Business & Games

A look into the current state of business and video games

By Alexander Mannos

The gaming industry is larger than the music and movie industries combined, and continues to grow faster than both of them.

The video game industry inspires some of the most impactful tech innovation today. From Virtual Reality, to the latest GPUs, gamers tend to be very tuned-in to the latest tech and hardware capabilities- either out of personal interest, or to gain a competitive edge. Gamers are some of the earliest adopters of new tech- but creating something new is only half the battle. For new technology to really reach implementation, it has to become commercially available and demanded; often times the first market for tech, is the gaming industry.

There has been a recent spike of streaming and competitive gaming.

Business Case Studies

Pricing models/strategies can be often copied over from video games and applied to other markets, services, and products. Most notably, Games as a Service (GaaS) or Live Service have become very popular over the last few years. In this, games are released now with the intention of being ongoing and dynamic- thus having Downloadable Content or add-ons (often free of charge). There is a seasonality to the games which follow said model, wherein they maintain a player-base well into their 5th year (or more) of release! This keeps players invested, and mimics the outcomes seen in brand loyalty or repeat customers (both of which are some of the foundations to big online retail companies like Amazon).

Another notable strategy that relates to Pricing, is the Season Pass. In this, there are un-lockable items or cosmetics that are obtained through in-game progression. Some of these are available to the free/economy class, while the more prestigious items are reserved for the Premium pass (who also obtain all of the economy cosmetics, of course).

The empirical profit-potential and popularity of gaming has been solidified. Note the revenue from some of the industry leaders: Game developers like EA, Activision, Ubisoft, CD Projekt Red, etc. to console manufacturers like Microsoft, Sony, and Nintendo. The numbers say that the money, is in the gaming community- and the numbers don’t lie.

Publishers need to better acknowledge the unique consumer base that makes this industry so vast. In this, as more and more companies seek to enter the world of gaming, they should remain cognizant of the players, and how they are perhaps less compromising or oblivious to corporate strategy. Microtransactions, Loot Boxes, and overpriced cosmetics are routinely under fire from prominent Streamers and reviewers.

Using one of the most popular games within the past year, as a case study:

Fortnite:

Fortnite is a unique case that even upon first glance, was very obviously going to be a huge success.

The game itself is a third person shooter (over the shoulder perspective), with a battle royale format, and a building component. Battle royale is effectively a game mode in which many (100) players are quite literally dropped onto a single island, all starting with no weapons or equipment. Upon landing they have to then scavenge and loot in the various areas they have chosen to land in, and continue to eliminate one another until only one player (or team) remains- all while their perimeter gradually closes, bringing them all closer together. The players may also destroy the various structures in the game to collect building materials, and then construct their own walls/ramps/floors/etc. for their desired purposes.

This concept sounds fun enough from a gaming perspective. It combined the already popular battle royale game mode, with the creative building component of Minecraft, all under a friendly/cartoonish G-rated persona to attract a younger crowd. As a game, this was going to be a smash hit.

But Fortnite’s quality as a game is not what made it so profoundly successful. More than what the game was, the much larger lesson is within how it was handled.

Fortnite was entirely free. That’s correct, free. Not only was it free, but it had no advertisements. How was it profitable? Cosmetic purchases. This is very key to the success story. Many games present loot boxes or in-game purchases that might lend a competitve edge in the actual playing of the game. Fortnite wanted to ensure that everyone had the same opportuntiy to win, each time. Therein, they limited the purchases to only the appearance of a player, not the gameplay. This by itself would make for a very successful game already, because with the rise of competitive gaming, people enjoy playing games where the size of your wallet does not influence the chances of success. It feels less rigged, and more consumer friendly. The aforementioned unique consumer in the gaming industry is acutely aware of these aspects.

Many large publishers today such as EA, have shown companies the repercussions of not being consumer-friendly in their pricing strategies. Battlefront II is an excellent example of what not to do in this case. Already having an association with overly aggressive/anti-consmer micro transactions, EA received the most down-voted comment on reddit due to this mishap.

The progression system in Fortnite that kept players gaming, was introduced in two tiers. There was the free version that offered some minor cosmetics and customizations (all still with no affect on gameplay), and then there was the paid battlepass tier. This second tier was a single upfront cost that would allow for periodically earned challenges, unlockables, etc.,. Due to the unprecedented speed of updated unlockables within the game, players kept wanting to obtain that next new outfit or item. The speed at which the inventory was refreshed, further reflects the general attentiveness to updates that the game offered. The map and ‘meta’ of the game itself would be updated almost monthly- further indicating just how attentive the developers were on providing the player with a fresh experience. This however, is not all that made the game such a viral sensation.

Fortnite went a step further. They achieved something that almost no other games had. Cross platform play. In this, players could play with one another across different mediums. A mobile user could be in a game with someone on an Xbox, Playstation, and PC. Thus instead of having segmented servers, everyone was united. At this scale, cross platforming had never been such a success.

For those keeping track, this game appeals to young children as well as competitive gamers and streamers. It combined two aspects of dramatically popular games (PUB G and Minecraft). It bridged the gap between consoles, and gave everyone an equal chance to win. It was routinely updated in big ways to provide new experiences and goals. It did all of this while being entirely free to play, with minimal load times and no advertisements. Revenue came from in individual in-game purchases, as well as through their battlepass system. Furthermore, Fortnite took full advantage of the modern ‘audience as an asset’ methodology that made streamers such a success. This blueprint is what was behind the most viral game of the decade. Later, Fortnite would go on to incorporate other entertainment hits, such as the EDM artist Marshmallow, or popular movies such as Marvel’s Avengers and Star Wars. The revenue from two of the highest grossing movie sagas of all time, is certainly not to be overlooked.

The game itself is fun enough, but the real beauty of this game comes from how perfectly it managed to connect so many pieces that had already been laid out. This is the critical lesson behind Fortnite that makes it a worthwhile case study.

Business Sense:

The vast majority of problems are solved via pattern recognition or application. In this, case studies used as examples of success or failure, have specific lessons/solutions, that can be practically copied and pasted to new problems- particularly if they are issues existing within a different industry altogether.

Consulting — Data Science — Supply Chain

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