Category: Value Creation In Games


How Emergence Changes The Business Model

December 24th, 2013 — 10:23pm

In this final post on emergence in games, I want to talk about how emergence impacts the business model.

Discovery

Emergent games are inherently social.  The more emergent a title is, the higher the volume of novel content generated by the players:  there are more surprises, more varied progress, and more opportunities for self expression.  As a result, there’s not only more to share, but more that players want to share.

Just look at The Sims:  that product has more shared content than almost any other on the planet despite being single player and lacking built in viral hooks.  Or Minecraft, a game with no marketing budget and a ridiculous amount of commerce and distribution friction.  Giving players interesting things to share — and by interesting I mean things that appeal to non-players — dramatically increases the native viral coefficient for the product and reduces the cost of discovery.

Player Life Expectancy

In previous posts I’ve noted that emergence increases the possibility space for players, which in turn increases their engagement (by reducing the pattern matching problem and increasing the likelihood of finding something interesting to play).  Greater engagement increases player life expectancy, and players who play longer are more likely to monetize.  The data Kongregate has data been sharing the last few years is particularly compelling on this point.

Development Expense

Launching a live service-based product puts you on the content creation treadmill:  you’re in a race with your players to author content faster than they can consume it.  That’s a very expensive proposition for most games if they want to maintain player engagement (it’s not enough to re-skin content or re-purpose mechanics since players will have already pattern matched the play dynamics).

In an emergent game every tiny bit of new content combines with all the old content, refreshing it and exploding the possibility space all over again.  Balance issues aside, both initial and ongoing content creation costs are small and manageable.

The Business of Play

So emergence lets us use the underlying mechanics of the game itself to drive discovery, increase player life expectancy, and reduce development expense.  That’s a much better approach to long term sustainability than optimizing LTV > CPA and trying to re-capture players in another game when they churn out.  In fact, emergence allows us to re-think core assumptions about how we make games.

Our industry is in the business of selling experiences through play.  Traditional game companies make products with a finite life, and they offer players more play by creating new products.  This approach comes with some inherent problems:

  • A short product life cycle means the threshold for success is high.  You need a large audience to return enough revenue to cover expenses, which in turn drives up customer acquisition costs.
  • It’s very difficult to find this level of repeat success, so companies use portfolio strategies to offset risk.  This raises the success mark even higher, since now a few hits have to cover a bunch of duds.
  • Milking the hits you do find can help, but sequels only take you so far (see Eidos and Tomb Raider as one of many examples).  These product lines get tired over time, due in part to the small possibility space that offers little in the way of new play.

This is what we call a hit-driven business, because if you fail to keep making hits, you die.

With emergence, you offer players more play in the same product.  There is more play in one emergent game than in 100 traditional games.  I’m being arbitrary with that ratio, but my point is that the possibility space is so large players never run out of interesting things to do.   As a result:

  • These games last forever.  A long product life cycle requires a smaller audience to generate the same return, thereby reducing customer acquisition costs and making less competitive niche genres viable.
  • With a long product life and a large possibility space, you have a lot of flexibility to adapt your product.  You take multiple shots on goal with one game, not many.  That’s less expensive than building new products until one hits.
  • Games of this type stay fresh for a very long time — there’s less risk of player attrition due to product exhaustion, and there’s no need for sequels.

You have to re-prioritize many of the metrics we use for evaluating success if you’re going to build products this way, but if you’re willing to take the long view emergence can get you out of the high risk hits business and into a safer, more sustainable model for making games.

 

The entire series on emergence can be found here:

Games Have An Attention Problem
Attention and Emergence
Emergence and the Build-Try-Fail Loop
Key Challenges Creating Emergent Games
How Emergence Changes The Business Model


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The Value Of Content Is Falling, The Value Of Content Is Rising

March 5th, 2012 — 6:46pm

I’ve written before about how value chain barriers are dropping, enabling a more product to reach consumers than ever before.  While a boon for consumers (setting aside for the moment the noise/discovery problem), this is a challenge for content creators:  more product means more competition, driving down prices and unit sales.  So the value of content is falling.

But it’s also rising.  Lower barriers make it feasible to bring niche products to market that couldn’t be justified in the past.  And consumers will pay extraordinary amounts for products that address a niche they find compelling.  The evidence for this is all around us, from low budget CCGs (e.g. the now defunct Warstorm) to high budget strategy games (e.g. League of Legends), and it’s been happening for years.

We’re talking about products that generate $50 – $100 per paying user.  Per month.  Do the math and ask yourself how small a niche you can serve and what it will cost to build the product.  You don’t need to spend millions like League of Legends, or even hundreds of thousands like Warstorm.  There are countless underserved niches out there just begging for a product.

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The Culture Of Try And User Generated Content

February 20th, 2012 — 7:25pm

Last week I posted about how the acceleration of personal sharing over the past couple decades has created a “culture of try”, where consumers are much more willing to sample new things and aren’t turned off by poor experiences despite a high signal to noise ratio.

While this is significant for indie games, it’s also very important for any kind of game that depends on user generated content.  A willingness to try and fail, repeatedly, is being baked into our culture and expanding the ranks of those willing to create content in any particular product.

There’s a great blog post by Raph Koster from several years ago in which he observes that “everyone is a creator”:

“…the question is ‘of what.’ Everyone has a sphere where they feel comfortable exerting agency — maybe it’s their work, maybe it’s raising their children, maybe it’s collecting stamps. Outside of that sphere, most people are creators only within carefully limited circumstances; most people cannot draw, but anyone can color inside lines, or trace. If the games require serious commitment and challenging creation tasks equivalent to drawing from scratch, they will have smaller audiences.

This is, of course, the argument that some in the comment threads were making against complex ecologies, cool NPC AI, and so on. The logic goes that too much complexity will overwhelm the casual user. We must not forget that casual users aren’t stupid users, they’re just not adept at, or willing to invest in, that particular system. They are likely heavily invested in creativity in some other aspect of their lives.” (1)

A lot of Raph’s article is about the barriers many games (and products in general) leave in the way of consumers who want to experience it on their own terms.  I agree with his reasoning that improving accessibility enables greater creation and consumption on the part of users, but I think this masks the underlying cultural shift going on.  People have been conditioned by the internet to accept false starts, and this is helping them tolerate less accessible products.

Some rules, perhaps, to go along with this:

  • Rapid feedback is critical.  Failing is ok, so long as they know immediately.
  • Feedback needs to be obvious.  The reason for failure should be explicit so they don’t have to waste time trying to understand why it didn’t work.
  • The build-try-fail loop must be very tight.  You can’t expect a user to spend thirty minutes building something before they can try it, only to have to spend that much time again if it fails.
  • The act of creating itself should be a fun experience, not a means to an end.  Some of that will be intrinsic to the user’s desire to create that got them to the starting line, and some will simply be via the absence of barriers, but if your product is dependent on users making stuff there is no reason not to make this part engaging as well.

There are huge benefits to getting more users across even the most shallow creation line for a product, but the most obvious one is that “creators are the most voracious consumers” (2).  To extend that further:  more creators means greater consumption per user, and greater consumption per user translates to greater revenue per user.

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Footnotes:

(1)  I’d also recommend reading Dave Edery’s post on the benefits of UGC that Raph links to at the beginning.

(2)  That’s Raph again.  He’s going to think I’m stalking him pretty soon.

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Indie Games And The Culture Of Try

February 13th, 2012 — 6:34pm

I have this theory that consumers are more willing to try unknown and experimental products because they’ve spent the last fifteen years being inundated with email links encouraging them to check out funny videos, shocking pictures, political or religious rants, or whatever.  We’ve been receiving these links for so long that they’re no longer novel or nuisance — they’re part of the very fabric of things.

Since each of these links comes with an implicit recommendation from a friend to take a look — you got it via email, after all (or Facebook and Twitter these days) – it reduces security fears and compels you to proceed.  But you really have no idea what you’re about to encounter.   I believe the sheer volume and variety has broken down resistance to trying new things and set a low bar for results.  You expect it’s probably bad, but you’re willing to try it anyway because it’s new and fresh.

That’s huge for indie games.  Let’s face it:  most of them are crap.  But in a world where folks are at least willing to take a quick look anyway, these games are given a small chance to reach their potential.  Hidden gems are no longer completely buried for lack of attention, and even if the game is bad, consumers are not being turned off to the whole notion of indie games.

Of course, the causal link could be weak and there may be some other underlying factor (e.g. the internet has reduced the friction to communicate with others substantially, and the quantity of content itself has boomed thanks to new tools and technology;  either of those may be a sufficient explanation by themselves).  But it’s worth considering that, as much as the internet has balkanized different groups around specific subjects or opinions, people seem remarkably open to trying new things.

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Friction Innovation Vs. Engagement Innovation

February 7th, 2012 — 8:06pm

I’ve been posting a lot of recently about value creation in games.  Most of my attention has been on the engagement side of this equation, but for today’s post I’d like to talk about the relationship between friction reduction and engagement.

First, friction reduction (a.k.a. accessibility) is not in an inverse relationship with engagement.  In fact, they’re highly complementary, since advances in friction reduction reduce the barrier to entry, increasing the viability of more experimental products.

Second, I’d argue there’s been an amazing amount of innovation on the friction side the past 20 years.  So much that there’s been little incentive to innovate on the engagement side.  I’m not saying engagement innovation has slowed – it has probably increased as well, just not at the same pace as advancements in friction reduction.  But when reducing friction is improving product value so dramatically, why bother taking any risks in engagement?

Looking for evidence?  I give you the last decade’s increase in cloning as exhibit A.  The friction reduction benefits are so strong that companies won’t even risk changing the numerical values in the game (see the Yeti Town clone of Triple Town).

I expect this is cyclical.  Friction reduction will eventually run out of steam in our current ecosystem and likely commoditize to the point where it’s simply not a differentiating factor, at which point more attention will shift back to engagement innovation.  But in the meantime I think the engagement piece is underserved, and there’s an opportunity there.

I do have some concern that over the long haul we, as an industry, will lose some of our expertise in engagement innovation if an entire generation of game designers grows up in a world based largely on friction innovation.  We’re not there yet, but I find it striking how many folks don’t know there difference between the two.

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