Why do games (as media) make so much money?

Mobile game revenue makes up for more than 50% of all game revenue, and that number is only for the US. It's much larger in Asia, which is an even bigger gaming market.

For non-mobile games, most of the revenue still comes from mobile-game-like monetization schemes such as lootboxes/gacha/battle passes/skins/etc, not from the traditional sales.

These types of monetization schemes are incredibly lucrative, with many people spending hundreds, thousands, or tens of thousands of dollars over the lifetime of such games due to their addictive nature and gambling mechanics. Traditional media does not have an equivalent to these kind of monetization schemes.

It's not the size of the audience. It's the monetization scheme. The times when game revenue meant buying good old single player games without DLCs are long gone. Companies have long realized that's not where the money is.

Traditional casinos make a lot of money. Although the odds are heavily in the house's favor, normal casinos do pay out some percentage of the money that is wagered. Most slot machines, over time, keep over 90% of the money that is put into them, and the rest is given back to the players.

The video games that are generating these big revenues are functionally identical to slot machines in their monetization schemes. There's one key difference. These games always keep 100% of the money. There's no way to get real money back. You can get cosmetic upgrades, various fake currencies, power-ups, and all sorts of other things in exchange for the real money. None of those things actually cost the video game company anything. They're just being paid to execute UPDATE statements on their database.

The effect of this is that a video game is a casino where no matter how lucky or skilled the player is, the house always keeps 100% of the real money no matter what. And we let children play in these casinos. In many countries they are largely unregulated. Meanwhile, the traditional casino that does occasionally pay out real money, is heavily regulated.

In terms of entertainment-time per dollar, at least classic AAA “$60 for 40 hours of entertainment” games are an incredibly good deal compared to movies. Indie games are usually cheaper and higher-skill, so I guess the deal is probably even better (I mean, a higher skill game doesn’t necessarily take longer to complete but it seems likely…). Wonder how this compares to the f2p micro-transaction based model.

If the $/time is much lower and the total $ is much higher, then I think we should just conclude that the games industry is providing way more entertainment-hours to humanity as a whole.

Most people aren't aware of the games market. You can get some brief overview here [1]. Console games make up < 30% of the market by revenue and users. Asia accounts for more revenue, and gamers, than the rest of the world combined. And that's disproportionately going to be China. So their trends dictate global trends.

Globally there are about 3 billion gamers. So it's largely just going to come down to a whole lot of people spending very little money. The average spend works out to $60/person, but that includes console gamers and mobile whales spending hundreds to thousands of dollars a year. The median spend is going to be much lower. I'd certainly take the under on $20.

And I think that's largely the answer. In terms of entertainment hours/$, there's no digital entertainment remotely close to games. So it has widespread appeal and affordability.

[1] - https://newzoo.com/insights/trend-reports/newzoo-global-game...

More recently: micro-transactions/subscriptions

But historically I'd bet it came down to the fact that games are simply more expensive than movies; a AAA game has cost $60 for the past decade and a half, while a movie ticket is ~$10 (or a DVD is ~$20, or you could just watch it on your existing cable or now streaming subscriptions)

Many of the biggest games (especially multiplayer) are now free to play + in-game purchases, but there are still plenty of big, prestige, $60 single-player games coming out every year

The interaction is a huge component of it. Shared experiences is important to a lot of people. It's why people love playing games with friends. Even single player games, people will still discuss online etc.

I think it's always more immersive than a movie, even in terms of non immersive games. "You" are the one playing after all. I also think there's such a wide variety of games that's there's something for everyone.

Music is much cheaper to consume. I have 95% of the music I ever care to listen to at my fingertips from a single music streaming subscription. That definitely contributes to the pure money factor and why games sell more.

A lot of artists make more in merch, vinyl, and touring ticket sales than they do in pure streaming numbers. Buying new video games generally cost more. Even if they don't, people tend to spend more on microtransactions.

A lot of it is scammy mobile games that predate on people.

But even if you take into account only PC+Console games, unlike shows and movies, the cash cows are free to play where value is maximally extracted based on the player's income. You can spend $0 if you can't afford anything, you can spend $20 if that's all you've got, or you can spend hundreds (even thousands). A movie can't really extract more than a couple ticket's worth regardless of how invested the person is (outside of maybe merchandising which is niche).

Also realistically you might watch at most 10 times a movie (20 hours), while these games (LoL, Fortnite, CSGO, Valorant, etc) are often played for thousands or tens of thousands of hours. So obviously it's more reasonable to spend more on something that you play every day.

The simple answer is that while there are fewer people spending on games, those that do spend more.

The details are more complex because of the variety of ways games earn money.

The simple buy-the-game model can earn more because the cost of most games is more than going to see a movie

On the darker side there are games that unethically try and leech as much money out of the players as possible, sometimes to a life destroying degree.

In the middle ground there are games with pay-to-win, pay for quality-of-life, pay for bling, and pay for additional content. Different cultures and subcultures draw different lines as to what is considered acceptable.

There are also a few things that muddy the waters, How much is the revenue generated by The Last Of Us TV series considered game industry revenue? How about Angry Birds merch?

Most top grossing games get the vast majority of their revenue from a very small % of users, referred to as “whales”. A game is a motivational system typically fulfils intrinsic needs (relatedness, autonomy, mastery and purpose). techniques which tap into rheee needs successfully compel people to pay.

TV by comparison is more passive so perhaps it’s less likely someone consuming it would experience the type of ‘flow’ and rewards you get from a game.

You can also check out Jane McGonigal’s Reality Is Broken for a bit more about the psychology of gaming or Yu-Kai Choi’s Actionable Gamification book. Choi’s book details many of the black hat persuasive techniques) commonly found in games, which also compel people to spend more than they perhaps would really want to!

If I were to hazard a guess:

1. The unit price of games is higher than any other media form. What do you pay for your TV shows? Probably not much with a subscription (or ad supported). Movies? $10-$15 a pop at the local theater. Music? Virtually nothing. And the higher price is supported by the following point:

2. Games are interactive and, hence, more engaging. You can spend dozens of hours in a game world and return back to it as desired. Even more so if it’s multiplayer where the lucrativeness is further enhanced by ongoing DLCs and other monetization schemes.

> But looking around it's still less universal than e.g. TV (±"everyone" watches TV but not everyone plays video games).

When you include mobile, I don’t think gaming is less ubiquitous than TV.

The AAA games industry has found a way to keep its product premium priced, and so when they have millions of people go out and buy the latest thing, they're not paying $15, they're paying $70 (and the long tail of discounts starts at that high price point). That yields enormous day one revenues.

On top of this companies have increasingly leveraged paid expansion Downloadable Content releases to both add value, which provides a supportive floor to the core product, and to yield further revenue from current players.

I would imagine, games are relatively less expensive to produce, so duds are less costly. That said, it's costly enough that the barrier to entry minimizes noise in the market (unlike music).

The music industry has social appeal but the truth is only a few artists do very well. So despite the volume of artists and releases there is a never ending stream of duds.

Another aspect to mention is games can add a marketplace directly to the media. Paying extra to change the costume a character wears in a TV show wouldn't work, but paying to change a costume of a game character is something people do every day.

Games are more replay able than movies and tv. Also, inapp purchases and subscriptions are the bulk of where games make their money. Non games apps are starting to catch up with the inapp and subscription schemes to increase profitability

I would guess that about the same amount of people that watch TV play games if you count mobile games.

Games have the tightest reinforcement feedback loop one could possibly imagine, second only to something like sugar or cocaine. They are made to be addictive and cost $60 for 30 hours of often thrilling engagement. Add the social element for networked games and you are talking about a ridiculously compelling experience.

They are monetising by tapping into "hidden gamblers".

>But looking around it's still less universal than e.g. TV (±"everyone" watches TV but not everyone plays video games).

What do you mean by TV?

I'm asking because I feel like by TV you meant TV + Netflix/HBO/etc...