Revenue Models

All posts tagged Revenue Models

Introduction

With the recent decision by EA to charge $10 for online play for used games, I began to wonder what is the reason for this. The conclusion I came to was a desire to create multiple revenue streams without having to create new content.

To better understand this concept, we need to look at other entertainment industries. These are Movies, Music and Books. The following examples are based on the production of a single work. (eg Movie, album, book, or game) The listed revenue streams are not all encompassing as things like licensing and product placement revenue are not listed. The listed revenue streams are the direct to consumer streams.

Movies

The video game industry most often gets compared to the movie industry due to budget, crew size and marketing. But I don’t think i have ever seen a true comparison on revenue streams though. So how does the movie industry earn their income?

Theatrical Release

When a film is released to theatres, people will pay around $10 for a single viewing. People choose to do this for the experience of seeing the film on a 50 foot screen with 30 speakers blasting sound. This experience is also useful for dating and hanging with friends. For many films the theatrical release will produce enough income to break even on expenses and start bringing in profit.

Video Release

Eventually a film will be released on video in a variety of formats. Instead of being sold in single viewing tickets, the film is now sold for lifetime home viewing. The experience is dramatically different from the theatrical release, but it is compensated for by the lifetime viewing privilege. The video release also brings with it the ability to include additional content such as deleted scenes and commentary.

Results

In the end, the movie industry have two very different revenue streams in which the consumer is buying the same content more than once, but with vastly different experiences.

Music

The music industry has been compared mostly to the indie game scene. Its product and market is vastly different from games though. There is still some cross over, but not as much as with movies.

Concerts

With the music industry, bands have the ability to hold live performances of their music. This is a similar experience as that of a movie’s theatrical release. Again similar to movies, people buy tickets for a single concert experience. If they want to go to another concert, they must buy a new ticket.

Album Release

Bands and other musicians also have the ability to record their music for sale in a similar fashion to a movie’s video release. Such sales are for lifetime home listening. This gives the customer the ability to listen to their favorite music whenever they want. Yet, just as with movies, this experience is vastly different than the concert experience.

Results

Just as with movies, the music industry has two very different revenue streams that do not rely on the production of new content. Yet the consumer of music is buying the same content with vastly different experiences.

Books

Interesting enough, books are the most comparable to games when it comes to possible revenue streams. By nature books are not capable very many revenue streams in which the consumer buys the same content multiple times.

With books there is one release. The consumer will most often buy a single copy of a book once in their lifetime. Publishers have attempted to compensate by releasing books in a hardback copy first with a high profit margin and then later in paperback with a slimmer profit margin. But most often a single consumer will not buy both the hardback and paper back copies of the same book.

Results

Books have very limited options for revenue. Since they are limited in their ability to sell the same content with different experiences as in movies and music, writers and publishers must create additional content to increase revenue.

Games

Finally we get to games. As I said  above, this industry is less like movies and music and more like books in its limits for revenue streams. As of now, we have a single release of games. Unlike movies and music we do not have a revenue model in which we can sell single use experiences that consumers are willing to buy into.

At one time we had arcades, but those did not fall into the same model as theatres and concerts do. Most games that were released in arcades never saw a home console release as the experiences were tied directly to the arcade. Those that did see console release were often vastly different due to technology constraints of consoles. The other downfall of arcades was the inability for large groups to share in the experience as is found in movies and music.

In the end we have a single revenue source of game sales. We are making up for this with the use of expansions and DLC but we have yet seen a model in which consumers purchase the same content more than once.

So what can be done to imitate the revenue models of movies and music? Is it possible to create a revenue stream in which the consumer experiences a game in a fashion that is not the same as they get at home? I don’t think that anyone has that answer right now.