泥中蟠龍's Game愛歌
[A love song for games of the dragon waiting for an opportunity]
Building a good business model (Part 2)
Thirdly, there is a flat rate. The flat fee is a pricing structure, regardless of usage, that charges a single fixed fee for a fixed term. At the beginning of online games, the linear rate was used most and it still is used. Developers simply needed to come up with a way to have more users for a convenient source of income and it could be the ideal model for the game makers if they attracted regular customers. However, it was hard to keep a "game over"-like exciting balance compared to the pay-to-play model because it guaranteed playtime within a given period time. Also, game developers used to feel pressure due to continuous updates to increase service hours or production of additional content. Besides, as competition intensified, they had to take other customers. Therefore, marketing costs to attract potential players for a new game tended to be increased, which caused market contraction. Unlike the existing business models—developing a game and selling it—, the flat rate, which charges a single fixed fee for a service, changed the paradigm of game production. It was the pretty unconventional method in those days, even though a much bigger service operation cost than production cost is about to open to doubt today.
Lastly, there is in-app purchase which is the most used app monetization strategy recently. As competition for the flat rate intensified, rival game developers adopted the in-app purchase model to enhance their marketing. It is a pretty simple way for users not to pay unless they have fun with a game, however, I think that the idea—a free game—was very radical at the time. The very simple idea doesn't mean to be easy to plan. Developers need to work hard to make purchases within an app. They have to continuously update the game and add new content to generate a better retention rate, percentage of paying users (PPU), daily active user (DAU), and average revenue per daily active user (ARPDAU). Due to free-game characteristics, game makers are required to encourage users and induce purchases through multiple devices because users, who got bored by the game, easily get out of it. On the other hand, unhappy consumers imposed excessive requirements for purchase also easily leave the game. Game balance also needs to be appropriately differentiated according to paying or non-paying users not to bring about discontent. Also, the balance for paying users has to be reasonably varied depending on their purchase amount. Summing up, the essence of the in-app purchase is to maintain a balance and a steady pace of updates, which is a daunting job because it needs to satisfy the requirements of difficulty levels of both the flat rate and the pay-for-play.
I've looked at the game business model briefly. There is still much to talk about it and I expect that it would form the basis of future columns about a variety of business models. And I hope that users would be satisfied with games with ground-breaking game business models in the future.
※ This is from Kyunghyang Games column by 泥中蟠龍 since September 2013.
(http://www.khgames.co.kr)
Translation by Kim Ki-hui
