In-Game Purchases: How Video Games Turn Players into Payers

Written by
Tracy Markle, MA, LPC &
Dr. Brett Kennedy, Psy.D.
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In This Article

Video game companies use behavioral psychology to highly stimulate users before hitting them up to make in-game purchases. This monetization system is so successful, it’s now utilized in all classes of video games. Studies show the likelihood of spending in-game has nothing to do with time spent playing or frequency of play. This means that video game addiction isn’t the only concern for gamers and parents of gamers. Most of the population won’t meet the criteria for addiction. However, anyone who plays video games is susceptible to impulsive or unplanned spending and overspending in-game.

The industry calls these in-game purchases “microtransactions” because a single virtual item is often relatively low in price, but often they are bundled together in “value” packs or games require players to purchase them repeatedly in order to meaningfully advance in the game.

These microtransactions can easily add up to hundreds, thousands and—in at least one extreme case—a million dollars. The most vulnerable to these manipulative monetization tactics are children and teenagers because they naturally lack impulse control at their stage of maturity.

People with a history of problem gambling may also be at risk. However, anyone who plays video games is susceptible and that’s a lot of people. The video game industry now generates more money than the global movie, music and North American sports industries combined. The World Championship Finals for League of Legends attracted twice as many viewers as Super Bowl 52. And Netflix says Fortnite is a bigger threat to their business than HBO. So, learning to protect yourself and your bank account from predatory monetization tactics in games is just responsible consumerism. Read on to learn how.

My Son Spent $3000 on In-Game Purchases

The news is full of stories about kids spending a small fortune on in-game purchases with their parents’ credit cards. Even comedian/actor Jack Black fell prey to the phenomenon. His eight-year-old son spent $3000 in an app marketed to children. In the following video, Black explains his first indication was when he received 30 email receipts from the app store. It turns out his son had repeatedly purchased $100 bundles of 99¢ virtual currency in game during one day.

It’s marketed to children and then there’s a one-hundred-dollar thing in-app?” he shouts. Indeed there are many high-priced virtual items available for purchase in-game. And games often obscure whether they are asking users to spend real money or virtual currency earned in game. It’s an industry that’s completely unregulated in most countries including the United States where Black lives.

Black says he took his credit card information off the iPad. (Which is something we strongly advise all parents to do if their children play online video games.) He explained to his son that he spent $3000 in real money, and contacted the video game company.

“I think they’re gonna give me a refund thanks to being on this show and telling them to give me a refund,” Black jokes.

Most people can’t go on national television to shame video game companies into refunding their money. So, taking a preventative approach is probably the best course of action and educating yourself is the first step. Read on to learn how so-called free-to-play video games are making billions of dollars for the video game industry.

Why “Free-To-Play” Means In-Game Purchases

It’s not an overstatement to say that the video game industry is a behemoth. Market researchers say it generated $174.9 billion in revenues worldwide in 2020. Which is an increase of nearly 20% from the year before. Mobile games played on phones and tablets are driving this mind-boggling growth. Ironically, the games downloaded as “free-to-play” are leading the way. How does a product that is “free-to-play” generate $86.3 billion in annual revenues? The answer: In-game purchases, also known as microtransactions.

Mobile game designers invented microtransactions as a way to recoup expenses from a market hesitant to pay for mobile apps. By pivoting to in-game purchases, video game companies found users were more willing to hand over their money.

This is because purchase offers can be timed with parts of the game that are arousing to the emotional brain. During times of high emotional arousal our ability to reason and make smart decisions becomes compromised.

And while children, teenagers and problem gamblers are most vulnerable, anyone who plays video games is susceptible.

You don’t even have to be an obsessive player who logs hours a week. A 2014 study found that time spent playing and frequency of play are not significantly related to spending in game.

Persuasive design is so successful that some video game companies are patenting their proprietary monetization formulas. All classes of video games, from so-called free-to-play mobile applications to $80, premium, AAA games, now utilize microtransaction monetization.

One recent study used a consumer protection lens to examine thirteen video game monetization systems submitted for patent. Video game companies described systems designed to increase the probability that users find in-game purchase offers desirable.

Price, timing, and presentation of the offer are optimized according to individual players’ user data.

For example, a system will offer a player an in-game purchase opportunity at a point in game play when that user has made an in-game purchase in the past. Systems also pair in-game purchase offers with known triggers for an individual player or known triggers for similar players.

In-Game Purchases: Person playing Candy Crush Saga on a phone.
Candy Crush Saga is one of the first apps to generate over $1 billion from in-game purchases. Source: Business of Apps

Such triggers might include:

  • Interrupting play to make the offer
  • Saying it’s a limited time offer
  • Placing a countdown timer on the screen
  • Making the in-game purchase offer unavoidable if the player wants to advance in the game.

Researchers also found that these monetization systems mislead players about the effectiveness, availability, and/or rarity of an in-game product. And they aren’t open about how individual user metrics determine in-game purchase options. For example, level of skill and progress in game determine:

  • Usefulness of virtual items available
  • Whether a user receives a reward in a loot box purchase

Consumer Backlash

Electronic Arts (EA) used these monetization tactics in Star Wars Battlefront II, kicking off a huge consumer backlash against loot boxes in 2017. This is not a free-to-play mobile game. Star Wars Battlefront II is a premium, AAA game that users purchase for $60-$80 to play on their consoles or PC’s.

This was not a free-to-play mobile game. Star Wars Battlefront II is a premium, AAA game that users purchased for $60-$80 to play on their consoles or PC’s.

When users discovered they also had to purchase multiple loot boxes in game to unlock central Star Wars characters like Darth Vader and Luke Skywalker, a backlash ensued.

When one player complained on Reddit that he spent $80 on loot boxes before he finally unlocked Darth Vader, a representative from EA responded by encouraging players who don’t want to spend money on in-game purchases to grind it out (a gaming term for putting in many hours of play to improve one’s skill and advance in the game.)

Another Redditor uploaded a spreadsheet showing it would take 40 hours of game play to earn the right to unlock one hero or villain.

The situation not only became a PR nightmare for EA, but also prompted Belgium’s Gaming Commission to investigate loot boxes in Star Wars Battlefront II along with EA’s FIFA 18, Blizzard Entertainment’s Overwatch, and Valve Software’s Counter-Strike: Global Offensive. As a result of the investigation, Belgium declared loot boxes to be illegal under gambling laws, but Battlefront II was not in violation as EA had already temporarily removed microtransactions from the game due to customer outrage.

Legislating In-Game Purchases

The United States recently settled another loot box legal battle. A class action lawsuit against Epic Games filed on behalf of US users alleged that Epic “violated state consumer protection laws, prevented minors from exercising their contractual disaffirmation rights, and negligently misrepresented the value of its in-game items in connection with its Fortnite and Rocket League video games.” On February 22, 2021, Epic Games announced that, as part of a settlement, they will give 1000 V-bucks (virtual currency) to anyone in the world that purchased blind-item loot boxes called Loot Llama in Fortnite and Event Crates in Rocket League. A website set up to publicize the class-action suit says the settlement also provides “up to $26.5 million in cash and other benefits to U.S.-based Fortnite and Rocket League players to resolve claims arising from players’ purchases of Fortnite and Rocket League.”

One Factor That Increases the Likelihood of Making In-Game Purchases Using Real Money

A study of the log data of a mobile phone game in South Korea aimed at young girls and women found some surprising results when they looked at who was more likely to spend real money in game.

How Video Game Companies Use Psychology to Turn Players Into Payers

Video game publishers work closely with behavioral psychologists to design their products so that they are habit forming. This area of psychology is called operant conditioning which is a scientific term for creating habits.

Psychologists proved decades ago that the best way to get people (and animals) to form new habits is to reward them for a desired behavior. But the secret sauce is to deliver their reward on an unpredictable schedule. If a person (or animal) gets a reward they really enjoy at least one time, they will keep repeating the behavior that got them the reward in hopes of getting it again.

Delivering rewards on an unpredictable schedule is called variable ratio reward schedule and both psychologists and video game companies know it’s the most manipulative reward schedule known to man and the basis for all addictions. It’s also the basis for monetizing many video games through carefully-timed in-game purchases.

In-Game Persuasive Design Terms to Know

Operant Conditioning: The process and study of teaching people or animals to adopt a new behavior by rewarding them for performing the behavior. By definition everything in a video game is operant conditioning because game designers must instruct users on how to progress through the game by using rewarding cues and prompts like exciting sounds, animations and messages. In this sense, operant conditioning is neither bad nor good. It’s just a term that psychologists use to describe the process of learning through reward.

Variable Ratio Reward Schedule: When operant conditioning rewards are delivered on an unknown schedule it’s called a variable ratio reward schedule. The variable ratio reward schedule is the most manipulative reward delivery schedule known to man and the basis of all addictions. It’s also the basis for many video game monetization strategies that use the principles of variable ratio reward schedule to elicit repeated in-game purchases from users.

Loot Box: A type of in-game purchase that has come under scrutiny of late because of its more overt use of the variable ratio reward schedule. Loot boxes are virtual grab-bags, the contents of which are not revealed until after purchase. Video games that sell loot boxes often display a list of prizes that could be inside the loot box, with some of them being highly valued by players. However, as with other random chance games, big payoffs are rare, and users often find themselves buying loot box after loot box in the hopes of obtaining a particular virtual item, only to blow their budget. Some games require the purchase of loot boxes in order to advance in the game. Japan, China, Belgium and the Netherlands have passed laws either completely banning loot boxes or banning certain types of loot box monetization in video games.

Learn How Persuasive Design Is Used to Create Habit Forming Digital Media

Online Addiction:
Everything You Need to Know
A Checklist for Ethical In-Game Purchase Monetization

A savvy video game consumer must weigh many aspects of the video game experience to decide whether a particular in-game purchase opportunity is reasonable and warranted. The following checklist of characteristics found in ethical video game monetization was informed by the Golden Rules of Ethical Monetization created by a think tank of video game designers called Project Horseshoe. Read their suggested guidelines here and use the checklist below to help navigate the world of video game monetization.

How to Avoid Impulsive, Unplanned or Unauthorized In-Game Purchases
Checklist: Signs That In-Game Purchases Are A Symptom of Video Game Addiction or Video Game Overuse

Need Help? Reach out.

If you’re worried you might be struggling with video game addiction or overuse there’s help. dTEC specializes in online addiction
and digital media overuse treatment and education.
Our experienced and knowledgeable therapists can help.

Originally published on March 23, 2021 and updated on March 29, 2021

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