Developing games for consoles was simple from a business perspective. Each year we'd put out a game or two, our publisher would manufacture it and ship it to retailers, and we'd get ~$6 per copy sold. If we wanted to maximize our return, our only avenue was to make the game as appealing as possible.
There were a few other financial strategies - but they were mostly dictated by publisher demands, not creative demands. Some games were targeted for $20 price-points, for example. Some games had a movie tie-in, to share marketing budgets with their respective films. But in every case the developer's mandate was clear: make the game high-quality.
The appearance of widespread digital distribution has changed things quite a bit from a financial perspective, but some of the fundamentals remained intact. Digital distribution 1 - allowed developers to essentially self-publish their games, and 2 - allowed for wild fluctuations in pricing, to find sweet sell-through spots. While retail shops had strong incentives to keep games at a consistent price, portals like Steam were able to try selling AAA games for $35, or $15, or $5. They'd have one-day sales, weekend sales, bundles - the pricing field was wide open.
The really interesting thing was that, according to a self-released report in 2009, lowering prices actually increased revenue. So they might sell 100 copies of a game this week at $10 each, but dropping the price to $5 the next week would spur 300 sales - a 50% increase in revenue. This sort of financial agility really showed the industry that digital distribution was not only more convenient - it was also more profitable, and more flexible than traditional retail.
At the same time Steam and other online stores were shaking up how consumers purchased retail games, a slew of Korean companies were making won hand over fist. (Lots of companies had tried this approach, but it was the Korean successes that kept everyone else working so hard.) These were the "microtransaction" games, which today we call "freemium" experiences. The idea behind a freemium game is that the game itself is free, but players may spend money to buy virtual items which allow them to adjust their experience. Most of these economies let real money substitute for time spent in the game - but that is not necessarily the only model. An important point about freemium experiences is that they are server-based, so customers are always just playing a client, and goods are stored centrally. Zynga is probably the best current-day example of a company which monetizes through the freemium model.
Freemium worked on some existing game archetypes (MMOs, primarily) but the model also enabled new design spaces, like persistent combat worlds and vanity social games (second life is a vanity game, but some people still think of it as a MMO). Freemium economics could easily be applied to any game which revolved around an economy - because payments could simply grant currency to players.
Apple's App store appeared after both Digital Distribution and the Freemium model were at least modestly well established. Initially, the App store looked like an isomorphism of Digital Distribution.
But the App Store isn't exactly like digital purchase portals. The app store "sells" free apps, and the store can be integrated directly into free apps. This allows players to:
- Grab games for free - like the freemium model.
- Buy items within the game - like the freemium model.
- Items are stored locally - like digital distribution
- Purchases are all wrapped within the store, which takes a 30% premium - like digital distribution.
The App store is a new approach, and it requires new design strategies to monetize your games effectively within it. They might not appear to be especially revolutionary on their own, but they challenge us to apply a bit of revolutionary thinking in how we design games which monetize in these ways.
There are four things happening in the App Store:
- Downloading free products from the store.
- Buying products from the store.
- Buying extended content (for games you already own) from the store.
- Paying to unlocking content from within a game.
Why would you pay?
The first revolution is to realize that people will no longer, in general, pay for your games unseen. There have been demos and the like for decades, but most console & digital distribution sales have always been based on a rigid "Buy before you try" mentality. Reviews and peer recommendations were a big factor in sales, and sales exploded in the first week, then trailed off steeply.
But on mobile devices you are strangling your future sales if you don't have a product people can play for free. If you have a very trusted IP, or an immaculate track-record you might still see healthy sales, but everyone else would be dead in the water.
In the last two years the most common model for a free version was the "lite" version. This didn't work especially well because of the self-contained nature of apps - they each have their own area in memory. Since lite and full versions were two distinct products, you couldn't transfer player data / saves / content between lite and full versions, which disincentivised players from upgrading. Going forward we'll see a majority of games shipping themselves for free, and allowing in-game upgrades for money. In-game upgrades are part of the same game, not a new game, and so they preserve all of your user data.
Why would you pay more for this?
Once people have your free game, you have two ways to actually make money:
1 - Show them that they like the game, and ask for a payment to unlock the "full" game.
2 - Tantalize them with additional content (characters / levels / powers) they want to buy a la carte.
These are not exclusive options - you can mix and match them.
Many developers weaned on the console generation have a bit of a rough time remembering to include a good slice of their game in the free version, and even more have a hard time deciding exactly what people might want to buy a la carte - not to mention budgeting time to create that add-on instead of core gameplay. But the greatest hurdle by far is learning to design these monetization opportunities into your game from the start.
A game designed to take advantage of monetization must be extensible. That means it must work, in some fashion, like a Lego structure - each component needs to have a natural place for additional components to join. If you build a menu - you need to build the system in a flexible fashion such that you have the option to introduce new menu-items without rewriting your engine. If you have a character select screen you need to make it scroll - so that your selection of characters can grow. Your list of levels should have hooks in it to add new levels, and your data files need to support new additions.
But even before that you need to design your game such that additional content is needed. If you are counting on full game unlocks, you need to design your game with a really awesome hook moment - right before you ask them (nicely) to unlock the full version. You need to show off this new content in some intriguing way - let them pick up but not fire one of 4 new weapons, or show them the next powerup they'll play with, or have them fight against an opponent they could subsequently unlock by purchase.
This turns the traditional marketing spiel upside-down. In console days marketing was a dance to convince people to buy your game - so every player had already been "sold." But now the hustle to sell becomes a part of your game experience. This is new - and it's something you need to plan for in pre-production, to put that monetization into the DNA of your design.
Here are six methods for infusing that monetization into your mobile app:
The Ski Jump
Build your game like a demo. It starts strong, gets stronger, and then ends with a bang that leaves your players aching for more. Then hit them with a request for a one-time fee while simultaneously promising them a lot more of the same.
The Sudoku Collection
Build your game as a series of unconnected mini-levels, and let players see how large the collection is both before and after they make a purchase. Purchase can be a lump sum, or a series of packs. You are leveraging the idea that your simple puzzle / physics mechanic is just the blast of gaming your players crave.
The Personalization Kit
This game is a complete experience already, generally revolving around some repetitive grind-tastic mechanic. You sell cosmetic upgrades to players which have no effect on gameplay, so that they have an opportunity to personalize their experience. This usually, but not always, takes place in a social setting, where individuality can shine through the rest of the player base.
Provide your players with a peek behind the curtain - create & share their own levels, adjust game variables, and otherwise tune their experience. Integration with social services like Game Center and Open Feint are toolkit-like features. (Though that integration should really be in your free version.)
Give your players assistance getting past a difficult area, or accelerate their experience in other ways. Money for time is the classic example, but money for experience or money for in-game currency works fine.
Offer your players some incredibly powerful - almost game-breaking item or upgrade. This feels a bit like a springboard - but it is significantly different. Whereas Springboards artificially inflate some attribute in order to help the player along, an Excalibur-level event fundamentally breaks the game.
None of these strategies are original, and none of them are especially hard to implement. But it can be a very different story if you already have a game, and need to graft on a monetization opportunity at the last minute. A few meetings and some early decisions about your game's monetization approach are absolutely required practice these days. They not only make your game profitable, they make that profitability seem natural.