The video game industry’s dark secret: How free-to-play games are ruining our hobby

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The video game industry has been booming over the last several years. This growth hasn’t just come from people buying newer and better gaming systems, but also from free-to-play games on smartphones and PCs. This movement to free-to-play games has become a major problem for the video game industry, as it promotes spending money on video games instead of actually playing them. Here are five ways that free-to-play and in-game purchases are ruining the video game industry, starting with the most prevalent problem of all: microtransactions.

It’s become incredibly rare for a high-profile video game to be released these days without some sort of recurring payment strategy, a far cry from the typical $60 standalone game purchase that dominated the video game industry just less than ten years ago. This is due to the popularity of free-to-play, downloadable games and gaming platforms like “Fortnite,” “League of Legends,” and Roblox.

But as console-only experiences in video games gave way to more digital and mobile-driven ones, so did the business model and the way that players interacted with the games they played.

According to Kevin Chou, co-founder and former CEO of mobile gaming giant Kabam, “In 2013, it was quite contentious to claim that the free-to-play business model would be the next big dominant paradigm throughout all of gaming.” “Back then, most mobile games were free-to-play, but we were suggesting that gaming in general—not just mobile gaming—is likely to develop in that direction.”

Most console and PC games had only begun to offer in-game purchases, but the popularity of social games like FarmVille demonstrated their potential.

These days, even the biggest video game franchises follow it as a model. While continuing its yearly new edition release, Activision Blizzard’s “Call of Duty” saw more than $1 billion spent globally on its free-to-play mobile game, and its “Warzone” platform surpassed the 125 million user milestone in June. Additionally, it converted the most recent instalment of its “Overwatch” series, which sold $1 billion worth of copies in its first year of availability in 2016, into a free-to-play format. Take- Grand Theft Auto V, developed and published by Two Interactive, is perhaps the finest example of a standalone game that is still selling well. As of August, the game had sold about 170 million copies.

When Kabam originally started making free-to-play games on Facebook in 2013, it appeared on the first CNBC Disruptor 50 list. Since then, it has transitioned to making first- and third-party games for social, web, and mobile platforms. Kabam focused on well-known IP to create games based on movie series like “The Hobbit” and “Fast & Furious,” much as Fortnite has done successfully.

Even while these games are regarded as free to play, they do have a highly lucrative side. Even if the initial download is undoubtedly free, there are incentives for players to spend money on things like seasonal “Battle Passes” that reward them with new gear and other cosmetic rewards as they advance in the game.

It has turned out to be a bonanza for gaming businesses. Activision Blizzard reported $5.1 billion in in-game bookings for its fiscal year 2021, a 5.2% increase from the previous year. These bookings include things like “World of Warcraft” subscriptions, skins and goods in “Warzone” and “Overwatch,” as well as other microtransactions. In contrast, the net bookings for 2021, which include both physical and digital game sales, were $8.35 billion.

In addition, Kabam profited from the success of their game “Kingdoms of Camelot: Battle for the North,” which the developer said was the highest-grossing iOS app of 2012. As a result, Kabam’s revenue increased by 70% to more than $180 million in 2012.

Epic Games’ Fortnite, which earned more than $5 billion in revenue from the sale of products and seasonal passes in its first year of release, is largely responsible for the rise in popularity of gaming passes.

But that also happened when the market for console and PC games slowed and tried to catch up with the rapidly expanding mobile gaming scene. Additionally, the video game business flattened even more, blurring the distinction between different game genres and players.

According to a report by data.ai and IDC, mobile gaming has grown faster than the whole video game business over the past ten years and is expected to generate $136 billion in worldwide expenditure this year, compared to a combined $86 billion for PC, console, and handheld console gaming.

Mobile games are a significant industry driver, according to Chou. “Consoles are not dead, nor are PC games,” he said.

According to Chou, some of it has resulted from creators porting high-quality console-level games to smartphones as mobile game quality has increased. He indicated “PlayerUnknown’s Battlegrounds,” a Fortnite-like battle royale game. The game, created by South Korean game producer Krafton, was enormously popular on computers and gaming consoles. It was later transferred to mobile platforms, where it has generated more than $8.5 billion in revenue worldwide.

What’s occurring, according to Chou, is that businesses are porting PC and console-quality video games to mobile platforms. You can still find gamers for PCs and consoles, but you can also significantly expand your audience.

Cloud gaming, which enables users to access their games or stored data remotely or via their phone or other devices, has also made that possible. Chou said that other gaming services including Sony’s PlayStation Plus cloud streaming, Amazon’s Luna, and Microsoft’s Xbox Cloud Gaming are assisting in bringing “continuous game quality to mobile” despite the fact that Google just shut down its digital gaming service Stadia.

It’s possible to drastically grow the user base without selling additional consoles, according to Chou. “There are individuals who love their consoles and are continuing to buy consoles, but in other areas of the world you wouldn’t buy a console necessary,” he added.

As more mergers and acquisitions (M&A) take place in the gaming industry, which has witnessed a rush of deals this year, investment in mobile gaming will probably rise.

In January, Microsoft floated the idea of paying $68.7 billion to purchase Activision Blizzard. Sony then announced plans to pay $3.6 billion to acquire Halo developer Bungie. Zynga, a mobile gaming business best known for its FarmVille game, was purchased by Take-Two in January for $12.7 billion.

In an effort to expand internationally and to better compete with competitor Tencent, Chinese game producer NetEase, which has produced mobile games based on the Lord of the Rings and the Harry Potter series, purchased French developer Quantic Dream in August.

With the August announcement of plans for a dedicated PlayStation mobile gaming device, Sony is also looking beyond consoles. By 2025, the business projects that nearly 50% of games will be released on PC and mobile, up from about 25% currently. In recent years, Nintendo has also sought to emphasise mobile gaming more.

In 2017, the acquisition of Kabam by the South Korean gaming business Netmarble made it a target.

Chou, who co-founded the esports organisation Gen.G and is currently managing partner of the cryptocurrency venture studio SuperLayer, stated that he still believes that mobile gaming will continue to grow in the future. He specifically mentioned the opportunities that Web3 can present for free-to-play games as well as the industry as a whole.

If I had things to do over again, I don’t think I would have sold Kabam since there is so much innovation in the game industry, according to Chou.

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