The History of Video Game Monetization

Video games are awesome. Over the past 20 years of my life I’ve considered myself a “gamer” – somebody who spends an embarrassing large amount of time and money on video games. While most people are intrigued by the evolution of gaming, it is just as intriguing to reflect on the evolution of video game monetization. Let’s take a look at all the creative ways game developers monetized gamers over the years.

In the beginning, there were arcades – coin-operated machines that let you pay to play. Pong, Space Invaders, and Pac-Man were the original favorites. As a child, I searched under cushions far and wide for my next quarter.

Retail stores began selling consoles systems like Atari, Commodore 64 and the original Nintendo. Now we’re in the era of the Wii, Xbox 360 and PS3. First you pay for the platform (console or computer) and then you pay for the games, which come in the form of cartridges, discs or diskettes (Captain Comic and Commander Keen were favorites). Retail includes brick and mortar outlets as well as online sellers.

Downloadable Games
Originally popularized on computers, downloadable games were made available either as a direct download or as shareware. Let me tell you, I loved shareware. I played the first level of Doom 8,438 times before buying it. Consoles began offering downloadable games through online stores like the Xbox Live Marketplace and the PlayStation Store. Gamers could save themselves a trip to the store and purchase new games, expansions or add-ons from their computers or favorite consoles.

Pawn Shops
The demand for game variety is very high, but many gamers can’t afford purchasing all the latest and greatest games. Pawn shops, like GameStop and EB Games, let gamers trade in their old games for credit. That credit could be put towards the purchase of other titles.

If owning games wasn’t your style, rentals proved to be a popular solution. Most video rental stores also have a video game rental section for the budget-conscious gamer. Another rental service is GameFly. A small monthly fee gives gamers unlimited access to their favorite games via mail. Other services like GameTap and OnLive charge a low monthly fee to access games directly via the Web.

Over the past decade a new form of game has risen to popularity know as MMORPGs or Massively Multiplayer Online Role Playing Games. MMORPGs are exceptionally captivating because of how immersive the environments and communities are. Additionally, new content is constantly being added so your “life” in the game never really ends. To support the massive development and hosting costs, gamers pay a monthly subscription to maintain their membership to the game. This can be paid for via credit card or game card.

Free-to-Play Games (Advertising)
Free games are exceedingly popular because there is a low barrier to entry. Yahoo! Games was one of the original free game portals on the Web and only required a Yahoo account.  The developer’s revenue was generated from advertisements placed throughout the gaming Web site. Other sites like MiniClip and AddictingGames also provide free games and generate their revenues from advertisements. The advertising monetization model is also used on several mobile platforms like iOS and Android.

In-game Monetization
Popular in free-to-play and mobile games, in-game monetization allows gamers to play a video game for free, but have ways of generating revenue from within the game itself.

  • Micro-transcations – in order to acquire special content (new levels, rare goods or currency) gamers must complete a small, in-game transaction. These micro-transactions can be made by credit card, PayPal, game card or mobile payment.

Micro-transactions are popular in social games like Farm Story for the iPad

  • Ad-Funded Payments – another form of in-game monetization is the ad-funded payment, created by TrialPay. Ad-funded payments give gamers the ability to buy games, memberships, goods or virtual currency by trying or buying a product or service from one of TrialPay’s blue-chip advertising partners (Netflix, Discover, GAP, etc.)

While gamers are eagerly awaiting the next generation of video games to hit the market, I’m excited to see what other unique ways game developers are going to let me pay for my gaming urges. David Perry, an industry veteran, came up with 29 business models game developers can use. How do you see video game monetization changing in the future?

Which are the most effective monetization platforms for your company?

One comment on “The History of Video Game Monetization

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