revenue models used by game producers

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The rise in the profitability of the industry has further driven the adaptation of different revenue models, micropayments being one of them. Microtransactions are a relatively new concept and have found widespread acceptance amongst the MMO (Massively Multiplayer Online) games. These games are widely available for free on the internet, without having to pay any kind of monthly charges/fees. This revenue model offers the customers/gamers an option to buy an in-game currency which can further be traded for game items such as specially designed weapons that enable the players to beat their opponents.

The main sources of revenue for online video games include paid subscriptions, sponsorships, advertising revenue, as well as pay per download. However, the increasing popularity of free online video games has led to a drastic change in the revenue models, with more and more producers of online gaming adopting these newer models to capitalize on this growing craze.This revenue model was popularized in Korea and later on adopted by several other Asian countries. It is widely used by Nexon – online game providers, who are considered as pioneers in propagating and popularizing this model and have grossed $2304 million in 2005.

This model enables the users to play the basic game for free but charge for the “weapons” or other similar accessories required for playing the games in a better way. These extra accessories are charged nominal fees and constitute a crucial source of revenue for free play games.Game related advertising is another form of revenue source widely used by providers of free to play online video games. These advertisements are frequently included within the game by game ad agencies and considering the sheer number of customers for free to play video games, has increasingly become the most preferred revenue source amongst the producers offering free online gaming facilities.

The selling of game-related merchandise is also a lucrative source of revenue. Targeted at kids and pre-teens, toys associated with virtual world heroes and characters from online games as well as collectible card games are rapidly gaining popularity amongst this particular age group and are selling like hotcakes.