Dwi14202a Cs94 Videogame
Dwi14202a Cs94 Videogame
Dwi14202a Cs94 Videogame
Yves GASSOT
Executive Director of Publication - CEO, IDATE-Digiworld Institute
No. 94, 2nd quarter 2014
Dossier
Video game business models and monetization
Edited by
Philippe CHANTEPIE, Laurent MICHAUD,
Laurent SIMON & Peter ZACKARIASSON
Papers
Innovations in the Video Game Industry: Changing Global Markets
Giuditta DE PRATO, Claudio FEIJO, Jean-Paul SIMON ......................... 17
Game Console Manufacturers:
the End of Sustainable Competitive Advantage?
Marie CARPENTER, Nabyla DAIDJ & Christina MORENO ....................... 39
'Few to Many': Change of Business Model Paradigm
in the Video Game Industry
Thierry RAYNA & Ludmila STRIUKOVA ..................................................... 61
Paid and Free Digital Business Models Innovations
in the Video Game Industry
Myriam DAVIDOVICI-NORA ....................................................................... 83
Exploring Mobile Gaming Revenues: the Price Tag of Impatience,
Stress and Release
Denis LESCOP & Elena LESCOP ............................................................ 103
Interviews
Yves GUILLEMOT, Ubisoft
Conducted by Philippe CHANTEPIE ........................................................ 123
Daniel KAPLAN, Mojang
Conducted by Peter ZACKARIASSON ..................................................... 127
Alain LE DIBERDER, ARTE
Conducted by Laurent MICHAUD ............................................................. 129
Features
Nomad Gaming - A New Era for Video Games? .................................. 135
Social Gaming - Markets and Trends, 2012-2016 ................................ 139
General Overview of Home Console Market ........................................ 141
By Laurent MICHAUD
Book Review
Godefroy DANG NGUYEN & Sylvain DEJEAN
Le numrique conomie du partage et des transactions
By Yves GASSOT ..................................................................................... 149
Service Section
NEMOG project (New Economic Models and Opportunities for digital
Games) ..................................................................................................... 159
st
1 Africa Regional ITS Conference
Accra, Ghana, May 26-28, 2015, Call for papers ..................................... 161
DigiWorld Summit 2014 - Mobility Reloaded
Montpellier, France, November, 18-20 2014 ............................................ 163
DigiWorld Yearbook 2014 ....................................................................... 167
C&S Dossiers .......................................................................................... 169
Extra papers / Guide for authors ........................................................... 171
Dossier:
Video game business models and monetization
Introduction
The Rebound of Videogame Industry
Papers
Innovations in the Video Game Industry:
Changing Global Markets
Game Console Manufacturers:
the End of Sustainable Competitive Advantage?
'Few to Many': Change of Business Model Paradigm
in the Video Game Industry
Paid and Free Digital Business Models Innovations
in the Video Game Industry
Exploring Mobile Gaming Revenues:
the Price Tag of Impatience, Stress and Release
Interviews
Yves GUILLEMOT,
Ubisoft
Daniel KAPLAN,
Mojang
Alain LE DIBERDER,
ARTE
Introduction
The rebound of videogame industry
Philippe CHANTEPIE
French Ministry of Culture and Communication;
Associate researcher, Innovation & Regulation Chair, Paris
Laurent MICHAUD
IDATE, Montpellier
Laurent SIMON
Mosaic - HEC Montreal
Peter ZACKARIASSON
University of Gothenburg, School of Business, Economics and Law
O
ver the last few years the videogame industry experienced a
deep transformation Formerly based on a traditional vertical
production model with developers, studios, publishers, hardware-
console manufacturers, the industry was mostly dominated by
retailers and hardware makers, in control of the value chain. Over the past
decades, the competition between the two (Nintendo, Sony) then three
(Microsoft) console manufacturers did not modify this industrial organization
as a digital model of domination by downstream. However, a few publishers
gained key strategic influence in this ecosystem, such as Electronic Arts,
Activision, Ubisoft, etc.
Today, this model and its ecosystem are experiencing profound changes
affecting the business models, distribution, supply chain, value chain,
financing and the ecosystem as a whole. It may be argued that,
paradoxically, the digital native videogame industry, the youngest and the
more dynamic sector of entertainment's industries, is just entering the digital
revolution. The videogame industry is entering a mutation phase, a rebound,
or a rebirth, that may appear as the first step into a complex maturity.
The mutation of the video game industry is not entirely new. It results
from some breakdowns of access modes and from the evolution of modes of
uses of video games. It started with the deployment of mobile games and
online games, increasing casual gaming and impacting business and
revenue models. It accelerated with games played on smartphones and
tablets. The paper of de PRATO, FEIJO & SIMON presents the main
movements in the video game industry, in particular the changes at work in
the Asian markets.
1 AAA is a classification term used for games with the highest development budgets and levels
of promotion, the equivalent of "blockbusters" in the movie industry.
Introduction 11
First, the entry of Apple and Android in the mobile sector has shorten the
value chain. This led to a remodeling of the barriers of entry for application
developer, both in terms of cost and market knowledge. It allowed a pool of
developers to swarm with hundreds of thousands of amateur developers
who wanted to try their luck this open market where they could compete on
equal foot with a limited number of professional developers.
much more open economy. This "economy of the multitude" has a larger
number of independent studios, individual developers, and new modes of
distribution. As the triple monopoly still acts as a gate-keeper for the well-
established platforms, the economy of multitude is quickly becoming a force
to be reckoned with in the future in terms of creativity, market adaption,
and revenue generation. This is especially the thesis of the article "Few to
Many" by RAYNA & STRIUKOVA.
The video game sector has shifted into an age of uncertainty and may
have reached a tipping point Formerly based on concentrated markets, it is
now shifting to open markets, supported by a strong demand. One might
claim that the traditional product based production of video game is
challenged by market production strategies.
Over a decade, the landscape of this sector went through upstream and
downstream changes. Along with consoles, Apple, Android, Facebook,
Tencent, etc, have emerged. Alongside 10+ major editors linked to this
ecosystem, a multitude of smaller studios have also appeared. From an
ecosystem, moving bottom to top, we have shifted to world markets with an
all-inclusive ecosystem: more access modes, more studios and more
developer. Such shifts have also modified the key success factors .
and organization of the game design have evolved rapidly over the past
decade, but the industry is largely configured to take advantage of only a
small proportion of the innovation occurring at interactive technologies, new
creative content and experience more social and cultural relevance (beyond
the relatively narrow market segments), and education and training.
The keys for success are less in the hands of the players already in place
who need to diversify their R&D strategy, with innovation, experiential and
hybrid models. The newcomers are much more agile and integrate such
strategies, which are more fragile and volatile, dependant on the success of
young companies. They are confronted with a high level of competition:
because of the costs at a global level but also by the creativity and the
speed of production allowed by the industrial organisation, talents
attractiveness, financing terms, legal environment, especially from a tax
perspective.
***
For this issue of Communications & strategies, the editors are happy to
complete the scientific papers by three interviews of actors or observer of
the video game industry. They're thankful for.
Giuditta DE PRATO
Institute for Prospective Technologies, European Commission, Seville
Claudio FEIJO
Technical University of Madrid; Research Centre for Applied ICTs (CeDInt)
Jean-Paul SIMON
JPS Public Policy Consulting, Seville
Abstract: The paper examines the video game industry in the perspective of being the
paradigm of innovation in digital media and content. In particular, it analyses the response
to two main factors that have impacted this industry over the last decade. First, it tracks
the evolution of its global market and its emerging geography with the rise of Asia.
Second, within this global landscape the paper explores how the changes derived from
mobile and on-line gaming enabled major transformations of this industry. From here,
some conclusions on the lessons from the evolution of this sector for the whole media and
content industries are presented.
Key words: games, game industry, video games, mobile games, apps, Asia, China,
freemium, free-to-play, mobile, multiscreen, cross-media, smartphones, tablets, virtual
goods.
O
ver the last forty years, the video games industry grew steadily,
increasing its audiences worldwide, widening its demographics
and adding access platforms along the way (video consoles,
personal computers, portable consoles, portals, mobile handsets,
tablets, etc.). Indeed, supply and demand have changed under pressure
from a variety of factors such as technological developments in interfaces,
devices, and networks, the emergence of social computing and communities
(*) The views expressed are purely those of the authors and may not in any circumstances be
regarded as stating an official position of their institutions.
nd
Digiworld Economic Journal, no. 94, 2 Q. 2014, p. 17. www.comstrat.org
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18 No. 94, 2 Q. 2014
and the production of simple and short games ("casual games" 1), capturing
an, until now, unsatisfied demand across age categories, socio-economic
classes, or gender (JUUL, 2012, KERR, 2006). In fact, there are 1.2 billion
st
active gamers worldwide as of 2013 2 (1 semester: WARMAN, 2013a),
from 880 active gamers in 2012 (WARMAN, 2012), and predicted revenues
of US $86.1 billion by 2016 and a compound annual growth rate of 6.7%. In
other words, this industry is going more and more mainstream 3 and
becoming/has become an established form of entertainment. Besides, the
industry is still expanding with new segments such as serious games
(STEWART & MISURACA, 2013) and electronic sport (TAYLOR, 2012).
From authors' perspective the key element that accounts for the growth
of this industry has been the ability of this digital native to deal with
technological changes, in particular to rapidly innovate in synergy not only
on the technological side but on the creative side, ushering in pioneering
business models 4 and attracting new geographies and users. To argue for
this view, the first section of the paper sums up the main trends identified in
a global landscape, namely the role of mobile communications (devices,
networks) combined with the rise of the "app economy", and the move
toward a multiscreen / cross-media paradigm. Section two analyses the
changing geography of the global video markets stressing the rise of the
Asia-Pacific region and the new role of China. Section three explores
changes in the legacy value chain through the processes of
disintermediation and re-intermediation. Some conclusions on the lessons
from the evolution of this sector for the whole media and content industries
close the paper.
1 Casual game: ease of use games (to learn, to access and to play) spanning all genres.
Classification of videogames is discussed in DE PRATO et al. (2010), see chapter 2 and 6.2.
2 Consultancy Newzoo reported.
3 The Economist (2011) traced back the move from niche to mainstream, to the launch of Sony
Play Station console in December 3rd 1994.
4 The analysis of business models is left to other papers in this special issue.
Giuditta DE PRATO, Claudio FEIJO & Jean Paul SIMON 19
Going mobile
According to the sources (ITU, 2013: 1), there were, in 2013, almost as
many mobile-cellular subscriptions as people in the world, with more than
half in the Asia-Pacific region (3.5 billion users out of 6.8 billion total
subscriptions). Wireless Intelligence (2012) estimated the total number of
unique (eliminating subscribers with multiple SIM cards) mobile subscribers
worldwide at 3.2 billion in 2012. Wireless Intelligence (2013) forecasts 8.5
billion connections by 2017 with 50% operating under the new generation of
mobile networks (3G 5: 40%, 4G 6: 10%). According to the Cisco Visual
Networking Index (2013:25): "Mobile data is well on its way to become a
necessity for most network users". Indeed, the shift to digital information is
scaling up by several orders of magnitude in data volume every couple of
years.
China and India are the fastest growing mobile (data) markets in the
world. China as a whole surpassed the 1 billion milestone earlier in 2012,
with three companies in the top ten mobile operators and China Mobile
ranking one (ABBOTT, 2012). In the case of India, 69% of Internet users
access via their mobile (McCLELLAND, 2012). India's Bharti Airtel was
ranking four in the top ten mobile operators. In 2012, mobile operators
revenues in BRIC 7 countries (over US $250 billion out of US $1.16 trillion in
2012, Wireless Intelligence, 2013a) represented almost 22% of total global
mobile revenue (up from 16% four years ago) having already surpassed
North America in terms of sales during 2011 (Wireless Intelligence, 2013b).
These growth markets have already turned into primary markets.
supply (network, devices) and demand led by the latter the "app" economy
within which games play a major role as explained below.
The release of the Apple iPhone in late 2007 played a major role to
trigger such a migration while mitigating the expected negative impact of the
financial crisis in mobile telecoms, as data growth in mature markets
accelerated (WEST & MACE, 2009) It was also the appearance of the
iPhone that dramatically changed the circumstances of mobile gaming from
the previous modest version of gaming in feature phones (FEIJO et al.,
2012). Tablets and smartphones are now being adopted as gaming devices
8 "Global mobile data traffic will increase 26-fold between 2010 and 2015. Mobile data traffic will
grow at a compound annual growth rate (CAGR) of 92 percent from 2010 to 2015, reaching 6.3
exabytes per month by 2015". Cisco Visual Networking Index (2012).
Giuditta DE PRATO, Claudio FEIJO & Jean Paul SIMON 21
for casual game players, driving the demand for wireless games; and
becoming in turn one of the most dynamic segments. The survey from
Information Solutions (2011) mentioned above showed that smartphone
owners were by far the most avid mobile gamers: 93% of smartphone
owners said that they played at least once each week, and 45% played
daily. Jupiter Research predicts games sales for tablets up to US $ 3.1
billion in 2014 (SNJV, 2012). Gaming is currently the dominant use for
tablets accounting for 67% of the time spent on that terminal (MICHAUD,
2013).
Along these lines, the first 'State of the App Economy Report' (Appnation,
2013) predicts that the largest contributor to this growth will be the app-
enabled commerce, with revenue from downloads, in-app advertising and
virtual goods complementing this. The total size of the 'app economy' is
expected to hit US $151 billion by 2017, more than double the US $72 billion
forecast for 2013. Revenues from games increased at a 66% CAGR over
2013 (FERGUSON, 2014).
Asia is "the most lucrative app market in the world" (Distimo quoted by
COSTELLO, 2014), with 41% of total revenue generated globally in
December 2013 coming from this region. In comparison, North America
generated 31% of the total, while Europe accounted for 23%.
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22 No. 94, 2 Q. 2014
The top grossing iOS and Android apps generally came from games. In
September 2012, games accounted for 64% of the combined total, a year
later; this had increased to 77%. The iOS market (iPad, iPhone and iPod
Touch) generates 89% of its revenues from mobile gaming 9 (Newzoo, 2012
quoted by SNJV, 2012). Also games were the most downloaded apps
across the iPhone (33%), iPad (48%), from Google Play (37%) and the
Amazon Appstore (a remarkable 63%) in 2013, according to a study from
Distimo. App Store dominates in mobile game sales, but Google Play is
catching up fast. The top three Apple store titles in 2013 were Clash of the
Clans (Supercell), Candy Crush Saga (King) and Hay Day (Supercell). For
Google Play, the top three grossing apps were Candy Crush Saga, Puzzle &
Dragons (GungHo) and messaging title LINE.
9 Based on the revenues from the 200 most popular games in the iPad, iPhone/iPod App Store
and Google PlayStore.
Giuditta DE PRATO, Claudio FEIJO & Jean Paul SIMON 23
scenario, 25% of US consumers play digital games every day, which makes
it one of the most common daily activities -29 % read a newspaper and 14 %
read a magazine every day (Ericsson, 2013).
Media and content activities are moving toward a five screen world
(SIMON, 2012, 2014a): TV, PC, game consoles, connected TVs and mobile
devices (smartphones or tablets). The screens are used prevalently
sequentially but more and more often simultaneously (multitasking,
complementary activities) and the industry starts to approach this scenario
with a cross-media approach. In fact, 25% of all US gamers play on all
screens (WARMAN, 2013a) and based on a US survey, a Google study
claims that, in 2012, 90% of media interactions were screen-based, 4.4
hours per day (38% of media interactions were on smartphones, 9% on
tablets, Google, 2012: 8), leaving a mere 10% for non-screen-based (radio,
newspapers, and magazines).
Developed regions such as Europe, the US and Japan, have been the
main markets for video games until 2009: these regions accounted for over
one half, or 26 billion, of the video games market (IDATE, 2011). The
10 This category appears to be less obvious to grasp, but it basically includes handheld
devices.
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24 No. 94, 2 Q. 2014
EMEA 11, once the biggest market for video games among the four major
world regions, was overtaken by Asia-Pacific in 2010. The main engine of
this shift is the on-line and mobile segment. If the US is still the leading
market, the next three are located in this region, respectively: Japan, China
and South Korea. In 2012, Asia-Pacific (APAC) accounted already for 33%
of the global market (US $ 22.2 billion of revenues, 298 million gamers)
growing at a 13% rate, followed by North America with 32% (21.8 billion, 169
million gamers) growing at a mere 1%, then Europe with 28% (18.8 billion,
274 million gamers) growing at 3% (WARMAN, 2013a). The same
consultancy, Newzoo, predicts that 38% of games revenues will be
generated by APAC by 2016 (WARMAN, 2013a). In addition, games is the
fastest growing Internet category in India (McCLELLAND, 2012).
Source: Morgan Stanley (2012), China (*) Gaming Industry Report. Quoted by The Economist
(April 2013), Special report: China and the Internet
(*)
1 Yuan: 0,12 Euro as of April 2014
The Chinese online gaming industry illustrates two striking facts. The first
is that the number of consumers and their spending have grown
extraordinarily fast: in absolute terms far more people are online to shop,
11 Europe-Middle East-Africa.
Giuditta DE PRATO, Claudio FEIJO & Jean Paul SIMON 25
play games, search, watch videos and use social media in China than in any
other country. The second is that consumers are spending almost all of that
time and money on Chinese Internet platforms.
12 Source: http://www.tencent.com/en-us/content/at/2012/attachments/20120703.pdf
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26 No. 94, 2 Q. 2014
Also some international titles are already popular like Temple Run 2, Angry
Birds and Fruit Ninja. Rovio opened its Chinese office at the beginning of
2012, and its first Angry Birds activity park in Shanghai at the end of that
same year.
Games sold for home consoles and handheld devices have still the
highest share in the total sales of video games: 49% in 2011 (IDATE, 2012:
36% for home consoles and 13% for handheld devices) but down from 70%
in 2004 (PWC, 2009). North America remains the main market for this
segment: in 2011 49% of the US households owned a dedicated game
console (ESA, 2012), up to 56% in 2012 (Nielsen, 2012). The EMEA and
Asia-Pacific regions followed respectively. Although declining in relative
share, the new consoles are likely to reignite the segment for some time; in
Second to consoles, on-line and wireless video games 14 are the next
largest product segments, reaching a 44% share (on-line games: 32%,
mobile games: 12%) (IDATE, 2012). The basic distinction for online games
is drawn between single user games and multiplayer games. The former are
generally available as "browser games", which are played by means of a
web browser and typically do not require additional software, specific to the
game, to be installed. Multiplayer games, however, are instead usually (still)
played in the form of "client-based games", where the activity required of the
client machine is still relevant, its performance and elaborating power still
matter.
14 These kinds of games do not have the same technological features and are not in the same
segment, however it is easier to present together as they differ from all former platforms.
15 Freemium is often included within the F2P category, the distinction is not stabilised and
keeps on moving. There is some "hybridization" between pay and free models: see
DAVIDOVICI-NORA (2014: 14) in this issue.
nd
28 No. 94, 2 Q. 2014
games going from a paid subscription model to the F2P model) (MICHAUD,
2013). According to research by NPD Group's Insights into the Freemium
Games Market report (2012, quoted by Mobile Business Briefing):
"Freemium games appear to have a high retention rate, with 84 percent of
users continuing to play after their initial interactions".
Since 2004, the online and wireless market has grown with remarkable
rapidity, driven by the increase in the number of broadband subscribers, the
innovation in available games, the transition to handheld devices, and the
newest generation consoles: e.g. Nintendo DS Wifi Connection was
launched in November 2005, and both Microsoft and Sony launched their
online services for gaming consoles between late 2003 and early 2004. 16
Now as smartphones provide the engine for growth the mobile segment is
likely to become the fastest-growing video games sector over the next five
years according to PriceWaterhouseCoopers (PWC, 2013) with revenues
increasing from US $8.8 billion in 2012 to US $14.4 billion in 2017 with a
CAGR of 10%.
Asia-Pacific is leading for on line and mobile games and has been a
pioneer in the field. Freemium is also the leading business model in Asia
according to Distimo (COSTELLO, 2014). With sales of US $9 billion (PWC,
2010), the Asia-Pacific region was already the biggest market of online and
wireless video games in 2009. Mobile Multiplayer Games (MMG) will be the
largest share by 34% of the total mobile games by 2017 in Asia 17, and
spending on virtual economy / in-game transaction will increase from current
20 to 52% over the same period. It is expected that the Asia mobile gaming
market will reach 50% of total global value (AHMAD, 2013). The emerging
revenue stream from selling virtual goods on line, an innovation born in Asia
with leading companies like Tencent for social networking and online gaming
(SNOW: Wi, 2009, In-Stat, 2010 a,b), is gaining momentum. Tencent has
converted most of its hundreds of millions of social-media users into paying
customers, mainly for virtual items in games.
16 It must be taken into account that figures on online games only refer to subscription fees,
while retail purchases of games are accounted for in the relevant categories: PC, console or
handheld.
17 The consultancy includes the following sub-regions: Asia-Pacific, Southeast Asia, Central
Asia, South Asia, and the Middle East.
Giuditta DE PRATO, Claudio FEIJO & Jean Paul SIMON 29
More than 50% of Tencent employees are R&D staff. Tencent has
obtained patents relating to the technologies in various areas: instant
messaging, e-commerce, online payment services, search engine,
information security, gaming, and many more. In 2007, Tencent
invested more than RMB 100 million in setting up the Tencent
Research Institute, China's first Internet research institute, with
campuses in Beijing, Shanghai, and Shenzhen. The institute focuses
on the self-development of core Internet technologies, in pursuing its
development and innovation for the industry.
Sources: http://www.tencent.com/en-us/at/abouttencent.shtml, http://www.tencent.com/en-
us/content/ir/news/2013/attachments/20130320.pdf
The social gaming market amounted to 55.3% of the total online gaming
market (MICHAUD, 2013).
The previous section reviewed the role of online and mobile games as an
engine of change with regard to previous dominant platforms. In this section
we will quickly 18 shed some light on the potential transformations that this
value chain might incur as a consequence of the disruptive trends brought
by these two new platforms: online and mobile.
Indeed, online digital distribution has affected the value chain structure,
resulting in a convergence of the roles of the distributor and of the retailer
under the range of activities of the publisher. Online gaming introduced new
distribution methods and started to rearrange the relative roles and
interaction dynamics among the actors at the different levels in the supply
chain. A whole part of the core business involving publishers, distributors
and retailers has basically disappeared as there is no longer any need to
duplicate physical products because these can be distributed over the
network. The publisher, in many cases, directly distributes games, without
the need for a distributor to act as intermediary between the publisher and
the retailer: i.e. "disintermediation" is taking place, cutting out the role of the
distributor. By the same token, it creates opportunities for developers to
circumvent existing intermediaries and to sell directly to the end customers
as illustrated by Figure 2.
18 For a broader presentation see DE PRATO et al. (2010), DE PRATO (2012), DE PRATO et
al. (2014), FEIJOO et al. (2012), FEIJOO et al. (2013).
Giuditta DE PRATO, Claudio FEIJO & Jean Paul SIMON 31
This is not necessarily true for client-based online games, particularly the
complex and expensive games, which in many cases still rely on the more
traditional chain to reach consumers. As noted by M. DAVIDOVICI-NORA
(2013), about "freemium": acquisition is not obvious, retention is volatile and
monetization complex. The low barriers to entry are not equivalent to a new
form of pervasive online publishing; the expertise of an intermediary, such as
the publisher may be required (not to mention the marketing/ promotion of
the product). Hence the emergence of new forms of "re-intermediation"
brought by Internet Service Providers (ISPs), online shops such as App
Store, PSN, and XBLA, and social networks like Facebook. These new
platforms act as content aggregators and provide portals for game
distribution which allows easier promotion and localization of new games by
users; at the same time they attract advertising which brings an added
source to the mixed revenue models. These new intermediaries are taking
on the role previously played by distributors. Their growing role being partly
based on the monetization of players' personal data raises new issues and
triggered reactions from citizen and policy makers (TUBARO et al., 2014).
Besides, policy makers have concerns about the FtoP model, about games
advertised as "free" that may mislead consumers about the true costs
involved 19.
19 After the UK's Office of Fair Trading (March 2014) investigated in-app purchases and free-to-
play games, the European Commission got involved.
See: http://www.jeuxvideo.com/news/2014/00070763-la-commission-europeenne-se-penche-
sur-les-free-to-play.htm
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32 No. 94, 2 Q. 2014
Conclusion
Consumer behaviour has evolved over the past few years and has
allowed the viral diffusion of online gaming to take place at an unexpected
pace. Both user engagement and the increasingly active role of users have
been sustained by the interactive and social nature of the online gaming
experience. This is seen as a first step for users towards interaction with the
game itself, to the creation of content paving the way for community
management. Nevertheless, this trend could take time to establish itself and
one should be cautious about predicting the different paths it could follow
and also about its potential impact on industry, as for instance new
competencies like community management become critical.
Asia is paving the way. The global market and its geography are
changing and old and new companies are aiming for the Asian market as
Giuditta DE PRATO, Claudio FEIJO & Jean Paul SIMON 33
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38 No. 94, 2 Q. 2014
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Christina MORENO
Tlcom SudParis, Institut MinesTlcom
Abstract: The video games industry has been subject to a number of significant
transitions in its short history. The current transition, however, has the potention to
restructure more fundamentally the technological, competitive and market dynamics with a
growing share of revenues attributed to non-console linked video games. Existing players
from the "traditional" video games market are not standing idly by as the market evolves.
What is unclear, however, is whether the competitive advantages they have built up over
previous generations of video games will be sustainable in the new landscape. Ironically, it
may be argued that existing competitive advantages could restrict their ability to adapt to
the new dynamics. By proposing two alternative scenarios for future development, we
examine the implications of either maintaining competitive advantage or developing
temporary advantages. The video games industry is judged to be an ideal laboratory in
which to investigate the consequences of hypercompetition and for developing strategic
management insight into sustainable competitive advantage in such a context.
Key words: sustainable competitive advantage, temporary competitive advantage,
business model, video games.
Since its emergence in the 1980s, the video games industry has grown to
become one of the most stable and profitable sectors in the entertainment
market. Video games were historically played within a specific technological
set-up initially involving an arcade machine and subsequently a PC or a
video-game console. Nowadays, videogames can be displayed in a large
number of devices including handheld devices such as mobile phones, MP3
players and tablets. All these hardware platforms can be used to play
videogames and the distinction between dedicated and non-dedicated
platforms is becoming less clearcut.
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Digiworld Economic Journal, no. 94, 2 Q. 2014, p. 39. www.comstrat.org
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40 No. 94, 2 Q. 2014
Market trends
In 2008, IDATE estimated that the video games market in 2012 would be
valued at almost 30 billion and that 11 billion, or 37%, would be accounted
for by games delivered on PCs or via mobiles (IDATE, 2008). In fact, in
2013, IDATE data on the video games market show the combination of five
software markets (home console, handheld console, offline computer, on-
line computer and mobile) as generating over 41 billion in revenues, with
over 61% coming from the three non-console based categories (IDATE,
2013).
The video game industry includes all the production activities from the
development to the distribution of gaming software and hardware and
accessories. Home console manufacturers remain key industry actors as
Marie CARPENTER, Nabyla DAIDJ & Christina MORENO 41
It has been possible to play games on mobile phones since 1997 when
the game Snake was installed on Nokia phones. Mobile video game
revenues have grown significantly since the launch of the iPhone in 2007.
There are two main revenue models in mobile gaming: the paid content
model, considered to be the "traditional model", and the Free-to-Play, ad-
funded and micro-transactions model. The first form of mobile gaming is
focused on enlarging the gaming population; the second is interested in
increasing the revenue per user. The flourishing mobile market corresponds
mainly to the second form of gaming.
Online gaming initially emerged in 1996 with the launch of Nexus: The
Kingdom of the Winds in Korea. There are two categories of online games:
browser-based games and client-based games. The first category
corresponds to games that can be accessed on a browser or portal, such as
"Yahoo! Games", and where there is no need to install any software. Client-
based games, on the other hand, require users to download software.
Initiatives have been undertaken to structure the online gaming ecosystem.
These include, for example, the development of the Steam platform by the
on-line game developer, Valve. Launched initially in the Windows
environment in 2003, Steam continues to evolve and adapt to the market by
adding new environments to its platform: iOS in 2010, Android in 2012 and,
more recently, Linux. By providing a pipeline directly to gamers, such
platforms allow developers to build communities more easily and increase
potential to monetize their online games.
Offline players have also progressively shifted online with the arrival of
social games. Broadband access enables the diffusion to a wider market via
social networks in which a whole new category of games such as Farmville
has appeared. These games are simple, casual and have a viral distribution
as users share them, challenge each other and post their performance to
compete with each other.
Marie CARPENTER, Nabyla DAIDJ & Christina MORENO 43
Traditional video gaming has also shifted to online distribution and the
main console manufacturers offer online services such as Sony's Playstation
Network, Nintendo's WiiWare and Microsoft's Xbox Live. By allowing games
to be downloaded to the console's hard drive, manufacturers can generate
greater revenues and also offer content other than games, such as music
and films. This form of access also facilitates occasional gaming and
enhances collective gaming experiences.
Finally, further disruption may emerge in the video game sector from
"Smart" TV initiatives from potential new entrants such as Samsung and
alternative players such as the low cost Gamestick, which potentially turns
every TV into a video console. The potential for mobile phones to be
converted to controllers for both hand-held and TV-based video games is
also likely to be exploited more fully in the future.
Traditionally, the videogame sector used the same value chain as that of
multimedia-based technology (Figure 2) with the console constructor
dominating and clearly influencing the other actors (DAIDJ, 2007).
With the multiplication of devices and the development of the Internet, the
value chain has evolved and the videogame industry involves a large
number of actors conducting inter-related activities. In the traditional value
chain, for example, the consumer has no interaction with either the content
owner or the developer. Today, however, such actors are increasingly in
direct contact with users.
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The concept of the business model is key to understanding the new ways
that firms seek to create and capture value in order to re-inforce competitive
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48 No. 94, 2 Q. 2014
advantage and sustain it. The two concepts of competitive advantage and
business models are thus intimately linked.
confined to a niche market. The challenge for the actors who have
succeeded in what has now become the "traditional" video game sector is to
consider if and how they need to reconsider their sources of sustainable
competitive advantage.
The premise of the two scenarios presented is that the first column
represents the situation of least disruption in which existing console
manufacturers and their partners can continue to sustain the competitive
advantage that they have built up over previous generations of console
technologies. In this scenario, consoles and their associated AAA games will
dominate the competitive landscape. The oligopolistic nature of the sector is
not undermined by the new technologies and players, but each of the two
markets continues to grow successfully. High barriers to entry persist in the
console-related businesses and the profits generated allow for both
traditional growth and diversification into areas of non-console gaming, but
these are considered primarily as a means to support the core business.
New sources of growth in emerging markets, notably China, will further
enhance the existing business model.
In the scenario presented in the second column, the sector is facing a far
greater market fragmentation and a more rapid fall in revenues from the
console market. This is closer to the 'big bang' event that video games
wrought on the pinball market some 30 years ago. There will be a host of
new entrants as mobile and tablet forms of gaming grow in sophistication
and game play. Many new entrants may be from China and other emerging
markets where mobile and PC gaming have developed without competition
from consoles. While barriers to entry are lower than before, they will
nonetheless reemerge in the form of technical and marketing prowess and
the financial commitment needed to build such video games across multiple
platforms and terminals.
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54 No. 94, 2 Q. 2014
Existing players will not remain static in light of the emergence of a faster
than expected decline in their revenues. Diversified console makers will
push for greater synergies between their devices and Nintendo will seek to
benefit from the greater transferability of its video games for handheld
devices to the new mobile terminals. Console makers will accelerate M&A
activities and actively partner to a greater degree with start-ups and growing
firms in the new non-console landscape to acquire capabilities. "Entry level"
consoles may be developed for emerging markets to maintain global market
share. All console manufacturers, and, more particularly, editors will be
called upon to accept a higher rate of failure and to adopt more rapid "fast
fail" procedures to ensure they are willing to drop projects faster and move
on to new ones. Such a development will mean that the level of financial
commitment to each project may be reduced and the creative process and
project planning procedures will have to be revised. Studios will transform
themselves more rapidly to adopt the new toolkit of non-console-based video
games. Both studios and publishers will experiment to a far greater degree
with the practice of launching beta versions of their games to generate
feedback on content, gameplay as well as buzz and viral impact.
upon to operate in a more agile way and to accept a higher failure rate for
new projects than has previously been considered reasonable or profitable.
Conclusion
Our analysis of the evolution of the video games sector has suggested
that it is an area in which the sustainability of competitive advantage will be
increasingly called into question. While we are not in a postion today to
predict the future market evolutions, we have proposed two scenarios in
which to consider the impact on sustainable competitive advantage of a
significant change in competitive dynamics. We believe that asking such
questions in advance of real-world market evolutions can contribute to the
emerging literature in the area of temporary competitive advantage.
Marie CARPENTER, Nabyla DAIDJ & Christina MORENO 57
An entirely new set of competitive dynamics may emerge with the entry
of significant players from other industries, such as Facebook with its Oculus
Rift acquisition, Apple potentially launching a TV and Amazon a set-top box.
On-going, granular observation and analysis of the real world developments
of different actors in the video games sector over the coming 5-10 years will
be of great relevance to the field of strategic management. Such research
should seek to identify possible opportunities for strategic adaptation for
game console manufacturers as they experiment with developing temporary
advantages and, over time, can include a performance perspective as the
results of such adaptations play out in the emerging marketplace. The
research will use the video game console market to address such questions
as: Which console manufacturers are adding temporary advantages to their
sustainable competitive advantages? Are they able to maintain both and, if
so, how did they do it and how did it improve performance? If not, does it
damage their performance? How have their business models had to be
adapted and how have they managed to overcome their inherent path
dependency? As this type of information is, by definition, emerging as firms
take decisions in reaction to on-going events, it would suggest a research
project conducted in close collaboration with industry actors.
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58 No. 94, 2 Q. 2014
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'Few to Many': Change of Business Model
Paradigm in the Video Game Industry
Thierry RAYNA
Novancia Business School, Paris
Ludmila STRIUKOVA
University College London
D
espite its relative youth (about forty years), the video game industry
is one of the most profitable entertainment industries. In 2012, its
revenues were comparable to those of the movies industries and
five times those of the music industry (MARCHAND & HENNIG-
THURAU, 2013). Overall, over 25 years, the video game industry has grown
yearly between 9% and 15% (ZACKARIASSON & WILSON, 2010).
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Digiworld Economic Journal, no. 94, 2 Q. 2014, p. 61. www.comstrat.org
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62 No. 94, 2 Q. 2014
the 'rules of the game' have changed. Before, leadership would be achieved
through technological innovation: the better the game, the bigger the gains
(BADEN-FULLER & HAEFLIGER, 2013). Mobile and online gaming,
however, relate to radically different gaming experience and expectations
that make technological innovation less relevant (especially on a 4-5 inch
screen) and require new strategies to gain competitiveness.
Value proposition relates to how the products and services of a firm are
put forward (offered) to customers (CHESBROUGH, 2007; GIESEN et al.,
2007; JOHNSON et al., 2008; ABDELKAFI et al., 2013). This is how
companies convince customers that their products and services can fulfil
their needs (JOHNSON et al., 2008). As value comes at a cost, pricing
model is a part of value proposition (GIESEN et al., 2007). In this respect,
the pricing model itself can be a source of value if it is particularly suited to
consumer needs (e.g. rental vs sales, volume discounts).
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64 No. 94, 2 Q. 2014
Value capture is, along with value creation, one of the most critical
elements of a business model. Besides the obvious revenue model
(OSTERWALDER et al., 2005; JOHNSON et al., 2008) that enables firms to
directly capture a part of the value created by their products and services,
this component also encompasses issues related to cost structure (Johnson
et al., 2008) and profit allocation (ZOTT & AMIT, 2002; HOLM et al., 2013).
From this literature, it is clear that two very distinct business model para-
digms have to be considered. The 'old' business model paradigm is the one
that prevailed from the early 1980s to the late 2000s. Characterised by large
studios producing games for consoles and PCs, this paradigm can be
described as a 'few to few' model 1.
Indeed, after the early boom of home video games in the early 1980s,
this model mainly revolved around a combination of increasingly
concentrated oligopolies. A few large studios, such as Activision Blizzard,
Electronic Arts, Sega and Ubisoft produce games for three game console
manufacturers (Microsoft, Nintendo, Sony) and (mainly) two Personal
Computer operating systems (Microsoft Windows and Apple Mac OS X).
Games are full-featured products sold 'boxed' (cartridge, optical disk),
usually through specialised or general distributors, at a price in the $4060
range. Considering the relatively high price point, this model also implies
relatively few customers 2. While in relative decline (-10% since 2008), this
model still accounts for a large share (61%) of industry revenues
(MARCHAND & HENNIG-THURAU, 2013).
The new business model paradigm that emerged in the mid to late 2000s
is radically different. It is a 'many to many' paradigm: many (independent)
developers (nowadays 280,503 active publishers on the U.S. Apple App
Store alone 3), many devices and distribution channels (e.g. online games,
social media platforms, tablets, smartphones, PCs, connected TVs and set
top boxes), very low prices (the average game price on the Apple App Store
is $0.75 4) and, consequently, a massive number of users (in December
2013, in the U.S. alone, over 100 million games were downloaded on the
Apple App Store 5).
1 While there are differences between console games and PC games, in particular in regard to
value chains and market structure, they indeed belong to the same 'few to few' paradigm.
Furthermore, as noted in DAIDJ & ISCKIA (2009), consoles have become increasingly close to
PCs over the past few years.
2 The role of second-hand markets and piracy, which significantly increase the number of actual
users, will be discussed in the next sections.
3 http://148apps.biz/app-store-metrics/? mpage=appcount
4 http://148apps.biz/app-store-metrics/
5 http://www.xyologic.com/app-downloads-reports
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66 No. 94, 2 Q. 2014
THURAU, 2013). Thus, despite its almost instant success the new paradigm
has not replaced the 'old' business model paradigm.
Video game industry was originally a product industry (games were sold
to customers as fully featured final products), so value proposition mostly
related to product offering. Yet, while major players in the industry did not
embed services in their value proposition, other actors did (e.g. game
rentals, second-hand games trades) and this third-party service offering
increased the value proposition.
In the mid 1990s, game publishers started to use online services as core
components of PC games, for instance Massively Multiplayer Online Games
(MMOG), which usually involve a 'persistent world' where thousands of
users can play together. By the early 2000s, some MMOG (e.g. World of
Warcraft) had become very successful, with several million subscribers. Yet,
while value proposition started to include more elements of service, the
participants in the business models (major game publishers, console
manufacturers, retailers) remained essentially the same.
Thierry RAYNA & Ludmila STRIUKOVA 67
The first radical change arose because of new market players that had
no choice but to offer an entirely different kind of product. In the second half
of 1990s, online 'browser' games, produced by independent developers and,
originally, remakes of simple historic games (e.g. PacMan, Tetris, Snake),
became increasingly sophisticated (MICHAUD, 2012). In the late 2000s,
browser games morphed into social network games (generally hosted on
Facebook), in some cases with an instantly large success (for instance,
Zynga's Farmville reached over 10 million daily active users in a matter of
weeks 6). With such games, value proposition changed from what used to
be originally a pure product offering to a full service offering ('Software as a
Service' or SAAS).
The tight control of Apple over its App Store and iOS third-party software
(all apps have to be validated by Apple before they are distributed to end-
users) has had radical and long lasting effects on the video game industry,
as it considerably changed product offering. Beforehand, mobile games
were sold like any other game, usually at a price of $15-40 7. Since prices
were relatively high, trial versions of mobile games (which would stop
working after some time or had limited features) were generally available for
free.
Apple radically changed this model by forbidding demo and trial versions
of software on App Store 8. Developers rapidly realised that without trial
versions, they were unable to sell their games at the usual $15+ price. This
led to the 'lite + premium' strategy, whereby developers were simultaneously
developing two different versions of their games, one with more features
than the other. The introduction of in-app purchase, first for paid apps (June
2009) and then for free apps (October 2009) removed the necessity of this
6 http://www.sys-con.com/node/1084929
7 Handango online software store for PDA (Internet Archive).
8 App Store Review Guidelines state that "Apps that are 'beta', 'demo', 'trial', or 'test' versions
will be rejected" (2.9) and "Apps that are not very useful or do not provide any lasting
entertainment value may be rejected" (2.12).
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68 No. 94, 2 Q. 2014
This new model rapidly became a necessity (DILLON & COHEN, 2013).
Because of the large number of independent developers entering the
market, capturing a critical mass of users became crucially important. This
led developers to start releasing games as soon as they had a minimum
amount of critical features ("Minimum Viable Product" or MVP) in order to
gather early feedback and trigger viral adoption, while developing additional
features in the meantime. While this 'bit by bit' release model has been
mainly adopted for smaller-scale apps and by independent developers,
major game publishers have also began to complement console games with
additional downloadable content (MARCHAND & HENNIG-THURAU, 2013).
The different usage of mobile games has also had critical impact in terms
of product innovation. Indeed, for PC/Console games, technological
innovation has remained, to this day, the pinnacle of competitiveness. Better
image quality, better animations, better 3D rendering, better controls
typically lead to greater profits (BADEN-FULLER & HAEFLIGER, 2013). For
mobile games, however, technological innovation is hardly as effective,
because of the context of use and of the limitations of mobile hardware (e.g.
a mobile device with 'small' screen and stereo sound vs. a 40-inch TV
screen with 5.1 surround). Consequently, innovation for mobile games
9 In-app purchase had been used for online multiplayer games, but not for single games.
Thierry RAYNA & Ludmila STRIUKOVA 69
Pricing model
Until the mid-2000s, the game pricing model was rather simple, with
games sold at a fixed price, usually in the $45-$85 range. Prices have
remained fairly stable, with a slight decrease in real terms over the past
10 years to $45-$60.
Yet, this simplicity hides a far more complex reality. Indeed, while video
games are durable goods, their subjective durability (the amount of time the
game remains played) is shorter (RAYNA, 2008) and it only takes a few
weeks before new game titles are available second-hand (HENNIG-
THURAU et al., 2007). To continue selling, game publishers have no choice
but to decrease prices and, after a few months, the price of games usually
drops to $10-$20.
Thus, in practice, the fixed pricing model gives rise to a form of second-
degree price discrimination, either temporal (same product an unused
game available cheaper at a later date) or differentiated (two products
unused and used games available at the same time at different prices).
10 Recent account by Ubisoft CEO Yves Guillemot claimed a piracy rate of above 90%
(http://www.pcgamer.com/uk/2012/08/22/pc-gaming-has-around-a-93-95-per-cent-piracy-rate-
claims-ubisoft-ceo/).
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A further issue for iOS Developers is that the basic version of the game
(available for free) has to provide 'lasting entertainment' for the game to be
validated by Apple. Hence, 'crippled' games that necessarily require in-app
purchases to be playable are forbidden. The challenge is that if the basic
version of the game is good enough, who will pay for premium content?
Some developers therefore adopted, instead, 'hurdle' price discrimination, by
11 For instance Microsofts plan to restrict access to used games on the new Xbox 720 console
(http://www.wired.co.uk/news/archive/2013-02/08/xbox-720-games-drm).
12 http://www.mmo-champion.com/content/3741-WoW-Up-to-7-8-Million-Subscribers
13 The critically acclaimed Star Wars: the Old Republic, despite a promising start, had to switch
to free to play with in-app purchases after just few months (DILLON & COHEN, 2013).
14 Although such strict validation rules do not necessarily exist for other platforms (e.g.
Android), Apple's rules changed consumers' expectations and had spillover effects in the whole
industry.
Thierry RAYNA & Ludmila STRIUKOVA 71
introducing artificial delays and pauses in the games that can be by-passed
by paying 15.
While the 'old paradigm' remains alive and well in the case of PC/console
games, it has nonetheless evolved towards the new model prevalent in the
mobile world.
The paradigm shift in the video game industry has also led to changes in
the way value is created. In the old paradigm, core competencies, which
reflect a company's fundamental knowledge (PRAHALAD & HAMEL, 1990),
are an important factor in value creation. For example, one of the reasons
why Atari failed in the 1980s was because of a lack of in-house capabilities
to create new software. Similarly, the success of Sony in developing the first
PlayStation can be partially explained by their previous experience in the
field of electronics.
15 A typical example is provided by Electronic Arts' Real Racing 3, which is free to play but
requires time for cars to be repaired or upgraded, unless the player pays.
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16 http://www.forbes.com/sites/davidthier/2013/07/19/why-sony-is-betting-on-indie-games-for-
the-ps4/
17 And even reached $265,000,000 for Grand Theft Auto V, the most expensive game title to
date.
18 https://www.kickstarter.com/discover/
19 www.kickstarter.com/help/stats
20 http://venturebeat.com/2013/01/08/kickstarters-best-of-2012-2-2m-backers-319m-raised-
18109-projects-funded/
Thierry RAYNA & Ludmila STRIUKOVA 73
As the video game industry shifts towards more online content, player
interactions and social gaming (where firms and communities build value
together), cognitive resources (e.g. communities) increase in importance
(BURGER-HELMCHEN & COHENDET, 2011). An increasing number of
competencies, such as production, accumulation and circulation of
competitive knowledge, are delegated to communities (SCHULZ &
WAGNER, 2008). While this key resource is not controlled directly by firms,
it can still be integrated into the business model by large companies and
independent developers alike.
21 Personalised avatars that were expected to be at the core of the Wii environment.
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74 No. 94, 2 Q. 2014
The situation could not be more different for mobile games. Indeed,
whereas games typically begin their life on a particular platform, they
generally cross over to multiple other platforms. For instance, Angry Birds,
originally developed for Apple iOS platform, was then made available on
Amazon Kindle, Blackberry, Google Android, Mac OS X, Nintendo DS and
Wii, Nokia, Palm Pre, PlayStation, Roku, Windows Phone and Windows 7,
Xbox, and even as a web app.
Value capture for mobile games has mainly changed because of the
switch of revenue models from 'pay to play' to advertisement-based (usually
22 http://www.bloomberg.com/news/2013-12-02/nintendo-seen-missing-target-as-sony-microsoft-
sales-dwarf-wii-u.html
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Currently, 90% of game revenues on the App Store come from freemium
apps, the most successful one being Puzzle & Dragons, which brought more
than $1 billion in 2013 in in-app purchases 23. However, capturing value with
such a revenue model requires a very large customer base, as only 1.5% of
gamers make in-app purchases and 50% of revenue is derived from the top
10% of those players who do make purchases 24.
23 http://www.gamasutra.com/view/news/210021/GungHo_reaps_over_1_billion_in_Puzzle
_Dragons_revenue.php
24 http://www.swrve.com/company/press-room/swrve-finds-0.15-of-mobile-gamers-contribute-
50-of-all-in-game-revenue
25 http://www.officialplaystationmagazine.co.uk/2013/11/01/when-ads-invade-games-in-game-
advertising-is-worth-over-1-billion-a-year/
26 http://techcrunch.com/2013/04/03/rovios-revenues-up-101-to-195m-non-games-45-of-that-
net-profit-71m/
Thierry RAYNA & Ludmila STRIUKOVA 77
Once value (or a part of it) is captured, the next important question is how
it is allocated. In the mobile ecosystem, profit allocation between developers,
operators, suppliers and application store owners depends essentially on
their respective market power (FEIJO et al., 2012). For developers using
external platforms (e.g. Facebook, AppStore) a decision has to be made of
whether to run transactions via this platform or to bypass it. Also, as users
are now increasingly involved in game design and production, this might
create further profit allocation issues in the near future. When comparing the
'old' and 'new' paradigm, one could get the impression that the former
enables PC/console game publishers and hardware manufacturers to
capture value more easily. Although it is true that such games tend to
generate more revenue, they are also significantly more costly to produce
(technological innovation is still critical for PC/consoles) and second-hand
markets and consumer piracy also hinder value capture.
of news articles published about Flappy Bird developer and his story). Yet,
as noted in GENVO (2013), there have been significant changes in the ethos
of gaming over the past few years, in particular with a further expansion of
video gaming towards educative gaming and 'serious gaming'. To this
respect, independent developers, because of their greater flexibility, shorter
time to market and ability to occupy niche markets, have taken the lead,
while traditional game studios have mainly continued to release titles that
correspond to the traditional gaming ethos.
Conclusion
While this could have been expected, what is more surprising is the co-
existence of radically different business model paradigms and, despite the
progressively tighter integration of both markets (with PC/Console game
publishers being very active on the mobile front and mobile game
developers reaching PCs and consoles), the relative lack of evolution of both
paradigms. On the one hand, console game publishers and manufacturers
still employ the same model they have been using for the past 40 years,
despite the ever greater share of revenues captured by new entrants. At the
same time, mobile and online games, despite their large success, still
struggle to capture revenues and turn them into profits.
very large revenue, could it be that the video game industry is a giant with
feet of clay?
References
DAIDJ, N. & ISCKIA, T. (2009): "Entering the economic models of game console
manufacturers", Communications & Strategies, (73).
DILLON, R. & COHEN, O. (2013): "The evolution of business models in the video
game industry", in Proceedings of the International Conference on Managing the
Asian Century, pp. 101-108, Springer.
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GIESEN, E., BERMAN, S. J., BELL, R. & BLITZ, A. (2007): "Three ways to
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of digital goods", Communications & Strategies, 71:13-26.
Myriam DAVIDOVICI-NORA
Institut Mines-Telecom/Telecom-ParisTech, Paris, France
Abstract: Digitalization of distribution has led to the creation of a broad range of digital
business models in the video game industry among them freemium, subscription,
advertisement, free-to-play. What are the borders of each model and on what economic
grounds can we compare them? This paper proposes an interdisciplinary approach based
on microeconomics and on business models literature to provide insights into the
components and the economic architecture in paid and free business models. This
framework enables also to understand recent hybrid paid and free business models in the
video game industry.
Key words: free-to-play, pay-to-play, video games, business model, innovation.
F
rom $10 billion in 2006, the video game industry is today the
dominant entertainment industry reaching $66 billion worldwide in
2013 before other entertainment industries. A substantial part of this
growth comes from the democratization of gaming today thanks to
new technologies, innovations in game designs and new business models.
135m people play at least one hour per month. Most of these new gamers
are casual gamers and have been attracted to the gaming world by social or
free-to-play games (MACCHIARELLA, 2012). In the US, 70% of PC gamers
play casual games, and 50% play casual social games in 2010. Interestingly
enough, casual online games appeal to all segments, including hardcore PC
gamers (McKINSEY, 2011). The industry had nevertheless to adapt to digital
distribution, though certainly before other cultural industries. Digital
distribution fosters also new clusters of services around the game and cross-
platforms gaming (mobile devices, PC, console) and gave birth to a broad
range of pricing and contents, among them advertisement, freemium,
subscription or free-to-Play (F2P) model (about 50% of current iOS games
are F2P). How can we compare these models? We need to think about the
scope of each model, its economic architecture and its values to clarify the
landscape of digital business models today. This should help developers to
choose the most relevant business model and other cultural industries to find
nd
Digiworld Economic Journal, no. 94, 2 Q. 2014, p. 83. www.comstrat.org
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84 No. 94, 2 Q. 2014
Importantly, EL SAWY & PEREIRA (2013) say that though the literature
focused progressively on the design of business models for services
provided through digital platforms, some research still remains to understand
these new models. The comparison among digital business models relies on
three main components (See WEILL & WORNER, 2013, pp. 74-75): content
(what is consumed?), customer experience (how it is packaged? including
tools, recommendations, business processes, interface) and platform (how it
is delivered?, partner, proprietary/public networks; types of platforms =
external platform like mobile devices, computer or internal platform like
customer data, customer analytics, human resource, finance, ...).
1 In this paper, we use the term video game to cover all games whatever the platforms
(computer, mobile and console).
Myriam DAVIDOVICI-NORA 85
How does this theoretical framework apply to the video game industry?
Here is a list of the main digital business models found in the literature
(OLSSON & SIDENBLOM, 2010; VAN DREUNEN, 2011; MOREL, 2012,
BEHRMANN 2012, MACCHIARELLA 2012, VANHATUPA 2013, CECI
2014): digital distribution, subscription, virtual goods, Free-to-Play, Free and
advertising, freemium, crowdfunding, early access, premium unit price,
hybrid, player to player trading. F2P model is often confused with freemium
model. In F2P games, the basic game is free and the players can buy
optional virtual items and services to enhance the quality of the basic game
experience. It is also called "microtransactions model". The range of virtual
goods can cover all parts of game service and are available in a dedicated
in-game shop for a price range between $1 and sometimes thousands of
dollars 2.
P2P architecture consists in three stages from the point of view of the
consumer: Monetization (the player first buys the game), Acquisition (the
player discovers the gameplay) and Retention (the player enjoys the game
2 In the game Dark Orbit (Bigpoint), a rare item (the Zeus Drone) was sold at about 1000
(CRAWLEY 2011). See DAVIDOVICI-NORA (2013a) for a typology of virtual goods available in
F2P games.
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P2P price
F2P price
Quantity
Market
target
(games sold or number of players)
3 Retention and addiction concepts are very similar to the game designer's view. Retention
means that the game has enough elements of attraction to make it popular and to increase the
player's replay value under the constraint of staying fun for the player (e.g. if addictive elements,
grinding tasks, are too emphasized, they alter the experience and reduce the overall enjoyment
of the game). Compared with slot machines, HARRIGAN et al. (2010) put forward that retention
is not based on winning real money but more on skills.
Myriam DAVIDOVICI-NORA 87
Since the monetization stage has been pushed to the end of the process,
it is now optional to pay. It happens when the player has a certain
experience of the game (engaged players) and hence profitability is less
certain. The architecture of the F2P business model is more complex, for it
generates multiple interactions among components and not only a one-to-
one relationship (as in the linear P2P architecture). We will explain the
underlying economic reasons.
4 Notable exceptions are Anarchy Online (sci-fi MMO by Funcom), Counter-Strike Online
(MMOFPS by Valve and Nexon), Team Fortress 2 (RTS by Valve) and FIFA14 App (Football
game by Electronic Arts). Anarchy Online, released in 2001 gradually became a hybrid F2P
game based on advertising and subscription. The game faced technical problems upon its
release (including problems of stability, registration and billing), and therefore earned a bad
reputation. In 2002, a free trial for a limited period of days was introduced, in an effort to build a
bigger subscribers base. The popularity of the game declined in 2008 after reaching a peak of
two million subscribers ("Funcom celebrates 7 years of Anarchy Online" (2008/07/01),
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seems that succeeding with a F2P business model looks more complex.
Indeed, F2P games have a specific design as J. Allen Brack, production
director of World of Warcraft reminds us:
From the producer's point of view, the F2P model should embrace the
whole market (the long tail) (see arrows in Figure 2) since its price is zero.
This attractive unlimited collective demand for the game cannot be
monetized at this stage. The first economic problem is that with no entry fee,
profitability is based only on performances of items sales. In other words,
F2P games developers cannot use collective demand (total number of
players of the game per unit of time) to assess profitability but rather they
must use the individual micro-demand for each item. The second difficulty is
that these individual micro-demands are contextual: there is no absolute
price-elasticity but variable price-elasticities depending on the level, gaming
profile, constraints, etc. faced by the player. It is not possible to give
objective value to each item. Items will then be priced subjectively between
one dollar and a thousand dollars with marketing threshold (price points).
This is all the more prevalent that digital items are pure public goods: they
are non-rival and non-excludable and they cost almost nothing to produce.
Economic theory adds also that players will get a greater willingness to
pay for virtual items if items are tailored to their individual preferences. Since
individual preferences are changing while playing, the F2P game developer
must offer a wide variety of differentiated items to potentially satisfy all
changing and diversified individual preferences to capture the maximal
consumer's surplus. However, contrary to HAMARI (2009), there is no
perfect discrimination in F2P as defined in microeconomic theory because
each item has the same unit-price for every player.
Consequently, the F2P developer must consider the game as market with
dynamic consumption and production functions where price is no longer the
main driver of equilibrium: the economics of "contextual" micro-transactions
governs the F2P model. These economic conditions are the main reason
why the F2P developer runs the "game market" and the e-shop with specific
metrics based on real-time data management 6 (choice of items, types of
items purchased, etc.).
Whales
Price or
Moving axis
Dolphins
Minnows
Free game
free players. The strategic objective is to make the game profitable firstly by
switching some players from the majority of free players to the minority
group of paying players (becoming minnows) and secondly by inducing
paying players to pay more (becoming dolphins and whales) 7. On Figure 2,
this strategy is represented by black arrows. It may seem counter-intuitive
that the optimization of monetization does not take into account the
maximization of the players' base. The main indicator remains indeed the
global profitability but it can be reached with a large base of whales (but
seldom) or also with a very large base of small paying players or with a small
base of large paying players.
Because players don't pay to get the game but to improve their gaming
experiences, even inside a same profile, there are individual variations: a
paying player can be a dolphin because he buys one more expensive item
or many repetitive cheap items. It turns out that the items micro-demands
are not constant functions. It becomes complicated to make an easy and
trivial relationship among fun, experience and monetization under these
conditions. F2P requires a dynamic micro-management of each player and
of its gaming experience. Items are used to differentiate the individual
experience of players and to capture a consumer's surplus based on the
contextual value of the item in relation to the gameplay. All the difficulty
consists now in managing the monetization stage of the F2P and to
coordinate it with other stages.
7 According to MACCHIARELLA (2012), most titles monetize only 5-10% of their active player
base.
8 For further details, see DAVIDOVICI-NORA (2013b).
Myriam DAVIDOVICI-NORA 91
Retention is volatile
The player is addicted to the game (the replay value) but is not yet
financially committed. It is necessary to emphasize emotional commitment
through narrative techniques, customization, quality of gameplay and
different push marketing techniques to stay connected to players (assiduity
rewards, regular new contents) and to use analytics to manage engagement.
To convert free committed players into paying players, they must have
incentive to pay and not consider paying as a constraint to level up but
rather as a means to increase the fun of its experience. Emotional
investment will translate into financial investment if the player considers it to
be necessary (FREEMAN, 2011). However, it is easy to damage retention
and make players quit the game because of any slight in-game change
(STUART, 2011) or because the monetization pressure is too intrusive and
breaks immersion (OLSON & SIDENBLOM, 2010). To maximize
engagement, it is necessary to make the game fun for free and paying, high
and low levels players. A bad retention increases acquisition costs and
decreases monetization. Happy engaged players will increase viral
acquisition.
Monetization is complex
One of the main astonishing paradoxes of F2P model is that the game
can be a hit without being profitable (which is impossible with a paid model).
Profitability depends indeed on the number of paying players and how much
they spend independently of the size of the base. In turn, this depends on
the management of monetization (running e-shops with events and sales,
the choice and value of items, and balancing paying vs. free items) and the
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92 No. 94, 2 Q. 2014
contextual marketing of items (right place, right price, right time, right player)
with its inherent risk of deterring addicted players.
No entry cost combined with long tail reaching means that minnows and
free players who form the big majority of players must be convinced to pay
for micro-transactions. It is necessary to get the psychology and the
frustrations balances right to make the player purchase based on his
perception of value (DAVIDOVICI-NORA, 2013a). Incentives to pay are
connected to utility of items in the game (to level up, to increase time to play
or number of lives, to team play) 9. To make free players pay, room still
remains for innovating in new means of monetization targeted to players'
playing profiles other than those existing today. The average spending
amount is nevertheless not correlated to the purchase power of players: if
the player of a puzzle game has a "champion profile", his objective is to level
up as high as possible without paying. He is not sensitive to waiting time or
in other words less impatient (he can replay the same level without paying
as long as he thinks it is feasible to him). LU (2014) confirms that whales'
players are not a demographic target but can be anyone. The focus should
therefore rather be on the quality of games for all players' profiles. As long
as value to the player exceeds the cost, he buys items. According to LU
(2014), the player is even more likely to become a dolphin or a whale if the
items have a long-term value to him.
9 The subjective pricing of digital items accounts also for incentives to purchase or not: see the
$174.99 Halloween package in Team Fortress 2 (Valve).
10 Items created by players are sold in the e-shop and the revenues are shared between player
and developer (often with a tax system).
11 According to STUART (2011), Bejeweled Blitz (PopCap) increased engagement by
increasing the frequency of players receiving special gems because they were most likely to
share the gems with their friends than any other things.
12 For example, if to monetize, the player must kill a dragon and if 90% of players failed to kill
the dragon, the dragon becomes a bottleneck to monetization. The developer must not remove
it or make it easier but can deliver in-game messages or hints, challenges and free goods to
keep the players engaged (STUART, 2011).
Myriam DAVIDOVICI-NORA 93
Acquisition Development
Continuous metrics
monitoring
Retention Monetization
13 Both Clash of Clans and Hay Day are updated every few weeks with new content (items, in-
app purchases, characters). To keep Clash of Clans balanced, Supercell runs an automated
testing simulation that runs thousands of battles one after the other, throwing in randomly sized
armies with different soldier types each time, and then correlates the data to see whether there
are bad balances that could potentially ruin the game (ROSE, 2013).
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Revenues timing (D): discrete for P2P (mainly in the first months after
release) vs continuously for F2P (less seasonal)
Revenues amount (D): limited for P2P (price of the game) vs.
unlimited for F2P (unlimited purchasing)
Profitability risk (D): higher before the distribution in P2P vs. higher
after the distribution in F2P.
Content management (D): outside the game in P2P vs. inside the
game in F2P.
Innovation/development process (D): discrete and slow for P2P vs.
continuous and reactive for F2P
Player's experience (P): possibility to speed up leveling by playing in
P2P vs. paying in F2P
Consumer risk (P): value of the game in P2P vs. controlling amounts
spent in the e-shop in the F2P
Playing with real friends (P): limited to some friends in P2P vs easier
with any friends in F2P (no financial barrier to entry).
15 e.g. the difference between the first shareware "Bewejeled" game with simple graphics and
challenges and more recent puzzle competitors with richer narration and items choices (e.g.
Candy Crush or Diamond Dash).
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We have delimited the borders of paid and free models. Based on this
section, we propose in the next section to analyze a recent evolution of the
business models in the video game industry: a mix of paid and free
components to deliver a more comprehensive service to players.
16 In-game Innovations should be managed carefully since they are new components (and
skills) for casual gaming developers. For example, in PlantvsZombie2, there are more choices
of plants and more narration (the player travels through time on a map before playing levels).
However, the player must replay two, three times the same levels to win stars or bones to open
doors to level up. From our point of view, the gameplay is not as much fun as in the Pay-to-Play
first version.
Myriam DAVIDOVICI-NORA 97
The basic unit price model for a premium version has survived to
digitalization and the economic architecture has remained the same
(purchase, download and play). It has been enriched by out-game services
provided by distribution platforms. For example, Steam (public platform 17)
or Battlenet (private platform) have innovated in services around the paid
game: automatic updates and patches, dynamic pricing and special deals,
easy access to sequel, add-ons and additional contents such as mods by
players and e-sport service, etc. Then, the paid model has extended to
provide for a continuous online gaming service, especially for MMO games.
The subscription model was introduced with or without a unit price to get
access to one game or a bundle of games (e.g. on TV or on multigames
platforms on PC like BigFish 18). Freemium is another evolution of P2P: it
has a free trial period at the end of which the player must pay a unit price to
access the premium version. A freemium full version is a finished product:
the game has an end and the player must wait for the next sequel to be
available to keep on playing.
First, the free model was only supported by ads (or out-game revenues)
and was mainly used for small casual games (e.g. Addictive games, Pogo.fr,
Yahoo !Games portals). The game is free as long as an ad is viewed. To
skip the ads, the player must pay a unit price. It looks like paying for comfort
(and this idea will be reused later by the F2P model). However, players
highlighted two main drawbacks of this model: either the game was of lower
quality due to lower budget or less fun because of the interruption of ads
(OLSSON et al., 2010). From developers' view, advertising can generate
significant revenue but only for the top-selling games. The model evolved
into the F2P or microtransaction model where the access remains free but
revenues are based on the sale of in-game items using real-money. The
revenues can come also from other types of in-game transactions: player to
player transactions. A fee is collected by the developer as a percentage of
the amount of the transaction either for earned items or UGC items (e.g.,
Team Fortress 2). Advertisement can nevertheless keep on being a
17 In a public platform, the owner gives access to games also produced by other developers
and is not limited by the distribution of games only developed by the owner of the platform
(private platform).
18 BigFish generated $130m in revenues in 2010 (CHANG, 2010).
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Conclusion
With the diffusion of the Internet and mobile devices gaming, digital
business models in the video game industry have evolved from paid to free
models with a broad variety of hybrid models. Experimentation with new
revenue models has changed the business models and the management of
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th
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OLSSON B. & SIDENBLOM L. (2010): "Business Models for Video Games", Master
Thesis in Informatics, Lund University, School of Economics and Management,
Departement of Informatics, 94 p.
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ROWLINGS T. (2014): "Top Tweets from Steam Dev. Days, Day 2", (2014/01/16)
http://www.gamasutra.com (2014/01/20).
STUART K. (2011): "The metrics are the message: how analytics is shaping social
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games", July 14 , http://www.theguardian.com, games blog (20/12/2013).
VAN DREUNEN J. (2011): "A Business History of Video Games: Revenue Models
from 1980 to Today", 11 p, The Game Behind the Video Game: Business Regulation
and Society in the Gaming Industry, New Brunswick, New Jersey, USA, April 8-9,
2011.
WEILL P., WOERNER S. (2013): "Optimizing Your Digital Business Model", MIT
Sloan of Management Review, March 19.
Abstract: The mobile gaming industry is growing at a rapid pace. Smartphones, tablets
and other mobile devices are new channels to deliver games to customers. However,
since the birth of Internet, users have been accustomed to getting things for free. How
then are mobile game companies able to make billions in revenue? What are the main
drivers of profitability in this sector? Our objective is to dissect the freemium pricing
strategy that is frequently used in the mobile gaming sector. With the help of the case
study of Gameloft, we explore the method and the path for converting free into profit by
playing with the users' frustration and stress.
Key words: Mobile Gaming, Business Model, Pricing.
A
lthough smartphones began to enter households in the late
nineties, it was not until the introduction of the Apple iPhone in
2007 and its successful adoption, that the smartphone global
penetration rates started to climb, reaching 23% worldwide in
2013. Concurrently with the dawn of a new era of mobile communication, the
video gaming industry began to expand into the mobile device segment.
The video game industry has its roots in the arcade gaming, the age
which began with Atari's Pong over forty years ago. Since then, the video
game industry has been creating content for several support types, including
personal computers and game consoles, with content prices ranging from
twenty to seventy Euros per title. More recently the content creation started
to concern mobile devices and smart TVs. Interestingly, the price range
applied to the titles of the hard core video game industry did not transpose
onto the prices of content for these devices, marking the range from only
zero to about 20 per title.
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104 No. 94, 2 Q. 2014
drivers of the developers' business models, inferred from the case study.
The last section concludes the paper.
Over the last three years the size of the video game industry has
expanded from 40 bn in 2011 to 66.66 bn in 2013 4. With the growing
global penetration rates of mobile devices, the mobile gaming sector nearly
tripled from 3.45 bn in 2011 to 9.46 bn in 2013. In 2011, about 80% of
the revenue was shared among the top four players, jointly representing
52.9% of registered users in the sector. Two years later, in 2013, the market
has evolved beyond recognition. The first player in the ranking, King,
exhibits a market share of 14.2%, while the top four players jointly represent
only 49% of the sector's revenues. DeNA, GREE, and Zynga have
experienced a noticeable decrease of their revenue between 2012 and
2013. Over the same period, the revenues of King, GungHo and Supercell
have skyrocketed. Dominance of the top-ranked players has diminished
dramatically. Among the top fifteen players in mobile gaming in 2013, only
one entered the mobile gaming sector prior to the year 2000 (Gameloft),
while six entered in the year 2006 or later. The prevailing majority of the
companies originate from USA, followed by Japanese-based companies.
The detailed depiction of the revenue shares can be seen in Table 1.
* corresponds to the date of entry of the mobile gaming division of the parent company, ** non-
segregated data, E estimated value.
Source: annual reports, Gartner, 2013
Over the past few years, players in the mobile gaming sector have
created value. Starting from nearly nothing before the emergence of
smartphones in 2007, the sector generated nearly 10 bn in 2013. These
players did so by using their unique capabilities in tandem with leveraging
the resources of the central players, such as Apple and Google, in an effort
to reach vast audiences to develop their businesses.
As for game pricing, there have emerged several distinct strategies: paid
download, freemium, ad-supported, and other. Paid download is the core
traditional pricing method where the end user makes a one-time payment to
purchase the title. Once paid for, the user gains access to download the
game, which is then installed to and played on a single mobile device. The
freemium strategy (ANDERSON, 2009) is a pricing method where the end
user is granted access to download and play free of charge; all the in-game
features are available at extra cost, with no obligation to buy them
whatsoever. As of February 2014, over 90% of the revenue from mobile
games developed for iPhone is generated through the freemium business
model 5.
the user first pays to download, and then is expected to participate in micro-
transactions to enhance his/her gaming experience. Subscription typically
requires a term commitment where a flat monthly fee is charged to the user.
Sometimes subscription-based games are made available as free-to-play for
a limited time during or immediately following the commitment term of the
subscription. Some firms practice a pricing approach where the subscription
fee endures for 6-9 months, and then morphs into a freemium strategy,
referred to above as sub-freemium hybrid strategy. Other firms offer
promotional days when users can download the non-freemium game for
free, and then make in-app purchases. In-app purchases are often not
required to successfully complete any given game; they are meant to greatly
enhance the gaming experience by alleviating stress due to impatience and
frustration of the user. As of March 2014, on the Apple App Store, mobile
game revenues are generated at 7:
- 92% from fremium business model with in-app purchases,
- 6% from pay per download business model,
- 2% from pay per download business model with in-app purchases.
sector, - all contributed to the business model instability and this is what
probably explains the lightning success of game developers like SuperCell,
Rovio and GungHo.
Table 2 - Elements of the strategy of the 15 largest of the mobile gaming industry in 2013
Four entrants among the top fifteen players come from the adjacent
markets: entertainment and video games. These players are historical
incumbents that have been leading their own markets for decades: Disney,
Denis LESCOP & Elena LESCOP 111
Activision, Ubisoft (with Gameloft) and Electronic Arts. These firms are
exploring the mobile distribution channel by adapting some of their existing
games to mobile devices (smartphones and tablets). The mobile activity
represents a very small part of their total revenue and does not appear to be
highly strategic.
Four entrants among the top fifteen players come from online auctions, e-
commerce and m-commerce markets. These players enter the mobile
gaming market by leveraging their social network (GREE) or their customers'
base. GungHo follows an entry strategy similar to that of a pure player based
on one successful game: Puzzle and Dragons. GREE and DeNA leveraged
their existing platform strategy by allowing third party developers to propose
games to GREE and DeNA customers.
The main functions of the top fifteen players can be broken down into
three elements:
Distribute
Some players like Big Fish Games develop and publish their own games,
and distribute the games of third party developers and editors through their
platform. Big Fish Games is specialized in premium casual games: the
company presents itself as the leading online marketplace for such games.
Big Fish Games offers third party developers a multi-channel distribution
approach by making games available on PC, Mac, iPad, iPhone, Android,
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Kindle, Nintendo Wii, Nintendo DS and retail. More than a market place, Big
Fish Games is a distributor (merchant model).
Platform
Invention, innovation, new products, and new ideas do not bring value
per se. TEECE (2010) neatly summarized a common theoretical belief:
markets, which are assumed to exist for all products and inventions.
Thus there are no puzzles about how to design a business - it is simply
assumed that if value is delivered, customers will always pay for it".
This theoretical ideal is just a "caricature" of the real world and cannot
explain the revenue generated in the gaming industry. In particular it cannot
explain why customers decide to pay at a point in time. Business models
and business design matter (BADEN-FULLER & MORGAN, 2010; BADEN-
FULLER & HAEFLIGER, 2013; WIRTZ et al., 2010) and are of tremendous
importance in the Web 2.0 and Internet industry (AMIT & ZOTT, 2001; ZOTT
& AMIT, 2010).
We had several reasons to select Gameloft for this case study. Gameloft
pioneered mobile gaming in 1999. It is the earliest entrant into the mobile
gaming sector among the top fifteen largest developers and publishers in
2013. Gameloft is the early signal from the French-based video game
developer Ubisoft, the parent company, to step into an emerging adjacent
market, with intent to multi-home on all available platforms. Gameloft
employs over 6391 people among which are 5200 developers. It has
published over 500 games for mobile devices. Gameloft relies heavily on
freemium pricing strategy with emphasis on micro-transactions and in-game
advertising. Gameloft displays a stable business model and strategic
positioning. As for 2013, Gameloft is still among the top ten publishers
worldwide in terms of total downloads on iOS and Google Play (ranks
second after Electronic Arts but before SuperCell or Gung Ho), top games
downloads on iOS and GooglePlay (ranks fourth) and revenues (ranks
Denis LESCOP & Elena LESCOP 115
twelveth) 8. In 2013, Gameloft counted twenty million daily users, one million
daily downloads and one billion downloads to date of its free to play games.
Gameloft commercializes its games in fifteen languages in 100+ countries
over 4000 different models of smartphones. Gameloft develops its own
games and franchises (Asphalt, Real Football, Modern Combat, Order &
Chaos) and works in collaboration with international companies like Marvel,
Hasbro, FOX, Mattel and Disney. Gameloft is undoubtedly an example of
success with a rather stable business model. For all these reasons we
consider Gameloft as a model for the mobile game industry.
The game starts out presenting the user with a need to manage a limited
number of resources: coins, cash, wood, food, energy and hearts. Coins,
wood and food can be obtained by doing chores and quests throughout the
game. Each of the actions is time sensitive: there is a timer assigned to each
action, and the user needs to wait until the timer expires in order to be able
to collect resources like food and coins. The cash, energy and hearts are
scarce resources. In the beginning of the game, the user is occasionally
presented with these resources in form of a bonus. Hearts can be collected
by helping a neighbouring town to do chores, and can be further used to
upgrade buildings in the user's own town to increase coin payoff, or to play a
lottery, where the user can win in-game items, cash or energy. Lottery can
also be played for free once every 24 hours. Hearts can also be purchased
8 Source: App Annie Index: 2013 Retrospective, The Top Trends of 2013, App Annie, January
2014.
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with cash. In the second half of the game, the option to earn hearts
disappears, and only the option to buy hearts with cash remains. Energy is
needed to do all actions in the game that yield payoffs. Energy resource is
limited and builds up to a maximum of fifty energy points as the user
progresses within the game. There are several ways to replenish the energy:
win a lottery, using hearts or cash to participate; level-up by doing chores to
earn experience points, which in turn promotes the user to the next level;
wait three minutes to replenish one point of energy for a maximum of three
minutes x 50 points = 150 minutes; earn as a bonus for doing chores; or buy
more energy with cash.
Cash is the most curious resource of all. In the beginning of the game,
cash is frequently offered as bonus. The user also has an option to get free
cash by watching short 20-30 second advertisements of other Gameloft
games. For each of the advertisements watched, up to a maximum of five
per each 24-hour period, a user is offered one unit of cash to be spent within
the game. Later in the game, Gameloft advertisements disappear, and in
their stead appears a list of Gameloft partners who advertise their products
and services with the help of Gameloft. In exchange for filling in your
personal information or purchasing real merchandise from these partners,
Gameloft grants cash for use in-game to the participating user. The cash can
be spent to buy all other resources, including the scarce resources, to hurry
production, hence eliminating the need to wait until the timers elapse, or to
buy in-game items. The in-game items can be either functional (e.g.
providing or enhancing coin resource), or decorative (e.g. outfit of your game
character or the character's gender). The cash, in turn, can be purchased for
real-world money using your credit card. The rates are presented in such a
fashion that they compel user to buy a larger pack of cash rather than a
smaller one: see Table 3 for details.
Amount Bonus Name of Cash Pack New Name of Cash Pack (2013) Price
10 0 Baby-sized Pack Pouch of Cash 1.79
25 1 Starter-sized Pack Bushel of Cash 4.49
50 5 Medium-sized Pack Sack of Cash 8.99
100 20 Big Pack Barrel of Cash 17.99
250 100 Extra-Large Pack Wagon of Cash 44.99
500 300 Super-sized Pack Bale of Cash 89.99
What compels the users to buy these packs of cash? What drives some
of the users to convert into paying customers? Since the beginning of the
Denis LESCOP & Elena LESCOP 117
game the user is faced with real-time delays throughout the game:
production of collectable resources takes real time, and each item in the
game (house, business, farm animal, etc.) has an associated timer. Upon
the expiry of the timer the resources can be collected (taxes, items
produced, harvest, etc.). Each action of the user's character costs one unit
of energy. Energy recuperation is also associated with a timer. Moreover,
free lottery, free cash, and land expansions are associated with a timer. The
farther the user is progressing into the game, the more yield there is from
each producing entity, but also the longer the time delay is. In addition, the
larger the town becomes, the farther it stretches, the longer, in real time, it
becomes for the character to walk from one place to another in order to do
the chores. The user has a choice to make in-game purchases of virtual
content that will enable the character to walk faster and to rush the in-game
timers. Such items are offered exclusively in exchange for in-game cash.
Hence, playing on the impatience of the user created by the need to wait all
the time, the game is offering a quick solution to relieve impatience through
purchases of packs of cash, which can then be spent to purchase the play
time (in lieu of wait time).
back regularly, the mood of the in-game characters decays from jubilant to
depressed, which affects the production yield. This contributes to user's
motivation to interact with the game daily.
Since the entry into the mobile gaming sector is nearly barrier-free, over
the past several years the device manufacturer's application distribution
platforms have been flooded with talented amateur game developer
wannabes, small developer firms as well as heavy-weight entrants from the
side market (video game industry). Gaining visibility in this sea of
competitors is key. Multi-homing is a necessity: the time of exclusivity in
gaming is over. Multi-homing on multiple platforms ensures the maximization
of the potential audience.
"One of the elements that make free-to-play unique is that we give the
games away for free and then are dependent on players enjoying the
game and any new content enough to spend within that game".
Being addictive and using methods at hand to frustrate the user, such
that the user eventually cracks and pays up, are the top ingredients in value
generation and capture. As we observed with Gameloft, the games are built
in such a way as to put the time pressure throughout the aspects of the
game. This time pressure does two things. First, it takes away the ability
from the user to saturate himself with the game by overplaying; limited
gaming periods in which the user does not have an opportunity to finish all
actions/chores/quests that they want make them return to play the game
later. In addition, the game encourages daily playing by offering bonuses.
Second, the time pressure gradually builds up a level of impatience so that
the user is either converted to a paying customer or simply stops playing.
Both of these scenarios can be viewed as desired by the game developers
when the objective is not necessarily to maintain the large-number user
base: instead it is advantageous to maximize the revenue per active user.
Moreover, addicted users use their social networks to make their friends play
as well, hence bringing more potential paying customers to the game
developer. Another ingredient appears useful to hook the players: "stress
and release". To the question "Do you try to erase the user's stress with
design [of your games]?", Kenji Kobayashi, Director at DeNA, answers:
"It's not that we erase it; we control and release it. When you think
about what games are at the core, they are about delivering stress to
the user. It wouldn't be fun if it's something that anyone could finish --
you put up obstacles for the user, and they feel a sense of
achievement when they overcome them, which is fun."
The underlying idea is very basic: you should know your players and
know what they like to provide them with the best playing experience.
Even though there is a lot of effort made to retain the user, the game
developer's ultimate goal is not to maximize the number of registered users,
but to maximize the conversion of active users to paying users. As is evident
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with the mobile gaming leaders, having highest profit per user is superior to
managing the highest number of users.
Capitalizing is not an easy task. The average revenue per user or per
th
paying user does not give a clear image of reality. According to 5 Planet
CEO Robert Winkler 9, 40% of revenue comes from 2% of players spending
$1,000 or more per year, 90% comes from players spending $100 or more
per year. Some top players can even spend up to $6,700 per year. These
kinds of players are often referred to as "the whales". They represent only a
small percentage: about 3-4% of paying users. As of now, developers are
not able to outline their profile: are the whales old or young? Are they
managers, doctors, employees, etc.? There are no specific demographics
that can help to distinguish the whales from other players. Lu (2014)
explains that these players are not compulsive: they spend in-game
strategically and only if they feel it is worth doing so. To track these players,
developers have invented batteries of metrics and analytics able to
accurately measure and develop the economic design of their games: how
and when are the players buying? What are they buying? At what level of
the game are they ready to spend? These metrics make their game more
agile and adaptable.
9 See: http://venturebeat.com/2013/03/14/whales-and-why-social-gamers-are-just-gamers/
Denis LESCOP & Elena LESCOP 121
games of their own and third-party developments, if the latter are willing to
pay for the in-game advertisement. By offering more, the game developer
eliminates the need for the registered users to wander around and check out
the competitor's products. The game developer strives to create a
playground - or platform - for its users to be able to find things to their liking
once they are tired of their current game, hence keeping the potential and
actual paying customers from leaving. Moreover, contrary to console games,
users on mobile devices play several different games at the same time and
can jump from one game to another very quickly: suturing the playing time of
each user is of great importance.
Conclusion
10 Available at : http://www.oft.gov.uk/shared_oft/consumer-enforcement/oft1519.pdf
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these rules only apply in the UK. However, other regulatory bodies may
follow the example of OFT 11. The first impact of these rules will be on the
fluidity of the revenue flows. Regulation may force companies to adapt their
business model again.
References
ANDERSON, C. (2009): Free: The Future of a Radical Price, Hyperion, 2009, 274 p.
LU, M. (2014): "Lessons on Mobile Gaming From a Whale", Gamasutra, The Art &
th
Business of Making Games, Blogs, 20 January 2014.
OFT (2014): "Online Games Industry Given Two Months to Get House in Order
th
Following OFT Investigation", Press Release, 30 January 2014.
11 See the FTC in-app purchasing complaint against Apple. Apple recently offered 32.5 M $ in
refunds to any Apple account holder who can prove they were billed for in-app purchases made
by their children.
Interview with
Yves GUILLEMOT
Co-Founder and CEO
Ubisoft, Paris, France
th
C&S: We have entered the 8 generation of consoles. Do you consider it likely
that this will upset the market positions of publishers and console
manufacturers?
Yves Guillemot: This new generation of consoles brings many changes,
incorporating all the innovations from parallel markets and multiplying their
potential through technological power. These platforms reach an
unparalleled high level of performance, immersion and opportunities which
allow us to create even more powerful game experiences. Each generation
of consoles has large implications for publishers who need to invest heavily
to maximize power and be able to seize the great opportunities that arise.
On the other hand, the strong growth in mobile and PC markets, driven by
social games, permanently connected and free access, is a challenge for
traditional industry players, with new economic and editorial models that
differ from more traditional games. These models started being introduced at
the end of the previous generation of consoles. New platforms like the
Playstation 4 or Xbox One have fully integrated these developments and
allow us to put the player at the center - before, during and after the game
experience - and to give him/her an increasingly active role in changing
content.
Casual gaming has grown rapidly and has already started occupying a
predominant position. Do you think it is likely that this will continue to
increase?
Casual gaming is not a new phenomenon. In 2006 the Nintendo Wii had
taken a big step towards attracting video games and a new audience, part of
which is now plays more traditional games. The rise of social networks,
mobile games and online greatly amplified this phenomenon and globalised
the supply and the audience to which it is intended. The video game market
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124 No. 94, 2 Q. 2014
Which factors do you think are the most disruptive of the game economy
factors present or future: free to play, an actor like Steam, etc.?
The free-to-play model was born in Asia to circumvent the problems of
piracy of the PC game business model. This model has experienced
significant growth in recent years in Western markets. By removing entry
barriers, it allows players to experience games and be free to invite their
friends and invest if they like the content. This model has now gone beyond
Interview with Yves GUILLEMOT 125
Daniel KAPLAN
Business Developer
Mojang, Stockholm, Sweden
C&S: Minecraft is, by any standard, a very successful game. How much of this
success do you ascribe to your business model?
Daniel KAPLAN:
I think it played quite a big role since it was discounted for quite a long time.
The game was discounted from day one, since it was released during very
early development. The whole idea was to release it early to see if there was
an interest and to see if the project could bear fruit. A lot of people who
bought it initially, I think, felt that they had somewhat invested into the project
and the ones who were on from the beginning made quite a good deal.
Do Minecraft exploit any specific previous business model, or has it paved its
way with a unique model to generate profit?
There are other games that were the inspiration for this model, Mount and
Blade from TaleWorlds for instance. They also released their game before it
was finished for a discounted price and continued the development with the
community.
Today Minecraft has become a phenomenon that is not only tied to the game
itself, but there are many physical product spin-offs. How important is this
brand extension for Mojang?
We are still a game company but it definitely helps. I think there is a fine line
in between how much you can do with a brand before it feels too stretched.
We try to create merch/products that we would like to have ourselves, rather
than try to fill gaps with our brand with various products. It is sure a fine line
and I think a brand can be too exposed and become too stretched.
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I think the problem with becoming too successful is that you will always be compared
with your success, regardless of what you produce after that. It is important to not
lose focus and continue to deliver things regardless of what they are so you dont
stagnate.
I think that it is almost impossible to create a success like Minecraft again. A lof of the
cred Mojang got was because it was an up and coming company/person during the
initial development of Minecraft, and the whole story around Notch (the founder of
Mojang) was a classic David and Goliath story, which we cant reproduce anymore.
We have a whole different starting point now in comparison from where we started.
The next game we are working on, Scrolls, is already profitable and was released in
a similar manner to Minecraft. We are super happy about the game being profitable
even though it is not close to the success of Minecraft. It is a bit silly to try to
compete/compare our projects with Minecraft to be honest.
What directions do you see the video games industry taking when it comes to
generating sustainable business models? Last year Minecraft was one of the
two pay per play games in the US top 20 mobile games. Not adopting a free to
play business model, is it a conviction or the best way to be different within a
serious competitive framework?
I dont know what will happen in the future. You see different trends all the
time and you see companies not following the trends and they are
successful. I think that the mobile business will continue growing and will
continue to have different business models for various types of games or
apps. I think it is hard to say that everything will be x or y. Considering the
widespread presence? of mobile devices, it allows for more niche products
too which will let you create products that dont follow the trends and can still
be successful.
Interview with
Alain LE DIBERDER
ARTE,
Managing director
and head of programs,
Strasbourg, France
Video games are reaching their full potential online with multiplayer or
massively multiplayer, social, viral, flash and ubiquitous components. What do
these developments inspire for you?
All these technologies are impressive and improving very quickly. But Im not
sure that they actually drive the industry to a new era. Videogamers were
social from the start, and videogames were viral far before Facebook or
Tweeter. Even in the Eighties, schools and universities were an effective
social media in which gamers and game reputations were debated, built
and destroyed. And they still are. The new phenomenon is that the social
dimension is now included in the code. And there are opportunities to make
money with it. But the videogame industry, for the moment, is not able to
catch the main part of this market, which is dominated by transversal
companies like Facebook, Twitter, Apple and so on.
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130 No. 94, 2 Q. 2014
Oculus Rift, Google Glass, holographic technology ... what do you think the
next disruptive gaming experience will be?
I cant see such a thing as a disruptive technology in the videogame history.
Technology is an additive process in the videogame industry not a
subtractive one. For instance when the home console began, in 1974, the
arcade market didnt disappear. The computer games started slowly at the
end of the seventies and added their sales to the console market. When the
PC market was mature, in the beginning of the nineties, the console market
exploded too in the 16 bits era. Online games began to be popular before
the web. I remember having wasted many hours playing Microprose Grand
Prix on line in 1992 with a 14.4kbs modem. Today the online market is
strong, but more than 20 years after, between 60 and 80% of the overall
market, depending on what you consider as a videogame sale is still
offline. We could also think of 3D games, Virtual reality helmets, streamed
games and so on. But the truth is that during 40 years many technologies
Interview with Alain LE DIBERDER 131
have been introduced, many have failed (especially with 3D, beware
Oculus!) and many have contributed to the Harlequin suit in which the
videogame industry is dressed.
What are the issues in which the French industry still needs to progress?
There are French developers, French magazines, excellent French
videogame schools, some French companies, but the French industry
doesnt exist. Of course there is Ubi Soft. But Ubi began to develop games in
Asia or Morocco 25 years ago, and regarding the workforce, is more a
Canadian company than a French one. Vivendi invested in big US
companies but they remained American companies reporting to French
shareholders. And Vivendi sold the main part of the shares to Activision.
Infogrames bought many British and American companies and the glorious
brand of Atari, but it failed. From the beginning, the golden era of Ere
Informatique or Loriciels, the French (little) companies have always sold
more than 80% of their products in the world market. Almost all the titles,
such as Another World or Alone in the Dark were in English, even in the
French market. Many French guys have succeeded in the videogames
industry, but as its a global industry, they were and still are involved in a
non-national world. A national videogame industry is a nonsense, except
maybe in Asia.
Use Logics
Book Review
Nomad Gaming
A New Era for Video Games? (*)
Laurent MICHAUD
IDATE, Montpellier, France
(*) This paper is a summary of a market report published by IDATE in the framework of the
Video Game Market Watch service of its DigiWorld catalogue. For more information, see:
www.idate-research.com
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2013 against more than 13,000 on Facebook and more than 1,800 on
Steam.
The games available on Google Play only represent 14% of
applications in volume, but 40% of downloads and 80% of revenue.
On average and on the basis of the 20 most profitable games on
Apple Store, the revenue generated over the lifespan of a game are nearly 4
USD per player.
Some titles recorded impressive results: Puzzle & Dragons from
GungHo, is the source of 2.5 million USD per day, Clash of Clans
(SuperCell) takes in 2.4 million USD per day, including nearly 530,000 USD
in the United States.
IDATE estimates that by 2016 the mobile games market segment
should continue to grow and reach a turnover of just over 9 billion EUR.
This report provides answers and focuses on the impacts of the mobile
gaming market segment on the video game industry. These impacts are as
much challenges as industry trends:
Mobile gaming focuses harsh competition, which now sees the
confrontation of players in mobile, social, casual and AAA gaming and the
aggregation of content and the Web.
The sector's established players must take inspiration from the
technological innovations, services and gameplay supported by players in
the mobile gaming segment freed from the physical market.
Innovation, responsiveness and growth of the mobile gaming segment
highlights a dynamic of discontinuous innovation of the established video
game segments.
Apple obviously holds a special place in the proliferation observed in
the mobile gaming market segment and in the end its influence goes well
beyond the mobile gaming segment.
Mobile gaming exerts competition with console gaming in terms of
time allocation and originality of the experience.
An era of volatility and massivity has emerged with titles such as
Rovio and Clash of Clans. It augurs for a change in dimension the economic
impacts of which are still hard to measure.
A mastery of all trades, from development to marketing passing via
economics and business strategy is now a requirement for studios.
But the development of a good game remains the first rule to apply.
Mobile gaming well supports the ubiquity of games and will provide
them their recognition.
From new worlds, new ways to dream and have fun are created in the
mobile games segment thereby enriching digital culture and entertainment
media.
Social Gaming
Markets and Trends, 2012-2016 (*)
Laurent MICHAUD
IDATE, Montpellier, France
I
n 2012 the social gaming market accounted for 36% of the online gaming
market and 13% of the overall video game market. In 2016 its share is
expected to rise to 46% of the online gaming market and 18% of the
overall video game market. This video game market segment is entering the
maturity phase. Its estimated worth in 2012 was EUR 5.4 billion, which is
expected to reach EUR 10.7 billion in 2016. Facebook is by a long shot the
leading social gaming platform, with 235 million active gamers in August
2012.
While casual games and virtual world games still constitute the majority,
a new generation of social games aimed at different types of gamers (mid-
core or core) is emerging. The arrival of new graphics tools and the
enhancement of game platform performance make it possible to develop
social games offering a much richer experience than before.
For brands, social games are a means of conquering and building loyalty
among consumers. Brands are in fact becoming aware of the opportunity to
be able to communicate more subtly with a large captive audience, including
by integrating directly with gameplay.
(*) This paper is a summary of a market report published by IDATE in the framework of the
Video Game Market Watch service of its DigiWorld catalogue. For more information, see:
www.idate-research.com
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Laurent MICHAUD
IDATE, Montpellier, France
(*) This paper is a summary of a market report published by IDATE in the framework of the
Video Game Market Watch service of its DigiWorld catalogue. For more information, see:
www.idate-research.com
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Many are claiming that this will be the last generation for consoles, as
cloud computing and network technologies have shown that they could
make console hardware obsolete. However, this is not going to happen in
the next seven to eight years, which is the typical life cycle of a home
console. Gamers are being treated to an increasingly spectacular and
entertaining experience, and HD is certainly contributing to the quality of this
experience.
The shift from HD to Ultra HD between now and 2016 will require four
times as much bandwidth and networks will not be able to handle this extra
capacity unless users' connections are upgraded. However, the HEVC (High
Efficiency Video Coding) standard will allow a gain of compression of about
50%. Finally the weight of the image will be divided by two.
Several 'social' features have also been added because social networks
have proved to be important for the gaming experience and for revenues, as
well as for loyalty. Console manufacturers have therefore integrated the
ability to share game images and videos on social networks, such as
Facebook and YouTube. Sony has gone one step further than its competitor
in this area by providing a 'Share' button on its DualShock 4 controller, which
speeds up the process. Cross-game voice chat, which is very popular with
PC gamers, is also offered.
Features 143
Players can use the cloud to start playing while the game is still
downloading. Console manufacturers will eventually be offering their own
cloud gaming offerings.
Online Multiplayer X X X
Ability of recording
and sharing X X UNAVAILABLE
gameplay
Cross-Game Chat X X UNAVAILABLE
Live Streaming X X UNAVAILABLE
Two games for free
each month X X UNAVAILABLE
Exclusive Game
Content UNAVAILABLE X UNAVAILABLE
Discounts or loyalty
programs X X X
Cloud Storage X X
UNAVAILABLE
(unlimited) (3GB)
Access to Netflix * X X X
Access to Hulu * X X X
Web Browser X X X
While these new challengers are mainly focusing on video games, the
three leading console manufacturers are continuing to position their devices
as entertainment centres over and above gaming. Microsoft and Sony are
more advanced in this area, which is no surprise given their respective
Features 145
Table 2 - The major audiovisual partnership agreements in the United States by device
After having initially relied on raw graphics and processing power, the
success of home consoles was later based around consumer electronics
and computing innovations. The previous console generations adopted this
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For this new generation of consoles, the real innovation is in the software
rather than the technical specifications. They are now pushing services for
the whole family, from VOD and games, to browsing the web. They are also
focusing on the user experience and integrating consumption patterns into
their 'social' features.
ranking services, challenges, VOD, etc. There are still many questions
surrounding the console manufacturers' willingness and their hardware's
ability to abandon physical media within the next six to seven years. These
manufacturers have undoubtedly given the issue serious thought already.
Decisions should be made by at least the end of this console generation's
life cycle in light of new HD formats. An Ultra High Definition image will be
four times larger than an HD image and will need significant advances in
compression for it to be carried across networks without restriction.
Book Review
Here is a book with a sober and minimalist title: Le Numrique (Digital) (*). It
is only the subtitle (The economics of sharing and transaction) that begins to
give something away. And it would be a mistake to ignore it.
There are several ways to tackle a book like this. One could read it from
cover to cover. Or one could move through it at random, putting ones faith in
serendipity, a word brought back into the vernacular by several authors cited
in the book, though still faithful to its meaning as coined by Horace Walpole
of "always making discoveries, by accidents and sagacity, of things which
they were not in quest of".
(*) Published by Economica, "with the support of the Brittany regional council".
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- The final chapter (7) delves into works that marry the digital and physical
universes, offering a theoretical refresher on the role that ICT play in urban
development, with an interesting foray into Silicon Valley, innovation clusters
in general, and the role that public authorities have in mobilising digital
technologies to increase regional appeal.
The authors conclude by gathering the common threads that run through the
work, the dialectic at the heart of the digital economy between sharing and
transaction, with the fundamental "arrangements" of "conflict," "cooperation,"
and "mutual predation".
We only hope the book will quickly find its way into English, so that it might
receive the wide exposure it deserves.
Author biographies
The Editors
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The interviewees
Yves GUILLEMOT founded Ubisoft in 1986 with his four brothers, and was
named CEO of the company in 1988. Starting off by importing and translating video
games from England, Yves and his brothers immediately used the distribution
business to fund the creation of games, starting with Zombie in 1990 for Atari ST.
Yves has overseen the phenomenal growth of Ubisoft into an internationally
renowned and respected creator of quality video games with 29 studios, distribution
in 55 countries and with more than 9,200 employees around the globe. For the 2013-
2014 fiscal year it generated sales of 1.007 billion euros.
Born in Brittany of France's west coast, Yves grew up in a family of entrepreneurs.
All five Guillemot brothers worked summers in the family agriculture supply business.
Later, Yves attended business school in Paris, formalizing his education in the
creation and sustenance of an enterprise. Yves is married and enjoys playing video
games with his three children.
The contributors
and an HDR from EHESS. Her research focus is on innovation and on the
organizational and institutional contexts that favor value creation in high-tech firms.
Her book on the great leap forward in France's telecommunications sector in the
1970s was published in 2011. Her work has also been published in the Harvard
Business Review, Industrial and Corporate Change, Grer et Comprendre and
Entreprises et Histoires.
For more than fifteen years, Yves GASSOT has been at the head of IDATE-
Digiworld Institute (www.idate.org), an institute that has established itself as one of
the leading research centres in Europe concerned with the telecommunications,
Internet and media industries. In this position, he has taken part in numerous studies
of the various markets and the strategies being pursued in the telecommunications
sector. He is on the panel of several expert committees, including the Conseil
Gnral des Technologies de l'Information, ITS and the advisory Committees of the
PTC and Iris Capital. He was special adviser of the European Commissioner of the
Information Society during the last regulatory framework review. He serves as
Executive Director of the journal COMMUNICATIONS & STRATEGIES and is scientific head
of the annual DigiWorld Yearbook and DigiWorld Summit. With a background as
rd
DPLG architect, he is a graduate of the Institute of Political Studies, Paris (3 Cycle).
Events
Publications
General information
The digital games market is an enormous and fast-growing industry with
extraordinary impact, particularly on young people and increasingly on other
segments of the population. How can we harness widespread enthusiasm
for digital games to contribute to advances in society and science in addition
to economic impacts? An Engineering & Physical Sciences Research
Council (EPSRC) funded project, called NEMOG, (New Economic Models
th
and Opportunities for digital Games) was launched on 11 February 2014 at
the University of York to answer this question.
NEMOG is set up to grasp this potential. The project studies the current
state of the digital games industry in order to identify the emerging market
strategies and suggest policy changes at UK and EU level. By doing this, the
project digs into currently adopted business models for recreational games
and for serious games (i.e. those games aiming at scientific and societal
benefits). The analysis of business models and of business models
innovation is rooted into the close collaboration with project industrial
partners and allows us to create in-depth case studies. Furthermore,
NEMOG addresses the availability, storage, privacy and security issues
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around clickstream data from online gameplay and purchases. Crucial to this
purpose is the interdisciplinarity of research conducted by the project units
and in close collaboration with members of the mainstream (recreation-
oriented) digital games industry, scientists, healthcare workers and
representatives of the nascent scientific- and social-goal-oriented digital
games industry.
Research team:
Cass Business School, City University London
Professor Feng Li, Feng.Li.1@city.ac.uk
Dr Alberto Nucciarelli, Alberto.Nucciarelli.1@city.ac.uk
Main Tracks
(1) ICT infrastructures and services - technologies and markets
Fixed and mobile developments
Country cases of coverage and take-up
Mobile broadband
Internet developments
Mobile operators
Continental fiber rings
Digital divides
Cyber security
Cloud computing
Broadcast developments
(2) Social and private applications
CT4D and M4D
E- and m-commerce
E- and m-learning
E- and m-health
E- and m-governance
Intelligent Traffic Systems
Agricultural applications
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Awards will be presented for the best overall paper and the best student paper.
For full details on the Call for Papers, please visit the Conference web site at:
http://www.africa-its.org/
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Service Section 165
Technical innovations
How far can LTE/LTE Advanced go in delivering high-speed Internet
access?
How will Wi-Fi, small cells and the SDN model influence the mobility
landscape?
Will there be a spectrum shortage?
Business models
How will vertical markets redefine their business around M2M and the
lnternet of Things?
Will 4G reinvent telcos business models?
Fixed and mobile advertising: competition or convergence? How to
leverage the additional personal data coming from mobility?
CONTENTS
Part 1: DigiWorld Atlas
Chapter 1: The DigiWorld in the global economy
Chapter 2: Markets and players
Chapter 3: Access
Chapter 4: Consumer services and contents
Chapter 5: Internet markets
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Annexes
Glossary
Index
Information/Orders
IDATE, Vanessa SEGURA
Tel.: +33 (0)4 67 14 44 81 - fax: +33 (0)4 67 14 44 00
v.segura@idate.org
www.digiworld.org/yearbook/
Our DOSSIERS
To be published
Latest published
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Information/Orders
IDATE, Vanessa SEGURA
Tel.: +33 (0)4 67 14 44 81 - fax: +33 (0)4 67 14 44 00
v.segura@idate.org
www.comstrat.org
Extra papers
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