How Has the Gaming Industry Grown by Giving Away Content?

Today, you can go anywhere and find video games that are available for free in some form or another. In fact, there are free versions of almost all of the most popular titles, including Call of Duty, League of Legends, Fortnite, PUBG, Dota 2, CS:GO, and Runescape. Even online casino games can be played for free by using the various promotional offers that are provided by iGaming brands in their marketing - most pertinently, the no-deposit free spin offers that allow players to try out the different games they have available on their sites. 

There has been a trend in recent years for video game publishers to give more and more of their content away for free. This may seem somewhat counterintuitive given that the creators of these titles need to earn a living and their employers are accountable to their shareholders. 

Yet, in reality, video game publishers have actually managed to grow their businesses and the industry as a whole by adopting this approach. On the surface, this makes no sense at all, but when you delve a little deeper, the rationale behind this move begins to become clear. 

A Brief History of Video Game Monetisation

It may not seem like it, but the way video game companies generate revenue from their content has evolved several times over the history of the industry. 

It started out in the 1970s and 1980s with arcade machines where players would feed giant boxes with coins to be allowed to play a game for a short while. But as home computers and game consoles became more affordable and accessible, arcades mostly fell out of favor and got turned into devices we enjoyed occasionally when out with friends. 

From the mid-1980s through to the 2010s, the main way to monetize a video game was to charge for the entire thing up front. Even then, exactly how the content was distributed and paid for changed several times. 

What started out as players handing over physical cash to receive a cartridge in the 1980s became digital card payments being exchanged for digital downloads, often without the need to leave the house. 

But since the late 2000s and early 2010s, there has been a gradual shift away from this model to the free-to-play one we know today. 

Line Goes Up

While this trend has begun to reverse in recent months, in line with wider market conditions, publicly traded video game publishers have seen their stock prices trend upwards over the last decade. 

This has been helped by an ever-increasing number of people taking an interest in gaming, driven by diversified demographics, especially more women and people from older age groups. 

Between 2015 and 2022, the number of people playing video games has increased by approximately 50%, rising from 1.99 billion to 2.95 billion, coinciding with the period in which many big titles were made available for free. 

At the same time, major gaming companies have been reporting bigger and bigger financial results. For example, Electronic Arts grew its annual revenue from $3.53 billion in 2009 to $7.285 billion in 2022, an increase of more than 100%. Over that same period, the company’s gross profit rose by 237% while EBITA went from an $800 million loss to a $1.335 billion profit. To keep up with the growing gaming landscape, many companies are adopting responsible gaming technologies to ensure player safety and fair play in their expanding environments.

EA’s peers are in similar positions to this, while many smaller businesses are also enjoying success. 

Serving Everyone

The reason for the success of this seemingly unintuitive approach is that while the games may be free, there are still plenty of ways players can hand over their cash. 

There are a few different approaches, but they mostly all work by allowing those with disposable income and the interest in getting more from their gaming sessions to buy additional content while also providing access to those who aren’t yet able or prepared to pay. 

These non-paying players are not “freeloaders” as they can help to promote the game, both offline and through social media, as well as generate revenue through ads and provide more opponents for those that do pay. 

Around 5.6% of gamers spend more than $1,000 a year on in-game purchases, far more than most would have paid for full titles, while the average is around $50-100 per player, meaning companies can earn more from their IP than in the past.