1. REVENUE MODELS FOR DIGITAL GAMES BSc thesis seminar 23.4.2013 Ville Majander

2. Overview  Subject definition, scope and motivation  Digital games business  Revenue models in the digital marketplace  Revenue models for games  Findings and conclusions

3. 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

4. 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?

5. 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

6. 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

7. 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

8. 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

9. 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