Play2Live is a start-up in the gaming and eSports streaming arena. It recently achieved its hard cap goal during an ICO and is now actively pursuing the steps in its roadmap.
In Part 1 of this series we looked at how well Play2Live was positioned to break into the fairly saturated market of gaming and eSports.
The major competitors are Twitch (owned by Amazon), YouTube (Google), Facebook Live, Mixer (Microsoft) and Steam (Valve). They represent a market of hundreds of millions of monthly active users.
It seems extremely well-positioned if measured against the traditional measures of competitiveness:
· Stay on top of and capitalize on trends
· Establish a niche and differentiate your product
· Solve problems within the industry
· Offer something better than the competition/ Add value
· Tap into change
However, the world has changed, and the traditional measures may be inadequate to gauge competitiveness.
So, this article — Part 2 of the series — asks whether Play2Live is ready to break into the saturated gaming and eSports markets if measured against specific requirements for competitiveness in platform-based businesses.
Competitive measure #1: Porter’s five forces vs Platform ecosystems
The Porter model — Five forces
Any student of strategy will be familiar with the so-called “Porter model”.
The model allows companies to assess whether and how they can satisfy their customers and be profitable, based on the intensity of the competition and rivalry within the industry.
The 5 Forces are:
· Threat of substitute products and services
· Threat of new entrants
· Rivalry of the current competitors
· Negotiation power of buyers
· Negotiation power of suppliers
It is based on a “value-chain” or “pipeline” view of the business. In this view, businesses control assets that they hope are valuable and can’t be imitated; they create value by controlling activities, from input (eg materials from suppliers) to output (the finished product). The focus is on internal optimization of labor and resources and on maximizing customer value.
The driver is supply-side economies of scale: the more a company can produce high sales volumes, the lower its average cost of doing business, and the more it can then undercut competitors through lower prices. This has led to companies with huge market share. For example, AB InBev controls about 46% of global beer profits and produces about 27% of global beer supply — this after it bought SABMiller, the number two company in the world, for $100 billion.
There are high barriers for new entrants. The classical list includes product differentiation, capital requirement, absolute cost, economies of scale, access to distribution and incumbent reaction (the likelihood of defensive action from current companies in the market).
The platform model — four players
Today, there is a fundamental shift from the “pipeline” model to the “platform” model of business. A very interesting analysis of this shift is provided in an article in the April 2016 publication of the Harvard Business Review, titled “Pipelines, Platforms and the New Rules of Strategy”. It is worth reading in full. (https://hbr.org/2016/04/pipelines-platforms-and-the-new-rules-of-strategy). The following is a summary of some of its findings.
A platform brings together producers and consumers. Platforms have existed in the past — for example, malls have linked consumers and merchants, or newspapers have connected advertisers and subscribers. However, technology has greatly reduced the complexity and the cost of setting up such platforms and reduced the need to own physical infrastructure and assets. This has significantly reduced the barriers to entry.
Today there are many examples of platform businesses. Airbnb, Uber and Alibaba spring to mind — and it is obvious how they have disrupted the hospitality, transport and retail industries.
A platform relies on an ecosystem with four types of players:
· Owners control governance and intellectual property
· Providers interface with users
· Producers create offerings
· Consumers/users use the offerings.
The following diagram shows this ecosystem for Android, where Google is the owner, manufacturers of mobile devices are the providers, app developers are the producers, and buyers of Android devices and services are the consumers/users.
The assets of a platform-based business are the community and the resources contributed by its members. The chief asset is the network of producers and consumers. Value is created by facilitating interactions between them and by maximizing the total value of the ecosystem. The skill of the owner shifts from dictating processes and managing activities to attracting participants and providing governance for behavior on the platform.
A prime example of this is in the story of Apple. In 2007, when Apple entered the phone market, 90% of global profits in the industry went to Nokia, Samsung, Motorola, Sony Ericsson and LG. By 2015, Apple generated 92% of global profits and most of the earlier group were making no profit at all. Apple — or perhaps Steve Jobs — saw that the iPhone could be more than simply a product. It could connect app developers to app users, creating huge value for both sides, and growing participation exponentially. By 2015, the AppStore offered 1.4 million apps and had generated $25 billion for app developers. Apple had set up a “platform” that benefitted its own devices, through the huge benefit it built for other participants.
Porter’s forces on a platform model
Porter’s 5 forces still apply, but they behave differently on a platform.
Firstly, the “network effect” comes into play. The driving force is not the supply-side, as for pipeline businesses, but the demand-side. “Higher volume” is not measured in sales but in the number of participants on the platform and the number of interactions there are. Suppliers and customers are not seen to be threats because of their bargaining power, but as assets that add value to the platform.
The larger the network, the better the match between supply and demand and therefore the higher the average value per transaction. This then grows more participation, which creates even better value. This is a virtuous cycle that grows market share. For example, we have seen Alibaba take over 75% of Chinese e-commerce transactions; Facebook dominates social media; Google accounts for 82% of Android mobile operating systems.
Secondly, parties can play different roles. An Uber user can become an Uber driver; an Airbnb user can be both a customer and a host.
Thirdly, despite external players being the asset, they can also become a threat. This can be because they defect to another platform that better meets their needs. Or they may try to set themselves up in competition. For example, Zynga produced games on the Facebook platform, then tried to set up on its own and to take its customers with it. Many telecommunications companies have become platforms, connecting providers and consumers. So, for example, Netflix is a provider of VOD (video on demand) on the platforms of telecommunications companies. It uses the infrastructure belonging to these companies, who have no control over Netflix interactions with users. If there were to be any unprofessional behavior or poor-quality products this can tarnish the reputation of the platform. Owners must establish clear governance parameters to prevent this.
Fourthly, the threat of substitute products and services is probably heightened in platform-based businesses as technology becomes obsolete and new ideas appear with incredible speed. Flexibility becomes key to survival — even if this means completely abandoning your original product for something new that you can introduce to your user base. This is possible in a platform-based business because the asset is the community, not the product. For example, Apple abandoned the iPod for the iPhone, even though the iPod was still very successful. Steve Jobs knew that if Apple didn’t, someone else would add music to their phones and he’d lose both the iPod profits and the customer base.
How competitive is Play2Live in the platform environment?
Play2Live has deliberately set itself up as a platform ecosystem rather than a product. It is based on its blockchain called Level Up Chain and is designed to provide an end-to-end solution for streamers, gamers and eSports fans.
Play2Live has included all aspects of the gaming and eSports environment into its ecosystem. This includes streamers, viewers and tournament organizers on a primary level, but adds bookmakers, producers and designers of games, suppliers of in-game items, streaming of major tournaments, P2P CDN and cloud services.
The platform has been set up in such a way that all participants can benefit from monetization options — whether this is for an individual’s first streaming, a viewer voting for the format of a tournament or watching an advertisement, a seller of a game or a bookmaker. There are 15 different revenue streams on the platform, and 11 of them are shared with participants.
The main function of the platform itself will be implementation and maintenance of technical functionality. Other interactions will be direct and transparent, due to the use of blockchain technology. Blockchain technology provides tokenization, speed, transparency, security and availability.
It is completely flexible, able to shift and adapt as needs change. The platform itself is designed to be robust enough to support completely different businesses in the future if required.
All of these features make it extremely competitive — not just in the gaming and eSports markets, but in any other market it chooses to move into, once it has grown its user base.
Competitive measure 2: Choosing the right competitive strategy
Competitive strategies for platform-based businesses
In platform businesses, it is not always obvious who the competitors are. The competition can come from unexpected sources, but tends to follow three main patterns:
The first is where an established platform, with a strong network, leverages its relationship with its customers to enter into a completely different field. For example, Google started in web searching, moved to maps, mobile operating systems, voice recognition, and now even into driverless cars and home automation. A technical “pipeline” company like Siemens would have had its eye on competition from other technical companies as it moved into the internet of things (IoT) and home automation — but it would not have anticipated that Google would be a competitor for thermostats in the home.
The second is where a competitor targets your customer base with an offering that leverages network effects. This is what Airbnb and Uber have done to the traditional hotel and taxi industries.
The third competition is when platforms that collect similar data to you, start to go after your market. A very good example of this would be the convergence of the health industry with IoT (the Internet of Things). For example, the number of “wearables” providing health and fitness information is predicted to grow from 46 million units in 2014 to 285 million in 2018. This might include watches to monitor exercise, fitness levels, heart rates, etc (Apple again), pacemakers that communicate directly with cardiologists, glasses that will monitor your eyesight and advise on correction.
What is the best way for Play2Live to be competitive?
Play2Live is positioned to take advantage of the second pattern. It will be able to target the customer base of existing streaming platforms because it will leverage network effects.
What makes it different from the current leading platforms like Twitch or YouTube is that it is blockchain-based. This allows for direct interactivity between participants that is not possible on current platforms. Blockchain also allows for easy monetization of all interactions on the platform, using the internal LUC token as the medium of exchange. The LUC can easily be converted into other cryptocurrencies or into fiat. It can also be used for crowdfunding of tournaments, for escrow funds, for the security of betting and payout of winnings.
Play2Live will need a huge marketing effort to attract the first groups of popular streamers, tournament organizers, bookmakers and others to its platform, as it does not have the brand recognition or customer base of a Google or Amazon, or even a Twitch. However, because it has designed such attractive and generous monetization options, once it gets started the “network effect” is likely to quickly grow the numbers.
And then it will be able to take advantage of the first pattern and avoid the dangers of the third. It will be able to move to new fields if the market shifts.
Conclusion — Play2Live meets the competitiveness challenges
So …. It looks as if Play2Live is well positioned to be competitive when measured against both traditional measures and against measures for platform-based businesses.
In Part 3, we will look at how well it will be able to deal with the fast obsolescence of technology and the threat of new products and services.
Stay tuned!
