable in the secondary market.
So, in the end, there isn’t a particular right way to monetize games, but rather a combination of several elements, that fit best the game, the genre, the title and the audience.
Monetization in games is always evolving, so adapting and testing are always good practices to keep a game running over 10 years.
While on The Sandbox, monetization strategies are still very limited, but here are a couple of examples and also their intrinsicate challenge:
- Asset/Avatar Sales: Provides a one time Sale - Boosts short term Sales, but it’s hard to sustain/maintain as a steady source of revenue in the long term.
- Season Passes: Having Seasons in your experience, allows you as a Creator to monetize through cycles (15 day Season, 1 month Season, etc) - It relies on having a player base, that is willingly to buy regular Season Passes. It’s challenging, but it can provide a steady source of income on the long term.
- Advertisement: Reserve the Loading Screen to advertise a brand, place a Billboard inside the game/experience. - This will require significative and substancial metrics in order to any advertiser have a ROI on their advertisement investment.
- Progression: Items that can give a boost Ingame, Items that unlock gated areas, Items that provide any type of power-up to the Player. - This has the downside of the game being tagged as Pay to Play. Depending on how it’s managed, it can be effective as the past already shown before.
- Cosmetics: If the game has enough culture, players will want to outstand and shine in the crowd. Nothing like that legendary skin that only you have it and everyone else desires it. - Monetization could come through secondary sales through royalties. One of the best examples is the Wizzyverse and the Wizzy’s. There were times where they traded over 1 Eth each, so for every time it was traded on that value, it would generate 5% on royalties. At today’s prices, that’s $150 for each transaction on the secondary market.
At this stage, a mix between all of the above would give you an immediate feedback - Focus on those that have better results and cut on those which aren’t appealing/attractive to the player base. Knowing your audience is very important!
As The Sandbox keeps growing, expanding and evolving, new monetization formulas will appear that weren’t that obvious before.
We want to hear your thoughts on it - What other monetization models on The Sandbox could be added to this list?
If you are interested in knowing more about Game Design, you should check out these articles too:
- Game Economy - Faucets and Sinks: ⚙️ Game Economy - Faucets and Sinks
- Game Loop - A Beginner’s Guide: ⚙️ Game Loop - Beginner's Guide to Core Gameplay Loop