By Reece Parslow
The United Kingdom’s video games market is worth nearly £6 billion. Although the UK has always been a world leader in the industry (particularly in game production), titles like Grand Theft Auto V have demonstrated the interest in talent stemming from the nation’s developers.
The market that games are now being created in however, is unique from that which existed ten years ago. The exponential rise in the number of Britons turning to their phones for games has forced the industry to adapt to a new player-base, and consequently, new models for generating revenue. Crucially, such models have relied on microtransactions – the purchase of in-game currencies to provide added benefits to the player. The success of microtransactions have caused mobile gaming to become the most valuable sector of the UK’s video game market, valued at £1.5 billion in 2020.
When the App Store emerged in the early 2010s, it was clear traditional streams of revenue through retail purchase would not be viable. In turn, developers constructed two financial models for their games – the “freemium” and “free-to-play.”
Freemium games are akin to a game demo. Whilst free at the point of download and available to play to a certain number of levels, access to the full game is restricted by a one-time purchase. This model was popular in the early days of the App Store, prevalent on popular games like Cut The Rope. The free-to-play structure is similar in games which are also free from download. However, all levels can be completed without need for any purchase. Instead, the player is limited in the amount of progress they can make periodically: recognisable in the stamina needed to start a level. The latter is common in most mobile games today, popularised by titles such as Candy Crush.
So why has the free-to-play model been successful in recent years? Firstly, free-to-play structures rely on continual engagement with the consumer – the deliberate limitation in its gameplay design staggers advancement and, subsequently, must be revisited each day to maximise opportunities to play and progress. Secondly, the model relies on a persistent and compelling approach to marketing premium currencies – frequently offering deals or sales on purchases to entice players. Thirdly, a large majority of free-to-play titles have a multiplayer element instilled within gameplay – both competitive and co-operative.
Use of the model does benefit the industry. The UK video games market in recent years has fostered a number of successful indie developers, revolutionising story and gameplay experiences. This is, in part, due to the lower cost associated with mobile development in comparison to consoles as well as the accessibility to an infinitely larger audience – 87% of the nation use a smartphone. The free-to-play model has also limited the extent at which games can be pirated: a problem that has been prevalent in the industry since the 1980s. However, most crucially, for developers the free-to-play model offers a form of financial stability provided the game is engaging to consumers.
Yet engagement is also the main problem associated with free-to-play games. The successes of the model are associated with requiring the individual to play the game continually even if in-game materials are not available: rationalising greater spending on currencies or lives to continue. In certain games, the model has evolved to prioritise “pay-to-win” features which give players making in-game purchases an upper-hand in gameplay. This is a core characteristic of games like Clash of Clans, in which players use real-world currency to build and train troops faster for battles. Some industry experts have observed this can reinforce harmful or addictive gaming habits, as well as spending habits. In particular “gacha” games (in which premium currency is used to have a percentage chance of receiving a feature character skin, unit or weapon) have been described by governments as a form of unregulated gambling and demonstrates the growing greed of companies.
Discourse surrounding the nature of game monetisation through microtransaction has accelerated in the last few years as the free-to-play model has been applied to a new generation of cross-platform games. Titles such as Fortnite, Genshin Impact and Apex Legends all use a form of the free-to-play model. In particular, Fortnite has caused significant concern due to the relative accessibility and content designed towards a younger audience. Furthermore the effect of the COVID-19 pandemic, which saw a substantial increase in the number of Britons gaming, has accentuated the amount of time spent with such games. As a result there have been greater calls to regulate microtransactions associated with free-to-play titles by legislators worldwide, including in the UK.
In 2019, the Digital, Culture, Media and Sport Committee published guidance suggesting that the Gambling Act 2005 should be extended to cover loot boxes; establishing a statutory line for when video games become a form of gambling. A report commissioned by the charity GambleAware made three proposals to regulate microtransactions and protect younger gamers from addiction. Notably the report identifies the need to specify a clear definition of loot boxes, implement more stringent age ratings based on loot box prevalence and publish the percentage rates at which winnable items are available. The latter suggestion is a feature already legislated upon in Japan, of which free-to-play games have dominated the market for years. The report also identified the need for distinct spending limits on microtransactions. On the other hand, some countries (like Belgium) have outlawed loot boxes as it ‘fails to add value to the skill needed to play a video game.’
The question of how far regulation should go is, at present, unanswerable. As AAA developers look to the free-to-play model to extend profit margins (of which the most dedicated 10% of a player-base can fund almost half of its revenue), would greater regulation still permit smaller games viability on the infinitely-expanding App Store? Indeed, should all forms of microtransactions associated with dangerous or addictive behaviour be outlawed by means of protecting the most vulnerable from exploitation? Finally, if the free-to-play model is the future outside of the mobile market, how can we definitively draw the line between gaming and gambling?
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