泥中蟠龍's Game愛歌_Building a good business model (Part 2)

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

泥中蟠龍's Game愛歌_Building a good business model (Part 1)

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 1)

 

Writing a series of columns, I've talked about game characters, the elements of the video game, game balance, smaller game developers, and the future of the gaming industry, etc. However, I barely mentioned a video game as a product from a commercial perspective. I'd like to deal with the game as a commercial product.

 

I want to talk about a video game business model (BM). What is BM then? Simply speaking, it is a monetization strategy that a developer uses to drive profit for its app. The video game is a product and developers have to succeed in making revenue because their goal is to pursue a profit. Therefore, the business model is an essential aim of making a video game.

 

First of all, there is a selling package, the most common method, by the types of the BM. Even a decade ago, it was the most important BM for the games. I still vividly remember that my heart pounded with excitement because of a newly-launched packaged game walking through the entire Yongsan Electronics Market. This kind of BM is straightforward. Profits come from the finished product. Developers just need to consider how to make a game fun. The rest depends on the matter of a form of promotion in the distribution.

 

Secondly, there is pay-to-play, sometimes pay-for-play, which was widely used by classic arcade games in an amusement arcade—it's rare to find them these days. Players need to insert coins to play a game and have to put other ones to continue the game. Game developers need to consider a couple of details for this type of BM, unlike packaged games. One is about a promotional video-like in-game advertising. Images on arcade screens during players' absence have to catch a passing potential user's eyes. To do that, developers should regard it as the most important element because its game has to be survived beating many other games in the arcade. The other is a game balance. Unlike packaged games, the owner of pay-for-play gaming machines could suffer losses if a user plays a game for hours. He/She needs to enhance profitability leading as many as users to insert coins in a short period of time. However, if it's impossible for the players to reach the objective and win, they won't enjoy the game again because the game doesn't provide a continuing motivation to play. Still, a fighting game is the exception. In the close-combat based game, players fight each other with their game characters until they defeat their actual opponents and they don't blame the machine—game balance—even if they lose. Accordingly, it was the most popular genre in the arcade for quite a while. The fight game was a profitable product that contributed greatly to the arcade business because players rarely complained about putting coins many times in such a short time. Summing up, proper balance, well-made promotional video clips, and fun factors are the core elements of the pay-to-play game business model.

 

I will talk about how to build a secure business model in Part 2. Let me finish Part 1 with the most famous line "To be continued" of the fighting game; a player being knocked down by the opponent could able to continue the fight within a ten-second count if the player inserted an extra coin in.

 

To be continued in Part 2

 

 

※ This is from Kyunghyang Games column by 泥中蟠龍 since September 2013.

(http://www.khgames.co.kr)

 

Translation by Kim Ki-hui

 

泥中蟠龍's Game愛歌 [A love song for games of the dragon waiting for an opportunity] The economics of video game

泥中蟠龍's Game愛歌

[A love song for games of the dragon waiting for an opportunity]

 

The economics of video game

 

Recently I watched the movie Spotlight. I like the film for its own sake, however, I am a big fan of Rachel McAdams, the heroine of the movie. She is well known for her role in the film About Time. She participated in an animated feature film as a voice actress at the end of last year. That was The Little Prince. I loved its beautiful images and her unforgettable voice acting as well.

 

I don't want to evaluate the animated film or talk about my favorite actress. I'd like to discuss the famous saying “Tame me!" by the fox in the great novel by french writer Saint-Exupéry.

 

The line from the novel has a couple of different meanings. One of the most-talked-about connotations is about cognition. Being tamed by someone means that one becomes one of a kind for him or her. Since the little prince tamed the fox, the fox became the only fox in the world for the prince not like a hundred thousand other foxes. The experience teaches the little prince that unique rose living in the Asteroid B 612—the name of the asteroid that is the home of the little prince—is the one for him not like five thousand roses in one garden.

 

The other meaning of the line is about scarcity. Our perception makes differences and scarcity is built around the differences. Thousands of ordinary roses in the garden, which haven't been tamed by the little prince, don't have something special for him. The easy accessibility to the roses depreciates their value. People who live near world-famous tourist attractions would not thrill watching the magnificent sceneries.

On the contrary, the limited accessibility makes people forgive to get closer to something. It's not easy for someone to make him/her mind to go to Antarctica to see penguins although he/she loves the short-legged flightless birds so much. Likewise, most average people usually give up easily to buy an unaffordable 20-carat diamond ring.

 

Recently, I played some newly released video games with a lack of accessibility. Balanced in-game virtual goods including items, characters, etc. are very critical for the accessibility to the game by users. The users would feel that a high-powered item or character, despite their advantages, are of no value to them due to their easy accessibility. But by comparison, they would easily forgive to have an extremely rare item or character. The balance of in-game virtual goods is closely bound up with paying user rate (PUR), retention, and average revenue per user (ARPU), etc. in most newly-released in-app purchase games. Now, game developers need to study economics for the virtual-world economy, if they want their items and characters, which themselves have made, to be tamed by users.

 

 

※ This is from Kyunghyang Games column by 泥中蟠龍 since September 2013.

(http://www.khgames.co.kr)

 

Translation by Kim Ki-hui