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REVENUE MODELS FOR DIGITAL GAMES BSc thesis seminar 23.4.2013 Ville Majander
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Overview Subject definition, scope and motivation Digital games business Revenue models in the digital marketplace Revenue models for games Findings and conclusions
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Scope, motivation, methods Revenue generation methods ”Revenue model,” ”revenue logic,” etc… Digital games Games played for entertainment on digital devices PC games Console games Mobile games Research method: literature review High-quality academic sources for theory Media and industry publications for figures and business examples
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Research questions How have revenue models for digital games changed since their inception? How can digital games most effectively be monetized and what methods are available?
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Digital games ”Entertainment software” Large and pervasive industry Estimated $78 billion (2012) 72% of US households report playing (2011) The business of digital gaming relatively unstudied
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The revenue model A component of the broader business model Terms often confused The logic with which revenue is generated Direct sales with transfer of ownership Subscriptions and limited rights-to-use Advertising Value-added content and additional transactions
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Revenue models for games Direct sales still common Not necessarily the most effective Subscription and diversified revenue streams perform well E.g. World of Warcraft – the highest grossing video game ever Added income from value-added products Downloadable content (DLC) Premium features
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Revenue models for games, ctd. Sale of virtual goods and other value-added content Primary revenue models for >50% of games in Japan $2.9 Billion in the USA (2012) Free-to-play a growing paradigm Game is offered for free Revenue generated from in-game purchases Supercell expected to generate $400 million in revenues in 2013
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Findings Digital distribution is king Valve’s Steam-platform has an estimated 50-70% of the market New modes of distribution enable revenue model innovation A broad range of tools for monetization exist Parallels to the broader market for digital products may be drawn Change driven by performance Limited rights-to-use generate more income than transfer of ownership
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