I don’t have the data to back it up, but I disagree. By the time that lootboxes and micro transactions appeared, the video game industry was already in competition with Hollywood for profits - if not already making more.
One of the largest costs for the industry historically has been manufacturing the physical media. It costs a lot to produce all the cartridges and packaging, and to have that shipped around the world. As technology improved, however, those costs began to drop on a per unit basis from the cartridges of old to the cds and dvds of the 2000s, allowing for a higher profit margin on a per unit basis. But the biggest kicker was the development of digital storefronts. Suddenly, you didn’t have to make a single piece of physical media in order to sell a game, and companies suddenly began to make back a lot more of that $60 directly instead of having it spent on manufacturing. They make the game once, and then each copy they sell after the first costs effectively $0 to manufacture since it’s the exact same copy as the first. Then you also have every game selling a “digital deluxe edition” for as much as $100 (or more!), often for just some exclusive cosmetics.
Micro transactions and live service is what they call the “long tail” of a game - you already made the product and sold it, but it continues to bring in money after the fact. Companies don’t have to spend huge sums to make a brand new game when they can just trickle out incremental updates and skins and rake in the money.
I don’t have the data to back it up, but I disagree. By the time that lootboxes and micro transactions appeared, the video game industry was already in competition with Hollywood for profits - if not already making more.
One of the largest costs for the industry historically has been manufacturing the physical media. It costs a lot to produce all the cartridges and packaging, and to have that shipped around the world. As technology improved, however, those costs began to drop on a per unit basis from the cartridges of old to the cds and dvds of the 2000s, allowing for a higher profit margin on a per unit basis. But the biggest kicker was the development of digital storefronts. Suddenly, you didn’t have to make a single piece of physical media in order to sell a game, and companies suddenly began to make back a lot more of that $60 directly instead of having it spent on manufacturing. They make the game once, and then each copy they sell after the first costs effectively $0 to manufacture since it’s the exact same copy as the first. Then you also have every game selling a “digital deluxe edition” for as much as $100 (or more!), often for just some exclusive cosmetics.
Micro transactions and live service is what they call the “long tail” of a game - you already made the product and sold it, but it continues to bring in money after the fact. Companies don’t have to spend huge sums to make a brand new game when they can just trickle out incremental updates and skins and rake in the money.
That $60 game costs them $20 to sell on steam. So not that different than paying $20 to manufacture a cartridge really.