Master Thesis MSc in Management of Innovation and Business Development AN INVESTIGATION OF MONETIZATION STRATEGIES IN AAA VIDEO GAMES By Mariusz Patryk Diaczok & Patrick Tronier Supervisor: Just Pedersen Date of submission: 14th of May 2019 Character count / number of pages: 270.395 / 119 Abstract The AAA video game industry has recently been associated with multiple controversies and community outrages, most commonly attributed to aggressive monetization strategies. Due to the rapid evolution of the industry in question, the body of academic literature is quite lacking, especially with regard to developments that are more recent. The authors gathered research investigating the impact of a number of factors, related to the most prevalent monetization strategies, on the games themselves, and combine these insights, in order to create a foundation for a holistic theory of these relationships. A qualitative study, in the form of a literature review, was undertaken to explore the various factors impacted by the chosen monetization strategy. In addition, a quantitative study was conducted to investigate how the choice of monetization strategy affects the rating scores given by critics and consumers. These studies add to the understanding of how a chosen strategy can affect the consumer perception of the game, which is directly related to the generated revenue. Furthermore, the literature review provides a rough outline for the interaction between consumer purchase motivations, purchase incentives implemented into the games and their effectiveness. These findings can have important practical implications for AAA video game providers when designing future games. Page 1 of 102 Table of Contents Abstract ....................................................................................................................................... 1 Introduction ................................................................................................................................ 4 Research question........................................................................................................................ 8 Sub-questions ................................................................................................................................... 8 Methodology ............................................................................................................................... 8 Importance of monetization strategies ....................................................................................... 12 Most prevalent monetization strategies ......................................................................................... 13 Aspects of microtransactions .......................................................................................................... 15 Implications of monetization strategies for the video game industry ............................................. 17 Main aspects of online evaluations ............................................................................................. 19 Online evaluations’ influence on the purchase behavior of video games ....................................... 20 Effects of valence ............................................................................................................................ 22 Volume and valence........................................................................................................................ 24 Variance .......................................................................................................................................... 24 Additional aspects of reviews ......................................................................................................... 26 The implications of online evaluations for the video game industry .............................................. 27 Ratings study ............................................................................................................................. 28 Method ........................................................................................................................................... 28 Limitations and delimitations ......................................................................................................... 30 Hypotheses ..................................................................................................................................... 31 Analysis ........................................................................................................................................... 33 Findings ........................................................................................................................................... 41 Motivations ............................................................................................................................... 42 Attitude ........................................................................................................................................... 43 Social interaction ............................................................................................................................ 43 Economic rationale ......................................................................................................................... 45 Perceived enjoyment ...................................................................................................................... 46 Function .......................................................................................................................................... 48 Necessity ......................................................................................................................................... 49 Effect of subjective norms .............................................................................................................. 49 Other factors affecting motivation ................................................................................................. 50 Concluding remarks regarding motivations .................................................................................... 51 Page 2 of 102 Purchase incentives ................................................................................................................... 53 Pay to skip ....................................................................................................................................... 54 Monetized Rivalries ........................................................................................................................ 55 Additional dark patterns ................................................................................................................. 57 Differentiation strategies ................................................................................................................ 58 Other incentivising mechanics ........................................................................................................ 59 Limitations of the papers ................................................................................................................ 61 Concluding remarks regarding the discussed incentives ................................................................. 62 Approaches to playing games ......................................................................................................... 64 How the games are evaluated .................................................................................................... 68 Perspectives of industry professionals ........................................................................................ 70 Conclusion ................................................................................................................................. 72 Bibliography .............................................................................................................................. 76 Appendix 1 – Literature review table .......................................................................................... 84 Appendix 2 – Ratings study, dataset ........................................................................................... 93 Appendix 2 – Ratings study, calculations ..................................................................................... 99 Page 3 of 102 Introduction The video game industry is both very dynamically changing and rapidly expanding. While still quite niche a decade ago, with global revenue under 20$ billion (Statista, 2010), its value was 138$ billion already in 2018, with the projections putting it at 180$ billion in 2021, as reported by The Association for UK Interactive Entertainment (UKIE, 2018). The research area of this thesis takes a more focused perspective, as the authors have chosen to investigate the so-called ”AAA” segment of the industry, due to two reasons, namely the scope and significant differences, between the identified segments. Firstly, it is considered the most interesting, as the production of these games involves the greatest risks and rewards, because of their high budgets and plentiful opportunities for revenue generation. This has resulted both in certain shifts in the business models and the main value streams, as well as multiple controversies related to community outrages over certain design choices within the games, which have caught the attention of the authors. The interest in new methods of creating value is understandable, due to a staggering