Introduction

Monetization describes the set of techniques used to generate money (revenue) from selling a video game as well as complementary digital content or items during the game's lifetime. From a business model broad perspective, monetization covers all possible revenue sources. These sources include both direct revenues from selling the game and additional content to the players and indirect revenue sources coming from outside the video game such as sponsoring, merchandising, ads, e-Sport or media rights.

Though we mostly focus in this article on direct sources of monetization targeted to players of the video game, we shall pay attention to the role of ads both as a historical means to monetize video games and as a new nonmonetary pricing component (clicking ads) to access items in F2P. We adopt a dynamic vision and present how monetization techniques have evolved since the birth of the video game industry.

Monetization, Innovations and Digital Technologies

Technological evolutions around digitalization of the value chain have opened up a vast array of new digital monetization techniques that have changed the nature of the game product as well as the relationships between developers and gamers. Indeed, before the arrival of the broadband Internet, most games were monetized as a finished "product": unit price for a physical item (disc then CD then DVD).

Since the 2000s and mainly the 2010s, the development of high-speed Internet, combined with the security of online payments, has radically changed the video games landscape. It made it possible for new forms of gaming interactions to emerge on social platforms (social games) as well as new game genres (MMO). Players were able to play online multiplayer games at any time. With the introduction of smartphones, it became possible to play "everywhere" on the go for different time lengths and thus stay connected to the game (in public transportation, while waiting, etc.). At the same time, Internet providers changed the access pricing for connecting to an unlimited flat fee, while WiFi connections for mobile devices made it less costly to use the Internet, thus fostering longer connections. A permanent online connection to the games keeps players active and enables the creation of new types of interactions.

We observe a global trend moving progressively from the notion of a single and limited gaming experience to multiple and customizable gaming experiences all along the game lifetime based on the release of different complementary digital contents. During this move, the video game concept switched progressively from a unique experience for all users with a fixed ex ante purchase cost to a "service" monetization model based on multiple monetization opportunities for new content creating different gaming experiences for each player.

A service vision helps in considering a game as a "multi-components" content where each component is sold unbundled or under different timings (start, middle, end of the game). This raises the question of how to design monetization to an entertaining and interactive experience all along its lifetime.

The technological context or user conditions on digital distribution platforms has an impact not only on game design but also on monetization techniques. For example, recent changes in mobile payment conditions (unlocking mobile subscriptions for mobile developers), and more recently blockchain technology and cryptocurrencies, opened up new monetization options. Adopting a service vision in combination with innovations in digital technologies helps to understand the current incredible variety of free and paid monetization techniques as well as the challenges they raised.

Monetization Models and Mechanics

We present the different monetization techniques from the perspective of the price to access the basic game experience. This price determines the financial barrier to the game. It can be free or not, and the choice determines whether the monetization model is free or paid. Then we show how developers can add different complementary monetization techniques to increase their revenues after players accessed the basic game experience.

Paid Models and Digital Evolutions

Individually priced games follow the historical paid model. This can include only the game (the software), or the game and its hardware, either on a pay-per-play mode (e.g., arcade gaming where coins are paid per session) or as a bundled hardware + software mode (e.g., portable home arcade games such as Game & Watch by Nintendo). Though some additional contents in the form of physical copies were available for computers, they were limited because of the high costs of transportation and distribution to retail shops. Digitalization of distribution brought significant advantages here. It lowered these costs and made it possible for developers to stay involved in the game via modifying the game after release or providing instant updates. Most importantly, online distribution has opened the way to a variety of post-release content (big sequels, small contents, add-ons, season passes, battle passes, micro-transactions, other services) and with it a large spectrum of monetization techniques (single price, bundle price, subscription price, multiples currencies).

Add-ons or Downloadable Contents (DLC) are expansion packs developed for an already existing game. They add new contents ranging from small (skins, maps, weapons) to large (new story missions or modes) that can greatly modify the game. For example, in the case of Grand Theft Auto IV (Rockstar North, 2008), two new episodes were released, Grand Theft Auto IV: The Lost and The Damned and The Ballad of Gay Tony (Rockstar North, 2009). The episodes extended the life of the base game by giving control to two new characters, weapons and vehicles (Wirtz, 2021). They can fix post-release issues to modify the end of a game such as providing an entire new end in the case of Broken Steel (Bethesda Game Studios, 2009) for Fallout 3 (Bethesda Game Studios, 2008). In the case of The Sims 4 (Maxis, 2014), hundreds of DLC packs for the base game equaling hundreds of dollars were sold to the players to extend and customize the game (Wirtz, 2021).

The content of a Season Pass is that of a paid DLC as the player pays upfront for future unreleased contents. Season passes bundle different contents such as costumes, skins, maps, weapons, quests or games modes with high value, sold at a discount price compared to individual purchases and with exclusive content. The first season passes came with L.A. Noire (Team Bondi, 2011) and Mortal Kombat (NetherRealm Studios, 2011). A closely related concept is the Battle Pass (erroneously sometimes called a season pass) which contains many digital locked items that are unlocked by completing challenges in the game (or challenges provided by the battle pass itself) in a limited timeframe. Battle passes can be seen both in paid games (e.g., Tom Clancy's Rainbow Six Siege, Ubisoft, 2015) and in free games (e.g., DotA2, Valve, 2013 and Fortnite Battle Royale, Epic Games, 2018; see F2P below).

Finally, selling single items in a micro-transaction model became successful in non-F2P games after the release of the "horse armor" pack for The Elder Scrolls IV: Oblivion (Bethesda Game Studios, 2006).

Another form of DLC is that of User-Generated Content created by players and sold for real money in a marketplace inside the game in agreement with the developer of the game. UGCs are purchased in real money or in a digital currency, and the game's developer takes a cut of the transaction price. This makes it possible for modders and creators to earn real money, and for the most successful ones to earn their living. In 2011, Valve was the first developer to introduce a paid-UGC policy in the Steam Workshop Program for its games Counterstrike: Global Offensive (2000), Team Fortress 2 (2007) and DotA2 (2013). In 2017, Microsoft opened a marketplace in Minecraft (Mojang, 2011; see also Seppala, 2015). The advantages of internalizing the marketplace (before, there were marketplaces outside the game on platforms such as CurseForge) are the profits of the transaction fee, the reduced transaction costs and the increased financial and transactional security. It makes it easier for players to find and purchase thousands of UGCs, from adventure maps to survival maps, minigame skins, characters, textures and modes. Players use Minecoins (purchased with real money in the game store) to purchase UGCs. Paid content ranges from approximately 150 Minecoins (about $1) to 1500 Minecoins ($10) with a mean price of 830 Minecoins ($5). Creators choose to give away their UGC for free or to sell them. Out of the $350 million in revenue earned in 2021 in the marketplace, Microsoft gives a 50% share to the creators and keeps 30% as a transaction fee and 20% as royalties (Harris, 2021; Mueller, 2021). Creators retain ownership of their work, so they can theoretically reuse their assets and ideas outside of Minecraft.

A dynamic version of DLC adopted by major franchise developers (e.g., Ubisoft, Take-Two Interactive, Electronic Arts, Activision, Square Enix) is the Game as a Service (GaaS) model (Good 2017; McAloon 2017; Schreier 2017). The notion of service in GaaS consists in providing different unit price contents at regular intervals (DLC, items, e-sport events, etc.). Developers can get more regular and less seasonal revenues while keeping players engaged with regular new content all over the year.

Episode monetization is almost the same as DLC except that each new version of the game franchise is playable on its own, i.e., without the need for the base game or previous episodes. In general, the first episode settles the narrative frame and the main characters. Episodic games have short monthly or bi-monthly release dates (e.g., the Hitman series (IO Interactive, 2000)) or longer yearly release dates (e.g., Grand Theft Auto: Episodes from Liberty City, (Rockstar North, 2009), or Half-Life 2: Episode One (Valve, 2006)). After the last episode, a bundle with all episodes is sold usually at a reduced price. Episodic games have several advantages over DLC: since the content is smaller, they are less expensive to develop and are priced cheaper. Their faster release makes players engaged in the story. At last, developers can build on players' feedback on the first episodes to develop future ones.

In addition to all these business strategies, developers can offer a subscription to attract repeat-purchase players with a discount price for longer enrolment. Subscription is used for different types of content in digital games: unlimited access to the games catalog, access to online servers, access to special perks or services bundles, access to battle passes or access to the game itself. The subscription to unlimited access to a catalog of old and new games is provided on all common gaming platforms: home consoles (e.g., Xbox Game Pass, PlayStation Now or Xbox Game Pass Ultimate for cloud gaming), computers (GameFly, UPlayPlus, Xbox Game Pass Ultimate, Humble Choice) and mobiles (Apple Arcade, Google Play Pass). The main advantage of accessing multiple games is to allow players to freely test new games that they would have probably not tested otherwise and discover new games genres (Davan-Soulas, 2021). Games are playable as long as the player subscribes. When/if the developer removes games from the catalog, players must purchase those games leaving the subscription service in order to keep playing (usually, subscribers are offered a special discount). Subscribing to an online server is attractive, either by renting a private server to play with friends (e.g., Minecraft Realms) or by using open servers to play online (e.g., World of Warcraft (Blizzard, 2004)). In its Nintendo Switch online service, Nintendo also includes access to SNES and NES games libraries. Subscription provides access to special perks or services bundles such as the Premium Pack in Second Life (Linden Lab, 2003) or to items bundles such as battle passes in Fortnite (Epic Games, 2018). Finally, subscription at a fixed monthly price can be the only monetization mechanism available in a game (e.g., Axe climber (MadFatCat, 2018)) which makes it cheaper for fast leveling players.

Compared to demos on CD in the physical world, online distribution helped developers to streamline the process of hooking players by testing freely a small part of the game before purchasing it or not. The provision of a shareware or trialware version of their game helps to reduce quality uncertainty faced by consumers with experience goods and to assess the fun of the game mechanics. The free part can be limited in quantity (a few levels, a few missions; e.g., Axe Climber (MadFatCat, 2018)) or in time (e.g., play 1 hour for free then pay 9.99€ for any BigFish games on sale on the site).

Finally, the most recent paid model is that of Play-to-Earn (P2E; or cryptogames or GameFi). It is a monetization model that evolved from existing real-money trading among players (sometimes illegally) in MMO or F2P games – as well as from Dragon's Tale (eGenesis, 2013), the first casino role-playing game based on bitcoin (Dredge, 2013; SingularDTV, 2018).

P2E games are real-money transactions backed by blockchain technology and its non-fungible tokens (NFT) (Mozuch, 2021). NFT makes copies impossible while providing an encrypted unique record of ownership to secure the transfer of the digital item. The price of items is based on cryptocurrencies (e.g., Ether for the Ethereum blockchain), making it mandatory to invest upfront with real money to start playing. Players must pay a transaction fee based on the transaction price to the developer plus additional fees with regard to cryptocurrency such as a gas fee. The evolving value of the item can lead to speculation as players bet on the future value, which depends on the in-game value and on the cryptocurrency market. Cryptogames are often collectible card games similar to the Pokémon card game (The Pokémon Company, 1999) or Panini cards but not always. For example, in Cryptokitties (Dapper Labs, 2017), players breed unique cats to make new ones and trade them with other players via the Ether cryptocurrency. People have spent more than US$100,000 to purchase a virtual cat (Cheng, 2017). A different and recent example is Sorare (Nicolas Julia and Adrien Montfort, 2019), a fantasy football crypto-game where the NFT cards' value depends on real soccer players' performance data. Another game genre is Rhythm Dungeons, a prototype rhythm game, which leverages the blockchain as a shared open database (Wang et al., 2019). During the gaming session, the player explores a roguelike dungeon by inputting specific sequences in time to the rhythm of music. By integrating a smart contract into the game program, the enemies are generated from other games that share the same blockchain. Similarly, the player may upload their characters at the end of their journey, so that their own character may appear in other games and make an influence. The design of Rhythm Dungeons shows the potential of a decentralized gaming experience based on blockchain.

Major game publishers have expressed an interest in blockchain features (Haqshanas, 2021). Already, the success of current Ethereum blockchain games slows down the Ethereum network considerably (Kharif, 2021). To increase the scalability of the network, game developers are developing their own blockchain and scalable sidechains (decentralized application chains or Dappchains) to customize the rules and algorithms and minimize the "energy-intensity" of each task.

Free Models and Digital Evolutions

The first free model is completely free for players, either in the form of freeware or in the form of adware. A freeware game is either an executable file that needs to be downloaded and installed, or a browser game that is played automatically via the web (e.g., a Facebook game).

Most freeware is adware supported by indirect monetization in the form of third-party ads. These ads take the form of banners, breaks in-between segments of the game, while downloading the game or product placement in the game. However, the popularity of freeware and adware has fallen mainly due to 1) the intrusiveness of ads that break player's immersion, 2) the birth of mobile gaming with the app stores enabling other monetization models (such as micro-transactions), and 3) the fact that most freeware, initially coded with Adobe Flash, can run on neither major current browsers (Google Chrome, Firefox or Safari; except with special installation) nor on the app stores. Many current major mobile game developers like PopCap Games, Zynga or King started as browser games companies with their own portals or on Facebook.

Adwares evolved into freemium monetization: either you play freely with ads or you pay to skip ads. Paying to skip ads in video games evolved into paying to get added value items which lead to the Free-to-Play (F2P) micro-transactions model.

The F2P model is currently the dominant monetization model: in 2020, F2P games generated 78% of global video games revenue ($109b) with Asian markets accounting for 59% (Takahashi, 2021). The first worldwide successful F2P game is MapleStory (Wizet, 2003). However, the first micro-transactions outside the F2P model date back to the MMO Achaea, Dreams of Divine Lands (Iron Realms Entertainment, 1997), a text-based multi-user dungeon (MUD). After offering a few high-quality in-game items for real-world money at an auction, Matt Mihaly, its creator, programmed and added the first "dual currency" system to the game (in-game currency earned in-game, and a premium currency to purchase virtual goods converted from real-world money; Hrodey, 2019). Today, most F2P transactions use this dual currency system. The F2P model provides a free version of the game always accessible and playable (no financial barriers to play) with the option to spend real money on some virtual content or items. The complexity of the F2P model comes mostly from addressing changing financial profiles of players (players are mostly free players who sometimes make one purchase) by mixing different types of items (cosmetics, bonuses, services, modes, adventures, etc.) with different types of currencies to provide an evolving free and paid gaming experience at the same time. Developers must therefore design monetization drivers all along the free gaming experience while carefully monitoring according to real-time players' metrics.

F2P has also developed new paying monetization mechanics for micro-transactions such as clicking ads, bundles of items and currencies, battle passes and loot boxes or gacha boxes. Clicking ads allows the player to watch an ad to get free access to certain paid items. This makes ads less intrusive than in adware, while acknowledging the existence of free players who never convert to paying players. Selling macro-transactions in the form of packs containing different complementary items (beginner packs, dungeon packs, PvP packs) or a mix of items, perks and currencies (VIP packs) is an attractive means to convert free players, often at a bargain price. Battle passes are a bigger bundle of mixed items and currencies with additional access-constraints to them. Battle passes are paid time-limited bundles with non-random items where items are unlocked progressively when the player completes levels or earns experience points. Battle passes work like the pre-purchasing of locked rewards. Initiated by DotA2 (Valve, 2013), the battle pass concept's first massive success in a F2P game was in Fortnite Battle Royale (Epic Games, 2018). It is now widely used in all genres from MMOs to puzzle games. Battle Passes usually target the most engaged players, as unlocking all rewards requires many hours of daily playtime. Players with limited playtime can purchase more expensive battle passes that have the first level rewards instantly unlocked. The battle pass price is cheaper than the cost of purchasing all items individually. But the items are locked and there is a very attractive and often exclusive final reward to unlock. It is often possible to subscribe to battle passes to get additional rewards and price reductions.

"Gacha" games are F2P games (often battle-genre games) with a dominant gacha monetization mechanic. Though gacha already existed in MMO-F2P games in Japan and Korea (e.g., MapleStory (Wizet, 2003)) or in the form of loot boxes in Western games, the first major successes using gacha as a "core monetization technique" on mobiles were Dragon Collection (Konami, 2010) and Puzzle and Dragons (GungHo Online Entertainment, 2012). Mainly used by Japanese F2P, gacha games, such as Monster Strike (XFLAG, 2013), Final Fantasy: Brave Exvius (Alim, 2015) and, more recently, Fire Emblem Heroes (Intelligent Systems, 2017) and Genshin Impact (MiHoYo, 2020), are starting to get popular in Western countries too (Wawro, 2017). Gacha mechanics have similar lottery mechanics to loot boxes found in Western video games: the player pays a small amount to open a box and receives a random virtual item from a list of possible items. The player knows the list of items, their probabilities and the cost to get them. Items in a gacha box have different quality levels (common, rare, epic; or 1 to 5 stars) with increasing rarity (5-star items are very rare). Although players can always play to get powerful items in F2P, it takes more and more time to upgrade the free basic items. To skip grinding, some players prefer to pay to get it faster. However, paying does not guarantee getting the desired item. A lucky player can receive the premium item on the first try while most players will pay repeatedly to increase their chances and are often motivated to do so since the cost is small. Compared to loot boxes, gacha boxes can contain collectible items (e.g., many different characters) making it compulsive for the players to pay to complete the collection. Gacha boxes often sell items with gameplay impact (heroes, upgrades) whereas loot boxes can also contain items that do not affect the gameplay (e.g., cosmetics or animations in Overwatch (Blizzard, 2016)). Finally, unlike standard collectible card games (CCG) and loot boxes, gacha items cannot be resold, traded to other players or transformed into new items (e.g., in Hearthstone (Blizzard, 2014), it is possible to transform useless cards into new ones). Combining risks of financial addiction with the risk of "pay to win" led the Japanese consumer council to enact some regulations to protect consumers against gacha mechanics (same issue as with loot boxes in Western countries). Developers reacted by including different "pity systems" to soften gacha mechanics: 1) Box gacha (the likelihood of receiving the desired item increases with the number of remaining items in the box), 2) Redraw gacha (free second chance after receiving an unfavorable item), 3) Trade gacha (trade the undesired items for a new roll that will give the player a better item), 4) Consecutive gacha (improved chance of receiving rare items when spending for rolls in bulk) and 5) Step-up gacha (slight price discount at each step that guarantees a rare item drop in the last step; THE N3TWORK, 2018).

Issues and Risks Related to the Design of Digital Monetization Mechanics

Digital monetization mechanics keep on innovating and evolving to maximize the incentives to buy. However, their effects on players and on gameplay are sometimes poorly anticipated, raising new issues for video game developers: issues of long-term retention and monetization of the players (pay-to-play and pay-to-win), or issues of players' protection (risks of financial addiction or gambling).

Pay-to-Play, Pay-To-Win and Long-Term Retention

Pay-to-Play (PTP) is the opposite of Free-to-Play. In F2P models, PTP mostly occurs when players have the choice of accessing an item either by playing or by paying. However, the free-playing mode progression speeds down progressively, to the point that it becomes almost impossible to progress without paying. The point is that a "reasonable speed" depends on the nature of the progression in each game. PTP occurs when a paid item is mandatory to level up. The risk for the developer is that free players may quit the game at some point in the progression. Pay-to-Win (PTW) is almost the same situation in a multiplayer game: it is not possible to beat other players without paying because powerful items are in paid access without additional constraints on skills or levels. Often, PTW is a short-term monetization strategy to push impatient players to skip playing hours to get high-valued items. But they become powerful in battles against free-progression players who may not yet have this same powerful item. An even more extreme situation is where all powerful items are available only by paying and not accessible by playing. In both cases, PTW reveals an unbalanced progression between free and paid players with a superiority of paid players in battles (because of fast access to powerful items). Additionally, PTW creates a contest among paying players in order to be the best, while discouraging free players feeling that merit and long hours should be needed to earn the item. The main consequence is that in both cases, free players feel that playing does not bring enough value to be able to level up or to play with paid players and often quickly quit the game. This in turn has a negative impact on long-term retention. To prevent this from happing and to limit PTW risks, some developers have introduced loot boxes and gacha boxes to sell random high-valued paid items. However, these monetization techniques are not exempt from criticism (see below).

Protecting Players from Predatory Random Opaque Monetization Mechanics

Criticism of loot and gacha boxes has led to heated debates on the legality of these monetization techniques. Indeed, loot and gacha boxes raise common issues regarding their "random reward mechanics", especially when they contain potential high-value rewards useful for in-game progression. Since high-value rewards are random, they can lead some unlucky players to repeat purchases and, thus, to potential financial addiction and high-spending levels – not just among adults, but also among minors. Cases in Japan suggest that some adult players spend several thousand yens per month on gacha boxes resulting in severe financial problems as well as suicides.

Public complaints started in 2012 in Japan about KompuGacha boxes (THE N3TWORK, 2018). These boxes required players to first collect a set of items before being able to unlock a specific rare item. These complaints caused an investigation by the Japanese CAA (Consumer Affairs Agency) which did not rule that the practice of KompuGacha was illegal but instead suggested that developers stopped using them or increased transparency on the chances and costs of other gacha boxes (THE N3TWORK, 2018). The transparency question is related to the notion of "dark patterns" in monetization where the consumer cannot adequately assess the final price of an item, either because of a complex pricing formula or because of no access to the information necessary to make an informed decision (Zagal et al., 2013). In 2016, another complaint to the CAA was made about false probabilities published in the gacha mobile game Granblue Fantasy (Cygames, 2014; see Nakajima, 2016). The CESA (Computer Entertainment Supplier's Association in Japan) announced then a new guideline requiring gacha game developers to fulfill one of the following conditions: display the estimated price to obtain any rare items if it is over a certain cap set by the regulator, or to display at the very least the upper and lower limit of distribution rates for rare items.

A similar controversy emerged in Western countries in 2017 with paid loot boxes in the beta version of Star Wars: Battlefront II (DICE, 2017; see Thier, 2017). Players complained against a "paid" random progression system obliging in the end DICE and Electronic Arts to disable paid loot boxes.

The need to protect consumers has raised questions regarding whether these mechanics constitute online gambling and therefore the consequent need to regulate them or not (Johnson and Brock, 2020). Gambling is the wagering of money on an event with an uncertain real outcome, where chance plays a dominant role. Since gambling activities are regulated activities, it became necessary to clarify the statute of random boxes in the monetization process. Lawyers, regulatory bodies and courts have entered the debate. In Japan, and most countries, gacha and loot boxes did not qualify as gambling based on the considerations that: no real money can be won, it does not "simulate" casino gambling activities, gambling is not a central part of the game, the main outcome of the game is determined by skills and the game is not provided by a gambling provider (Koeder and Tanaka, 2017).

However, in view of financial distress and protection of minors, loot boxes became illegal in some countries (Belgium, Netherlands, Australia) and developers had to modify loot boxes or disable them immediately for players in these countries. In other countries (Japan, China, France, UK, USA), they are still authorized under the condition that the developers publish information regarding the probabilities and prices and discard items with an impact on progression. Honer (2021) provides a complete overview of existing regulations and consumers' protection with regard to loot boxes.

Real-Money Trading, Play-to-Earn and Gambling

Gambling and betting issues in video games were even more prominent with the growth in trading among players of virtual items using real money. Starting illegally outside the control of the game developer first, they have progressively become a legal part of the game design with e-Sport and P2E models.

The first case emerged in 2016 with Counter-Strike: Global Offensive (CS:GO; Valve, 2012) and DotA2 (Valve, 2013). Many CS:GO betting portals existed at the time but CS:GO Lounge was the biggest one. Issued by a company from Costa Rica, players could gamble real-world money on virtual items from their Counter-Strike account on Steam using skins as a virtual currency. This was technically possible for outside betting websites by using an already existing feature inside Steam allowing trade among players with a Steam account (Matulef, 2016). But the situation was problematic for Valve for at least 3 reasons: firstly, those sites leveraged on Steam user accounts to run a gambling business that was allowed neither by Steam's openAPI nor by user agreements; secondly, they created ambiguity for players on Steam's involvement in these sites and possibly earning revenues from them; and thirdly, there were no age restrictions on these sites implying that the participation of minors was not controlled. Valve sent notices to these sites requesting them to cease operations through Steam or to face legal action. This finally closed their betting functions (Yin-Poole, 2016).

These events associated with the growing interest in betting of virtual items in e-Sport or gambling in Play-to-Earn (P2E) games have revived legal scrutiny by gambling commissions around the world as to whether new legislation for digital items is needed or not.

For example, in the UK, gambling legislation and controls do not apply to practices of using in-game items such as skins or virtual currencies. Although changing a law could be easy, this would in practice remain ineffective for different reasons. The sites are relatively easy to set up, they are shut down frequently and are therefore hard to police, they are almost all run from outside the UK and they attempt to avoid UK legislation by simply stating that UK users should not play (Phillips, 2016).

Another recent issue related to gambling and sports emerged with the Daily Fantasy Sports games genre. Players engage in virtual team sports battles based on real stats of each real champion in their teams, and can spend money in the game to purchase complementary items (as in F2P games). These games raise the question of whether they are rather gambling sites or gaming sites. The actual decision depends on countries or even on states' different jurisdictions. Usually, when skills dominantly affect the result of the game, it is not gambling. However, if the game requires spending a wager to increase points earned on the basis of individual performance statistics of athletes, it can be considered gambling (Gatto, 2020). Again, jurisdictions can reach different conclusions based on the design of the monetization process.

Gambling issues came back strongly to the front with the recent growth of P2E (or DeFI, Decentralized Finance) games and the use of blockchain technology to trade virtual items. This technology allows players to control virtual items ownership and to trade them for real money. It means that virtual items obtained in one game can be sold and have real monetary value outside the game. A common argument was that the virtual items won were not a thing of value. The courts have historically agreed with this, in cases where the game's terms of service prohibited the transfer of virtual items and the game publisher did not host or sanction these secondary markets (Arbanel and Johnson, 2020; Gatto, 2018).

For example, investing real money in P2E games to have a chance to win real money rewards, or something in the game that could be traded for real money, could raise gambling suspicion if traded on a marketplace operated by the game developer (Gatto, 2018). Consequently, the management of blockchain technology and real-money trading must be decentralized to escape gambling laws. In addition, as P2E games are a growing market segment, they could in the near future become a new way of creating jobs and earnings for some players (Luthra, 2022). It could therefore be reasonable to envision that more legislative scrutiny will probably occur even on decentralized P2E gaming platforms.

Summary

Digital monetization mechanics in paid and free games are converging in creating an engaged and long-term relationship between players and the game: Game-as-a-Service games provide dynamic content releases in the form of packs of different natures, while F2P games release both units and bundles of items with different access and usage modes, mixing play and purchase modes. Paid and free models need to innovate their content in order to keep players engaged, increase the game's lifetime and be able to offer new spending opportunities to players. Paid and free monetization models have their own strengths and weaknesses. Paid models of monetization are less difficult to design and less random, but lead to a higher financial barrier for players, excluding potentially interested players or friends to play with. On the other hand, free models have a more flexible monetization where it is possible to test in real-time new mechanics, where there is no maximum expense limit but where the management and monitoring of the free/pay differential value is increasingly more complex. That is the reason why F2P monetization mechanics have recently come under criticism. However, F2P models allow for fast adjustment based on players' reactions and complaints. Today, "real-money" monetization in P2E games (such as in the Daily Fantasy Sports games genre) is also challenging gambling jurisdictions in countries all over the world. This highlights how choices made about the design of monetization mechanics will make the game fall under gambling laws or not.

Monetization has become a connected, real-time and evolving activity, mixing traditional paid models with free models. These techniques are coexisting in a digital-distribution era implying that each has its pros and cons.

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Author Information

Myriam Davidovici is an Associate Professor in Economics at IPP/Telecom-Paris, 19 Place Marguerite Perey, F-91120 Palaiseau, France.

To contact the author: Myriam.Davidovici@telecom-paris.fr

Citation Information

Davidovici, M. (2022). Monetization. In Grabarczyk, P. (ed.), Encyclopedia of Ludic Terms (Spring 2022 Edition). URL: https://eolt.org/articles/monetization

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