Games as services, Uncategorized, video games

Developing a service ethos: Services and microtransactions to transform games industry

November 2007

Ask Nexon, the Korean providers of drive-away hit Kart Rider, about the challenge of online games development; their response is telling: “we’re not games developers, we’re service providers”.

With no monolithic games reliant on retail releases, Nexon appear to have very different business models to most western studios. Their games are free to play, making money from selling items which allow players to look cool, express themselves, play better, win competitive advantage, or meet people. 4m daily players and $9m monthly profit from virtual racing goggles and Santa hats is no mean feat.

As developer, publisher, marketer and distributor of their own games, Nexon interfaces directly with its customers daily. Optimised for broadband, their games break little new ground in design or graphics. Their business model dictates that games production is secondary to managing their customers, creating a platform that allows them to sell more cool stuff to players, who move their avatars between games, customising their identities as they go.

If you’re thinking this is hardly relevant to you, think again. While you may not build a massively multiplayer casual games platform anytime soon, chances are your games are all being dragged online by your friendly console manufacturer partners. Episodic and incremental content is coming – like it or not.

Microsoft announced recently that Xbox Live had sold roughly $25m worth of Points to users on Arcade and Marketplace, including several games that grossed $1m+ from post-launch content alone. In the same breath, Microsoft cautioned that uptake of this kind of content was below expectations. Hence the sales pitch about how splicing discrete bits from your game costs little and delivers a hefty margin from less price-sensitive consumers.

Sony too repeatedly preaches that moving to online services represents a fundamental change in how games are made, delivered, played and supported. It’s not simply a case of breaking games into chunks, or even changing or extending your pipeline to encompass frequent releases. I’d argue that the fundamental change is in how the developer manages and responds to consumers, which has huge impact on developers who are rarely structured to do that.

This challenge is visible in companies testing item sales on Marketplace. Finding the right items for the right price has involved much trial and error. Bethesda faced loud gamer disapproval when it tested pricing for incremental content in Oblivion, but sales are now impressive.

Well before launch, Sony too has come under fire for item sales plans in Gran Turismo 5, in which formerly free cars must be purchased via their online store. It may cost hundreds of dollars to drive them all, although some argue that matching price more accurately to usage is fairer since the most gamers fail to finish their games.

These are studios struggling to evolve from being production companies who fired and forgot their games to being service companies who must respond rapidly to what their customers want. It might help to take a leaf out of the Asian handbook.

The leaf in question isn’t technological or gameplay-related. It’s about how you work with your customer. Nexon’s items sell because it watches and listens carefully to its customers, endeavouring to satisfy their needs. For all but a few with online experience, most developers’ sum experience of live customers is providing patches, technical support, and solving installation problems. Rapid response to consumers is a matter of months not days.

Inevitably studios will be shoved into direct contact with consumers – how else to find out what has sufficient perceived value to sell for £1.50? Answers to these questions are ultimately in your consumer’s hands – in what they, and not your studio’s creative director, perceive the value to be.

So, instead of simply planning how to build Santa hats, you also need to know who will buy them for how much. That means a change in mindset to develop direct and permanently open links to the consumers themselves.

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