How do Game Developers make money?
Many of us play free video games. We install these games from marketplaces like Google Play Store or App Store without paying a single dime. So, did you wonder how these game developers publish their games for free?
Earlier, when there were no mobile phones and games were available either on PCs or gaming consoles. Game makers made money selling game CDs and cassettes. However, with the advent of technology and introduction of mobile gaming, developers found new means to generate revenue.
Currently, the revenue model of gaming companies is divided into two groups — 1) Paid by Ecosystem 2) Paid by Online Gamers
Paid by Ecosystem: This group includes in-app advertisements, in-game products or brand placements, and incentive based advertisement. Among these three, you must be familiar with In-app advertisements (IAA). In-app and incentive based advertisements are similar. While playing games on your phone, you may have watched several ads when progressing from one level to another, i.e. in-app advertisement. These range from ads for different games to insurance company ads. Game developers also earn money when they endorse products or brands in their games. This model is called In-game product or brand placement. For instance, if you play Asphalt 9, you will see racing cars of brands like Lamborghini, Mercedes, in the game. Here, the brands pay the game developers to endorse their products.
Paid by Online Gamers: This is a conventional route of generating revenue for game developers. However, currently, a significant portion of revenue comes from the ‘paid by ecosystem’ model. Here, online gamers pay game makers to get access to their online games. There are four routes, which game makers use to generate revenue. 1) Purchase/pay per download- Gamers pay an upfront fee to purchase or download the game. 2) Premium upgrades — A version of a game is available for free, but gamers must spend to access the next version or extra features of the game. 3) In App-purchases (IAP) — The game is available for free but gamers spend to purchase virtual objects (skins, new cars) or currency. 4) Subscription- Gamers purchase monthly or annual subscriptions of a game.