How do video games make money?
For game developers, the most common gaming business model is pay to download but there are many approaches to making money from games and there is no one-size-fits-all approach.The gaming industry depends on several monetization models to make such mammoth profits: consumers may simply buy games, revenues can be generated via in-game advertising, or gamers spend money on microtransactions (individual purchases, loot boxes, gacha), downloadable content (DLC), or tiered extras such as season or battle passes within the game. Each of these models can be exploited individually, however, in many cases, gaming companies choose to combine at least two of the three models to boost income prospects.
The combined models function mostly in free-to-play (F2P) games, where gamers are encouraged to pay for enhancements, such as additional lives, currency, personalized avatars, an ad-free experience, or unrestricted playing time. Those playing for free may face in-game advertisements, timers, fewer customization options, or gated content. Some companies have been criticized for diminishing the free experience of their F2P titles in favor of more aggressive, pay-to-win (P2W) monetization strategies where players cannot complete certain endgame content without paying for certain in-game items.
Industry trend: live service games
Live service games or games as a service (GaaS) represent a growing segment of video games where gaming titles receive a long or indefinite stream of monetized new content post-release to entice players to continue playing and paying. This approach was initially popularized with multiplayer online games such as World of Warcraft, Destiny, League of Legends, and Fortnite. In recent years it also found its way into major single-player releases such as Assassin’s Creed: Valhalla. This trend is no longer limited to PC or console games but is also popular with the top-grossing mobile titles.For PC gaming, the premium GaaS segment was the biggest revenue driver with approximately 19.3 billion U.S. dollars projected in 2025, compared to the 7.5 billion U.S. dollars of the pay-to-play premium PC gaming category.
Gaming monetization leaders
Many of the top gaming companies worldwide implement several monetization strategies in their gaming releases, with newly released titles being increasingly likely to include some sort of additional in-game spending options. In 2021, game sales only accounted for a third of Activision Blizzard’s company revenue, with most of the net revenue (6.49bn USD) being generated via microtransactions and downloadable content, subscriptions, and other means. Electronic Arts (EA), already no slouch in terms of monetizing their titles via live services, made approximately 3.91 billion U.S. dollars in revenues from extra content sales in the most recent fiscal year.Mobile games: in-app purchases vs in-app advertising
Some mobile genres generate a bigger share of their revenue via purchases than others: engagement-intense genres like strategy or RPG (as well as casino games that are based on player transactions) see most of their revenue from in-app purchases. In contrast, more than 94 percent of hypercasual gaming app revenues were via in-app revenue. Compared to other app categories, mobile gaming apps had the largest share of free-to-download apps with in-app purchases.Gaming subscription services
In addition to all other monetization options, another contender has risen through the ranks: gaming subscription services. Already mainstream among console gamers, video game subscription services have now become mainstream and are estimated to generate annual revenues worth 11 billion U.S. dollars in 2025. The most popular cloud gaming and gaming subscription services worldwide include PlayStation Plus, Nintendo Switch Online, Xbox Game Pass (available for console and PC), and EA Play.Gaming subscription services grant subscribers access to a digital library of games from which users can download titles to their gaming device. However, users must remain subscribed to play these games. Typically, new games are added to or leave the service on a regular basis. Gaming subscriptions may offer the ability to purchase and own these titles to allow them to be played outside of the subscription service (often at a discounted price). The most common reason for gamers to subscribe to these services was being able to try lots of different types of games, followed by the possibility of always having a variety of games available to play.
