Free-to-Play (F2P) and the Evolution of Game Business Models
How games make money, from boxed sales and subscriptions to free-to-play, ads and battle passes—plus the pros, cons and loot box regulations.
Buying a game used to mean buying a disc or cartridge in a box. Things are very different now. Many games are free to download and start, subscription services let you play hundreds of games for a monthly fee, and games that reward you for watching ads are everywhere.
In this post we look at five major revenue models in the game industry in turn: one-time purchases, monthly subscriptions, free-to-play (F2P), advertising and battle passes. Rather than labeling any one of them good or bad, the goal is to give a balanced overview of the benefits and burdens each model brings to developers and players. At the end, we also cover how different countries regulate loot boxes, sticking to confirmed facts.
Buy Once, Play It All: Premium Sales
The oldest model is the one where you buy a game once and get to enjoy everything in it. It's commonly called buy-to-play or the premium model. Today people often buy from digital storefronts like Steam, the PlayStation Store and the Nintendo eShop instead of physical boxes, but the structure is the same.
- Pros: The price is clear from the start. Developers can more easily focus on "delivering a polished experience from start to finish" rather than "how long can we keep players hooked."
- Cons: Revenue is concentrated around launch and drops off sharply afterward. As development costs grow, recouping them through a single sale becomes harder, and the risk of failure is higher.
That's why many premium games today also sell downloadable content (DLC) or expansions separately to generate revenue after launch.
Paying Every Month: Subscriptions
In the era of online games, monthly subscriptions were the dominant model, because servers needed steady income to keep running. World of Warcraft, released in 2004, is the classic example of huge success with this approach.
Subscriptions today look a little different. More services now bundle many games rather than offering a single one. Microsoft's Xbox Game Pass, launched in June 2017, is a well-known example.
- Pros: Players can try many games for a fixed fee, and developers get predictable income.
- Cons: Individual games depend heavily on the terms for inclusion in the service and how revenue is shared. Players also often lose access to games once they cancel.
In the late 2000s, a number of subscription-based MMOs switched to free-to-play. As retaining subscribers grew harder, they lowered the barrier to entry and sought revenue in other ways.
Free-to-Play (F2P): Start for Free, Pay as Much as You Want
Free-to-play offers the game itself for free and sells items, cosmetics, convenience features and the like within the game. This model first drew major attention in Korea. Nexon's Quiz Quiz, released in October 1999, was Nexon's first game to use it, and its lead developer later worked on MapleStory. Free-to-play then spread from PC online games to mobile games, and on to big-budget console and PC games.
The key to free-to-play is that there's no barrier to entry. Since you can start without paying, lots of people give it a try. On the other hand, only a fraction of players actually pay, and the model easily ends up with a large share of revenue coming from a small number of big spenders.
| Benefits | Concerns | |
|---|---|---|
| Players | Start for free, spend only what you want | Designs that keep pushing purchases; spending is hard to control |
| Developers | Broad user base, long-term revenue after launch | Operational burden; revenue concentrated in a few payers |
The most common criticism is pay-to-win—a structure where those who spend money gain a competitive advantage. To avoid it, some games such as Dota 2 and Fortnite sell only cosmetic items that don't affect stats. Even within free-to-play, what you sell makes a big difference to how fair players feel the game is.
Advertising: Paying with Time Instead of Money
In mobile casual games, ads are a major source of revenue. Typical formats include interstitial ads between rounds, banner ads at the bottom of the screen, and rewarded ads that players choose to watch in exchange for a reward.
- Pros: The majority of players who never pay can still contribute to revenue. Rewarded ads are watched only when players want to, so they tend to cause less resentment.
- Cons: Too many ads break the flow and hurt players' impression of the game. For games played by children, developers also need to watch what ads are being shown.
Today hybrid models that combine ads with in-app purchases—often including a separate "remove ads" product—are common. For small developers, advertising is also a realistic way to start earning revenue right from launch.
Battle Passes: Unlocking Rewards Season by Season
With a battle pass, players earn rewards one by one as they level up by playing during a set period (a season). There's usually a free track anyone can earn and a paid track that requires purchase. This format started with Dota 2 in 2013 and became widely known when Fortnite adopted it from its second season in 2018.
- Pros: You can see what you'll get in advance, so it's more transparent than random boxes. Rewards are mostly cosmetic, so they often don't undermine competitive fairness.
- Cons: The pressure of missing rewards when a season ends can make playing feel more like homework than fun. Buying passes for several games at once also adds up.
Loot Boxes and Regulation
The most controversial product in free-to-play is the loot box (also called gacha)—paying for a random reward. Loot boxes can easily drive repeated purchases until the desired result appears, and they have been criticized for triggering gambling-like psychology. Countries have responded in different ways.
- China: Announced rules in December 2016 requiring online game operators to disclose drop rates from May 2017.
- App stores: Apple added a drop-rate disclosure requirement to its App Store Review Guidelines in December 2017, and Google Play introduced the same requirement by May 2019.
- Netherlands and Belgium: In April 2018, the gambling regulators of both countries concluded that loot boxes in some games could fall under their national gambling laws.
- South Korea: In February 2023, the National Assembly passed an amendment to the Game Industry Promotion Act, making it a legal requirement to display loot box types and probability information. The rule took effect in March 2024.
- PEGI in Europe: From June 2026, newly rated games with paid random items have this reflected in their age rating, and from October, existing digital games with such elements are also being adjusted to PEGI 16.
Some argue that disclosing odds is only a starting point, since knowing the odds doesn't make it any easier to control one's own spending. The industry, on the other hand, sometimes describes loot boxes as an extension of long-standing collecting culture, like physical trading card packs. The debate is still ongoing.
Which Model Is Right?
It's hard to say any single model is the right answer, because what fits depends on the genre, platform and scale of development. Single-player, story-driven games pair well with one-time purchases, while long-running competitive games tend to suit cosmetics and battle passes. Short-session mobile puzzle games often mix ads with small in-app purchases.
What matters is whether players can clearly see what they're spending money on, and whether the game stays fun even if they don't spend anything. Developers and players alike should remember that a business model isn't separate from game design—it's part of the game experience.