How did we go from buying one-off games to spending ∞ money on them?

To find out, we need to understand the business model that enabled it. I am talking about Game as a Service (GaaS).

Games as-a-Service, a definition

Games as a Service (GaaS) is a business model in which developers and publishers provide players with ongoing, living, and often evolving content and services after a game's initial release. 

This is why they are also known as "living games," "live games," or "live service games," as they are constantly changing with updates.

GaaS focuses on creating a continuous and engaging experiences for players, often with the goal of maintaining a long-term online community and generating recurring revenue.

The impact of service design in the industry

As a service and strategic designer, I am probably biased in writing this section but I believe service design has played a key role in transforming the video game industry.

One of the reasons is servitization, the shift from a product-dominant logic to a service-dominant logic. Now companies are focusing more on providing value-added experiences and services to customers, rather than simply selling products. 

Designing experiences has become a crucial aspect around game development. Experience-centered services aim to create immersive and engaging experiences for players, which can lead to increased customer loyalty and revenue.

A model that benefits also users

As a result, game developers are increasingly focused on creating games-as-a-service (GaaS) models that provide continuous content updates, community engagement, and personalized experiences for players.

Today's service-based models align developer and customer motivations. Whereas in the past, they worked with addictive mechanics or a marketing ploy with a high price tag to entice the user to purchase, but without maintaining the user's interest.

Subscription games, in order to make money, require the user to keep wanting to pay monthly to keep playing. A developer who wants to keep my interest high is one I would like to invest my time in.

What we have today

Even though paid games still exist, initial purchase prices are lower than they used to be. Now monetization has moved inside games: after the sale or in support of the initial free experience. There are many ways to provide customized game experiences that, combined, can generate revenue:

Free-to-Play (F2P) It means the game is free, to ensure more incoming users. Then imagining it as a funnel, fewer and fewer users will go ahead and pay. It is a subset of the Freemium Model of Spotify or Canva. The 2 best known examples at the moment are Fortnite and Call of Duty: Warzone, which gained popularity during the pandemic.

Microtransactions They represent low-cost purchases, compared to the cost of a full game, that provide some form of additional content to the buyer. 

This macro category includes:

• Downloadable Content (DLC) This is additional content created for an already released game and distributed online. It can be added for free but often it is a content sale. There are games that leverage online communities and have hundreds of DLCs such as Train Simulator or Flight Simulator. DLC often comes in at half the cost of a game, so they should deserve a separate category.

• Loot boxes are virtual packages that provide a random assortment of items and rewards. Players do not necessarily have to purchase these items with real-world money. A very engaging example of this model are FIFA packs, which mimic sticker packs in real life.

• Other in-game purchases can range from new maps and levels for multiplayer matches, new items, weapons, vehicles or character equipment, to temporary upgrades and in-game currency. Most popular are character skins, as in Fortnite, which can be a way to build social identity in online communities.

Seasonal Digital Passes provide large content updates for about a year or a season. Players must purchase a pass to access the new content; if they don’t, they are unable to access new maps, weapons, missions, and game modes, falling "behind" their peers. Games such as Destiny use this approach to the season pass. A related concept is the battle pass, featured in games such as Rocket League and Fortnite Battle Royale.

In-game advertising (IGA) is a strategy used to increase revenue by displaying in-game ads of various types (banner, video, audio, and branded mini-games). Fortnite uses various forms of in-game advertising, including special events, limited-time modes, and in-game cosmetics. These strategies help promote the game and collaborate with other brands, products, and media. 

In-game advertising in Fortnite

Pay to win (P2W) allows players to use real money to gain an unfair advantage in a game, such as purchasing powerful items or abilities, creating an imbalance between paying and non-paying players. This can discourage free players from continuing.

Pay to progress (P2P) allows players to spend real money to accelerate their progress in the game or access more content without gaining a direct advantage over others. This increases the convenience and motivation of free players to continue.

Clash of Clans is the classic example of pay-to-progress game

Tech companies and game subscription services

Tech giants and major hardware companies have entered the arena of video game subscription services, reshaping the way gamers access and enjoy their favorite titles.

Here are some notable examples:

1. Apple Arcade: Apple added this subscription service to its ecosystem of products and services. It provides access to a curated collection of high-quality games on various Apple devices. It offers players a wide range of titles, often without ads or in-app purchases, for a fixed monthly fee.

2. Google Play Pass: Google, following Apple's example, provides subscribers with a library of premium games and apps on Android devices. Before shutting down, Google Stadia offered a cloud gaming subscription model that allows players to stream games instantly across multiple screens.

3. Xbox Game Pass: This Microsoft service offers an extensive library of games for Xbox and Windows PCs. Subscribers have the freedom to download and play games as part of their subscription, including access to new releases from Xbox Game Studios.

4. Sony Playstation Plus: Sony's answer to Xbox Game Pass, but lacks consistent day-one releases and mobile streaming support. It includes online multiplayer games, monthly game downloads, and cloud-based save storage.

5. Extra → Amazon Game Studios and Netflix Games: Another perspective of this trend is indirect competitors from the entertainment world. Amazon Game Studios develops and publishes games for various platforms. Netflix includes mobile game experiences in the subscription, without ads, additional fees or in-app purchases.

What lies ahead

The future of the industry promises personalized experiences, evolving services and innovative revenue models. Developers will regularly introduce new content, updates, and events, ensuring that players always have something new and exciting. GaaS will enable a more sustainable revenue stream as players don’t buy just a single game, but subscribe to a continuous gaming experience. This change aligns the interests of developers and players, as both parties benefit from the continuous delivery of content and services.