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29 business models for games July 2, 2008

Posted by jeremyliew in business models, games, games 2.0, gaming.
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At the Social Gaming Summit recently, on the panel about Monetization and Business Models, David Perry mentioned that there were 29 business models for games that he was familiar with. I asked him to do a guest post listing them all and he agreed.

David Perry is a 27 year industry veteran whose games have sold over a billion dollars at retail. He’s the Chief Creative Officer of Acclaim Games, Inc. and prior to that was the founder of Shiny Entertainment, Inc. which was purchased by Atari. For more information, please visit: http://www.dperry.com

_______________________________________________________________________________
Potential Video Game Monetization Methods.

These models come from 25 years of watching people experiment with game monetization.

Note: The good news is there’s lots of choices and many of the models can be combined.

List © 2008 David Perry. www.dperry.com

1. Retail (bricks & mortar), selling boxed product at places like EBGames, Gamestop or Virgin Megastore. This also includes mom & pop stores, hardcore specialist gamer shops, and online retailers like Amazon.com that ship the product to your door. The gap in this market is “same day” physical delivery of games too big to download or 1st party titles (basically combining online & bricks and mortar in one solution.) The future of this space is pre-paid cards as the consoles will (in the future) go online only, distributing everything directly to the consumer, so retail (to make it worth selling the hardware) will need a cut of the software sales. Hence prepaid cards. The Gamestop tactic of re-selling USED games (to avoid paying for new product) will finally be over. To drive users to retail, the making of special “enhanced” versions just for their retail chain is a common practice.

2. Digital Distribution (direct download, direct to consumer), like the Steam service from Valve Software, the PlayStation Store or Xbox Live Arcade from Microsoft. This also technically includes “unlocking” access to a game already on a service, like the faux install process on Facebook (however the player would have to pay to do this unlock.)

3. In-Game Advertising (either obvious billboards or branded items in the game world, or subtle product placement (certain clothing, sunglasses or vehicles like Gaia Online), or built into story elements (like the hero’s girlfriend works for a Neutrogena). Companies like IGA, Massive, Game Jacket, Mochi Media, Google, VideoEgg etc.

4. Around-Game Advertising (basically making money from banner & skyscraper adverts that circle the gameplay window), this is common on flash game aggregator sites, they use services like Google, Commission Junction, personal affiliate deals etc. The revenue comes from CPM (cost per thousand views), CPC (cost per click), CPA (cost per acquisition of a player), CPP (cost for a “real” player who really plays for a certain time, or to a certain level.)

5. Pay Finder’s Fee from First Dollar. This allows you to pay much higher finders fees with no risk. Like offering (as the finder’s fee), the first $25 that comes in from any player they find. You balance the fee to a sensible percentage of the average income you get from players. We [Acclaim] get around $70 per paying player, so this seems reasonable.

6. Advertgames (the whole experience is an advert), common on movie websites, can also be big like America’s Army or the Burger King games on Xbox 360. I did one of the first of these called “Cool Spot” for 7-UP. The advertiser helps fund the game and depending on the deal, that determines who earns cash out of the revenue. Your reputation will impact this equation.

7. “Try Before you Buy” / Trialware / Shareware / Demoware / Timedware (this is letting you play crippled, shortened, or restricted time versions of a game for free, while trying to up-sell the full version.) This is a real balancing act as too much in the demo can kill any hope of future sales. Xbox Live has been experimenting with this concept, they seem to have hit the sweet spot by giving one playable level and then giving a big reveal (like there’s a giant boss monster around the corner) then they say “Buy the full version to continue!”. That’s basically the ‘cliff-hanger’ trick, and just like TV it works.

8. Episodic Entertainment (borrowing from the TV model), you either buy the episodes in a serial fashion as they become available, you can pay for all episodes unlocked for a period of time, or they are sold as expansion packs.

9. Skill-Based Progressive Jackpots (where players buy a ticket to enter into a tournament) this generates a progressive jackpot and winner who reaches a certain (winner) status wins the jackpot. You keep a percentage of the jackpots. The game must be skill based.

10. Velvet Rope or Member’s Club (where the user pays for VIP access), they get special privileges and access to special areas on your site or in your game. They sometimes get special access to new product before anyone else etc. (Basically the more interesting perks you give, the more likely people will want it.)

11. Subscription Model (like World of Warcraft or Conan) paid monthly, usually by credit card or automatic debit payment. It’s sometimes coupled with a retail purchase to get the install files / manual. Commonly players set up the credit card payments and don’t stop them, as they want to keep the game ‘available’ or keep their characters alive that they’ve worked so hard to create. (It’s pretty great to get a subscription from people that don’t even play, so expect more people to design games were they will clearly KILL your characters if you stop paying. Not good for players, but it’s on the list as it’s a monetization method.)

12. Micro-Transactions (small, impulse driven up selling), for vanity, saving time, better communications, leveling up faster etc. These are generally paid for using virtual points (earned in the game) or the points being bought by the player for real money. A new trend is using Friends to buy these items, where the item just costs you inviting a friend to the game, or an amazing item costs you inviting ALL your friends to the game. Another trend is to sell consumable items like actually selling the bullets you fire, or buying gas for the car you race, however this really grays the “free to play” line.

13. Sponsored Games / Donationware (serious games, games for good, charity games), these are the games that are somehow helping society, so could be paid for by a philanthropist, or by a charity or non-profit, or by player donations. www.Onebiggame.org is an example.

14. Pay per play / Pay as you go / Pay for Time (like the old arcade machine or pinball system), you only pay for what you need, for a pre-set number of lives, or as long as you can last. Also used in Internet Cafes and game parlors. This model could be used for game time online as well.

15. Player to Player trading of Virtual Items (letting them trade land, property, characters, items, also by auctions). You keep a cut of all the money exchanged. You also keep the transactions safe for the player (they don’t have to go to the gold farmers or risk the black market for characters.) Some games let the players cash this money out of the game, so it can become a full time job, but is also a major fraud generator (they use fake credit cards, buy things, trade things, sell for cash, cash out).

16. Foreign distribution deals (like the movie industry), where you need funding, so you pre-sell your foreign distribution rights in advance, then use that money to fund the project in the countries you care about the most. www.gameinvestors.com will be helping people do this.

17. Sell Access to your Players (like lead generation, special offers etc.), this is where you monetize your user database by inserting special offers, or personal profile questions into the registration loop. Like when you register, you’re asked if you would fill out a profile in return for virtual points. This is then paid for by an external agency who collects the data live. (Value is equal to how exclusive the data is, how detailed (revealing), and how fresh.) The agency would generally give you the questions and the capture code.

18. Freeware (get lots of users), it’s not a plan to make money, but then again, if you make something that’s very compelling you can expect offers to acquire your software, company or technology.

19. Loss Leader (focus on your real goal), meaning you sell the game far too cheap. There’s clearly TOO much value for money, (like the PS3 Hardware strategy). You use the passionate following to your free game to help sell something else, like a Toy, TV or movie deal, and that’s where the real money is that you were focused on.

20. Peripheral Enticement (the game cannot function without a piece of equipment), so it’s really a way to make you money on the hardware. (Gym equipment is a good example, like the virtual bike or rowing games, you tease them with the software into a very expensive purchase.)

21. Player to Player Wagering (they place wagers before they go head to head), the winner keeps the pot and you keep a percentage of every pot. The games they play MUST be skill based games. Gambling virtual items is another technique, where they buy/earn/trade virtual items, then bet them on maybe a 1-on-1 basketball game, the winner keeps the items. (You made your money selling the items to them in the first place.)

22. User Generated Content (letting users make endless new content), they can sell it to each other, or sell access to it, or get people to pay for time spent playing it, for points they can turn into cash (like IMVU), and you keep a cut of all sales.

23. Pay for Storage Space (on a server) to save progress, stats, game data etc. As an example, this can be used for Karaoke games where you pay to store your library of songs. (Or at least you think you do, even though you are technically just making virtual storage space for your songs.)

24. Pay for Private Game Server (where your friends come to play), like renting multi-player servers, or giving your friends a maximum quality experience. This is more for the hardcore First Person Shooter multi-player crowd.

25. Rental (stores like Blockbuster, or online like Gamefly), the old rental paradigm meant trying to design the game so it couldn’t be played through within one rental period. These days with the Netflix / Gamefly Model, it doesn’t matter anymore.

26. Licensing Access (like signing a deal with a chain of cyber cafes to unlock your game for their users.) Or using your game as a part of a TV show. Or letting a corporation use your brand in their advertising such as McDonald’s Line Rider commercial

27. Selling Branded Items from your site (using a service like Cafepress) – You need to work hard on your identity to make this interesting for people to wear. For example, Gamer Vixens http://www.cafepress.com/gamervixens/

28. Pre-Sell the Game to the Players. This model lets your fans actually fund the development of the title. For example, they pre-pay $5 in advance for a $50 game. (They also get to see it get developed and get to provide feedback.) When the game is launched, they get it for free (as they already paid the $5 advance.) Clearly you have to either have a reputation or a very hot idea to generate enough interest in advance, but once you get on a roll, this can work.

29. Buy Something, get the game for Free – This is the Trialpay model, where the player buys something they want (like a subscription to Gamefly), then Gamefly gives Trialpay a nice fat fee. From that fee, you get paid, and Trialpay gets paid. So by signing up to Gamefly, they get their service and they also get your game (technically) for free.

I’m sure there are plenty more models you’ve seen over the years, if you think of some I’ve missed, please email me at: dp@dperry.com

Comments»

1. Notes, video and commentary on the Social Gaming Summit « Lightspeed Venture Partners Blog - July 2, 2008

[...] Although most of the discussion was focused on the four models of advertising, subscription, digital goods and retail, David Perry noted that there are by his count 29 business models for games. [...]

2. Webdriver » Blog Archive » 29 Modelos de negocio para videojuegos - July 2, 2008
3. 29 Business models for games : iMediaPress - July 5, 2008

[...] Designing a game and want to monetize it? Well here’s 29 ideas from David Perry, a 27 year game industry veteran. The article was posted by Jeremy Liew, Managing director of Lightspeed Venture partners on LVP’s blog. Here’s link to the original post. [...]

4. Digital Distribution to spawn new micro-publishers? | Daniel.Hjelmtorp.com - July 7, 2008

[...] challanges in the competetive harshen game market. Even as game developers and publishers look for new ways to profit and/or create and drive new revenue sources, its a hard struggle for the gamers time, attention, wallet and energy. Even if video game over and [...]

5. Bashers » Blog » 29 manieren om geld te verdienen met games - July 7, 2008

[...] weg’-opzet. Volgens David Perry, bekend als de bedenker van Earthworm Jim en Messiah, zijn er 29 manieren om geld te verdienen met games. Handig voor wie bezig is of zou willen zijn met games. Andersom is de lijst ook handig: tegelijk [...]

6. [ Lien ] 29 business models pour les jeux vidéo | Buzzbizweb, du buzz, du biz et du web | Benjamin Mercadier - July 16, 2008

[...] sur le blog de Lightspeed Venture Partners que vous allez pouvoir découvrir les 29 business models et le potentiel que représente les jeux [...]

7. George - August 25, 2008

Another (indirect) way to make money from games is creating games to have humans perform work for you for free. The video link below describes how people are using games to create a much better image search engine. Basically, they’re using games to have humans perform work to catalog and tag various pictures/images with key words. Apparently, this image search rocks Google’s image search. So using games to have people build / create part of your product. Pretty cool. Not sure how many other applications this would have..

8. Vodafone's Internet Explorer: Online Gaming: Part 1 - August 31, 2008

[...] Lightspeed – On 29 business models for [...]

9. What’s a Social App Developer to do? - September 19, 2008

[...] Where there’s a will, there’s a way. At the Social Gaming Summit in San Francisco this past June, Acclaim Games‘ Chief Creative Officer Dave Perry cited 29 business models for games. [...]

10. Xbox Mod - September 30, 2008

Looks killer. Nice write-up

11. 29 Business models pour l’édition de jeu vidéo : Jouer-Online - October 1, 2008

[...] blog de Lightspeed Venture Partners retranscrit une intervention de David Perry, d’Acclaim, qui mentionna 29 business model autour [...]

12. Mobius - January 4, 2009

That’s so nice, long and detailed write up for game monetization, but how many people are actually going to follow all those steps? :)
I guess you don’t have to follow all of them right off the bat.

13. How to Set Up Wordpress as a Membership, Lead Capture or Product Delivery Site - January 24, 2009

[...] 29 business models for games « Lightspeed Venture Partners Blog [...]

14. x-gamer - February 1, 2009

cool site! really love to read here! thanks for the info…

15. Sachin Agarwal - February 17, 2009

If the used game market goes away, so do AAA titles. You cannot have the risk mitigation of resale in digital distribution. Plus, the console makers control the pipe to their machine. With physical distribution, you can play GameStop off of Target off of Best Buy off of Walmart.

I like Dave, but he uses the same example of a hidden camera showing a GameStop rep pushing new buyers to used product every time he speaks. There’s no rigor to the objection.

Yes, I’m biased. But I did this analysis before I started Dawdle, and no one wants to give Microsoft, Sony, and Nintendo the same power that the music industry gave to Apple.

16. UMBC’s got GAIM » Blog Archive » Business models for games - February 17, 2009

[...] post 29 business models for games is from last summer, but I’m pretty sure that most of the content is still relevant, even if [...]

17. links for 2009-02-18 « Brent Sordyl’s Blog - February 18, 2009

[...] 29 business models for games « Lightspeed Venture Partners Blog 6. Advertgames (the whole experience is an advert), common on movie websites, can also be big like America’s Army or the Burger King games on Xbox 360. I did one of the first of these called “Cool Spot” for 7-UP. The advertiser helps fund the game and depending on the deal, that determines who earns cash out of the revenue. Your reputation will impact this equation. (tags: games) [...]

18. martin - February 19, 2009

Nice article! Thumbs up.

19. browser games - March 2, 2009

very nice article! thanks for the list!

20. wasser - March 11, 2009

An easy and proven way to make money off of your games (or any software, really) is to use InstallIQ via W3i (http://www.w3i.com). Definitely worth checking out.

21. Strip Business — ArtPatient.com - March 17, 2009

[...] comics, usually the comic acts as the basis for the merch, the video games and the tv shows/movies. This gave me another idea. What if you had a short video game created and the comic expands and continues the idea? Of [...]

22. 29 Options « Tish Tosh Tesh - March 19, 2009

[...] 29 Business Models for Games [...]

23. 29 Video Game Business Models, Heres My Top 5 | The Koalition | The Urban Gamers Guide - April 3, 2009

[...] see the full list of all 29 methods visit here Share This Post :del.icio.us | Digg it | FaceBook | Google | Myspace | N4G Tips | reddit | [...]

24. So just how much money can you make developing iPhone Games? « excapite - November 30, 2009

[...] low. Plus, as David Perry points out in his guest posting for LightSpeed Venture Partners, there are many business models for games developers. Which is great news for the weekend code warriors and small startups who are [...]

25. 29 business models for games « Thoughts - April 20, 2010

[...] Taken from a post from nearly 2 years back of the same name: 29 business models for games, although I’ve taken the headings as I think they’re self-explanatory [...]

26. Haris Kinnis - July 20, 2010

Hello ,

We are interested in buying or renting an online game(multi player game) for placement on our website. We already have a database of users so our players will need to be authenticated through our existing users table.

27. The History of Video Game Monetization | Demystifying Digital Commerce - July 22, 2010

[...] are going to let me pay for my gaming urges. David Perry, an industry veteran, came up with 29 business models game developers can use. How do you see video game monetization changing in the [...]

28. FLINK! vs Search vs Twitter: The final analysis « excapite - October 15, 2010

[...] lsvp.wordpress.com/2008/07/02/29-busi… [...]

29. Sandra_browsergamez - November 26, 2010

Hey thanks for yout article.. think it will nice to refresh taht list. Maybe you could do that?
=)

30. Competitive Advantage - December 6, 2010

I was always kinda interested in game business, but I never thought it is this complicated. Thanks

31. michaelbryn - September 20, 2011

I have a question about a business model in a game that doesn’t stand out in these 29. In a game called Bin Weevils, a television network gets children interested in their content by putting their shows into a theatre in the game. It is not a major part or a major revenue stream so not their main business model but a business model no less. What would you categorize this model as?

32. Some Thoughts On Gamification « sinisterdesign.net - October 26, 2011

[...] like Zynga take a game (say, Harvest Moon), rip out all of its complexity, then stuff it full of monetization mechanisms, leaving behind a hollow, abusive, compulsive exercise in its stead.  Tim Rogers [...]

33. Kristiyan - January 27, 2012

Wow great strategies, I’m gonna try N20,thanks for the ideas.

34. go - July 31, 2012

thank you ! Nice list


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