Directory of All Essays

Wednesday, April 09, 2008

A Services Strategy for Casual Games


Gamasutra posted up an article that has been bouncing around in my documents folder for a little while. The original title was "A Services Strategy for Casual Games", but the new one is a bit more punchy.

One response that I've heard quite a bit is that portals will never allow user data to be released back to developers. This is quite true for most established portals that have traditionally focused on selling packaged goods online. However, middlemen adapt and markets flow around stupidity. More sophisticated variations on sites like http://www.mmoportal.com/ are bound to emerge. If a dozen portals don't want your business, find the one that does. Given time and a exclusive supply of successful games, they'll grow into a bigger fish that can help feed your team.

The portals are engaging in a kneejerk reaction to changing business models. In the long run, do they really think they can keep customer data away from developers when the games that players want are online services? Such companies just end up being a roadbump in the way of progress. A portal that gets irritable about giving up customer data guarantees that their cut of the pie is zero. This is their loss, not yours.

take care
Danc.

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Sunday, November 12, 2006

Killing the elder game

I had a chance to sit down with Andrew Tepper, the designer for A Tale in the Desert. His game is a good example of a village game, one of those small MMO that flourish in the dark corners of the internet. They’ve got a small group of dedicated developers making a wonderful, profitable game that is invisible to much of the world. They bootstrapped themselves into existence without selling their souls and are planning for an optimistic future. I believe the market could eventually sustain a couple hundred more such carefully targeted titles without undue competition. Just don’t make a traditional fantasy MMOG

One of the fascinating things about A Tale in the Desert is that it ends. Every 18 or so months, the game starts over again with a new ‘Telling’. This is highly uncommon. Most online games are actually two very distinct game designs mashed uncomfortably together.
  • The advancement game: The newbie grind
  • The elder game: The eternal end game

The two games
In the advancement game, the player gain levels, learn skills and build in-game friendships. The grind up to level 60 in World of Warcraft is a good example of the advancement game.

Once you've completed the advancement portion of an MMOG, you begin the elder game. Now that you’ve got hundreds of hardcore max-level players, you need to keep them entertained in order to keep the subscriptions flowing. Typical mechanics that you find here include PvP, Quests for items that give social standing but not practical benefit and lots of guild politics.

The elder game is all about maintaining a steady state. Brian Green describes it as an episode of Star Trek. No matter what crazy things happen in an episode, everything is back to the same situation by the end. Sure, you spent two months planning a raid to capture that enemy castle. The balance is carefully tweaked however so that eventually, you will lose the castle. Use of heavy negative feedback means that all the PVP, legendary questing and more is ultimately and intentionally for naught.

Tension
There is obvious tension here.
  • Game balancing. Building and balancing two distinct play systems cost a lot of money, time and effort. The shear scope of the game systems is often a problem.
  • Audience Expectations: During the advancement game, you’ve attracted and trained a population of players that loves advancement. Then you plunk them into a steady state system. The whole process provides a schizophrenic value proposition to the customer
  • Cultural shifts over time: Steady state systems are even more difficult to balance in the face of shifting cultural dynamics. When the game launches, you want a lot of investment in the advancement game. As the game evolves, you need to start improving the elder game to keep the players who have maxed their character. Finally, you need to start streamlining the advancement game since the newbie zones are often desolate after the initial rush of players. So over the life cycle of the game, you end up with radically different design requirements that are constantly shifting.
Cyclic games
A Tale in the Desert is a great example of how you can run the game in 'cycles' or 'Tellings' in Andrew's terminology. Instead of heading directly into the elder game once the advancement game is played out, you end the game and start it over again. This gives you the ability to start out all the players from scratch and let them replay the game that they originally fell in love with. Think of it as the repetitive play of Tetris, but on the scale of 3 to 18 months instead of 15 minutes.

You end up with some great benefits:
  • More focused design: Instead of multiple game designs, you have only one, the advancement game. This can reduce costs and improve balancing.
  • Built in opportunity to refresh the game play. Suppose you want to add a completely new system into the game to address some flaw that was uncovered in a previous Telling. In a traditional MMO, you’ll often run into massive resistance from the player base if you try to alter an existing system. They seek to protect their investment. When a new Telling begins, you have license to add new mechanics. Players may even expect it; there is a thrill in discovering new systems.
  • Clearer player expectations: It is easier to align player expectations with the design. You aren’t forced to constantly shift the design as the player demographics age.
  • Marketing relaunch opportunity: You get the opportunity to relaunch the game in the market. Every Telling is in effect a new version of the game that can be promoted and sold as a bright and shiny new thing.
Not all is rosy
You introduce some interesting new problems, but these are not insurmountable.
  • How do you get players to go happily into the light? Andrew’s answer is group goals. The group chooses to complete goals that win the game and start the next cycle. By empowering the player to make the choice, there are far fewer complaints. The designer engineers the Seldon-esque dynamics of the system to encourage player choice to flow, on average, in a particular direction, but the players still make the final choice.
  • How do you prevent increased player churn at the end of the telling? Currently, the churn doesn’t seem so bad from the numbers that were bandied about. A small meta-game involving tokens that indicate social hierarchy might be enough to stem end of Telling churn even further.
  • Wither the player content? When you reset the world, you wipe clean vast quantities of player content. I don’t honestly know how bad of a problem this ends up being. This social force could easily contribute to the dramatic momentum of the game. Imagine one group trying to prevent the end of the world and their clashes against those who want to advance to the next round. Setting player expectations regarding the purpose and life span of their creations is likely the biggest challenge.
  • Gaps in the advancement game turn away new players: In a typical advancement game with lots of grinding and leveling, there quickly emerges a gap between players that join only weeks apart. In a traditional MMOG, you know that if you grind long enough, you can ultimately join your friends at the elder level. Cyclic games that only have the advancement game always have to deal with players that exist in classes based off when they joined. One such cyclic title: Earth 2025, mitigates this somewhat with the use of allegiance systems, where new players can join existing groups. In other games, setting up a healthy flow of economic value between newbies and elders can also increase the collisions between players of different levels.
All in all, these cyclic online games are a fascinating variation on the typical MMOG. It only goes to show that the dominant game design model is not the only model and that there is still an enormous space to explore in online games before we've completely tapped out their possibilities. Thanks to Andrew and Brian for the great conversations.

take care
Danc.

References
A Tale in the Desert
Andrew Tepper's game.
http://www.atitd.com/

Psychochild
Brian’s web site. He mentioned the elder game concept to me.
http://www.psychochild.org/

Earth 2025
One of my favorite examples of a cyclic game.
http://games.swirve.com/earth/
http://en.wikipedia.org/wiki/Earth:_2025

Village Games
My article on village games from 2005
http://lostgarden.com/2005/10/game-business-model-learning-from.html

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Friday, December 23, 2005

What is the critical mass necessary to create a major world culture in an online game?

So World of Warcraft has reached five million accounts. Good for them. You have a population that is substantially larger than the size of the Netherlands during the Dutch Golden Age. Now there was a culture that gave us some great fruit paintings. (And wonderful droppe!)

Will online games one day give us a meaningful world culture?

This got me musing about how major cultures of the world formed and what it would mean for an online world to act as a seed for a new major world culture. It is a very idle thought exercise.


Thought #1: Creating a great culture just requires the right recipe
Culture is not magical or divinely created. Put enough people in an isolated environment for a long enough period of time and strong, highly unique social norms will develop. It is a natural human dynamic evident in any group of any size. Give me an island, a bumper crop of people and enough time and we can grow you a unique culture that has a more outrageous accent than either France or Alabama.

Thought #2: Critical mass matters
Any size group can create a culture. It happens in companies, in families, you name it. But to create a culture that sustains itself over generations and influences others without itself being corrupted requires a certain amount of mass. Population is one measure of mass. Money is another.

If you look back through the years, most major cultures seem to really hit their stride with with populations ranging from five to thirty million. These are numbers that are arrived at in a very rough manner. I looked up the population of countries with strong cultures in the 1700’s and assumed that at the very least, this is what you needed to sustain a major culture that generates its own unique language, rituals, identity and history. Games are starting to reach substantial population levels. Five million is a good start.

With their ties into gold farming and other real world economic activities, online games are beginning to build a strong economic foundation that can anchor deeper social behaviors. We are seeing thousands of people dedicating their lives to performing the rituals in the game for economic reasons. At the very least this creates a classic split between population classes.

How do you greet a gold farmer? What words do you use? What is their social class? Do you look down upon them? Do you hate them? Are you justified? Such rich human biases driven by economic realities are fertile soil for the creation of lasting cultural flavors.

Thought #3: Cultures diverge from their source
All cultures borrow liberally from the cultures that found them. It is only through economic, social, or geographical isolation will cultures begin to diverge into their own unique cultural identify.

Online games will initially be highly derivative places. Early America colonial culture was highly derivative of European culture. Early online games ape the social mores of Western geek fantasy culture or Eastern pop heroic culture.

Game worlds are isolated electronically, but their users can always log off and go home. Is there enough isolation of users in an online world to create a strong divergence from the original source culture? I wonder.

Thought #4: Time is critical
Put a few million European criminals on an island and come back twenty years later and you’ll still have a few million European criminals. Come back in a generation or two and you have a unique culture that is influenced by its past, but is defined by the cultural environment of its present. There seems to be a strong generational element to the renewal of cultural memory.

Online games are short lived commercial entities. It is difficult to imagine any sort of generational maturation process occurring within the population of modern online worlds. Online games at this point in our history blip in and out of existence just long enough for excited child-like cultures to be born and then snuffed out.

But what happens when several generations grow up playing online games? What happens when a single world with a critical population lasts not just years, but decades?

Thought #5: When is a gaming culture meaningful?
When a large group of online users is willing to die in order to maintain their world and way of life, then the online world will be meaningful.

This is perhaps harsh, but is a critical point.

Culture exists because the community declares its existence. They gather up all the quirky little habits and behaviors that surround them, label them, and set them high upon pillars of unassailable values and ideals. “This is my culture and I value it” the members of the community declare to the foreigners at their gates. “I am willing to defend it.”

It isn’t about a few unstable individuals who do something violent. It is about normal, rational men and women who choose a path despite the consequences because they deeply believe in its inherent value.

Until then these worlds we builds are just a hobby. Idle play by idle children. There may be rants, raves and passion, but until an online world becomes a preferred way of life, they have no more meaning than a cheap Sunday play attended by crowds of crowing foppish dilettantes.

Closing thoughts
If I were to create a score card of the key categories that are necessary to create a great culture and then rank modern online gaming, we still have such a long ways to go.
  • Population - B+: The population numbers are looking good.
  • Economic leverage - C+: There’s promise, but it isn’t there yet. I expect this to catch up quickly in the next couple of decades.
  • Divergence Time – D: This is a big problem. Online worlds still don’t last very long. This leads to a series of ephemeral toy cultures. Perhaps the days of the Roman Empire are long lost and our Golden Ages can be measures in seasons instead of centuries.
  • Core values – E: The basic human values of friendship and companionship are in place, but no online world has managed to give players something bigger than themselves to believe in. Until this evolution occurs, online game worlds will remain a pleasant adornment that rests lightly on the real world we all must inhabit.
Did I mention that these were very idle thoughts? :-)

Take care
Danc.

Completely meaningless references


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Saturday, October 15, 2005

A Game Business Model: Learning from Touring Bands

Most metropolitan areas sport a wide array of bands that eke out a reasonable living by touring about the nearby countryside. At every stop, they get a bit of cash from the till, sell a handful of t-shirts and maybe even an album or two. If they are good, they build up a sizable population of groupies that worships the ground they walk on and follows them from show to show.

Very few people outside of the circle of fans know who these bands are. Yet the moderately successful bands make enough to get by and a few even manage to prosper. These bands do not sell a product like their mass market Brittany Spears brethren. Instead, they survive by providing a service to their devoted fan base.

Over the past several months I’ve been tracking several successful online game developers who operate in a similar fashion. Each operates profitably, employs a small staff and appears to be growing. Their names include Jagex, Iron Realms, Three Rings and Iron Will games. Chances are that you’ve never heard of them.

This essay is about illuminating a successful, alternative, business model that has the following key characteristics:
  • Supports large numbers of independent game titles in a low competition environment.

  • Is amendable to bootstrapping and thus avoids the need for large publishers, money men or other controlling interests.

  • Encourages unique pockets of innovation.

  • Offer an opportunity for sustainable, lower risk profits for a small group of developers.
A business lesson learned from touring bands
A touring band cannot rely on selling millions of copies at $17.95 a pop to anonymous music fans across the nation. Instead, they make their money by selling a wider range of goods and services to a narrow group of fans. There are really only two ways of creating a reasonable revenue stream. You can get a little bit of money from a large number of people. Or you can get a lot of money from a relatively small number of people.

Touring bands aim for the later. They build a brand based off a powerful social experience and establish a strong relationship with their customers. They then leverage this brand to encourage the sale of merchandise, event tickets and more. The result is a strong lasting brand and high per customer revenue.

There is a classic business case taught in most MBA entrepreneur classes that examines the 30-year reign of Grateful Dead. Even though they allowed free taping of their concerts and capped their ticket prices, they remain to this day one of the top grossing bands of all time. They bucked the trend of selling records through the corporate food chain and instead provided music directly to their fans.

There is a simple lesson here. A dedicated fan base combined with a service-based business model can be a great foundation for an owner run business.

Modern games are the equivalent of a Backstreet Boys album
Games have typically relied on the opposite strategy. In order to participate, you first need to get a giant publisher to fund your game development. Then the finished retail game is marketed to a broad audience and if everything aligns, a title can sell the million plus copies necessary to break even.

The result of the standard mass market business model is quite predictable:
  • Emphasis on big mega hits in order to break even.

  • Requires the upfront investment of large amounts of money. If you were a garage band, expect to lose your intellectual property.

  • Products tend towards bland ‘pop’ experiences in order to maximize the market opportunity. More than likely, you are a studio band assembled for the sole purpose of being the next Monkees.

  • High risks of failure due to intense competition in the broader market
What do touring bands have to do with games?
Games are by no means rock bands (despite the existence of lovely men like CliffyB.) However, we can apply the basic business techniques practiced by touring bands to the newly minted field of online games with good success.

Let’s look at what the companies I mentioned earlier are doing.
  • Three Rings produces an online game called Puzzle Pirates that focuses on casual puzzle games in a persistent online community.
  • Iron Realms makes a series of text-based MUDS.
  • Iron Will makes a 2D Ultima Online-style MMO.
  • Jagex makes a web-based 3D MMO.
  • Sofnyx makes a multiplayer Scorch Earth game called Gunbound.
  • There are others, but they all operate far below the radar of the mainstream gaming press.
The similarities are worth noting. Each started with a small community numbering in the thousands. Many customers have been with the games for years. Each operates either a micropayment or a subscription model that doesn't cap the amount of money the customer wishes to spend. Though none of these companies publish their numbers, rumor has it that they are almost all profitable.

Development costs were low and initial investment came from the team members, friends and the occasional angel investor. Publishers or venture capital was almost never involved.

The differences are also important. Core gameplay ranges from puzzling to shooting to turn-based combat. There is a bit of a focus on fantasy worlds, but from what I’ve gathered there is little overlap in the core user bases. Currently this means little competition from similar games and rumor has it that the impact of larger MMO’s is relatively insignificant.

These games are the equivalent of small successful touring bands. They provide a service, not a packaged good. They sell to a dedicated fan base that despite being small provides enough additional revenue per user to make the venture profitable. The result is a self-contained community served by small team of dedicated independent developers.

Village Games (Aka the Small Multiplayer Online Game)
I call these small online multiple games ‘village games.’ They are quirky, isolated communities much like a traditional village or small town. The communities tend to be a bit more friendly and insular then their larger city-sized brethren such as Everquest or World of Warcraft. The game play tends to be a bit more unique and able to take risks.

Here are some defining factors for a village game.
  • Focus on creating a small community numbering typically in the thousands.

  • Either subscription or micro-payment based revenue model. Often there is no cap on the amount that a single player can spend inside the game.

  • A small development team, usually numbering anywhere from 3 to 10 people.

  • The game experience is addictive for a year or longer.

  • The game focuses on a niche experience that is not provided by larger retail titles.
A village games is a distinct service-based offering that is separate from other forms of games. It certainly isn’t a retail title. It isn’t an ‘indie game’ or a ‘casual game’. Those are packaged goods titles that are merely trying to sell the same old shite through a different channel. It isn’t a mainstream MMO because the funding model and number of people served is radically different.

So why in the world would a designer be interested? If it weren’t for a few critical factors, we could write these titles off as a peculiar niche sub-genre.

Business factors
In order to paint a practical picture of how village games operate, I compared the genre to retail titles in eight major categories:
  • Core Business Drivers: How do you make money?

  • Upfront investment: How much does it cost to start the business?

  • Break even and Payback periods: When do I get my money back?

  • Sources of Equity: Who funds my game?

  • Ownership: Who owns the fruits of my labor?

  • Risk of Failure: What are my chances of success?

  • Potential Upside: What do I get if I succeed?

  • Competitive Insulation: Who is going to stop me from winning?

The results are fascinating and suggest that the village game market is a great opportunity for entrepreneurially minded game developers.

Core business drivers
One of the most tricky aspects of understanding village games is the fact that they are driven by completely different business metrics than games sold as packaged goods. Switching your brain over to thinking about quality of customers, not quantity, is the first step.

A retail title gains a developer roughly 70 cents per copy sold. The publisher gains about $18 per copy sold. The price of each copy is fixed and has mere weeks before substantial price erosion takes place. Making money is a matter of selling as many copies as quickly as possible. The viewpoint is always short term and focuses on shipping and placing physical goods.

A village game, on the other hand, is instead about keeping and maintaining customer loyalty. A typical customer will spend an average of $60 a year and stays on for an average of 18 months, with some players staying for years. The developer generally keeps all $60 in revenue. Making money is a matter of maintaining your current customer base and incrementally increasing that base over time. The viewpoint is almost always long term and focuses on maintaining and extending customer relationships.

To put these numbers in perspective a village game customer is roughly 130 times as profitable as a retail customer for the game developer. This means that a game developer can sell less and make more profit.

Upfront investment
However, a highly profitable venture is of now use to your typical game developer if the cost of starting up the venture is too high. Upfront investment is the amount of money that you need to put into a project until it begins to pay for itself. It is here that village games truly shine.

A typical retail game will run anywhere from $2 to $10 million over an 18-month development period these days. In my model I choose a mid-level next generation title that costs about $3 million to develop, plus another million in marketing. Someone needs to sink $4 million in cold, hard cash into a project before they see even the glimmer of profitability. A next generation mid-level retail title must sell roughly 800,000 to 1 million copies to reach profitability.

A village game requires total investment of roughly $250,000 over an 18-month period. In essence, you are paying for the salary of the development team plus miscellaneous marketing and server expenses. At 18 months, your game starts making enough money to pay for your monthly expenses without having to go begging. A village game with 3 to 4 employees needs to maintain a customer base of roughly 6000 to 9000 users.

At this point, you've reached what is known as 'Break Even'. That is when your monthly expense are equal to your monthly revenues. You'll notice that in my model both the retail game and the village game reach break even at the same time. The nice thing is that the village game consumer 12 times less cash in the process.

Payback
If you were an investor, there's another metric you'd be interested in called Payback. After you've sunk so much money into a project, at a certain point you'd like to get it back. If you took out a loan, you'll have to pay it back. If you remorgaged your house, you'd like to unmorgage it as some point. Payback is the point in time at which the vast profits from your venture accumulate to the point where you can payback your initial investment.

For a retail game, the sales come in a giant spike upon release. Payback occur almost immediately, typically 18 to 20 months after the start of development.


Here village games show their first sign of weakness. Payback occurs after about 30 months. If your goal is making large amounts of profit (or 'greedy pig profits' as a profession in economics termed it years ago) village games are a long haul.


From a developer's perspective, this means two things. If you are in the business for making games, the path to profitability is roughly the same for retail and village games. If you want to simply make a big profit, retail games will get you there more quickly. However, you need to take into account both risk and your ultimate goals.

For the moment, I'm assuming that you are in it for the love of making great games and that the slow road is just as good. In that case, you need to consider how to fund your village game.

Sources of equity
Funding is the boogie man of game development. We have nothing like the 'producer' structure that exists in movie industry where rich folks toss good money at creative entrepreneurs. Instead, we have the publisher system, aka 'selling your soul'.

When you are dealing with millions of dollars in start up costs, the requirements of an advanced distribution channel, and low success rates, a portfolio model of funding retail games is inevitable. Publishers rule the roost for good reason. They are the only ones who have the critical industry knowledge to fund and maintain a quality portfolio of retail game titles. In general, a company must fund 20 to 50 titles a year in order to maintain a positive return on their investment. Your game can not simply be ‘good’. It has to be the correct puzzle piece that fits in the middle of a highly nuanced portfolio mix. Due to all these factors, getting funding for a retail title is nearly impossible.

A village game operates in a completely different world. Due to the relatively low burn rates, it can be funded with ‘sweat equity’, the main developers working for a pittance. It is also amendable to both friends and family investment as well as angel investment. As a village game grows its customer base, the revenue and profitability numbers became much more exciting to smaller VC companies. You'll need to find folks who are comfortable with the longer payback period associated with village games, but that is not an insurmountable hurdle.

The upside of all this is that unlike a retail title, a village game has readily available sources of start up funds and means of supporting growth at later stages if desired. This ready access to seed money is perhaps the strongest benefit of all that village games have going for them. There is no excuse to not make a village game.

Ownership
A major side effect of the funding model is that retail games and village games have radically different ownership models.

Retail games give over ownership to the publishers. They typically own the rights to original license and have full managerial control over the development and execution of the title. All of the risk and all of the potential upside is owned by the publisher. The game developers are studio musicians that do their job for a meal and a place to sleep. The result is often craftsmanship, not entrepreneurial breakthroughs.

A village game tends to be owned by the developers themselves. They take on all the risk, but they also get a bit of the upside if they succeed. Personally, I’m a huge believer in the entrepreneurial spirit. Overall, a company with an ownership culture will be more agile, more profitable and more innovative than one that treats their workers like hired guns.

Village games lend themselves well to lifestyle businesses. They are exhausting initially due to their reliance on sweat equity. However, as a steady subscriber based is built up, that company has more freedom to combine work and play.

Risk of failure
There is a more pratic reason to consider starting up a village game. Most games fail and there is nothing more crushing than working on a title for multiple years and seeing it crash and burn. Village games offer smart teams the opportunity to steer their way out of danger.

Retail games have an impressively high risk of failure. Only 116 games out of roughly 5000 released in the US since 1995 have broken 1 million in total unit sales. A mid-level title needs to sell almost a million copies to break even. For next generation console titles, a 5 to 10% break even rate will be impressive.

Releasing a retail title is like firing a solid gold cannonball at a moving target while wearing a blind fold. Retail games get one shot at success during a short 4 to 8 week release window. If all factors are not perfect, the title’s sales will suffer. This risk of failure is also almost entirely due to market factors that are outside the control of the development team. Items like the funding of other teams, the marketing spend, the release schedules of other major titles and the whims of the player all are big factors.

Village games, on the other hand, typically experience a soft launch. An initial version of the title is released into the wild and it attracts a few customers. The developer has the opportunity to adjust their title in order to fix the most egregious errors. Often a title will evolve over a period of years, until it matches the demands of the target audience nearly perfectly.

Village games succeed or fail based on the skill of the developer and their ability to successfully target a niche market with compelling game design. If you are an experienced game developer, you have a much greater chance of creating a successful village game, than creating a financially successful retail title.

Upside
At this point, some of you may be intrigued by the thought of making a village game. There will be some of you that are wondering how much money such a enterprise could gain you. It turns out that regardless of your business model, you still need to make games for love, not money.

Retail games can make over a billion dollars with a single title. That is rather exciting. However, as a developer, you are going to see approximately none of it. Royalties, for all intents, are a myth propagated by those good folks who wish to hire fresh labor at inexpensive rates. If you are a developer on a retail game, the upside of successful title is that you get to keep your job until the title is released. If you do a really good job, your team is signed on for a new title and you have job security until it is released or canceled.

A successful village game will produce a steady profit, but the money never becomes astronomical. Instead, you'll be able to provide above average salaries and many years of job security. This is far better than most games can promise.

Competitive Insulation
The long life of a village game occurs because it is highly insulated from direct competition.

Such a thing is unheard of in the retail market. Since a successful game must capture such a substantial portion of the market in order to achieve profitability, games are almost always in direct competition with one another. The result is a massive arms race that is quite difficult to win.

Village games exist in a far less competitive environment.

  • First, they are able to target themselves at a niche game mechanics. The hardcore Scorched Earth-style gameplay of Gunbound is unlikely to be replicated by World of Warcraft anytime soon.

  • Second, they build strong communities that resist the siren call of external delights. Sure, World of Warcraft has some great content, but is it enough to make you leave your friends behind?

  • Third, they are very low profile. Since these games are often built through low levels of marketing and word of mouth, it is uncommon for their players to even realize that alternatives exist. For a retail game this would be fatal. Since a village game can survive on such a small number of subscribers, it is actually a competitive advantage. In that same population of 3 million WoW subscribers, you could have 300 completely viable village games.

All of this has a surprising impact on innovation. When you only have to worry about satisfying your little niche, it becomes more worth your while to explore local maxima in your game design. Irons Realms sports some of the most intricate political systems ever found in a commercial game. Puzzle Pirates has created a PvP combat system that appeals to 30 to 40 year old women. With innovation comes additional competitive insulation. Go ahead, EA. Just try to clone Gunbound. I would pay good money to see the results.

Wrapping it up
By this point, you should have a good overview of some of the business dynamics behind successful village games. In short, here is a unique business model that provide low entry barriers, low competition, easy access to seed capital and copious amounts of creative freedom. The money is good, but not great. However, the chance to build your very own profitable game company is nearly priceless. That is a dream that was crushed out of most developers long ago. The basic business drivers of small numbers of highly profitable customers make it all possible.

I’ve been looking at game business models for some time. Very few offer an entrepreneur any reasonable chance of success. I understand the retail business and keep my hand in it, but it is often too volatile for anyone except the bright-eyed youngsters and the sharks that feed upon their efforts.

As I slowly grow older and more conservative, I’ve started looking for a way to mixing game development with a stable family life. There are two paths. The first is to become a manager in the upper echelon of the current industry. If you can get to the portfolio management level of the retail industry, a lot of the turbulence lessens. But you lose the daily interaction with the development teams, and for a lot of us, that is what this is all about.

The second path is to go outside the industry and find a new niche for game development where the profit margins are still fat and the role of being an owner / developer is still a viable option. I’ve talked a bit about Serious Games as one option on this path, but to be honest I can’t stomach the steady diet of military and government projects it typically entails. Village games, on the other hand, excite me.

Here is a market niche where a passionate team with a bit of money put aside can carve out a viable, vibrant community that is insulated from outside competition. They can perfect a game over years of face-to-face interaction with their biggest fans. Most importantly, they can own their own destiny, be it success or failure. And to be honest, the odds aren’t bad.

Have band, will travel
Hundreds of bands have tried to make a living touring their local cities, playing gigs and selling t-shirts. Most fail, but a few succeed because it is a real business model that provides a solid service to fans of live music. It is a hard life, but you are your own person and you get to do something that you love. These scrappy little groups are hidden from the mainstream media until one miraculously breaks out to the surface. Maybe they are a Nirvana, or a Beatles, or a Grateful Dead. But when one emerges, the industry is changed forever. And the people in the suits who diddle with the numbers on their portfolio spreadsheets ask, “Where the heck did they come from?”

Village game developers are the true touring bands of the game industry. They are at a sweet spot with low competition, moderate returns and the chance to own your own game development company. You’ll need a game designer with a bit of a business head. He’s the songwriter. You’ll need a programmer who isn’t an asshole. He’s the lead singer. You’ll need an artist. He’s wailing on the lead guitar. You’ll need the web / infrastructure guy. He’s in the back laying down the drum line.

Given enough passion, enough skill, and enough years tuning your sound out on the road, and maybe, just maybe, you will give birth to the next great game that shakes the foundations of the entire industry. The simple truth is that the tour is an end all by itself.

So what are you waiting for?

Take care
Danc.


References

Escapist article on Boutique MMORPGs
This was a nice trackback on my article that describes quite a few more games that fit the criteria and also gives some solid numbers.
http://www.escapistmagazine.com/issue/75/15

Examples
Grateful Dead
Retail: Royalty break downs PS: Edited this at 11:36pm, Oct 19th to improve the flow. Edited on Dec 29th to add additional links.


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Thursday, August 25, 2005

News: Station Exchange deemed an early success

Here's the News.com article.

There will be people saying that paying for virtual goods is an poor practice that drives customers from the game. The reality will be that most people are willing to pay and that the revenues they generate will easily offset the lost revenues from the players who are morally outraged.

I'd be surprised if a substancial portion of the next wave of MMOGs do not have some form of non-subscription revenue model. If you can generate more profit with less people, you have a lower risk project with higher potential returns. From a business perspective, this is a no-brainer. From a customer perspective...well, they've already spoken by demonstrating massive support for the secondary markets. Now it is simply a matter of implementation and mass adoption. One big player has made the change and others will follow. Another link is formed between the virtual world and the real world...

take care
Danc.

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