Epic Games co-founder, Tim Sweeney, used his keynote speech at Dice Summit, held in Las Vegas, to
call an end to “loot boxes” in video games. Loot boxes refers to the practice of publishers selling virtual goods in-games (e.g. weapons, ammunition, avatars, special powers, unlocking new levels) which enable users to customize game-play or assist with progress through the game. Loot-boxes are typically sold through in-app purchases and enable game publishers and game developers to generate on-going revenue from their tiles while also keeping players engaged. The reality is many game publishers are just as addicted to the revenue from loot boxes as the game players that buy them. The most successful mobile games rely heavily on the free-to-play model which is monetized through in-app transactions. So how should publishers replace this lucrative revenue approach?
Loot boxes have been banned in Belgium, so publishers and developers have reverted to conventional approaches to monetizing game play e.g. pay to download (following a trial period), in-app advertising, and subscription games. Where there is no legislation Strategy Analytics expects responsible publishers and developers to switch away from loot boxes and to re-adopt conventional approaches. Indeed, as we highlighted in our report “Will Apple Arcade Succeed Where Others Have Failed?” Apple is attempting to breathe life into the subscription-based business model to target users seeking a premium, advertisement and in-app purchase free games experience. We are yet to hear news or early results of this initiative. Strategy Analytics recommends publishers adopting strategies to leave their loot boxes behind need to address the following questions:
1. Are there segments of the market dissatisfied with micro transactions and ads in games?
2. What segments of the market prefer paid games?
3. Who is interested in subscription gaming services? Are there different segments?
4. What types of games (i.e., console, PC, mobile) are they interested in?
5. What will motivate gamers to subscriber to a subscription gaming service?
6. What needs to change to make the economics work for publishers?