Pricing strategy in video game industry Essay
Video Gaming industry has gone dramatic changes when increasingly more digital systems emerge and improved technology in lightweight devices, mainly in cultural games(Facebook, Myspace) and mobile games. 27% of US on the web population play at least one video game on online social network, and Facebook gaming revenue hit $1. 32 billion dollars in U. S industry in 20111. Also, as more than more people have smart phone especially apple’s iOS equipment, gaming application becomes more and more popular in mobile market(72% game applications on iTune)2. There are classic console game players just like EA, Activision, Nintendo and Ubisoft with this industry, also there are leading company in the social video game area including Zynga on the market.
Traditionally, gaming console games are offered in stores with $39. 99 to $59. 99 retail selling price for the whole dvd content. Hard-core games just like Call of Duty(Activision), Assassin’s Creed(Ubisoft) and the like. usually selling price at $59. 99 when casual titles such as Nintendo wii games cost around 30$.
Usually the pricing approach for these gaming system game businesses is the sector standard means every player with this market uses the same regulation as a similar price. It is usually considered as based on cost framework because of the number of years of creation (18 to 36 months), money-consuming game development cost and all sorts of add-on expense (packaging, advertising third-party license etc . )3 They also only have two months’ shelf period as the game lunch. Because of the high access barrier inside the console game industry and high manufacturer perception among customers, a number of main opponents dominate industry. The system game cost does not differentiate too much among these players.
However , since facebook’s serious success contributes to people’s behavior change to be social connected, a a lot of small businesses start to access social gaming market and undergo great time growth speed such as Zynga. Zynga’s charges strategy can be Free-to-Play and charging in-game ui micro-transaction products such as digital gift or buildings. The free-to-play concept is not really new from this industry since plenty of Korean online game businesses such as Nexon, NcSoft previously using this business structure while traditional online games use subscription model ($15.
99 per month) such as Regarding WarCraft(Blizzard) and EVE Online(CCP Games). Since the internet band width improvement plus more internet users in US(250 million)4, online games and social video games represent strong growth pattern comparing to traditional gaming console games. As users have more options in free games rather than high grade games, a lot more companies get into this market by offering products for free with micro-transaction options.
Zynga’s many popular subject CityVille has over seventy million regular monthly active users while best selling single console game Call up of Duty(Activision) has 18 million replications sold in US market. Facing the competition of Facebook game titles with liberal to play concept and excessive growth potential of online game market, some of the traditional package-good game businesses start to offer cross-platform Fb game titles to improve their expertise in the market including EA, Fiat and Ubisoft. Their main strategy is always to develop Facebook or myspace companion games(Free to Play) to presented console game title.
Individuals companions game titles not only present free-to-play game content nevertheless also allow users to unlock products in the main system game including Dragon Age Legend(EA). That they intend to leveraging their manufacturer awareness in the gaming sector, acquire even more users to experience main online games and increase monetization funnel to increase income. EA responded very quickly with this digital tendency by doing aggressive acquisitions for popular fb or mobile game companies.
However , a whole lot of additional traditional gaming console game firms react slower (Ubisoft, Sony) or will not change (Nintendo). Most of console game corporations conduct a conservative technique and will develop several social games(much short develop time) to make trial because total the gaming console retail revenue revenue is much higher than that in cultural and cellular market. Other folks are not in a position of next fast-paced digital step and suffered reduction (THQ laid off 200 personnel in 2011 as a result of decreasing product sales in full products).
Generally that enjoy hard-core online video console online games generally are generally not satisfied with the free-to-play cultural companion online games because of decrease quality of overall game content and totally different game play with primary games. A substandard companion merchandise of Facebook . com platform will certainly damage the company’s standing in this market for new users. However , considering that the users profile between down and dirty players (average 29 years of age male) and social players (average more than 30 years old female) are so diverse with very few overlap, that makes these types of console game companies unsociable to the inability of Facebook or myspace product.
Casino game market, however, the liberal to play options have a huge impact to customers’ options. For instance , World of Warcraft ( Most well-liked Massive Multiplayer Role Playing game, 12million users with $15. 99 monthly membership fee) lost 600, 500 users since 2008 although RuneScape(Jagex) (free-to-play game with subscription alternatives at $5) has one hundred and fifty million registered users and over 10 million active users.
Vent responded to competition since 2011 on free to Play options till level twenty in the game. An additional game God of the Wedding rings switched by subscription style to liberal to play style and found double earnings and 400% user development immediately. I recommend the costs decision machine in computer game industry to think about customer, firm capability, item feature, buyer and competitors’ issues.
Company Examine company’s positioning in terms of digital trend on the market and give attention to the products with higher profit margins Analyze company’s expense structure and allocate affordable resources upon other platform product development depending on financial forecast Product. Since console game goods have set price in the retail stores, determine other possible channels pertaining to monetization just like digital option contents, unique side-product bundle etc . Decide conceivable virtual buying items depending on the game technicians and game enthusiasts motivation (self-expression, social status and cultural network) Supplier Company and kind good romance with selling distributors for more resources about shelf occurrence and company promotion Buyer. Deliver social partner games with high-quality articles to enhance primary game Deliver sociable games that directly target Facebook users Enhance company manufacturer and establish community to highly engage with users Rival Learn from competitors on the digital content material development Expand to other country that opponents did not concentrate.