Game Production: business models
Fabiano Dalpiaz
1 Outline
Lecture contents
1. Revenue models for videogames 2. Business model canvas 3. Business model canvas: Rovio
2 1. Revenue models for videogames
Definition of a revenue model
A revenue model is a framework for generating revenues. It identifies . which revenue source to pursue, . what value to offer, . how to price the value, . and who pays for the value Part of a business model Several models exist that can be combined (see next slides)
Definition of revenues model based on “Afuah, A. 2004. Business Models: A Strategic Management Approach. New York: McGraw-Hill/Irwin, pp. 67-69”
3 1. Revenue models for videogames i. Physical game
Revenue is obtained by delivering the game by selling a physical copy . Distributed via CD/DVD/Blue Ray
Sub-models . Box sales: value from the physical copy that is staked on the shelves of a shop . Special editions . Merchandising (e.g., T-shirts but much more!) . Peripheral enticement . Preselling
4 1. Revenue models for videogames ii. One-time fee
The game is distributed digitally and is sold through the payment of a one-time fee . No physical product is delivered . License / key / serial code to activate the game . Sometimes the game can be downloaded for free, but cannot be played until activated
5 1. Revenue models for videogames iii. Subscription
A subscription fee is required to enable playing the game for a limited duration . Pay-per-play: payment per experience (number of times the game is played) . Pay-per-time: specific time period (e.g., 12 months) Subscriptions can be made to a publisher or a platform too . Indirect subscription to a game
Premium subscription (the game is free but advanced functions cannot be used without a premium account)
6 1. Revenue models for videogames iv. Game demos
A demonstrative version of the game can be played . Payment required to unlock the full game What/how to lock? . Functionalities . Content (e.g., only a few levels are available) . Time-based (full game only for X days)
7 1. Revenue models for videogames v. Game marketing
Conduct marketing campaigns that concern the videogame When? . In-game marketing (company logos, virtual buildings, branded products in the game) . Before-game marketing: ads are shown before playing the game . Around-game marketing, which connects to the number of page views, clicks, and acquisition of players
8 1. Revenue models for videogames vi. Free
Even free games can potentially generate revenues Two sub-models . Freeware: no payment, but used in conjunction with another business model . Freemium: similar a paid subscription but players can still play with some limitations
9 1. Revenue models for videogames vii. Game content
Revenue is generated by introducing extras into a videogame . Mechanics . In-game currency Big chunks of extras are often referred to as downloadable content (DLC) Micro-transactions can be used to buy inexpensive add-ons Pay-to-win to buy game mechanics that let the player easily win Content can also be generated by users (user- generated content)
10 1. Revenue models for videogames viii. Game economics
Creating an economic system within the game for people to interact with . Virtual currency: pay real money to obtain game cash . Virtual marketplace: obtain items from that market either with real money or game cash • In the end, either boils down to real money
11 1. Revenue models for videogames viii. Selling/licensing core game assets
Developed assets can be reused by selling them to others, or licensing their use Examples . Game content . Game mechanics . Game engines (think of Unreal!)
12 1. Revenue models for videogames ix. Voluntary basis
No-one is forced to pay; money is made on a voluntary basis . Donationware: people can decide to make donations, but that is not mandatory . Crowdfunding: obtain initial funding to sustain the development of a game
13 1. Revenue models for videogames x-xii. Further models
Player data . Publishers can get consent to use players’ data . Player data can be sold to marketing companies Foreign distribution . Distribution rights sold to a different publisher in a different country Game renting . Renting the game for a few days . … obsolete right now
14 2. Business model canvas
Definition of a business model
A model of the business of a company, aggregating . the value a company offers to one or several segments of customers . the architecture of the firm and its network of partners . for creating, marketing and delivering this value and relationship capital . in order to generate profitable and sustainable revenue streams
15 2. Business model canvas
Nine fundamental questions
What do we offer to our Who are our customers? customers? How do we reach them? How do we get and keep them?
WHAT? Value proposition
HOW? WHO? Value configuration Customer segment
Partnership Distribution channel
Core capability Revenue Relationship
Cost HOW MUCH?
How do we operate and deliver? How do we collaborate? What are our revenues? Our pricing? What are our key competencies? What are our costs? 16 2. Business model canvas
Answering the questions via the canvas, illustration
17 2. Business model canvas
Answering the questions via the canvas, illustration
18 2. Business model canvas
a. Value proposition
What do we offer to Who are our customers? our customers? How do we reach them? How do we get and keep them?
WHAT? VALUE proposition
HOW? WHO? Value configuration Customer segment
Partnership Distribution channel
Core capability Revenue Relationship
Cost HOW MUCH?
How do we operate and deliver? How do we collaborate? What are our revenues? Our pricing? What are our key competencies? What are our costs? 19 2. Business model canvas
a. Value proposition
Def: An overall view of a firm’s bundle of offerings, products and services, that together represent a benefit or a value for its customers . [Kambill et al., 1996]
Studying the value proposition is the starting point of the business model canvas!
refined by
requires Value targets Core capabilities Customer segment proposition
20 2. Business model canvas
Running case study: the Montreux Jazz Festival
The Montreux Jazz Festival (MJF) is an annual event that takes place in the little Swiss town of Montreux. The first edition dates back to 1967 Over the years, the MJF has grown in fame and went on to become a World event, attracting famous artists and visitors from the entire globe MJF is now led by the MJF Foundation, and has become an obvious favorite among sponsors thanks to the unique visibility it provides, a great opportunity for Montreux Municipality’s tourism and economy Many off-stage activities The case study involves a new company, TicketCorner, that sells tickets on-line and off-line
21 2. Business model canvas a. Value proposition
Business to consumer (B2C) . Event tickets (and access)
Business to business (B2B) . Distribution channel reach • Advertise products . Integrated B2B solutions • Sell products . Point-of-sale affiliation • Have POS outlets at the festival
22 2. Business model canvas a. Value proposition for the MJF
23 2. Business model canvas
b. Customer segments
What do we offer to our Who are our customers? customers? How do we reach them? How do we get and keep them?
WHAT? VALUE proposition
HOW? WHO? Value configuration Customer segment
Partnership Distribution channel
Core capability Revenue Cust. Relationship
Cost HOW MUCH?
How do we operate and deliver? How do we collaborate? What are our revenues? Our pricing? What are our key competencies? What are our costs? 24 2. Business model canvas b. Customer segments
Def: Categorizations of the population into social class or psychologically defined groups
refined by
targeted by Customer Value proposition segment
25 2. Business model canvas b. Customer segments
Value Proposition Target Customer
Event tickets (& access) Individual event visitors
Distribution channel reach Events & Organizers
Integrated B2B solutions Venues
POS affiliation POS Partners
26 2. Business model canvas b. Customer segments for the MJF
27 2. Business model canvas
c. Distribution channel
What do we offer to our Who are our customers? customers? How do we reach them? How do we get and keep them?
WHAT? VALUE proposition
HOW? WHO? Value configuration Customer segment
Partnership Distribution channel
Core capability Revenue Cust. Relationship
Cost HOW MUCH?
How do we operate and deliver? How do we collaborate? What are our revenues? Our pricing? What are our key competencies? What are our costs? 28 2. Business model canvas
c. Distribution channel
Def: a set of links or a network via which a firm “goes to market” and delivers its value proposition
precedes
Distribution link
is a refined by
delivers Distribution serves Value proposition Customer segment channel
by Actor
29 2. Business model canvas
c. Distribution channel
Value Proposition Distribution Channel Target Customer
Ticketcorner POS network
Event tickets (& access) Affiliate POS network Individual event visitors
Distribution channel reach ATMs Events & Organizers
Integrated B2B solutions Call Center Venues
POS affiliation Ticketcorner Website POS Partners
B2B salesforce
30 2. Business model canvas c. Distribution channels for the MJF
31 2. Business model canvas
d. Customer relationship
What do we offer to our Who are our customers? customers? How do we reach them? How do we get and keep them?
WHAT? VALUE proposition
HOW? WHO? Value configuration Customer segment
Partnership Distribution channel
Core capability Revenue Cust. Relationship
Cost HOW MUCH?
How do we operate and deliver? How do we collaborate? What are our revenues? Our pricing? What are our key competencies? What are our costs? 32 2. Business model canvas d. Customer relationship
Def: customer equity: acquisition, retention, add-on selling trust and personalization mechanisms, …
refined by Value proposition
Relationship Distribution link concerns mechanism
Customer segment
33 2. Business model canvas d. Customer relationships for the MJF
Note: customer relationships about the festival will be coordinated by the MJF, not by TicketCorner
34 2. Business model canvas
e. Core capability (key resource)
What do we offer to our Who are our customers? customers? How do we reach them? How do we get and keep them?
WHAT? VALUE proposition
HOW? WHO? Value configuration Customer segment
Partnership Distribution channel
Core capability Revenue Cust. Relationship
Cost HOW MUCH?
How do we operate and deliver? How do we collaborate? What are our revenues? Our pricing? What are our key competencies? What are our costs? 35 2. Business model canvas e. Core capability (key resource)
Resource (assets): available & useful in responding to market opportunities or threats Capability (know-how, key resource): aptitude to exploit and coordinate resources to create, produce, and/or offer products and services to a market
Core capability
is a refined by
required by Resource Value proposition
by Actor
36 2. Business model canvas e. Core capabilities (key resources) for the MJF
37 2. Business model canvas
f. Value configuration (key activity)
What do we offer to our Who are our customers? customers? How do we reach them? How do we get and keep them?
WHAT? VALUE proposition
HOW? WHO? Value configuration Customer segment
Partnership Distribution channel
Core capability Revenue Cust. Relationship
Cost HOW MUCH?
How do we operate and deliver? How do we collaborate? What are our revenues? Our pricing? What are our key competencies? What are our costs? 38 2. Business model canvas
f. Value configuration (key activity)
Def: set of interdependent activities that add value for the customers to the company products or services . Some of the business processes… . But not all of them!! (do they deliver value?) Value activity
is a refined by needs (in) Value implements Resource Value proposition configuration creates (out)
by Actor
39 2. Business model canvas f. Value configuration (key activities) for the MJF
40 2. Business model canvas
g. Partnership
What do we offer to our Who are our customers? customers? How do we reach them? How do we get and keep them?
WHAT? VALUE proposition
HOW? WHO? Value configuration Customer segment
Partnership Distribution channel
Core capability Revenue Cust. Relationship
Cost HOW MUCH?
How do we operate and deliver? How do we collaborate? What are our revenues? Our pricing? What are our key competencies? What are our costs? 41 2. Business model canvas g. Partnership
Def: contract/agreements with partners for the provision of goods or delivery of services
refined by Distribution channel
Partnership Value configuration concerns agreement
Core capability
with Actor
42 2. Business model canvas g. Partnerships for the MJF
43 2. Business model canvas
h. Revenue
What do we offer to our Who are our customers? customers? How do we reach them? How do we get and keep them?
WHAT? VALUE proposition
HOW? WHO? Value configuration Customer segment
Partnership Distribution channel
Core capability Revenue Cust. Relationship
Cost HOW MUCH?
How do we operate and deliver? How do we collaborate? What are our revenues? Pricing? What are our key competencies? What are our costs? 44 2. Business model canvas h. Revenue, examples
REVENUE
one time
sale
registration See earlier slides for recurrent further details in the context of games! subscription
advertisement
use
transaction
commission
45 2. Business model canvas
h. Revenues for the MJF
Value Proposition Revenue Model Target Customer
Event tickets (& access) Revenue cut on tickets sold Individual event visitors
Distribution channel reach Advertising online & print Events & Organizers
POS affiliation Fee B2B platform usage POS Partners
Integrated B2B solutions Fee general contractor service Venues
46 2. Business model canvas h. Revenues for the MJF
47 2. Business model canvas
i. Cost
What do we offer to our Who are our customers? customers? How do we reach them? How do we get and keep them?
WHAT? VALUE proposition
HOW? WHO? Value configuration Customer segment
Partnership Distribution channel
Core capability Revenue Cust. Relationship
Cost HOW MUCH?
How do we operate and deliver? How do we collaborate? What are our revenues? Pricing? What are our key competencies? What are our costs? 48 2. Business model canvas
i. Costs for the MJF
Cost positions Percentage of total
Point of sales network development and maintenance TicketSoft platform development and maintenance Ticketcorner marketing
Point of sales & event acquisition and maintenance Website
Call center
R&D
49 2. Business model canvas
MJF, altogether (still partial)
50 3. Business model canvas: Rovio
What is Rovio Entertainment?
Global entertainment media company from Finland Creator of Angry Birds . The game triggered a business empire Rovio did 50+ games before the big success Five groups of customers
51 3. Business model canvas: Rovio
Multiple value propositions
52 3. Business model canvas: Rovio
Key activities, partnerships, resources
53 3. Business model canvas: Rovio
Rovio’s goals: 1. Brand Awareness
54 3. Business model canvas: Rovio
Rovio’s goals: 2. Importance of the story
55 3. Business model canvas: Rovio
Rovio’s goals: 3. Quality and sales volume
56 3. Business model canvas: Rovio
Rovio’s goals: 4. Growth capability
57 References
Mandatory
1. Osterwalder, Alexander, and Yves Pigneur. "An ontology for e-business models." Value creation from e-business models (2004): 65-97.
58 Acknowledgements
The slides on the Business Model Canvas are adapted from a presentation by Professor Yves Pigneur at the SIKS meeting in Amsterdam – May 30, 2006 Material on the business models was assembled starting from the work of Game Production 2014 students . Thijs Prins, Koen Smit The case study on Rovio is adapted from an online presentation by Jukka Ala-Mutka: http://www.slideshare.net/JukkaAM/entertainment- company-business-model-canvas-case-rovio-entertainment
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