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Business Models

Business Models. Show me the Money. Expenses Direct, software licensing, salaries Indirect, opportunity cost, garage developers Revenue Sales Licensing Advertising. Game Budgets. MMO = $20-40 Million+ Console = $20 Million PC = $10 Million Downloadable Console = $250k-$500k

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Business Models

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  1. Business Models

  2. Show me the Money • Expenses • Direct, software licensing, salaries • Indirect, opportunity cost, garage developers • Revenue • Sales • Licensing • Advertising

  3. Game Budgets • MMO = $20-40 Million+ • Console = $20 Million • PC = $10 Million • Downloadable Console = $250k-$500k • Casual = $20k-$200k • Web = $500-$500k

  4. Games for less • Low-cost tools doesn’t always mean cheap • Biggest Indie Mistake • Your time is extremely valuable

  5. Direct Costs • Salary is the biggest • Software Licensing • Torque, Flash, Unity <$500 • Director <$1500 • Virtools < $10,000 • Unreal, Vicious Engine, Others >$10,000+

  6. Indirect Costs • Opportunity Cost • What could you do if you weren’t doing this? • Garage Developer • After-hours, on the side • $0 development?

  7. What Makes a Hit? • Console = 1 Million units • PC = 200k units • Casual = 100k units • Downloadable Console = ??? • Web = Millions of plays • MMO = Millions of players

  8. What Makes Success? • Have proper expectations • Console = no go • PC = no go • Casual = 20k units • Downloadable Console = ??? • MMO = 1000 players • Web = Millions of plays

  9. Sales Revenue • PC or Console = 5-15% • Casual = 25-50% • Downloadable Console = 30-70% • MMO = 97% • Web = ???

  10. Casual Games Revenue • Sale = $20 • Transaction costs = $1-3 • Portal = $6-10 • Distributor = $2-6 • Developer = $2-10

  11. Direct Sale • Sell games direct through your own website • Use TryMedia or roll your own • Keep 80-90% of revenue

  12. Portal • Shockwave, Real, MSN, Yahoo, Big Fish Games • Keep 30-70% of revenue • Massive built-in audiences • Need relationship with each • 100’s of portals

  13. Distributor • Distributes on multiple portals • TryMedia, Oberon • Necessary to reach some portals (MSN, AOL, Pogo) • Keeps 20-50% of ‘Developer’ revenue

  14. Agent • Will keep 5-20% of ‘Developer’ revenue • Has relationships with portals • Allows you to focus on the game • Will not provide funding

  15. Publisher • Takes 30-70% of ‘Developer’ share • Provides funding • Provides game direction • May own IP • Fully exploits the property

  16. Contract Gotchas • Define revenue • net != gross != net • Advertising & Other Revenue • Exclusivity • Ownership • Pricing

  17. Try Before you Buy • Download • 1-hour trial • Product must stand on its own • 1% conversion is good

  18. Subscription • Recurring revenue is awesome! • Lots more ongoing costs and maintenance • Game community is key

  19. Commissioned • Revenue fixed from the start • Long sales cycle • Need to focus on this

  20. Item-based • Good with MMO/subscription style games • Difficult to craft, but can be very successful

  21. Ad sponsored • Kongregate, Shockwave • Lots of downloads trying it • Good ancillary revenue, but you won’t get rich

  22. Skill-Based Games • Don’t bother

  23. Alternative Platforms • Mobile • SecondLife • Skype • IM apps

  24. Business ?’s

  25. Market Overview / Business Models Summary • High-level overview of game industry • Discussed where expenses come from • Seen how revenue is generated • Compared different ways to succeed

  26. Coming Up • Technology to make it happen • I tell you what to do

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