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[Mephs]

Hey everyone,

I'm a bit of a 'total complete n00b' as regards the business side of games, being more of a programmer/designer combo than a 'business type', but have been reading a few articles from Paul Graham recently.  After reading these articles, I have started to really think about how we make games work as a business opportunity.

I'm starting to wonder if our standard business model for indie games in inherently flawed as a means to produce profit. The reason being that most games (perhaps online games excluded) are one off consumable items.  If you get lucky, lots of people buy the game, but once purchased, that's it, they have no need to use your services again, except perhaps to buy another game, if you're lucky (or exceptionally good at what you do!)

So one way we could increase the profit from a games business is to make lots of games and hope people come back to purchase future titles.  This strikes me as a bad idea as it relies on us as a business having to potentially spend a long time developing multiple titles in order to make maximum profit and at some point, a customer may have purchased all of our games and stop giving us money despite liking us as a company and potentially willing, or even wanting to give us more money for more product.

So my question and the point of this post, is how can we improve upon the problems of the current most widely used business model in games of (and yes, I'm aware I'm drastically simplifying this here):

create game,
sell game,
rinse and repeat

My own personal thoughts on this came about when thinking about Google and Microsoft and thinking how they came to be such huge and profitable companies.  The core of both companies is something that is essentially a service, something that a user needs for some reason to keep coming back to and using again and again.  In the case of Microsoft, it is an operating system.  In the case of Google it was a search engine.  Games don't generally have the ability to draw customers back to them over and over again, as I mentioned earlier, this is because most games are pretty much consumable items.  Can we turn games into something more profitable by making them something that offers a service, or otherwise is something that isn't just a consumable, or is less of a consumable?

I know we can offer a service if we make our games MMOs or otherwise online, but I'm not sure this is feasible for a lot of indie developers as the online element of games quite significantly raises the barrier of entry to creation of the games.

I wonder if this might be possible via some sort of game that utilises user created content to extend the longevity of the game, but perhaps has a means to monetise premium user generated content.  Maybe the most popular content gets monetised by end users paying to obtain it and the proceeds then being split between the game creator and the content creator.  Then we would have a system that has incentives to users to create good content, saving the developer the work and making both the developer and the content creator happy with receiving proceeds for their work.  End users who do not create content would also benefit because of the mass content sharing, much of which may even cost them nothing extra.

Anyway, I'm hoping people wont get caught up in my (probably bad!) idea, it's just meant to try to illustrate the kind of thing I'm getting at rather than illustrate a 'good' idea!

Maybe it's not really possible to change the business model of games in this way, maybe it's not really desireable if it even is possible, but I think it's worth posing these questions!

Would anyone care to share any further thoughts?

Thanks,

Steve O

[synapse]

http://giffconstable.com/2009/07/virtual-world-and-social-game-arpus/

[Snakey]

The short answer is yes. There are many games that simply act as a service.

World of Warcraft is a service and that is what people pay for.

[JackieJay]

In fact, any game you sell you're delivering a service.
People pay to play the game, that's a service.

[ஒழுக்கின்மை (Paul Eres)]

i dunno, there are still a lot of companies that make a lot of money using the old formula of 'make a game, sell it, make another, sell that'. i don't see those companies going out of business any time soon -- i'm thinking of companies like capcom, konami, atlus, koei, and hundreds more; successful companies -- who make 95%+ of their money through game sales and not subscriptions or hardware or extras. are you really saying that there is a basic flaw in their model? if so, why haven't those companies suffered for it?

[Mephs]

Well, agreed, money certainly can be made using the current system, very good money in some circumstances, but that doesn't imply it is optimal.

Also, I agree with the post about games like World of Warcraft being a service, but I reiterate that's not of much use to us indies because even the best of indie developers would find it nigh on impossible to ever hope of creating anything on the same scale as World of Warcraft without being incredibly clever about how they approached it.  I say this with some authority as I actually work making an MMO for a living!

That aside, I just think that if we were able to adjust the business model for games to somehow act more like a multiple-use service I think there may be potential for a larger number of companies to be earning larger amounts and for our business to be less risky. 

For example, you don't have to rely on a huge number of initial sales if you are offering a service, as it may simply be enough to have a small number of customers who keep coming back to make use of the service over and over.

Sure, perhaps it's not necessary, but again I think it's highly worth mulling over things like this, do we really want to be the dinosaurs left behind because we thought we could carry on going the same way forever? 

Cheers,

Steve O

[Falmil]

Even if you could make more games with a kind of "service" business model, should you? Part of the issue is that (I believe) most indies have creation and a project in mind first, and then worry about the business aspects of it second (unless its going to require a server or other continuous resources). Trying to figure out how you can charge more usually just forces you to cheapen the game somehow by modifying it to be more profitable. The problem is that most games that indies make aren't the kind of games that need to be "multiple-use".
I think most of the risk comes from the high development cost of games. Companies are able to make millions of dollars in profit in games, while on the other hand, all an indie needs to do is break even (that is assuming they're "paying" themselves) in order to feed themselves. Another risk is the long time it takes to create a finished game. A large project can take a long time, only for a team to realize that game is crap, but iterative development, prototyping and just having smaller sized projects can reduce some of that risk.
Also, selling a service means that you have costs of your own for maintaining the game, so if not enough people play per month, than you may go under. Unless you're attaching fees to a game for no reason other than to make more money.

[synapse]

Even if you could make more games with a kind of "service" business model, should you? Part of the issue is that (I believe) most indies have creation and a project in mind first, and then worry about the business aspects of it second

Are you really trying to say that if you're indie you can't be a business first?  That's pretty awful :O

I run a medium-sized Facebook game and it is extraordinarily profitable using virtual goods and a free-to-play model.  The dev-cycle for online webgames can be extremely low (~3 weeks) and takes minimal understanding of PHP/MySQL (which you can learn on the fly).  There is nothing 'cheap' about easily being able to reach a wide audience - in fact, a true creative designer should prefer their game to have large exposure.

The traditional developer model is aging and, in terms of indie business model, rapidly becoming obsolete.  There are several indie teams that have built games on Facebook, with no funding, and within a single year are now earning $20+ million/yr.  Steve O, your mind is in the right place - don't listen to anyone on here that tells you otherwise.

[alspal]

I don't want my games on facebook, and I don't mind being obsolete.

[Kren]

There are many ways to sell a game, facebook is just the newest one, that doesn't mean that the old ways sucks or have flaws, anyways, for Capcom I would expect to see a virtual arcade machine on the internet, pay 25 cents or less to play any capcom arcade game with one credit, that would own.

[Falmil]

Are you really trying to say that if you're indie you can't be a business first?  That's pretty awful :O

Obviously not. It's just that not every game can work with an online service-oriented model. If you want to make games on Facebook, that's fine. Some developers might not want to make the kinds of games they see that are popular on Facebook. Even though you yourself might have a good game, in my experience, most of those kinds of games just have some kind of loose notion of gameplay and someway to keep you coming back to play more so you are likely to keep spending money in them. It's mainly a question of if you can make a game without compromising your vision for the purpose of making sure you can make money off of it.

[JackieJay]

This thread is kind of, herr... pointless.
You can make, let's say, common games, sell them and gather your revenue for a few months or you could release a mmorpg or any other kind of game that forces your customers to pay a monthly. Nothing new.

The traditional developer model is aging and, in terms of indie business model, rapidly becoming obsolete.  There are several indie teams that have built games on Facebook, with no funding, and within a single year are now earning $20+ million/yr.  Steve O, your mind is in the right place - don't listen to anyone on here that tells you otherwise.

Facebook is just like the IPhone or java games.  All those platforms seemed like gold mines at first and everyone started milking them until the market got clustered. Now there's very little money to be made out of them. The iPhone market is still very much alive, mainly because it's relatively new, but we all know it's not the money making machine it once was. The facebook games are a novelty, that's where the money is right now. More importantly, the site's popularity was at it's peak when the service was launched, all that was to be expected. Now give it a year or even less, you'll see what I'm talking about. No matter the way you make money, be it by advertising or selling games, it will end up the same way.

The Xbla and wiiware platforms are a lot better designed in the sense that while not everyone might be able to develop for them, they will exist and generate some steady revenue to the creators as long as the respective consoles are being supported.

The traditional indie business model has been around for as long as PC gaming exists, and it never ceased to make money.And it will continue that way until the PC platform as we know it eventually ceases to exist, which imo isn't going to happen anytime soon.

If there is an alternative to the traditional business model you might as well as tell us how it is, instead of just telling us it exists even though that's all you know. I just don't buy that "services" alternative, simply because that's what we've been doing for so many years now.

[synapse]

If there is an alternative to the traditional business model you might as well as tell us how it is, instead of just telling us it exists even though that's all you know. I just don't buy that "services" alternative, simply because that's what we've been doing for so many years now.

It was in my first post in this thread.  The alternative model is free-to-play + virtual goods, and can apply pretty effectively to any persistent online game.  These games are essentially a 'service' because you must maintain the game, create new content, and interact with the community.

[JackieJay]

That doesn't replace the traditional business model, unless you're suggesting we all make mmo games which is not viable to many.In addition, the simple renting of a server is more than most indies can afford, and a game with a decent userbase will require more than one, and I'm not even talking about the production costs.

[ஒழுக்கின்மை (Paul Eres)]

we aren't even sure how successful this new model will be long-term. it could just be a fad. sometimes when you jump into what you think is the next big thing, it turns out it actually wasn't the next big thing at all. sometimes it is, sometimes it isn't. remember when lasterdisc and cd-based fmv-games like dragon's lair and night trap were considered to be the next big thing?

i think selling in-game goods will be around for i while, but i kind of doubt the game industry will ever reach a point where more money is made from the sales of in-game goods than from the sales of games themselves. maybe i'll be wrong, but it's what i predict.

[JackieJay]

Assuming you're talking about the selling virtual goods business model, that's not really a new thing. One of the first free mmorpg I played, Tibia, was supported by selling in game goods as well as premium accounts if I'm not mistaken and that game was released in 1997. Along the years I came across many others, and pretty much every one of them was supported that way. That business model works, or at least it's working for many companies, and like you said it will continue to sell. But then again, if this business model was that more effective than the traditional make-game-sell-game one, then we all could be playing WoW and Guild Wars for free right now.

[Falmil]

I think the new part is that its been proven to be highly profitable.
Considering the amount of work that went into WoW and the large pre-existing Warcraft fan base, I doubt Blizzard would have gone the other way even if they knew it would work, considering they would end up taking in less money by doing so.

[JackieJay]

WoW is just the first example I thought off, I could talk about pretty much any actual AAA-grade MMORPG. Mediocre MMORPGs will look attractive if they are free, so people jump the wagon, get addicted and end up spending a lot of money in virtual goods (and I'm pretty sure than in some cases even more than they would if the game had a monthly fee), so in a way that's a pretty smart trick to turn people into your relatively low budget game without them knowing they will end up splashing a lot of money on it.

I'm pretty sure MMORPGs developers always knew this was a profitable business, or else they wouldn't have been doing this for many years now. Before you embark in a project like this you have to know what you're in for, even if these projects don't involve as much money as AAA grade games, they could still represent a risk that might not be worth taking.