Video Game Industry Embraces Internet And New Business Models: Others Should Pay Attention
from the game-theory dept
We talk a great deal around these parts about new business models at both the macro and micro level. Individual experiments and successes, as well as failures, are both interesting and instructive, but a good macro-level look at how entire industries can function in a digital marketplace should be equally useful. With that in mind, Chris Dixon has an absolute must-read post on Medium on the lessons other industries can learn from the PC gaming industry's success in recent times.
It's worth noting before we start here that the past five years or so have been chock-full of hand-wringing over every potential danger to the PC gaming industry you could imagine, from casual mobile games to piracy. And, to some extent, I can understand that fear. After all, PC gaming has perhaps lower barriers to entry than other entertainment mediums, making competition more heavy, while the average consumer of PC games is likely going to be more familiar with the ways of piracy and the technical workarounds to DRM than the average music or movie consumer. Too bad for all that fear that, as Dixon's article notes, the PC gaming industry has enjoyed healthy growth over these past several years (something like 50% revenue growth since 2012). Much of that has to do with the innovative ways gaming companies have found to do business.
Even if you have no interest in video games, if you are interested in media, you should be interested in PC gaming. Over the past decade, PC gaming has, for a variety of reasons, become a hotbed of experimentation. These experiments have resulted in a new practices and business models — some of them surprising and counterintuitive — that provide valuable lessons for the rest of the media industry.Those experiments will sound quite familiar to the Techdirt reader. They include free-to-play models, with game extras being sold to gamers. They also include the development of strong and convenient selling platforms, like Steam and GOG.com. The so-called "freemium" model is particularly well done in PC games, in part because many of those games respect gamers enough not to use the model to break the integrity of the game itself.
The PC gaming world has taken the freemium model to the extreme. In contrast to smartphone games like Candy Crush that are “free-to-play,” PC games like Dota 2 are “free-to-win.” You can’t spend money to get better at the game — that would be seen as corrupting the spirit of fair competition. (PC gamers, like South Park, generally view the smartphone gaming business model as cynical and manipulative). The things you can buy are mostly cosmetic, like new outfits for your characters or new background soundtracks. League of Legends (the most popular PC game not on Steam) is estimated to have made over $1B last year selling these kinds of cosmetic items.Medium also goes on to point out PC gaming's latest foray into money-making in the form of live events. In what will sound familiar to anyone who has read our posts about the music industry, live gaming events are fantastic revenue generators, especially as they've become massively popular in the past few years.
Add to all of this the relatively permissive attitude in PC gaming circles that companies have towards mods of their games and you have a recipe for violent adoption and the willingness to buy by the gaming public. Mods make games more attractive to wider audiences, increasing purchases. Some mods indeed become their own games, increasing purchases. Most game companies encourage this modding culture, generating good-will within the consumer-base. No other industry does this as well.
Contrast this to the music industry, which relies on litigation to aggressively stifle remixing and experimentation. Large music labels have effectively become law firms devoted to protecting their back catalog. Sometimes this means suing their peers, and sometimes this means suing communities of users. The end result is a strong chilling effect on new experiments. Almost all new music-related tech products are minor variations of preceding products. It’s too risky and expensive to try something genuinely new.And finally, there is the embrace of crowd-funding. Crowd-funding has been adopted in virtually all entertainment mediums, but I struggle to see any of them doing crowd-funding as well as the PC gaming industry. From experiments done by household PC gaming names like Tim Schafer, to diverse tiered-rewards for funding, to the willingness of some to forego offers from traditional game publishers to go the crowd-funding route, PC gaming is full of these success stories.
The point of all this is that new and innovative business models can work for other industries as well. There's nothing unique about the PC gaming industry that won't translate over to some degree for music, movies, television, etc. They just have to try.
Thank you for reading this Techdirt post. With so many things competing for everyone’s attention these days, we really appreciate you giving us your time. We work hard every day to put quality content out there for our community.
Techdirt is one of the few remaining truly independent media outlets. We do not have a giant corporation behind us, and we rely heavily on our community to support us, in an age when advertisers are increasingly uninterested in sponsoring small, independent sites — especially a site like ours that is unwilling to pull punches in its reporting and analysis.
While other websites have resorted to paywalls, registration requirements, and increasingly annoying/intrusive advertising, we have always kept Techdirt open and available to anyone. But in order to continue doing so, we need your support. We offer a variety of ways for our readers to support us, from direct donations to special subscriptions and cool merchandise — and every little bit helps. Thank you.
–The Techdirt Team
Filed Under: business models, copyright, internet, video games
Reader Comments
Subscribe: RSS
View by: Time | Thread
The unique feature of the gaming industry, at least compared to the others, is that it is not a cartel, and so there is real competition in the industry.
[ link to this | view in thread ]
[ link to this | view in thread ]
Never again with Steam.
[ link to this | view in thread ]
Re:
[ link to this | view in thread ]
Personally, I see that as the only acceptable future for all creative work - interested parties should make sure the creator gets to do his thing, and the result should be free to share (and guess what reality already proves wrong those saying nobody would then bother to contribute). People with an actual job have to keep working every day if they want to keep eating - neither musicians, writers nor any other artist should expect a lifelong rent for something they once did - and their "estate" even less so!
[ link to this | view in thread ]
Wonder whatever happened to those people that said digital pricing would be cheaper than retail shops because there was no shipping and packaging costs.
[ link to this | view in thread ]
[ link to this | view in thread ]
Re:
The reduced value of a game tied to an app store evidently doesn't register to most people. Perhaps it's made up for by the integration with what I'll call "game services" platforms that provide boring common things like the signalling for setting up multiplayer sessions. Those do have concrete value, and they're part of how you get the console-like "It just works" behaviour, which isn't to be sneezed at.
[ link to this | view in thread ]
Re: Re:
Sure, you might not be able to save a huge amount on a new release AAA title - but who honestly claimed this was guaranteed to happen in the first place?
[ link to this | view in thread ]
Funny; It's a really good game, and they KNOW it's a really good game. They don't need to hit you with a crazy upfront cost because the game is good enough that once you start playing, and find your into it (if it's your thing, you will become part of their community and want to contribute.
When you've created something that's good enough that you can give it away, knowing your customer base will want to give you money, you've really created something special.
[ link to this | view in thread ]
[ link to this | view in thread ]
Re:
How is Star Citizen not mentioned here?
Because this isn't a list of success stories.
[ link to this | view in thread ]
YOU ARE WRONG!
The "freemium model" is not only broken, evolved to a thing even worse, pay to get screwed. Other startups like Nutaku are following the same scheme
[ link to this | view in thread ]
Re:
[ link to this | view in thread ]
Re:
[ link to this | view in thread ]
Re: Re: Re:
[ link to this | view in thread ]
Re:
http://mortalityplays.tumblr.com/post/77937806438/webcomic-patreon-megalist
Non-syndicated comics I don't see on that list (non-exhaustive):
* Penny Arcade
* Sluggy Freelance
* xkcd
There also doesn't seem to be much overlap with this list of comics or this one.
[ link to this | view in thread ]
Re: Re: Re: Re:
[ link to this | view in thread ]
Re: Re:
[ link to this | view in thread ]
Non-syndicated
* Penny Arcade
* Sluggy Freelance
* xkcd
[ link to this | view in thread ]
Buy The Game Once!
[ link to this | view in thread ]
wow
[ link to this | view in thread ]
very good
[ link to this | view in thread ]
Re:
http://goodsiteslike.com/sites-like-steam/
[ link to this | view in thread ]
nice articles
[ link to this | view in thread ]
Re: Re:
[ link to this | view in thread ]
Re: Re:
[ link to this | view in thread ]