As micro-transactions such as loot boxes come under fire, the industry looks to new monetisation models. Premium games and subscription services might hold the answer. But isn’t part of Fortnite’s success based on the fact it’s free (at least initially) to play? Here’s where the money will be made in 2020…
Traditionally purchased from brick-and-mortar stores, and latterly ecommerce sites, the advent of digital distribution saw people starting to buy and download video games directly onto their devices. In more recent years, subscription games (think World of Warcraft) and subscription services like Xbox Games Pass, Ubisoft’s Uplay+ and Origin Access have been chasing consumers’ cash.
Then there’s mobile gaming, where free-to-play and premium titles (where the developer and the retailer each take a share from the sale) compete for attention in app stores. And consumers musn’t be fooled by ‘free-to-play’. When they don’t get charged for a game, there has to be a way within the game for the developer to make money. Take Fortnite – according to gaming analytics firm SuperData, it earned the most annual revenue of any game in history across 2018.
Related Read: The Marketing Potential of Mobile Gaming
Top earning free-to-play games:
- Fortnite, Epic Games — $2.4B
- Dungeon Fighter Online, Nexon — $1.5B
- League of Legends, Riot Games, Tencent — $1.4B
Top earning premium games:
- PlayerUnknown’s Battlegrounds, Bluehole — $1.028B
- FIFA 18, Electronic Arts — $790m
- Grand Theft Auto V, Take-Two Interactive — $628M (source: Superdata Research)
Spending while playing
The secret to Fortnite’s success? Selling in-game ‘skins’ and ‘costumes’ and charging an optional quarterly fee for access to exclusive system updates. As a result of these kinds of in-game purchases (or micro-transactions) free-to-play has become the dominant business model in terms of global revenue. Games like Fortnite represented 80% of global revenues in 2018.
In-game monetisation might be a huge source of revenue, but it’s likely developers will need to come up with alternatives following well-publicised concerns around loot boxes. This form of random reward sees players purchase a digital grab bag with no idea as to what might be inside, causing many to view it as a form of gambling.
Belgium banned loot boxes in 2018 and, in 2019, top console producers Microsoft, Nintendo and Sony announced a strict loot box policy to be introduced in 2020. This coincides with the launch of the Entertainment Software Association’s initiative to disclose loot box odds by the end of the year.
This means certain video game companies will have to share the odds of gamers getting specific items from their in-game loot boxes, therefore removing the gambling element. A key learning from all this controversy is that game-gamer relationships should be built on trust. So transparency, in particular around micro-transactions, will go a long way in 2020.
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Getting brands to buy-in
If a mobile game is free and doesn’t offer in-app purchases, it’s probably making its money via advertisements – and this is prompting some to position gaming as advertising’s next key channel. Gaming has gone mainstream, with 86% of internet users worldwide saying they have played a game on at least one device within the past month, so it’s understandable brands want a slice of that kind of exposure – whether it’s through banner advertisements, native in-game ads, product placements or rewarded videos (source: eMarketer).
The proliferation of streaming services, such as Twitch, and the popularity of video game content being uploaded to YouTube has grabbed the attention of advertisers, and with the imminent launch of further cloud-gaming platforms (Google Stadia was released in November 2019), more and more brands will add games into their marketing mix.
By doing so they will have access to an attentive and fully immersed audience, who can’t block ads that are served directly into a game. Brands will also find they have greater control over when and where their messages appear.
To discover more about 2020 marketing opportunities in the gaming sector, download our latest guide ‘Gaming Marketing 2020: Trends to Stay Ahead of the Game’.
Rewards for the win
The rise of Google’s AdMob and Twitter’s MoPub has helped developers rethink their monetisation strategies by implementing rewarded ads, resulting in a number of hybrid games (with both in-app purchases and rewarded ads) emerging recently. This gives players the option of paying with their time (by watching an ad) or paying with their money (to buy a skin or game-enhancing tool). Google claims that, as a result of working with AdMob to implement a hybrid game app, Chinese developer Avid.ly saw users buy in-app items 18% more often and spend 20% more time in the game. Overall, total revenue grew by 40%, prompting Avid.ly to roll out rewarded ads across its library of gaming apps (source: Google AdMob).
Creating a mobile loyalty league
Subscription services are not only an enticing revenue stream, their promise of enormous libraries and access to upcoming games also drives greater engagement. And while they have traditionally been the domain of PCs and consoles, mobile game developers are experimenting with subscriptions – often offering them alongside in-app purchases – to give users a premium experience.
So how does it work? By paying a fixed fee, consumers gain access to a variety of games in a curated environment. Some services offer a degree of exclusivity – like Apple Arcade, which gives designers the freedom to create games without the need to integrate free-to-play dynamics – while Google Play Pass is populated with games that are live on the Google Play store. Both subscription options complement Apple and Google’s existing app store models, with the latter presenting the opportunity for existing games to find new revenue streams beyond their existing in-app purchases or in-app advertising. Regardless of the platform, however, the long-term success of this monetisation model will rely on publishers working alongside iOS and Google Play to communicate the value of game subscription services.
Related Read: Cloud Gaming: The Challenges and Opportunities
To conclude, the type of game will no longer dictate how it is monetised and, as a result, diversifying gaming revenues will be a key focus in 2020. If they haven’t already, marketers would be wise to include gaming in their strategies going forward. To discover more, download our latest report ‘Gaming Marketing 2020: Trends to Stay Ahead of the Game’.