Types of monetization for video games

It would be pointless to try to describe all the business models that are used to monetize video games “process of turning an asset into money” if we take into account the infinite possibilities that exist. However, there are four basic business models. These four models are the basis of any model, beyond that there are only hybrid models and elements of monetization, such as the sale of virtual goods or the incorporation of advertising / sponsorship.

To arrive at these four basic models we have taken into account the two most relevant elements in the commercialization of a video game; its content and its use “understanding it as the act of playing.” Through these two elements we have obtained the following basic business models:

– Pay-to-Play: It consists of making the content and use of the video game pay. There are no limitations.

– Free-to-Play model: It consists of offering free content and use of the video game. In this model, monetization comes from advertising and / or the sale of virtual goods / services.

– Freemium: It consists of offering free use of the video game but not all of its content. All of them are accessed by paying.

– Subscription: It consists of making payment for the content and use of the video game. There are limitations of use.

The traditional model is the Pay-to-Play Model, that is, the player must pay a fixed price to play and access all its content without limitations. Although year after year it is losing ground to other business models, it is still the most important business model and the one that generates the most income. It is true that its participation has worn off with the arrival of video games for mobile devices, but it is still the king in home video consoles and will continue to be for a few more years. Do not abandon this option as it is still giving very good results.

Components to monetize

Over the years the video game industry has evolved in both hardware and software, offering better and more advanced technologies. However, the sector has not only adapted to the demands and technological possibilities but also to an increasingly competitive market. Added to this adaptation is the arrival of new consumer habits and new player profiles, very relevant factors for the rethinking of traditional monetization policies.

In this context, new monetization strategies appear to increase the profitability of video games.

Components (In-Game):

• Virtual Money «Virtual Currency»: It is the exchange medium used by a video game to formalize purchases within it. Often, a differentiation is made between the virtual currency “virtual money that is obtained by the mechanics of the game and with abundance” and the hard currency “premium virtual money that is obtained with real money or with very specific actions and with a lot of scarcity”. Virtual money is used to buy virtual goods / services or additional content within video games. At present, practically all new Free-to-Play video games, although many Pay-to-Play video games also add this component. Its importance resides in the fact that it is the exchange currency to buy virtual goods in-game, so in most cases it acts as a toll in the acquisition of virtual goods.

• Virtual Items «Virtual Goods»: These are intangible objects that are bought and exchanged on the Internet and that only make sense within a virtual world, in our case, within a video game. They are usually bought with virtual money although there is also the possibility of accessing them with real money.

• Advertising and sponsorship: It is the most common component to monetize free video games “Free-to-Play model” although there are also many examples of Pay-to-Play video games that have introduced this in their model.

• Bonuses and Virtual Services: Everything that does not fall into the previous definitions, such as a design tool to customize your avatar in more detail, an extra bonus to progress faster the level or experience of the character, a statistical tool to improve your game results etc.

• DLC “Downloadable Content”: This is an exclusive and additional digital download content of a video game that is sold separately and after the launch of this. This content is usually released to extend the longevity of the video game and to take advantage of its commercial success, offering new content, such as maps, settings, characters, missions, etc. Its acquisition does not make sense without having before the video game since it is a complementary product and dependent on it.

The 3 basic strategies to increase the income of a video game: Introduction

For many, it can be quite a dilemma just thinking about how to increase the income from your video games. You may find that, even applying a good business model consistently, the economic results are not as desired, and you have to redirect the situation immediately. Or you can be one of those lucky ones whose monetization is as expected and the results are satisfactory, but not satisfied with it, you want to optimize your income even more. Regardless of your situation, what you want is to increase the income from your video games and you don’t know where to start.

Although many professionals tend to complicate everything, in reality there are only 3 basic and fundamental ways to grow the income of a video game “and it is valid for any product or service”, regardless of your business model:

• Increase players: It consists of creating strategies that allow current users to grow. There are those who prefer to do it from within the “in-game” video game through social game mechanics and that it is the game players themselves who manage to attract new users.

• Increase the average spending of the players: It consists of getting the player to make a higher payment than usual. For example, video games with the Pay-to-Play model tend to launch special or collector’s editions, incorporating some added value, which may be an in-game value “within the video game” such as new scenarios, weapons, objects, etc. or an out-game value «outside the video game» such as incorporating a CD with the soundtrack of the game, figures of the characters, books, etc.

• Increase the frequency of player purchases: It consists of getting your players to make purchases or payments in-game regularly. For example, video games with the Free-to-Play model work very well with this strategy thanks to the creation of weekly and monthly events, allowing users to get new objects or exclusive content.

Your choice must be consistent with your video game. It is useless to increase income by attracting new players if your video games do not have mechanics that promote social interaction between players.

Learn more on how to increase your game monetization here.