Microtransaction

A microtransaction (MTX) is a way that people can buy special things inside video games using small amounts of money. These special things are called virtual goods, and players can purchase them with micropayments. Microtransactions are very common in free-to-play games, which are games that players can start playing without paying anything at first. The developers of these games use microtransactions as a way to make money.

Games that use microtransactions are sometimes called "freemium". If a game lets players buy items that give them an advantage, it might be called "pay-to-win". The idea behind microtransactions is to let more people play the game by offering items or features that players can buy if they don’t have the time or skill to get them by playing normally. In the long run, developers believe that the money made from many small purchases will be more than from selling the game once.

One popular type of microtransaction is the loot box. When players buy a loot box, they get a random set of items. Because players might need to buy several loot boxes to get what they want, this can bring in a lot of money for game developers. Some people think this is similar to gambling, especially for younger players. Items that can be bought with microtransactions can be for looks, like new outfits for characters, or for gameplay, like special weapons. Some games only allow players to buy things that can also be found by playing normally, while others have items that can only be bought.

People, especially children, often spend money on microtransactions because of how it makes them feel, and there has been a lot of talk about how this affects kids. Many discussions have focused on regulation and legislation efforts to protect young players. Microtransactions are usually sold through a special store inside the game. Big companies like Apple and Google help games offer these purchases and take a share of the money made.

History

Initially, microtransactions in games allowed players to use real money to buy special items or abilities. For example, the arcade game Double Dragon 3: The Rosetta Stone from 1990 let players insert coins to get better weapons or health.

Later, online games like MapleStory and Second Life let players buy virtual money to purchase items and customize their characters. In the 2000s, games such as The Elder Scrolls IV: Oblivion began selling small pieces of extra content, like horse armor, for a few dollars. Today, many popular games use microtransactions to let players buy special looks for characters or other fun additions.

Impact

In 2011, reports showed that free games, especially those where you can buy extra items, were making more money than games you had to pay for right away. By June of that year, free games made up 65% of the money earned in Apple's App Store for the top games. Even though most people don’t spend money on these extra items, the ones who do can add up to a lot because the games are free to download.

Later studies found that most money made on phones in 2013 came from free games you can play, like Candy Crush Saga. Some experts think that in the future, all games might use this way of making money. This model can also help fight people copying games without paying. However, some groups have said that these games don’t always make it clear that you’re spending real money, which can sometimes lead to unexpected charges.

Criticism and regulation

Further information: Loot box § Regulation and legislation

As people learned more about microtransactions in games during the mid and late 2010s, they began to criticize how these features work. Gamers often felt that loot boxes, which give random rewards, were unfair because they could change how the game is played, cost too much money, and might encourage people to spend more than they should.

Governments around the world started looking into these issues. For example, in 2018, both the Netherlands and Belgium banned the sale of certain microtransactions in games. In the United States, there have been efforts to pass laws to protect children from these features in games. Similarly, the United Kingdom has suggested that microtransactions should be treated like gambling to better protect young players.

Psychology and ethics

Some people worry about the right and wrong of selling tiny extra payments called microtransactions, especially to kids. Researchers look at why people feel the urge to buy these things.

Many games try to make players decide quickly whether to pay a little money—like 99 cents—to keep playing. This can make players feel they must spend to continue. Another reason people buy microtransactions is the feeling of almost winning. When players keep losing, they really want that happy feeling from winning, so they might buy something to help them win. Then, when they do win, they think it was because of what they bought, and they may keep buying more when they lose again.

Kids often play games with microtransactions, and many spend money on things that change how their character looks. Some kids and parents feel these systems push kids to spend too much money. About half of kids think they need to spend money to enjoy the game fully. This can create a big difference between what free players can do and what paying players can do.

Kids can feel excited when they buy and open special items, especially when they do it with friends. But sometimes, friends pressure each other to keep buying items, hoping to get rare ones. Kids might also feel left out if they can’t buy special items that others have, making them spend money just to fit in. Watching videos of players opening items can also make kids want to spend money, even though the players in the videos often have more money to spend.

Some families have faced big financial problems because kids spent large amounts of money without understanding how much they were spending. This has led to serious money issues for some families. Kids and their friends sometimes spend a lot of money on these items, even if they don’t get anything valuable in return.

Data

Microtransactions have become very common in many video games, including those on smartphones, consoles, and PCs. Many games offer themselves for free and then rely on microtransactions to make money. This business model is very profitable for companies.

Some people worry that collecting data about customers, like their spending and preferences, might be unfair even if it is legal. This data helps companies make better games and earn more money. In 2016, games like Clash Royale, Clash of Clans, and Game of War were among the top earners through microtransactions. Even big games like Grand Theft Auto Online made more money from microtransactions than from selling the game itself. In 2021, Activision Blizzard made $8.8 billion, mostly from microtransactions.