I just had a chat with a 12 year old who has been playing Runescape for a couple of years. Currently, in his summer holiday, he is playing it for about 50 hours a week. He has tried other MMOs. Free Realms, for instance, is too childish for him, just like Maple Story. He very much likes the latest upgrades to Runescape, especially the animation pack (except for the abyssal whip). So I asked him who plays Runescape, and this is his opinion:
20% Fat short bald men.
50% College/university nerds.
5% Kids like him.
2% People with illnesses and mobility problems.
23% The rest
The marketing community will love his demographic classifications!
Firstly you may well have heard that most console games make a loss and it is only the occasional hit that pays to keep the industry going. I have to tell you that this is absolutely true. Here are what the problems are for these games:
What you pay for the game doesn’t go to the publisher. The retailer and distributor take their margin (say 40%), the platform holders want their license fee, the actual plastic and cardboard of the game have to be paid for, there is the cost of shipping and finally there is the tax man’s share. I haven’t done the maths recently but you can see that the publisher is going to end up with between a quarter and a third of the money. Out of which they have to pay the developer, the marketing costs, their staff, etc etc.
This generation there has been a massive jump in the amount of content in games. Part of this is HDTV, part of it evolution and part of it bragging rights. Game content is ridiculously labour intensive and therefore expensive. This has rapidly brought us up to movie level budgets.
Also this generation, Sony and Microsoft both moved to completely new CPU architecture. This put game development on a very expensive learning curve. And many development assets that had been used in previous generations of console had to be replaced.
Whilst the current generation of consoles are powerful, they still can’t run the sort of middleware needed to really simplify game development.
Unlike movies games only have one revenue stream, the sale of the plastic and cardboard item. Movies have cinema income, rental, pay per view TV, non pay TV, in flight movies, DVDs, etc etc. A whole plethora of revenue streams some of which go on for ever.
When you buy a game you aren’t just paying for your use of it. You are also paying for the use of it enjoyed by the person who buys it secondhand off you, and the person that buys it off them. And so on. The initial purchase has to compensate the publisher for all the users of the game. And each of those users can’t complain because they get part of their initial purchase price back.
Piracy. Currently only the PS3 isn’t cracked. On PC piracy levels for boxed games are 90+% and at times it gets just as bad for console games. So the honest people have to pay for the thieves.
Currency fluctuations, these have been massive over the last year or so. If your costs are in euros and your income is in dollars (for instance) then your business has changed completely and a healthy profit could well have become a substantial loss.
Marketing has become difficult as the media has fragmented. Television advertising is no longer the universal panacea. Now there are a huge number different media that have to be used. And used properly. This takes a huge jump in the skill and knowledge required of a marketing department. Which can lead to far higher costs.
Against this background we have the release, this autumn, of Modern Warfare 2, developed by Infinity Ward and published by Activision. This looks like being the defining game of this generation of consoles. Surpassing Grand Theft Auto, Bio Shock, LittleBigPlanet, Halo, Braid and everything else. The level of anticipation out there is beyond belief. Activision have done a brilliant marketing job.
Now, Activision are in business to make money, so this is an opportunity to make shipping containers full of the stuff. And they are doing some clever stuff to make sure they get every cent possible. Activision aren’t the biggest game publisher in the world by accident. Her is some of what they are up to:
They have looked at the price elasticity of demand and realised that Modern Warfare 2 has such a high perceived value that they can charge a premium price. They would be fools not to because they won’t lose any sales. In fact it would be very interesting to know the price/demand curve for this game because I reckon that the most profitable pricing point is even higher. This game is a must have purchase to so many people.
Which is exactly why Activision are selling three different editions at three different price points. They call them Standard, Hardened and Prestige. In reality they are Premium, Super Premium and Super, Super Premium. This is clever stuff.
Finally, why just make a profit with the software? As is the fashion these days they are making a hardware peripheral to go with the game. This time it is night vision goggles, which are bundled with the Super, Super Premium version of the game. Activision could make a lot of money from selling millions of these.
This is fascinating stuff. The reaction out there in the community is begrudging acceptance. They know they have no option but to buy the game and the extra price over a “normal” game is not too high a price to pay. Activision have been extremely clever in challenging the industry pricing norms. Too many marketing people are guilty of “me too” pricing without ever really thinking about what they are doing.
Brutal Legend from EA is being marketed as the funniest video game ever. A very interesting marketing idea. Here are some videos so you can get a feel for it.
You have had some success on iPhone with a relatively small number of high priced titles and have recently set up 8Ib Gorilla for lower priced titles, which is highly commendable. However given the scale of what is happening on iPhone you are barely scratching the surface.
The AppStore has been open for a year, it has seen the biggest success of any new gaming platform in the whole history of video gaming. There are now about 65,000 apps published and there have been over one and a half billion downloads, how many of these are yours? Yet you are the world’s number two game publisher.
Electronic Arts is a publisher yet most App developers are not using publishers. I suggest that you find some very good reasons to change this, and quickly. Developers should think that it is better to come to you to publish their iPhone games than it is to go directly to Apple. Here is some of what you can do:
Provide tools and libraries to speed up development. Cross platform should be essential, for Android, possibly for nGage and for other upcoming mobile platforms such as Zune.
Commission Apps so people are writing the right things. Don’t overdo this as EA doesn’t necessarily know best.
Market the Apps you publish. Most Apps fail through a lack of marketing. You can use a wide variety of low cost methods to get global recognition of everything you publish
Finance as necessary. Most Apps are home written, so need no finance. But a few do. Also some developers may prefer a one off payment to waiting for royalties.
Your initial, very short term, target should be to publish an App a day. Very quickly you can gear up to what the market will bear. There are an infinite number of niches available for Apps, so there are lots of markets to go for.
The next step is to talk to Apple (and Google, for Android) and build a solid MMO business model. You think World of Warcraft is big, in a couple of years time there will be several iPhone MMOs that are bigger. Probably. One or more of them could be yours.
Unless you go for this full bore you are just rearranging the deckchairs on the Titanic, and speed is of the essence.
Whilst on the subject of Microsoft, how about a comparison with Sony and Nintendo. Now that is interesting, two on the way down, one on the way up but still well behind. Notice the pre Christmas bumps in activity for all three. And how the Nintendo bump was smaller in Q4 ’08 than in the previous two years, whilst Microsoft had a negative bump! You can see a lot in these little graphs.
This is all interesting and useful stuff. What would be interesting is if anyone has managed to read these two articles without typing their own search terms into Trends. It really is addictive if you have an enquiring mind.
To show just what people care about in the world here is Afghanistan compared with Wii! Afgahanistan is well ahead in news but nowhere when it come to what people are searching for.
As you can see Trends applies a fantastic metric to the performance of any company or brand. It is a brilliant tool for any manager and every marketing professional. You could even use it as a basis for people’s bonuses!
