How come games make more money as an industry than other media?
For non-mobile games, most of the revenue still comes from mobile-game-like monetization schemes such as lootboxes/gacha/battle passes/skins/etc, not from the traditional sales.
These types of monetization schemes are incredibly lucrative, with many people spending hundreds, thousands, or tens of thousands of dollars over the lifetime of such games due to their addictive nature and gambling mechanics. Traditional media does not have an equivalent to these kind of monetization schemes.
It's not the size of the audience. It's the monetization scheme. The times when game revenue meant buying good old single player games without DLCs are long gone. Companies have long realized that's not where the money is.
Most big spenders are incredibly wealthy, like buy $30,000 wristwatches for fun wealthy. Games have figured out how to 'go infinite' on their spend possibilities and capture wristwatch money from these folks.
The other thing novel to games is social aspects. Just like buying fashion to wear in public, games let you show off your money in a way other mediums don't. Music has a near equivalent with VIP passes and private shows, but scaling these are human-bound in space or time respectively, which games aren't limited by.
Second, games provide a sense of community. A lot of game revenue is monetizing people's desire to not be alone. Calling these players addicted is I think reductive. Are people addicted to church? To golf? To therapy? Maybe some of them, but it's a poor generalization.
People spend big in games because:
* The spending is very stimulating visually and audibly (think lootbox openings)
* The gains from their spending translates directly to game-social prestige, game power, or both (i.e. an Advantage)
* This Advantage allows them to lord over the players who have spent less (or 0 in the case for F2P players)
Whether that manifests into addiction depends entirely on the rest of the game's design (but you know, games that introduce the Advantage tend to want to make a lot of money by getting you hooked on spending...)
> Second, games provide a sense of community. A lot of game revenue is monetizing people's desire to not be alone. Calling these players addicted is I think reductive.
Yes, these games do provide a sense of community because they are purposefully designed to do so. Without an incentive to play while getting lorded over by whales, the fish will leave. Without a bunch of fish to lord over, the whales will leave. Again, this depends on the game's design, but the vast majority of them encourage addiction to the Advantage and its use against others.
Maybe you can extend this analysis to IRL stuff. I don't know because I don't participate in any of it.
Source: [Let’s go whaling: Tricks for monetising mobile game players with free-to-play](https://www.youtube.com/watch?v=xNjI03CGkb4&t=0s)
One, it's fresh - games had a fixed cost for about 25 years. Notice I didn't say it's new, because games had similar monetization tactics if you go back far enough to arcade tokens.
Two, the most vocal players are not yet in the income-earning years of their life which makes them incredibly price sensitive. Once they get older and have a better grasp of time and money, they may decide spending $200/month on a game you enjoy daily from the toilet is on par with other hobbies they could have, and more convenient.
From another angle, consider grocery stores which purposely arrange their stock inefficiently to make you walk deeper into the store. And force you into data collection price clubs by withholding competitive prices. This stuff is just as 'exploitative' as dark patterns, but with only a fraction the digital ink spilled over it. (I'm doing my part!)
Monetization schemes lay on a spectrum, but even arcade tokens lie on the tamer end in comparison to modern schemes. The biggest difference: the only Advantage most arcade tokens would give you is an extra life (i.e. a skilled player can get away with minimal pay). I am aware of 0 arcade games that give you extra speed, damage, or max HP just because you put in another coin while that is INCREDIBLY common with modern monetization schemes.
> Once they get older and have a better grasp of time and money, they may decide spending $200/month on a game you enjoy daily from the toilet is on par with other hobbies they could have, and more convenient.
Sure and I won't argue against continually spending money on games. I think its a really good thing that helps develop content and keeps the game alive (I think $60 for modern AAA games is absolutely ludicrous; it was $60 back in the 90s or 80s and it certainly hasn't kept up with inflation and dev-costs).
> I think game monetization is over-scrutinized for a couple of reasons.
My stance:
* The stuff most people spend money on (i.e. in-app-purchases for lootbox/gambling opportunities) is bad for gaming because they encourage BS game designs that artificially restricts progress and incentivizes psycologically manipulative tactics
* These BS game designs make the games worse (as a "pure" game) 99% of the time
I basically haven't touched a modern AAA game in 5+ years because of this. In terms of gameplay, indie games have been way more interesting and diverse. And I give 0 shits about graphics.
This reminds me of an article (which I can't find again) talking about "the toy in the interface". A good game will be fun to simply interact with on a user interface level.
Has anyone built a lootbox simulator yet? Skip the game and just do lootboxes. Give people a way to scratch their lootbox itch for free.
If done well enough, with a good toy in the interface, this could actually draw attention and profits away from those who exploit.
Kinda reminds me of progress-quest. A level grinding RPG that grinds for you automatically.
Do you have any data to back up this claim? I don't have data to prove the opposite either, but I don't believe this is true. I know multiple big spenders in real life. They have a very average income, but instead of putting the ~$500-1000 that's left each month into a saving accounts, they spend it on mobile games, i.e. make bad financial decisions. FOMO is probably the main driver.
I'm sure the people you refer to exist. There are whales that are so rich that they don't care about wasting $10-100k on a game, but I don't believe these are the majority of players that spend large amounts. I think the big spenders on average have below average income, they are just bad at self-restraint, and/or relatively young and inexperienced with money.
Kongregate used to share data pretty liberally and had a wide view of the industry in their day. They were playing with less zeroes than the big names but the trends were the same. https://blog.kongregate.com/dont-call-them-whales-f2p-spende...
I'm out of the game for a while now but keep in touch with former colleagues and they've gotten much better rounding out the spender curve. But the folks at the tail still got that wristwatch money. If you don't have a spend stream for them you're leaving a huge piece of your revenue on the table.
* Activision Blizzard 2022 Report: ~50% of revenue for the first six months of 2022 came from mobile
Source(PDF): https://investor.activision.com/node/35551/pdf
* Forbes: 7 Mobile Games Now Make Over $100 Million Every Month
Source: https://www.forbes.com/sites/johnkoetsier/2021/08/11/7-mobil...
* NCSoft Q3 2022: ~440 KRW billion in mobile sales vs ~97 KRW billion in PC sales
Source: https://kr.ncsoft.com/en/ir/irArchive/earningsRelease.do
* Game-of-the-Year Elden Ring has sold 17.5 million copies by September 2022. Assuming a very generous $100 average per copy, thats $1.75 billion.
That put's it slightly below the 3rd highest revenue mobile game in 2021.
Sources: https://www.eurogamer.net/elden-ring-sales-surpass-175m
https://sensortower.com/blog/billion-dollar-mobile-games-202...
Previous strategies in Las Vegas casinos did not survive such things without being heavily heavily heavily regulated and I believe that is going to be coming to things like pay to win and other types of games where stories of addicted whales dropping tens of thousands per month abound.
What is particularly loathesome is that a lot of these strategies have made their way into children's games and it's just shocking considering the amount of regulation that went into 1970s era children's TV programming.
I think a lot of adults who are in policy positions who have any exposure to video games are from the 1970s and '80s and '90s where arguably games are made in a by much more egalitarian game designers who just wanted to make a "good game" but the last two decades has seen the rise of amoral mbas taking over game mechanics in search of revenue ar all costs
Is it because Asian consumers have a lower disposable income and cannot afford gaming consoles and gaming PCs as much?
For the wealthier East Asian countries like China, Japan, and Korea this isn't the case. It's more of a cultural thing due to various factors including
- Smartphones and mobile games became popular long before they became popular in the US. People are used to paying money for mobile games. It was this way from the very start.
- The Gacha model was popular in Japan even before mobile games. That's where the word comes from. Korea had similar machines.
- People take public transportation much more than in the US, which leads itself to playing games on the go (mobile).
- At least in Japan (less so in China and even less so in Korea), people prefer non-competitive gaming. That's why competitive games like DoTA, LoL, Counter Strike, etc, were never popular in Japan. Even Diablo with PVP never was popular.
Consoles and gaming PCs tend to be expensive (in terms of upfront costs), require more physical space to use, and are hard to move.
Mobile phones have multiple purposes and, crucially, are mobile (shocker, right?)
This means that if you could only have 1 electronic device, you'd 100% choose a mobile phone.
And what better way to find a lot of customers than a F2P mobile game? It has 0 barrier to entry, a large audience, relatively low development costs, and little actual "game design" expectations.
The video games that are generating these big revenues are functionally identical to slot machines in their monetization schemes. There's one key difference. These games always keep 100% of the money. There's no way to get real money back. You can get cosmetic upgrades, various fake currencies, power-ups, and all sorts of other things in exchange for the real money. None of those things actually cost the video game company anything. They're just being paid to execute UPDATE statements on their database.
The effect of this is that a video game is a casino where no matter how lucky or skilled the player is, the house always keeps 100% of the real money no matter what. And we let children play in these casinos. In many countries they are largely unregulated. Meanwhile, the traditional casino that does occasionally pay out real money, is heavily regulated.
You have that backwards. Slot machines give back 90%+ of what goes into them. Most strip casinos give back 99%.
It's just that they give it back by paying a single jackpot of millions of dollars, so most people walk away losers over time. It's sort of the perfect analogy of concentration of wealth.
For example, do you know that if you do gambling machines on cruise ships, the payouts change substantially as soon as you enter international unregulated waters because there's no longer local gaming commission regulations they need to adhere to
Take a look at the values of some of the items on there. Prices like 10000$+ to use a model of a knife in a game that's like from a decade ago sounds like insanity to many people but thinking from the perspective of someone who has something like a lot of illgotten gift cards to wash, the markets exist... I'm sure a ton of it is legitimate but when some of these approach prices of a fourth of a new car it's kind of obvious
https://archive-yaleglobal.yale.edu/content/money-laundering...
And that money laundering has been drawn to it is... pretty well established.
CSGO is still the number one most played game on Steam. Not that skins aren't being used for money laundering, but rare skins in a popular game do have intrinsic value (vanity)
When you write it like that it sounds sinister, but the reason that real gambling is dangerous is because you do sometimes get your money back, and it’s possible to convince yourself you still have a chance to come out ahead. Knowing that you’re spending money without ever having a chance to get it back means you’re not gambling, you’re making a purchase.
You could say the same about buying food - no matter how lucky or skilled the player is, the house will always keep 100% of the money they spend. Because it’s not gambling.
There's a reason hasbro sells packs of random cards with rarities instead of selling an entire set of cards for a flat price. Because they can take advantage of people and hurt them to get more money.
I think you just described Chuck e. Cheese.
Given the four hours of entertainment plus the plush toy and car launcher my son got, I'd say we got our money's worth.
Also their food is good now.
Earning tickets is pretty priceless. Took my daughter to Great America and they had an arcade with ticket dispensing games. She loved it. She’s 3 and not very good but the staffer great sports. They’d put in a coin to show her how it was played and earned a huge strip of tickets (they were pros at all the games) and then give her the tickets.
The prices are still sky high but yeah, it's actually edible as an adult, tasty even. At least the one in Cupertino.
It'll probably take you $40 to get a $10 trinket, but you can get something back.
In a broader sense you're paying to play the games and when you're done you leave; in FTP the game is free, and they have to addict you, and will spam you with notifications to keep your attention.
If the $/time is much lower and the total $ is much higher, then I think we should just conclude that the games industry is providing way more entertainment-hours to humanity as a whole.
Entertainment-time might not be a good measure of utility (arguably, time is another cost, not the measure of benefit), and time-sitting-in-front-of-the-media might not be an accurate measure of entertainment-time.
Globally there are about 3 billion gamers. So it's largely just going to come down to a whole lot of people spending very little money. The average spend works out to $60/person, but that includes console gamers and mobile whales spending hundreds to thousands of dollars a year. The median spend is going to be much lower. I'd certainly take the under on $20.
And I think that's largely the answer. In terms of entertainment hours/$, there's no digital entertainment remotely close to games. So it has widespread appeal and affordability.
[1] - https://newzoo.com/insights/trend-reports/newzoo-global-game...
But historically I'd bet it came down to the fact that games are simply more expensive than movies; a AAA game has cost $60 for the past decade and a half, while a movie ticket is ~$10 (or a DVD is ~$20, or you could just watch it on your existing cable or now streaming subscriptions)
Many of the biggest games (especially multiplayer) are now free to play + in-game purchases, but there are still plenty of big, prestige, $60 single-player games coming out every year
Video games are more engaging than movies because of a feedback loop. A movie is a scripted adventure that ends and its done, some are re-watchable but 2nd to Nth time thru won't ever evoke the same feelings as first time. With a video game there are adventures to go on, gear to chase, puzzles to solve, high scores to try and top and in a lot of cases you're creating or customizing something in game that gives you more of a sense of ownership. This feeling is kind of like having collectibles and your own customizable toy chest. Even playing through games a 2nd time or repeating activities in-game will have varied outcomes, especially if you're playing with others and overcome some challenge in a new way.
I think it's always more immersive than a movie, even in terms of non immersive games. "You" are the one playing after all. I also think there's such a wide variety of games that's there's something for everyone.
Music is much cheaper to consume. I have 95% of the music I ever care to listen to at my fingertips from a single music streaming subscription. That definitely contributes to the pure money factor and why games sell more.
A lot of artists make more in merch, vinyl, and touring ticket sales than they do in pure streaming numbers. Buying new video games generally cost more. Even if they don't, people tend to spend more on microtransactions.
But even if you take into account only PC+Console games, unlike shows and movies, the cash cows are free to play where value is maximally extracted based on the player's income. You can spend $0 if you can't afford anything, you can spend $20 if that's all you've got, or you can spend hundreds (even thousands). A movie can't really extract more than a couple ticket's worth regardless of how invested the person is (outside of maybe merchandising which is niche).
Also realistically you might watch at most 10 times a movie (20 hours), while these games (LoL, Fortnite, CSGO, Valorant, etc) are often played for thousands or tens of thousands of hours. So obviously it's more reasonable to spend more on something that you play every day.
The details are more complex because of the variety of ways games earn money.
The simple buy-the-game model can earn more because the cost of most games is more than going to see a movie
On the darker side there are games that unethically try and leech as much money out of the players as possible, sometimes to a life destroying degree.
In the middle ground there are games with pay-to-win, pay for quality-of-life, pay for bling, and pay for additional content. Different cultures and subcultures draw different lines as to what is considered acceptable.
There are also a few things that muddy the waters, How much is the revenue generated by The Last Of Us TV series considered game industry revenue? How about Angry Birds merch?
TV by comparison is more passive so perhaps it’s less likely someone consuming it would experience the type of ‘flow’ and rewards you get from a game.
You can also check out Jane McGonigal’s Reality Is Broken for a bit more about the psychology of gaming or Yu-Kai Choi’s Actionable Gamification book. Choi’s book details many of the black hat persuasive techniques) commonly found in games, which also compel people to spend more than they perhaps would really want to!
1. The unit price of games is higher than any other media form. What do you pay for your TV shows? Probably not much with a subscription (or ad supported). Movies? $10-$15 a pop at the local theater. Music? Virtually nothing. And the higher price is supported by the following point:
2. Games are interactive and, hence, more engaging. You can spend dozens of hours in a game world and return back to it as desired. Even more so if it’s multiplayer where the lucrativeness is further enhanced by ongoing DLCs and other monetization schemes.
When you include mobile, I don’t think gaming is less ubiquitous than TV.
On top of this companies have increasingly leveraged paid expansion Downloadable Content releases to both add value, which provides a supportive floor to the core product, and to yield further revenue from current players.
The music industry has social appeal but the truth is only a few artists do very well. So despite the volume of artists and releases there is a never ending stream of duds.
That's quite off the mark. The biggest franchises are made to be addictive. But most games are made to be fun, and people tend to like fun.
That's the difference between someone enjoying Super Mario or 99% of games, and someone with 20k hours playing the same MMO even when they are quite aware they're not having fun. Shigeru Miyamoto didn't sit down with psychologists to create an addictive game, but you bet your ass Blizzard, EA, Ubisoft & co. routinely do.
What do you mean by TV?
I'm asking because I feel like by TV you meant TV + Netflix/HBO/etc...
Nowadays I've heard the term linear TV being used for the old style. That's when you're sat infront a flow of programs without choice in which program that's being shown next on that channel.