A digestible guide to the new gaming ecosystem

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The popularization of digital games has had profound effects within the interactive entertainment industry. The shrinking gap between producers and players is presenting the industry with a new set of challenges, but also exciting new opportunities. Today’s audiences have come to expect more sophisticated gameplay even from relatively simple games. We are witnessing a trend in technology which is pushing games to new platforms and distribution methods, slowly rendering the days of boxed games obsolete. As a result, new models for monetization and engagement are becoming necessary. Game companies are quickly coming to this realization, with many embracing the change and many more shifting, or planning to shift, their business models to adapt.

The elephant in the room of new monetization strategies is the free-to-play (or F2P) model. F2P games are games which are available at no cost to players. Microtransactions within the game are then used to monetize the game. Players can play for free, but are often encouraged to pay for certain in-game items (like powerful bonuses, levels, costumes, etc), and maintained through frequent updates and patches over long periods of time. In other words, in the F2P era, games are becoming less like a product and more like a service.

Welcome GaaS

Over the last 5 years, we’ve been witnessing the games industry shift more and more towards the Games as a Service (GaaS) model. As a result, games have been enjoying longer and longer life-cycles today than ever before. A major contributor to this, of course, is the shift to digital distribution which makes it easier for gaming companies to release patches, title updates, and add DLC to their games to keep them fresh. With distributors like Steam and the Apple App Store able to carry thousands of titles at once, games have more opportunity to earn income long after their initial release.


SuperData has found that effective monetization through free-to-play and GaaS is putting considerable pressure on pricing within the industry, as premium titles now compete directly with games that ask for no upfront payment to start playing. More so, it has lowered the barriers to entry for players, the influx of demand has resulted in a glut of supply and competition. According to industry sources, there are currently over 170,000 games active on Apple’s AppStore platform, which all compete for a similar audience.

Success in this new age of game monetization

Almost anyone who has ever sold something is familiar with the concept of a monetization funnel. Within the new age of free-to-play this visualization is more important than ever before. New revenue streams have quickly made inroads in the gaming business, while traditional ‘units sold’ often still functions as a stepping stone from which game companies expand. Acquisition, retention, and monetization are pretty simple concepts, but if you're looking at employing a Game-as-a-Service model your approach and focus will have to diverge from that of a traditional pay-to-play game.

Acquisition

The name of the game for boxed game sales. Make your game, get it on a shelf and dump money into marketing to get people to buy it. This model worked very well for many years, but in this new age of digital distribution and its increasingly connected consumers, the idea of spending a bunch of marketing dollars to get as many customers as you can to make a high-cost one-time purchase has become a dangerous trap to fall into. With that being said, the prospect of acquisition is very easy to become enamored with, "we built this game, now let’s get a zillion people playing it" is a great thought to have, but it’s not the be-all-end-all of how games achieve high lifetime value (LTV) anymore. A lot of F2P game makers are still making the mistake of spending too much money on acquisition, but in the age of F2P and GaaS it’s kind of like pouring a bunch of water into a leaky bucket, everyone falls out and they make no money.

Retention

Retention is the most critical piece of the F2P monetization funnel, and the one thing that anyone selling a service should embrace. A core aspect of the F2P model is achieving a high LTV (Lifetime Value) from your customers. Lifetime Value being a major function of retention, you will want to figure out which features and mechanics are going to keep your players engaged with your game, and make them core aspects of your game which are incredibly fun and rewarding.

Keep the customers you get

Its almost inevitable that throughout a game’s lifespan, players will continuously fall off or stop spending (Churn), but if your retention strategy is sound, you will also be developing a hardcore or even a loyal casual following who are willing to spend more and hopefully make up for the churn. In order to maximize your chances for retaining your playerbase, keep your game free to play forever. That's right, enable your players to experience nearly all of your game for free. Don't kick out the players who will never pay, they may introduce someone they know to the game who will. Instead of kicking people out of your funnel who aren't profitable, give your fans a way to buy anything they may want, offer a virtual currency that is earnable in-game to keep them playing. Keep it fresh. Track retention, churn, and play duration. The best performing F2P games are releasing new material over time. The name of the game is delivering ongoing value to keep your players engaged. Give everyone a reason to love your game enough to spend money inside of it; make everyone a "Whale" because a whale is just a symptom of a highly engaged player. Your retention strategy should always be a part of your game that players want to keep coming back to.

Monetization

The goal of your game, even if its free-to-play, is to make money. So, how do you ultimately monetize? Well, hopefully you've got a strong retention strategy in place, so the next logical step is figuring out how to convert some of those players into payers. If your game is fun, and your players are loyal and engaged you should have plenty of customers who are willing to pay for the additional value you provide. Your responsibility is to ensure that your DLC items are desirable and that your pricing is right. You should always be thinking of ways to incentivize your players to buy. Offer rewards for spending goals, bundle, and make as many things as possible earnable by playing the game. Drive higher ARPU (average revenue per user) by selling things like gear and enhancements, time displacement (speed up/slow down task duration), costumes & vanity items, maps and map skins, virtual currencies. You will never get everyone who plays your game to pay. Don't be discouraged. According to NewZoo, only 39% of console gamers in the US never spend money on console games, and 55% of mobile gamers never spend money on mobile games. Even if you do all of this right, there is still a chance your game could fail, always listen to the voice of your community and learn how to do things better.

Being Disruptive and Delivering an Experience

Gaming is one of the most interactive and engaging forms of entertainment. It is one of the few forms of interactive entertainment that entire communities are able to be built upon. How you leverage and interact with that community will be key to your games ability to build, retain, and later monetize your playerbase. Use tools like Steam Early Access or Apple's TestFlight to test your model with a sample group of players, which can be a great way to get early feedback and test your ideas. The game companies of the future will take risks and test their strategies endlessly. The most successful games will be those that provide their players with the most opportunity to build equity. For players, experiences are what keep them coming back to play again. Every F2P game needs some kind of “quality hook” that allows players to immediately discern that your game is worth their time, some way for them to tell that it was professionally built by a developer who cared about providing them with a great experience. Whatever the hook to your game is, make it something powerful, fun, and rewarding.

Free to play is only the beginning

The F2P model opens a lot of doors for the games industry, but is only the beginning. Even though it’s been around for a little while now, the free-to-play model is still not mature. There are still tons of opportunities to be disruptive and to think outside the box. Extending on the F2P model will be key for games of the future, as F2P is only a small piece of the high-LTV puzzle. The companies that embrace this will set themselves up for success out of the gate. In this new gaming ecosystem, game companies will have to think more like marketers and service providers from the very onset of their planning, all the way to their post-launch support. They will partner with other brands, and attempt to engage and delight their players from angles that exist even outside of gameplay.

Give your fans exactly what they expect, and then some.

The International is the largest tournament of the year for DOTA2 players

Competitive Games

If your game is competitive, put money from select DLC into community building, be it tournament prize pools, contests, content creation rewards, or anything else fun that can help you to build more hardcore players and drive a crowdfunding mindset for your community towards a common goal. Give playing a purpose! Promote grassroots and major tournaments for your game through some kind of "community" or "events" portal within your game, and facilitate the signup of competitor and spectator alike. The more dedicated and loyal your playerbase, the higher LTV your game will amass. Engage new players and reward hardcore fans by hosting mini-events in hot-spots around the world. Host live streams and entice players to watch and participate with DLC and/or virtual currency giveaways. Rewarding engagement builds "Whales". Tomorrow's e-sports games will facilitate entire ecosystems of their own.

Life is Strange is a fantastic episodic game with a very strong narrative

Narrative Games

If the game you're creating has a strong focus on narrative, use that strong story as part of your retention strategy. Break your game's epic tale into chapters, and stagger their release over a period of time. Keep your customers wanting more; keep them coming back with cliffhangers and other classic syndication strategies. Just be careful that your story doesn’t drag, interesting plot developments should happen frequently and leave your players wanting more. Each chapter needs to be rich with content that lets your customer feel that they were able to extract incredible value for what they paid.

Last of Us is an award winning adventure title from Naughty Dog known for its incredible story and survival strategies.

Adventure Games

Create a marketplace in your game for upgrading weapons and other tools that help players advance throughout your game. Sell powerups like temporary invincibility, or extended shields to help them defeat bosses. Consider extending the adventure outside the game with partnerships with businesses like Medieval Times, or Zombie Run to create extended activities that your players can participate in in real life and promote these activities through messaging in your game to build awareness. Add the chance to earn in-game rewards like redeemable tickets that grant access to exclusive side quests for anyone who participates.

Monument Valley is a visually stunning puzzle game for iOS

Casual Games

A lot of casual titles exist for mobile devices. If your game is on mobile, there is a good chance that it's built to pass "The Starbucks Test". What that means is that players of your game can play and have a meaningful experience in the time it takes for a barista to make your macchiato. If your game is a casual game for mobile devices, it might make sense to get a better understanding of when and where your players are interacting with your game. If they play while waiting on line at Starbucks, it’s probably wise to reward your players for playing at places like that. That might mean partnering with Starbucks to offer a free DLC item if they play while connected to the Starbucks WIFI, or maybe including virtual currency coupons attached to Starbucks cups.

Sim City allowed players to install Nissan Leaf charging stations in their cities.

Casual games might benefit from taking a page out of Sim City 5’s playbook. EA partnered with Nissan to offer a free Nissan Leaf charging station in-game item that SimCity players could install in their city which made Sims and the in-game businesses happy as a result of it not producing any pollution inside the city.

Adver-Games

Gamers are way more engaged than those watching TV, so more brands should start thinking about getting into the game too. The problem is that not many brands have figured out how to market to this audience yet, and the development cycle for any game can be pretty long sometimes, but those who have attached their names to well built games have been extremely successful. Volkswagen's GTI mobile games had rich driving physics that were ahead of their time and very well received by mobile gamers. Your brand's game doesn't necessarily have to be based on your actual product offering either. Red Bull, an energy drink company, released games for their Air Race series, as well as Red Bull Crashed Ice for consoles which were extremely fun and engaging, driving many to check out Red Bull TV which built new interest in their products. For your game, try to partner with an indie game developer with a good reputation and help them build something fun. Indie developers know a lot about creating games that passionate gamers love, so leaning on them for their creativity will help your chances of success considerably. When your brand develops an advergame, an obvious benefit for your brand is that you can help guide the developer when creating game mechanics and in-game rewards, as well as the visual and gameplay style from beginning to end. It’s naturally more expensive to create an entire game from scratch and will take a lot longer to create than partnering with a developer to launch branded DLC, but the potential benefits from engagement outweigh the costs.

What if your brand released a game where additional content was unlocked by buying your product in real life? It’s not hard to imagine a world where "the next League of Legends" is a game built by Nike or some other powerhouse brand where they are the title sponsor and principal financeur for all of that game's e-sports events.

Nintendo's Super Smash Bros. is one of the best party games around

Party Games

If your game is a party game, it is likely meant to be played by multiple people simultaneously from the same system. So we know that your players (2-8 at a time) are likely together socializing and having fun together when playing. It might make sense for a game company supporting a party game to partner with brands like Tostitos, or Coca-Cola to offer in-game content with the purchase of one of those products. Offer in-game music purchases or partner with Spotify or TIDAL to offer custom soundtracks for your game as great music is often a welcomed addition to social gatherings. Think outside the box to create engagements with your players which enhance the real-world experience of playing your game. How cool would it be for your players to be able to order pizza delivery from inside your game's pause menu?

Be Authentic and delight your community

Go where your community is.

Is your game huge on Twitch? Help make it so by being an active participant in the community. Your game doesn’t need to be “E-Sports” for it to be fun for spectators. Even if your game isn’t a competitive game it can still succeed on Twitch, “Let’s Play” videos are second only to video game trailers in terms of viewership. Super Evil Megacorp, the developers of VainGlory do a tremendous job with leveraging their Twitch channel to engage with fans. SEMC streams frequently, and has an in-game system for announcing when they will go live, as well as what they plan to talk about. Those who choose to tune in are given a chance to win “some sweet sweet ICE”, the in-game currency of VainGlory.

Events can happen anywhere

The astounding growth in popularity of E-Sports events serve to highlight the penultimate example of gaming-oriented events and what they can mean to game companies. These events are huge, and attract fans from all over the globe eager to spectate, participate, and otherwise engage with the competitive gaming community. These events typically take place at large conference centers or major sports complexes around the world, where gaming fans congregate and watch the spectacle of competition occurring between high level players of E-Sports games. It is the ultimate destination for super fans, and watching the action is the ultimate entertainment for spectators. If your game is competitive, hosting your own events or supporting your game through the grassroots community like this can have massive benefits for your game’s brand equity. The costs, and payoffs both come with unlimited potential.

Gaming conventions are great places for indie developers or major publishers to engage the community and introduce their games to the world

Even if your game isn’t competitive, there are tons of ways to promote your game and build your community through events which celebrate it. Gaming conventions are constantly happening around the globe and provide a great opportunity for you to get your game into the hands of gaming enthusiasts. Conventions are great for community outreach by themselves, but consider combining your mere presence with a more social approach and stream some gameplay and interviews through your company Twitch channel and entice viewer and event-goer participation with the chance to win swag, DLC, or virtual currency.

Fighting game fans can tune into Capcom Pro Talk on Twitch to ask questions they want answered by the ultimate human, Mike Ross.

Another kind of event that you can leverage for promotion and delighting your players can happen right from your office! Regularly scheduled Twitch Events happen right on your channel and can include anything from new DLC announcements to “challenge a dev”, Q&A sessions, and pretty much anything else you can think of that will engage and excite people who play your game!

Valve teamed up with Rick & Morty masterminds Justin Roiland and Dan Harmon and released an announcer pack for their game

Embrace "The Modders"

Video game modding is very popular within the PC gaming community. It usually involves tech savvy fans diving into the back-end code of their favorite games to fix bugs, update graphics, or introduce new elements. Commonly, game companies will either go to certain lengths in an attempt to stop people from modding, or ignore the community altogether. What if they chose to embrace them instead? What if your company built an "App Store" within your game with free DLC inside of it, and enabled community built DLC to be sold and take a cut for yourself. If you build it, they will come. You may just end up with some great DLC items that you didn’t even have to spend any of your own resources building. Along those same lines, consider partnering with a brand to seed some free branded DLC which users can attain by engaging with a brand into your new marketplace, and if you’re a brand — think of the marketing opportunities a game can present, how can you provide value in exchange for engagement? Seek out hot games and commission branded DLC for it, just make sure you give your branded elements away for free; don’t forget to make them super fun and interesting.

The Free to Play future

Whatever your game monetization strategy of the future may be, it is becoming increasingly important that an innovative marketing and monetization strategy are put in place to drive awareness to your game as well as engage and delight your community players long-term. In order for a game to be successful in today’s highly competitive marketplaces, providing value to your fans through the in-game experiences you provide them is paramount. Keep your retention mechanics as fun to interact with as the game itself and always be looking for ways to make your game a better place for your players to invest their time and money. Creative solutions that keep audiences engaged and excited are part of the lifeblood here at Digital Surgeons. If you’re building a game we’d love to collaborate with you on some strategies for your next title. Get in touch

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