04-01-2011, 03:00 PM
Ooh! I was wondering when this discussion would come up here on the forums.
I think we all agree the monetization models PBM employed in the 80s and 90s are no longer viable. Consumers these days simply expect more for free, particularly on the Internet. Game shops that sell a packaged product, with 60+ hours of graphical and audio entertainment have been able to thwart this expectation (though this may be changing), but any service or game that relies on the web will have a very difficult time surviving purely off handouts from fans/customers.
Examples of failed transitions to the web from the traditional monetization model abound in the entertainment/media industry:
Absent from that list is the game industry, and aside from my little blurb about the large game shops above, I think the online games industry has gotten it mostly right. If not right, then way more right than the above industries.
In my limited and brief assessment I think there are three monetization models (w.r.t. online games) that can succeed in today's market where users simply won't cough up big bucks up front.
Of course, the three models aren't mutually exclusive. For example, one could have a free to play add supported tier, and no-ads paid tier. Personally I think the two tiered model with micropayments is a real killer. For those who are dedicated, they will opt straight for the subscription. Those who are more casual or not totally sold on the subscription (or just don't like the idea of committing that much money up front), will impulse buy the cheap little bonuses/items that give them a boost. Both groups are psychologically satisfied.
I think we all agree the monetization models PBM employed in the 80s and 90s are no longer viable. Consumers these days simply expect more for free, particularly on the Internet. Game shops that sell a packaged product, with 60+ hours of graphical and audio entertainment have been able to thwart this expectation (though this may be changing), but any service or game that relies on the web will have a very difficult time surviving purely off handouts from fans/customers.
Examples of failed transitions to the web from the traditional monetization model abound in the entertainment/media industry:
- Music industry - 10 years ago you bought albums, today people buy singles. This required a shift in their model. All songs are no longer equal.
- TV/Film - rise of TiVo/DVR, streaming, and netflix like services have put brick-mortar stores out of business. TV networks are in a tizzy because their customers are jumping ship for streaming services, or ignore all the commercials with TV on demand.
- Newspapers - Perhaps the most like the old PBM. They made the mistake in the web's infancy of giving news away for free online, and now they realize that was a huge mistake.
- Books - Publishers are late to the online bandwagon, and are acting much more conservatively then their other industry counterparts. They are attempting to bring the old model directly into the virtual space. E-books costing more than paperbacks? Restrictive DRM: can't share, lend, give away books.
Absent from that list is the game industry, and aside from my little blurb about the large game shops above, I think the online games industry has gotten it mostly right. If not right, then way more right than the above industries.
In my limited and brief assessment I think there are three monetization models (w.r.t. online games) that can succeed in today's market where users simply won't cough up big bucks up front.
- Ad supported - The tried and true web model. If you can gather a sizable and loyal following that grows modestly, marketers will eat them up. They love targeting a consistent audience that shares a specific demographic.
- Free Tier + Paid Tier - The game is free to play, though the experience is not near as rich or full as intended. This model can be well executed if the free tier is fun and engaging, otherwise it is a thinly veiled attempt to take their money. People don't like pretense, and they tend to get defensive/hostile when confronted with perceived underhandness.
- Free to play + micropayments - Probably the most controversial. The source of contention being, if the game is fundamentally a FTP game, but you can get pay for things that significantly enhance your edge over the other players, then those you can pay the most will win. That is generally the argument against FTP+microstransactions.
However, I think this model shouldn't be dismissed so easily. The wild success of itunes, app stores, and amazon's one-click feature indicate that people are ready and willing to sped money on virtual goods if: 1) the price is perceived to be insignificant and 2) making the purchase is easy. Micropayments is the online equivalent of the candy+magazine display at the checkout stand, that is, a place for impulse buying. It comes down to balance.
Of course, the three models aren't mutually exclusive. For example, one could have a free to play add supported tier, and no-ads paid tier. Personally I think the two tiered model with micropayments is a real killer. For those who are dedicated, they will opt straight for the subscription. Those who are more casual or not totally sold on the subscription (or just don't like the idea of committing that much money up front), will impulse buy the cheap little bonuses/items that give them a boost. Both groups are psychologically satisfied.