What was once a small feature of the gaming world became a major business model through microtransactions, now defining the video game industry. An optional way to add to gameplay with small purchases, microtransactions have expanded into a key source of revenue for game developers. The rise of these transactions destroyed how video games are monetized, and along with being profitable, they have also been controversial.
How microtransactions reshaped video games
Microtransaction was introduced to help the developers generate consistent revenue after the initial sale of the game. While traditional games would require you to fork out upfront for the ability to win, today’s titles, especially free-to-play games such as Fortnite and League of Legends, require you to spend money for things like character skins or power-ups as you play. Companies such as Riot Games and Epic Games, whose big hit games are fueled by microtransactions, have proven this shift successful by selling more than games.
It may come as no surprise that microtransactions have come under fire. Both sides feel that while some find these rewards more choice and better make gameplay, others see them as manipulative, a tactic used to get players to click more, with random rewards such as loot boxes. Similarly, this is compared to gambling, where players continue to put in, if not sometimes quite hopelessly, to get rare items.
Psychological Triggers and Microtransaction Addiction
But microtransactions aren’t about adding extra in-game content; they leverage numerous psychological mechanisms to encourage players to spend more. There’s a lot of instant gratification and a lot of dopamine release. A player gets a reward—the character skin or power-up—immediately, and this causes a small bump in their brain’s reward system. Such spending can be addictive because players find the thrill of buying these things comparable to the thrills associated with gambling. Fear of Missing Out (FOMO) is a common tactic, as these offer limited-time or exclusive items that generate urgency. It compels players to shell out money out of trepidation that they may be losing something important—even if the transaction doesn’t directly interfere with gameplay.
The problem with spending money repeatedly on microtransactions isn’t just the initial enjoyment — it can be harmful in the long term, usually to younger audiences. Studies have shown that systems like loot boxes promote addictive behaviors and are in the same space as gambling behavior. So, especially for vulnerable consumers, it’s a worry that it might cause more problems than anything else. By exploring these psychological dimensions, you can paint a fuller picture of why microtransactions are such a success but so controversial and gain readers’ engagement when addressing their business and ethical implications.
The numbers behind the rise
With the financial force of such popularity, microtransactions have fuelled the gaming industry to new heights. 2022 global microtransaction revenues hit $92.2 billion, with 83% growth from a few years ago. In particular, mobile games have benefitted greatly from this model, and Asia has accounted for more than 50 percent of these revenues. No company, EA included, has reaped such enormous returns, with its FIFA (EA) Ultimate Team mode alone bringing in billions in the past decade.
Very few—roughly 5 percent to 20 percent—make the purchases. However, this minority earns huge profits, showing that this business strategy has proven effective.
Regarding looking ahead, it’s easy to say microtransactions will follow for the foreseeable future, even with some pushback from regulators in certain regions. Governments and consumer advocates are starting to tackle the exploitative nature of some microtransaction systems that target younger audiences. But the rock and the hard place of regulators and game publishers’ financial interests mean the tug of war will continue. One of the inseparable parts of the gaming world is microtransactions: with microtransactions, we give them a sustainable revenue stream and alter how players approach their favorite games.
Image credits: Furkan Demirkaya/Ideogram
