Why The $183 Billion Video Game Industry Can't Quit Microtransactions

CORRECTION: At 6:28, this video incorrectly attributed the source of the United Kingdom's loot box protections guidance. It came from the Government of the United Kingdom.

The video also misstated the number of countries where loot boxes are currently illegal. Only Belgium has laws currently in place that ban loot boxes.

The video game industry cannot quit microtransactions.

In fact, two of the largest video game companies in the United States — Electronic Arts and Take-Two Interactive — now make the overwhelming majority of their money from live-service games, subscriptions and in-game purchases, according to their recent earnings reports.

Microtransactions are purchases that users make inside a game using real money. They show up as subscriptions, virtual currencies, and character customization options, among other examples.

Popular live-service titles such as Fortnite, Call of Duty: Warzone, and Clash Royale were built around this revenue model. Game publishers must provide updates throughout certain game life cycles to retain player attention, which is where the term "live service" comes from. Gamers pay for those updates through season passes or subscriptions.Gamer backlash from the early attempts at in-game purchases caused the video game industry to shift its approach to these subscriptions and bundling purchasable content.

"The industry is really moved to more of a what they call a battle pass system, or some kind of packaging of seasonal content," said Mat Piscatella, executive director of video games at Circana. "Those systems have found much warmer response because I think people are finding that they're getting more value, and more reliable value for their money."

In-game spending has become a high-stakes issue in addition to a lucrative business. Electronic Arts' live-services operations made the company $5.6 billion in its most recent quarter, according to the company's latest earnings report. Epic Games, which created the popular Fortnite franchise, took Apple to court over an in-game payment system that the developer released inside Fortnite in order to bypass Apple's App Store fees. In Europe, app stores and so-called loot boxes are a major focus of tech regulators.

Watch the video above to learn more about microtransactions, the backlash involved, and where the industry goes from here.

Chapters:
0:00 — Intro
1:23 — The rise of microtransactions
4:00 — Gamer backlash
6:07 — Regulation
8:08 — What's next?

Produced, Scripted and Edited by: Christian Nunley
Animation: Christina Locopo, Jason Reginato
Camera, Jeniece Pettitt and Andrew Evers
Supervising Producer: Jeff Morganteen
Additional Footage: Getty Images

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Why The $183 Billion Video Game Industry Can't Quit Microtransactions

[Malaki]

They keep doing it cause yall keep buying. Stop ✋️ buying this mess

[Gary_M]

"Let's lay off thousands of developers but double the salary of our CEO. These gamess are expensive, y'all. Trust us."

[MitchellEdelman]

The premise that gamers can do nothing about this is not true. If people didn't participate and buy micro transactions they would fail to exist. The issue is micro transactions are wildly popular among gamers.

[katherynlee]

I miss games where you have to unlock everything without spending a dime.

[sync]

If buying isn't owning then piracy isn't stealing

[MrBrewman]

Madden is hands down, the worst. You buy the same game every year and pay for micro-transactions and the game and graphics never change.

[ddt-bug]

7% of the development cost goes to the CEO alone...that's why the development cost are so high😂

[prometheus]

“Seriously? I paid 80$ to have Vader locked?”

[karni]

Mobile gaming, is not gaming. Its software that is designed to separate you from your money

[ENTHUSIASTICFIFAFAN]

I miss the good old times playing games like Starcraft, diablo 2, age of empire, etc. All of which didn't have microtransaction.

[Nighthawk-]

It's greed plain and simple. Microtransactions is why I don't enjoy gaming as much.

[TheDrosul]

The problem with micro transactions is that the company is then incentivized to create problems in the game, just so they can sell you the solution for more cash.

[AJftwlol]

The saddest part is that gamers will keep buying these games and spend money on microtransactions just because they are addicted to the gameplay loop. We let these companies keep getting away with this.

[CodingAbroad]

I have never purchased a microtransaction

[JRPGGUY]

90s and 2000s gaming was peak. 2010s and beyond was gaming's downfall

[RedShipsofSpainAgain]

2 simple rules on games:
1. Always say NO to microtransactions.
2. Always say NO to subscriptions.

[SuperSnickerSof]

“A way to recoup staggering developments costs” how about not paying your executives ludacris bonuses

[apostolos]

CEO of predatory mobile game developer Kabam says regulations are in a good place right now.

[jasondisney]

Whenever I see/hear Microtransactions being mentioned, the first thing on my mind is EA..

[armastus]

Gamers let this happen. I worked for EA when this trend started and actual fun got thrown out the window in favor of microtransactions. So enjoy it!