I don’t have the data to back it up, but I disagree. By the time that lootboxes and micro transactions appeared, the video game industry was already in competition with Hollywood for profits - if not already making more.
One of the largest costs for the industry historically has been manufacturing the physical media. It costs a lot to produce all the cartridges and packaging, and to have that shipped around the world. As technology improved, however, those costs began to drop on a per unit basis from the cartridges of old to the cds and dvds of the 2000s, allowing for a higher profit margin on a per unit basis. But the biggest kicker was the development of digital storefronts. Suddenly, you didn’t have to make a single piece of physical media in order to sell a game, and companies suddenly began to make back a lot more of that $60 directly instead of having it spent on manufacturing. They make the game once, and then each copy they sell after the first costs effectively $0 to manufacture since it’s the exact same copy as the first. Then you also have every game selling a “digital deluxe edition” for as much as $100 (or more!), often for just some exclusive cosmetics.
Micro transactions and live service is what they call the “long tail” of a game - you already made the product and sold it, but it continues to bring in money after the fact. Companies don’t have to spend huge sums to make a brand new game when they can just trickle out incremental updates and skins and rake in the money.
The retail store the physical media was sold in would take $30 of that $60, going by the usual retail margins. Though they did also have to pay for the shipping and people to put the games on the shelves, take money for the games, and prevent people from just walking out the door with them. But the game publisher would only see $30 from retail stores or $40 from steam either way.
Also I bet the retailers had certain ad budget requirements before they’d even consider putting them on shelves.
I don’t have the data to back it up, but I disagree. By the time that lootboxes and micro transactions appeared, the video game industry was already in competition with Hollywood for profits - if not already making more.
One of the largest costs for the industry historically has been manufacturing the physical media. It costs a lot to produce all the cartridges and packaging, and to have that shipped around the world. As technology improved, however, those costs began to drop on a per unit basis from the cartridges of old to the cds and dvds of the 2000s, allowing for a higher profit margin on a per unit basis. But the biggest kicker was the development of digital storefronts. Suddenly, you didn’t have to make a single piece of physical media in order to sell a game, and companies suddenly began to make back a lot more of that $60 directly instead of having it spent on manufacturing. They make the game once, and then each copy they sell after the first costs effectively $0 to manufacture since it’s the exact same copy as the first. Then you also have every game selling a “digital deluxe edition” for as much as $100 (or more!), often for just some exclusive cosmetics.
Micro transactions and live service is what they call the “long tail” of a game - you already made the product and sold it, but it continues to bring in money after the fact. Companies don’t have to spend huge sums to make a brand new game when they can just trickle out incremental updates and skins and rake in the money.
That $60 game costs them $20 to sell on steam. So not that different than paying $20 to manufacture a cartridge really.
The retail store the physical media was sold in would take $30 of that $60, going by the usual retail margins. Though they did also have to pay for the shipping and people to put the games on the shelves, take money for the games, and prevent people from just walking out the door with them. But the game publisher would only see $30 from retail stores or $40 from steam either way.
Also I bet the retailers had certain ad budget requirements before they’d even consider putting them on shelves.