Premium, Freemium or Subscription? Each approach has advantages — and pitfalls

The Games-as-a-Service (GaaS) market is booming for good reason: players are delighted by continuous content updates, evolving narratives, and vibrant communities. But for businesses, success in this competitive landscape requires strategies that maximize player Lifetime Value (LTV).

This article explores key methods to not only convert players into spenders but also build loyalty and engagement for long-term revenue growth.

Understanding Player Motivations: The Cornerstone of LTV Optimization

Psychology plays a vital role in how much players are willing to spend. As Ryan Ward, CEO of PIXLVRSE, notes:

"An often-overlooked advantage of the premium GaaS model is the psychological effect of the upfront purchase on player engagement and retention."

• Endowment Effect: Players value what they own more. Buying a game increases personal attachment and time investment.
• Sunk Cost Fallacy: Upfront purchases motivate players to keep playing to “justify” the expense.
• Commitment and Consistency: Players stick with their choice to remain consistent with their decision to purchase.

Despite this, premium GaaS games must still overcome the challenge of upfront cost in a world filled with free alternatives. Developers must clearly communicate the value proposition: a complete, ad-free, high-quality experience.

Download the Live Service Gaming Summit Agenda Here

Monetization Strategies for Boosted LTV: A Multi-Faceted Approach

The Power of the Freemium Model

Revenue from Free to Play games amounts to over 85% of all game revenue.

Freemium games are free to play but monetize through in-app purchases using a variety of psychological strategies:

• FOMO: Limited-time deals create urgency and encourage quick spending decisions.
• Gambling Mentality: Loot boxes and random rewards mimic gambling behavior.
• Pay-to-Win: Competitive advantage for paying users pressures others to spend.
• Hidden Costs: Complex currency systems obscure actual item prices.
• Exploiting Impatience: Monetizing shortcuts for time-consuming tasks.
• Social Bragging Rights: Encouraging players to spend to stand out socially.
• Fake Rarity: Creating artificial scarcity to push impulse purchases.

Subscription Services

“If you’re a dev making a ‘one and done’ narrative game... subscription services are going to be an increasingly important part of your planning.” – Simon Carless, GameDiscoverCo

Subscriptions offer regular income and long-term engagement by providing access to premium content, rewards, and gameplay benefits. Consider tiered subscriptions to serve different user segments.

Targeted In-App Advertising

Properly managed, advertising can supplement monetization:

• Ads tailored to user preferences can be non-intrusive and relevant.
• Too many or poorly targeted ads can hurt user experience and retention.
• Data collection must be transparent to avoid privacy backlash.

Beyond Monetization: Nurturing Loyalty to Maximize LTV

• Prioritize Engagement: Use content updates, events, and challenges to retain players.
• Personalize Experiences: Use data to recommend content and rewards that matter to individual players.
• Foster Community: Encourage social interaction, forums, and multiplayer events to strengthen player connection.

“Some developers try to build the game first and then add monetization features later. This is a mistake...” – Nick Lim, CEO at Sonamine

Game design and monetization should be developed in tandem to maintain gameplay quality while meeting revenue goals.

Data-Driven Optimization: The Key to Sustainable Success

Use analytics to:

• Track player behavior and spending patterns
• Test and refine pricing models
• Develop new features based on user preferences

With a balanced, player-centric approach, developers can monetize responsibly while keeping players loyal and engaged.

Download the Live Service Gaming Summit Agenda Here