How the Video Game Business Model Has Changed Over Time

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    Over the last 100 years or so, the way humans have told stories has changed dramatically. Before, we wrote books, scripted plays, or sang songs. Then came radio, film, and television, creating new types of entertainment and making it easier to tell our stories to bigger audiences. 

    Many stories were sold in the form of books, vinyl, cassettes, videos, CDs and DVDs. Each one sold for a flat fee from a store and granted us the right to enjoy it as much as we liked. 

    When video games came along in the 1970s and 1980s, they created a whole new way of telling a story, adding a new interactive element. But they continued to be sold in the same way (for the most part), with gamers buying a cartridge, tape, or disc and taking it home to play. 

    That has changed in more recent years though, with publishers looking for new ways to generate revenue from their intellectual property and trying to keep up with the changing technological landscape. 

    Some people argue that the changes have degraded the quality of games, while the earth-shattering success of some titles with these new business models would suggest that the majority of gamers disagree. 

    Early Video Games

    Some of the first video games actually used a “pay per play” model. In the 1970s and early 1980s, few people owned consoles or computers, so they had to visit an arcade to play titles like Space Invaders and Pac-Man instead. 

    Inserting a coin into the machine would grant the player a finite amount of time or lives. When they were used up, the game ended and they’d have to insert more coins to continue. 

    Traditional Monetization Method

    This changed pretty quickly once more people began to buy their own hardware. Video games began to be sold like books, movies, and music. You’d visit a store, hand over your dollars, and leave with a physical medium that contained the entire game. 

    Even as retail sales moved online, the monetization model didn’t change. Only, instead of visiting the store to get a new game, players would have it delivered right to their home. 

    When you had finished with it, you could sell it on to someone else, recouping some of your initial spend. 

    Early Attempts at Recurring Revenue

    However, publishers didn’t like this model as it meant they couldn’t profit from these secondhand sales. They also had to contend with software piracy as it was relatively easy for someone to copy a disc and share it with a friend.

    Early pioneers of new monetization methods were Ubisoft and EA. These companies created their “online passport” systems that required a player to enter a unique code to enable multiplayer functionality on a new device.

    Retail copies of games would include a card containing a unique code or could be purchased separately for those that had bought a game in the secondary market. 

    This was widely unpopular among gamers who felt they were being punished. 

    Free-to-Play and DLC

    Publishers then turned the model on its head. Instead of taking something away from players if they didn’t pay, they created a model that let them pay extra for more content. 

    Early developments of this were “downloadable content (DLC) packs”, containing extra maps, new weapons, extra cars, and/or new customizations. Players could still enjoy the original game they paid for, but if they handed over a little extra cash, they could get even more content. 

    This approach proved incredibly popular, with gamers willing to pay extra to extend the life of the titles they owned. 

    The next step in the development was to make the game free and to only charge for these extras. Today, there are thousands of free-to-play games from brands like PokerStars, Ubisoft, and even Nintendo.

    Some of today’s most popular video games use this model of monetization, including Fortnite, Call of Duty: Mobile, and Candy Crush. 

    This model was pioneered by Zynga with its free-to-play games like Words With Friends, Farmville and Mafia Wars, a move that has been credited with making video games popular among a much broader demographic than before. 

    Some companies, such as Take-Two and Electronic Arts, have combined the old and new monetization models together, charging for their games upfront and allowing players to pay for regular updates. 

    For example, Grand Theft Auto V continues to attract around a million players a month despite being almost eight years old. Rockstar Games regularly pushes out updates like the Diamond Casino and Resort and the heists missions. 

    Although some criticise the approach, it does seem to strike a reasonable balance between providing a quality game and ensuring those that create them continue to be fairly compensated for their work.

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