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“Business Models and Pricing Strategies in Videogames Industry”

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“Business Models and Pricing Strategies in Videogames Industry” ΔΘΑΣΜΗΜΑΣΘΚΟ ΠΡΟΓΡΑΜΜΑ ΜΕΣΑΠΣΤΥΘΑΚΩΝ ΢ΠΟΤΔΩΝ ΢ΣΑ ΠΛΗΡΟΦΟΡΘΑΚΑ ΢Τ΢ΣΗΜΑΣΑ Διπλωμαηική Εργαζία “Business models and Pricing Strategies in videogames industry” ηοσ ΠΑ΢ΥΑΛΗ ΑΡΑΜΠΑΣΖΗ Τποβλήθηκε ως απαιηούμενο για ηην απόκηηζη ηοσ μεηαπηστιακού διπλώμαηος ειδίκεσζης ζηα Πληροθοριακά ΢σζηήμαηα Φεβροσάριος 2014 2 Abstract In our thesis we examine which factors have an influence on players‟ intention to buy virtual items. In order to examine these factors we created a research model and conducted an online survey. Especially, we included constructs from an IS (Information System) perspective as well as from a game centric approach. We analyzed the results using PLS-SEM method and we found out that the Game-centric constructs: customization options, in-game functionality features, prestige, participation and perceived enjoyment have a positive effect. We distinguished as the most important Game-centric constructs the customization options, the in-game functionality features and the prestige. IS-centric constructs such as performance expectancy, effort expectancy and perceived value are also important for players‟ intention to buy virtual items and they have a strong effect. These results can be useful to videogame companies which adopt business models that include virtual item transactions. Based on these results we suggest that videogame companies should offer virtual items taking into account the most important Game-centric constructs and establish or improve their virtual shops by taking into account the IS-centric constructs. 3 Acknowledgements I would especially like to thank my supervisor Professor Dr. Anastasios Economides and Phd Vasileios Terzis for their trust and valuable guidance. Besides, I would like to thank everyone who has taken the time to complete the questionnaire of this Thesis. 4 Table of Contents Abstract .................................................................................................................................... 3 Contents of Tables .................................................................................................................... 6 Contents of Figures ................................................................................................................... 6 Contents of Images ................................................................................................................... 7 Introduction .............................................................................................................................. 8 Current state of video games industry ................................................................................... 8 Video game industry: old and new trends and changes ....................................................... 10 Literature Review ................................................................................................................... 12 Game as a Product (GaaP) ............................................................................................... 12 Game as a Service (GaaS) ............................................................................................... 13 Benchmarks and metrics of business models ....................................................................... 17 Video games Business Models: Theoretical framework ....................................................... 18 Pay-once/Fire and forget model ....................................................................................... 18 In-Game advertising ........................................................................................................ 20 User Generated Content (UGC) ....................................................................................... 23 Video Games Betting ...................................................................................................... 25 Sponsored Games / Donationware ................................................................................... 27 Crowdfunding ................................................................................................................. 29 Subscription .................................................................................................................... 30 Pay per play / Pay as you go / Pay per time ...................................................................... 33 Bitcoin mining as a means of payment ............................................................................. 35 Free to play (F2P) ........................................................................................................... 37 Microtransactions ............................................................................................................ 37 Virtual items transactions in business models ..................................................................... 39 Theoretical Background of research model ......................................................................... 41 Methodology .......................................................................................................................... 47 Case Study method ............................................................................................................. 47 Online Survey ...................................................................................................................... 48 PLS-SEM method ................................................................................................................. 49 The Research model ................................................................................................................ 51 Data Analysis and Interpretation of Results ............................................................................. 58 Measurement Model .......................................................................................................... 59 5 Structural Model ................................................................................................................. 60 Implications ............................................................................................................................ 64 Bibliography ........................................................................................................................... 67 Appendix ................................................................................................................................ 77 Contents of Tables Table 1-Global Market 2012 - 2016 .......................................................................................... 9 Table 2 SWOT analysis of pay-once/fire and forget model ...................................................... 20 Table 3 SWOT analysis of In-Game advertising model ........................................................... 21 Table 4 SWOT analysis of user generated content model......................................................... 24 Table 5 SWOT analysis of player to player wagering .............................................................. 25 Table 6 SWOT analysis of skill-based progressive jackpots ..................................................... 27 Table 7 SWOT analysis of crowdfunding model ..................................................................... 30 Table 8 SWOT analysis of subscription model ........................................................................ 31 Table 9 SWOT analysis of pay per play / pay as you go / pay per time model .......................... 33 Table 10 SWOT analysis of bitcoin mining as a means of payment model ............................... 36 Table 11 SWOT analysis of microtransactions ........................................................................ 38 Table 12 Price list of In-game Credits ..................................................................................... 39 Table 13 Virtual items transactions in business models............................................................ 40 Table 14 Summary of selected constructs, related causal links and support evidence. .............. 55 Table 15 Results for the Measurement Model .......................................................................... 59 Table 16 Discriminant validity for the measurement model ..................................................... 60 Table 17 Hypothesis testing results ......................................................................................... 60 Contents of Figures Figure 1 Global Market 2012 – 2016 ......................................................................................... 9 Figure 2-CARGs of all platforms ............................................................................................ 10 Figure 3 Game as a Product model .......................................................................................... 13 Figure 4 Game as a Service model .......................................................................................... 16 Figure 5 Moore„s High-Tech Marketing Model - Technology Adoption Life Cycle................. 17 Figure 6 - Value chain evolution ............................................................................................. 19 Figure 7- Number of World of Warcraft subscribers 2005 -2013 ............................................. 32 Figure 8- Revenue of GemStone III ......................................................................................... 35 Figure 9 - The Research model ................................................................................................ 51
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