If you’ve played any type of modern video game or casino game, you have most likely come across microtransactions or in-game purchases. In recent years, these features have become more frequently used by game developers. Either as an additional monetization strategy or as the entire business model of a given title.

The consumer’s reaction to this change has been both positive and negative. Companies like EA, for example, have been accused of incorporating pay-to-win tactics in their games. Meanwhile, while few people love microtransactions, many actually enjoy the fact that their inclusion often means that the games themselves are free to play.

Below, you can see what microtransactions and in-game purchases are, and how they are impacting the economics of the gaming industry.

Definitions – what are microtransactions and in-game purchases?

It’s important to start off by understanding the definition and difference of the two features:

• Microtransactions: Microtransactions are a type of in-game purchase that are defined by their small purchase value. The exact monetary classification of this can vary, but generally you are looking at purchases of less than $5, that can go as low as $0.10.
• In-game purchases: As the name suggests, in-game purchases are additional purchases you can make within a game. These could be cosmetic items, upgrades, loot boxes, or season passes, for example. Some in-game purchases can cost upwards of $40 or more, a price tag that is usually reserved for sequel-sized DLCs.

How do game developers incorporate microtransactions into their products?

The economics of these features are complex as they depend on the type of game, what you can buy, and the initial cost of the game. You can see four specific examples below and the economics of each one explained.

Free-to-play game with optional purchases

Historically, you would buy a video game for a one-off retail price and that would be it. There would be no in-game purchases. This meant that developers had to prioritize sales numbers and it would be their only option for generating revenue.

Now, oftentimes games are free, but they will contain a range of optional microtransactions and in-game purchases. In many games, there is still a retail fee and in-game purchases.

This transformation means that game developers aren’t just reliant on game sales anymore. A change that opened up a world of new possibilities in terms of revenue streams and how to continue to make money from a game.

For example, Fortnite is a “free-to-play” game – you can download and play it for free. However, Epic Games makes millions from its V-Bucks currency and the money players spend on buying new cosmetic skins for their characters.

Content gated behind a paywall

While many microtransactions and in-game purchases don’t affect gameplay, some do. For example, with the mobile game Star Wars Galaxy of Heroes, players can purchase loot boxes that contain shards of characters that they can unlock, which can in turn strengthen their roster and allow them to wield more powerful teams.

Economically, this is a win-win for developers as they are essentially monetizing features already in the game.

Another example of gated content is paid DLCs, which may lock everything from additional missions to characters, vehicles, weapons, and more behind a paywall.

Cosmetics that have no gameplay influence

This is an incredibly popular feature of games like Diablo 4 and Path of Exile 2 and they are generally one of the more accepted in-game purchases. Players get to buy new outfits and cosmetic gear for their characters to customize their appearance. They have no in-game effects so are not “pay-to-win”.

Developers often sell cosmetics because they are easy to implement and can generate huge revenue. They can be also marketed as unique or exclusive to certain special in-game events, putting pressure on players to buy now or lose the skins forever.

Auto-buy features for casino games

Your typical sweepstakes casinos will have plenty of promotions and optional gold coin packages available, and this site has more info here about them. However, that’s just features of the platforms themselves. The games these casinos host can have in-game purchases too.

A primary example is the bonus buy feature in many Pragmatic Play slots. Players can purchase the bonus feature for a set multiplier based on their spin value. This will then automatically trigger the bonus feature, which is usually free spins or some type of game.

These features cost practically nothing to implement and they prompt players to spend more or use their coin balance quicker on the slot games and thus generate more revenue.

Microtransactions will only become more common

As you can see, microtransactions and in-game purchases are here to stay. In the online casino industry, they are not widely used, but more developers like Pragmatic Play are introducing bonus buy features that can encourage players to spend more.

In contrast, they remain a staple of mobile games and are becoming more frequently used in PC and console titles as well. Microtransactions are helping developers can effectively monetize different aspects of their games, often with minimal additional dev time required. They serve as additional revenue streams and are often more effective than the original selling price of the game itself.