These factors have had a chilling effect on creativity, similar to the industry-wide writer’s block afflicting Hollywood. Instead of retaining market-share by taking risks that may enhance gameplay and narrative, studios have looked for new ways to monetize in-game dynamics by imitating mobile-phone games. This often involves the adoption of the "games as a service" (GaaS) model, where games are platforms for continuous updates and monetization, as well as micro-transactions.

Popularized by mobile games' free-to-play models, in-game purchases for virtual goods or advantages have become a lucrative strategy, adopted by AAA games like FIFA (Ultimate Team) and Call of Duty (cosmetic skins, battle passes). The global micro-transaction market is expected to reach $219.4 billion by 2032.

As they adopt new monetization strategies, larger studios are also engaging in mass layoffs, stemming from a variety of factors, including the need to readjust after the temporary spike in demand during the Covid-19 lockdowns, technological advancements allowing developers to automate processes, the need to cut cost due to inflated development budgets and corporate restructuring following high-profile acquisitions. 

The industry’s adoption of a leaner model could be a healthy sign for its future sustainability, but combined with the adoption of micro-transactions, it indicates a desire to compete in the mobile game arena (contrasting with an alternative “indie” model or the search for creative niches and fan-loyalty). 

Its convergence upon a low barrier to entry model (the market of which is already highly saturated), suggests the industry’s recent explosive growth is, in fact, a bubble: gamers may find what studios offer of not much more value than cheaper alternatives, leading to declining sales. 

The decline of large studios, however, would not accompany one in the ubiquity of GaaS and micro-transaction, as the sustainability of these practices relies on their being highly addictive. Small in-game purchases work to subtly replace enjoyment for gameplay dynamics and skill-development with the endorphin-releasing addiction to novelty. 

Regarding the financial sustainability of the mobile phone model, in their 2018 research paper “A Cross-Lagged Study of Developmental Trajectories of Video Game Engagement, Addiction, and Mental Health” Krossbakken and colleagues found that “the stability of video game addiction indicates a condition that for a substantial number of people does not resolve spontaneously over the course of 2 years.” In other words, like any addictive behaviour, it tends to endure over time.

Pay-to-win systems and loot boxes that compel players to spend money to remain competitive (for the gamer never really 'owns' an ever-changing product) exploit the same psychological triggers as traditional gambling. In this sense, they degrade the gaming experience. Micro-transactions have significantly changed how users interact with digital products, especially  games. These can lead to substantial spending over time due to their incremental nature.

In their 2018 research paper “Predatory monetization features in video games and internet gaming disorder,” King and Delfabbro identify what they call “predatory monetization schemes in video games.” These involve getting players to underestimate their total spending and act impulsively through pricing strategies that keep individual purchases low, require repeat purchases for a given gameplay dynamic (for example through variable or randomized rewards, where the content of a “loot box” is unknown until purchased) and make in-game purchases easy. With randomized rewards, the unpredictability element is particularly prone to fostering compulsive behaviour in players, just as gambling addiction does. Indeed, several countries have moved to ban or limit features like loot boxes from games, including Belgium, the Netherlands, Japan, China, South Korea and Brazil.

Beyond this, predatory monetization in game design often relies on a broader psychological dynamic, namely so-called escalation of commitment, or the “sunk cost” fallacy, “the belief that one has invested too much to quit.” King and Delfabbro found that “[S]pending more and more money on loot boxes may have a ‘sunk cost’ effect that serves to justify continued expenditure.”

The above dynamics can be reinforced by being normalized in a social context: “Sunk cost effects may also operate vicariously via exposure to proximal on-line players who are entrapped and make maladaptive purchasing decisions.” For example, “observing other players’ spending…with favourable outcomes may provoke counterfactual comparisons.” This social normalization of gambling relies on several related game dynamics: from simply observing a certain behaviour, to leaderboards and other elements that stimulate competitiveness which is then enhanced through purchases (the pay-to-win model), to so-called “Fear of Missing Out” (FOMO), as with limited time-officers and the like.

But, whereas gaming can represent an instance of overstimulation or “novelty” addiction, there is also a rising niche of game development meant to counteract such negative impacts. Game development has the potential to significantly contribute to mental health prevention by integrating therapeutic elements into gameplay. Some games have integrated cognitive behavioural therapy dynamics and stress-reducing, focus-enhancing elements. A game may even reward impulse-control, the very opposite of the gambling dynamic. Such a model, however, needs to avoid the pressures incentivizing the adoption of gambling-like dynamics by being financially sustainable.

We may suggest then, that, in a scenario of likely contraction for larger AAA studios, the gaming industry will tend to polarize. On the one hand, we have gaming models reliant on micro-transactions, rendered sustainable on account of their addictive quality but also facing the challenge of increasingly restrictive legislation. On the other, however, we will continue to see indie (and more creative AA and AAA) developers willing to cultivate niche loyalty, if also accepting a smaller overall market share.