For decades, we have paid for videogames in the same way. In exchange for a one-time fee, you could play a game as many times as you liked. You can sell or lend your game at your own discretion.
This model of paying cash up front remained constant, even as the sales model changed from big cardboard boxes to digital downloads. In the last five or six years, however, a new revenue model is becoming more prevalent.
What are microtransactions?
Microtransactions usually involve small monetary amounts. Microtransactions can be as little as two dollars. However, many games allow players to spend much more.
In the late 2000s, they first appeared as mobile and social games where the users could not buy the game up front but instead purchase additional items in-game.
Microtransactions, which are now common in free-to-play video games, have two main mechanisms. First, users can skip waiting periods. Every so many hours, players receive a limited number of lives or currency in the game. They can wait until the next refresh or buy more. Examples of this are PokerStars, Candy Crush Saga, and Farmville.
The second type is to purchase additional items in the game that allow players to customize their characters or add new skills or features.
Most players were satisfied with the deal. The players understood that while they were able to play the game for free, they could upgrade their experience by paying a developer.
Microtransactions for Larger Games
Microtransactions have been added to many games in recent years. It didn’t mean that players wouldn’t have to pay money for games such as NBA 2K20 or FIFA. They’d need to buy both games to get all the content.
Microsoft first talked about microtransactions in 2006. However, it took them a long time to implement this model. Tiger Woods PGA Tour 11, a game by Electronic Arts, was the first to include microtransactions . The online play option was only available to users who purchased a used game.
The practice was not popular among gamers. So, it was replaced bj88 by “season passes”, which allowed players to pay for additional downloadable content. It was popular for games such as Call of Duty that allowed players to download new maps.
Developers have added new forms of microtransactions to their arsenal. First, there is the lootbox. The user can purchase a box of in-game goods, but they don’t usually know what is inside until they pay for it. Character and weapon customization is another option that can be purchased from a menu.
Huge Profits
Publishers of video games will say that microtransactions are necessary to cover the rising costs of creating large-scale games. However, the cost of the game has been stable for more than 20 years.
Microtransactions have also been credited with a huge increase in popularity for games such as CS GO. The ability to customize and upgrade characters was a big hit with fans.
Critics claim that the main reason behind this move is to generate revenue from gamers who buy or rent second-hand games.
Microtransactions, regardless of their motive, are a major source of revenue for publishers. Take-Two Interactive (the company that publishes Grand Theft Auto, Red Dead Redemption and other games) generates over 50% of its revenue from in-game purchases. In order to put it into perspective, Take-Two Interactive generated $857.8 millions of profit just in the second quarter 2020. This means that more than 425 million dollars of revenue came from the microtransactions.
Here To Stay
It’s safe say they are here to stay. Publishers make a lot of money with microtransactions and the payment model generates revenue streams long after the initial sale of the game.
Many fans complain about them, especially the annoying messages that ask them to purchase more items, or the unfairness in “pay to win”, but there are many who are willing to pay.
Microtransactions will not disappear as long as these factors are unchanged.