Games as services, games monetisation, video games

Extraordinary games businesses 1: Artix Entertainment

June 2009

For this month’s column I want to kick off a new series analysing some of the most interesting and successful companies operating at the fringes of the games industry, market pioneers and commercial innovators redefining what a games development company is and what it can achieve.

Our first target is Artix Entertainment, a company that I am guessing many of you will have never heard of. Artix develops Flash-based persistent browser games which it operates through www.battleon.com, its own games portal. Its portfolio is centred around four core single, multiplayer and massively multiplayer games titles. All feature classic role-playing gameplay and persistent game state tracking (i.e. your achievements and progress in the game are recorded on an ongoing basis) even for the single player games. The games are all Flash-based and played through browsers on almost all internet-enabled computers. They comprise colourful but basic manga-inspired 2D graphics with largely static backdrops and little by way of animation. As games aesthetics go, Artix’s games bear little resemblance to today’s retail console and PC titles.

However, as games popularity goes, Artix’s games rank alongside any of today’s console and PC titles, even the blockbusters. Since it was founded in 2002, Artix has attracted over 80m player registrations (currently increasing at a rate of some 200,000 per week) and gets 12m – 17m people playing its games every month. Most remarkably, Artix, a family run business, has built this vast online games user base with a headcount that has only recently reached 29 full-time staff. Of this, just 16 are based in its Florida headquarters with the remaining 13 telecommuting from elsewhere in North America and Europe.

Artix’s business model has matured over time whilst retaining one constant: complete commercial independence. Beginning with donations to help keep the servers running it has evolved to encompass one-off player upgrades, advertising, in-game promotions, retail cards, merchandise sales and, most recently, microtransactions and subscriptions. The one-off upgrade has historically formed the cornerstone of the business with players able to unlock premium features via one-off payments of $20 – $30. However, the problem with this model is that the high ticket price puts off many gamers whilst the one-off nature of the payment caps the potential revenue achievable per player and can result in a substantial mismatch between player revenues and ongoing player costs. Microtransactions, on the other hand, suffer few of these problems and, as elsewhere in the browser-based MMOG market, have now become a crucial part of Artix’s business. For its most recent game, MMOG AdventureQuest Worlds, Artix has also sensibly replaced one-off upgrades with a 3-12 month subscriptions costing $4-$6.50 / month.

Artix has never revealed any revenue or profit figures publicly. However, in its 7 year history, it has never raised any external capital and, according to its CEO, is sufficiently cash generative that it has never had a need for external finance having rejected numerous VC suitors. Artix’s potential for continued player base, revenue and profit growth remains strong. Its games are still only available in English and it has long-term plans to add several European languages and Chinese. Additional titles will be added to the Artix portfolio and may well follow the more commercially aggressive example set by AdventureQuest Worlds.

Artix is a very private company and exists largely below the games consumer press’ radar. Its games are neither previewed nor reviewed on the major games editorial sites despite reaching comparable player numbers to Xbox Live. Artix’s games do tend to attract quite a narrow demographic (the majority are 13-17 year old boys for whom accessibility, gameplay and community are more important than flashy graphics) but this is arguably one of its fortés and one of the reasons why it has grown so effectively without traditional games promotion. Artix maintains an extremely close relationship with its user base, listening to recommendations, implementing weekly content updates and running regular player events. Its games are therefore highly tailored for this demographic and regularly tweaked to maximise their appeal to them. As a result, word-of-mouth has played a critical role in growing the user base although this has been supplemented by more conventional web advertising methods. However, their direct marketing costs are still low.

Artix is an example of what a games developer can achieve with limited capital, a small team (by traditional development standards), tried-and-tested gameplay designs and an extremely strong service mentality. Far from being commercial or even creative inhibitors, the use of Flash and the web as technology and distribution platforms has opened up a broad range of new revenue and audience opportunities for Artix. From this relatively modest foundation, it has built a sustainable and rapid growth business model; a low cost-base coupled with direct consumer relationships monetised via multiple revenue streams, total creative and financial independence, and a sizeable gamer footprint.

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