Video games are big business: from the latest blockbuster, an indie hit, a mobile time-passer for your transit ride, or a packed esports arena with massive online viewership, there's good money in creating engaging and immersive entertainment products. However, game economics have changed, particularly in the internet era, and developers and publishers have had to pursue revenue by adopting more creative and sustainable monetization models, including upfront, service-based, microtransaction-based, or even ad-based revenue streams. Against this backdrop, and against a negative media and political bias towards video games,1 we have seen an increasing appetite worldwide for governments to step in and regulate the games industry.
So it comes as no surprise that, even in the United States, the federal government has made a move to protect the populace from perceived exploitation, even if the new legislation, a bill from Republican Senator Josh Hawley and endorsed by two Democratic senators, is shockingly broad in its application.
Background -- The Current State of Games and the Rise of In-Game Monetization
In 2018, digital games and interactive media revenues grew 13% to reach USD$119.6 billion. To put that in perspective, that is more than ten times the global recorded music industry (USD$19 billion [+9.7%]) and rapidly approaches the vaunted global film industry (USD$135.6 billion [+2.5%]).
With competition for consumers' entertainment time at a fever pitch across many converging industries,2 game developers are under immense pressure to deliver immersive, compelling, perfectlyexecuted games that take full advantage of the latest technology. In the past twenty years, average game development costs have increased approximately ten times to USD$90 million while retail prices for AAA console and PC games have remained relatively stagnant (drastically decreasing when taking into account inflation) at approximately USD$60. Further, these development costs do not take into account marketing costs which are regularly 80-100% of the development budget for console and PC games and 300%1,000% of the development budget for mobile games.
