RETHINKING VIDEO GAMES: EVOLUTION OF THE DIFFERENT BUSINESS MODELS
The global digital gaming market has taken the global media and entertainment industry by storm. The market for digital games is anticipated to expand at a CAGR of 15.7% and generate a revenue of USD 264.9 Bn by 2023. Out of the three platforms on which digital games can be played, the mobile gaming segment is the largest, having generated USD 45.2 Bn in 2017, followed by the console and PC segment.
A number of factors have contributed to the immense popularity of the digital gaming industry. The increasing number of smartphone users having access to the internet is the primary force behind the growth of this market. Technological advancements, such as a shift from 2G to 4G network has increased the number of digitally downloadable games and 3D games. The increasing adoption of e-Sports, especially in the Asia Pacific region, has encouraged gaming companies to invest in this segment, which in turn has bolstered the growth of the gaming industry.
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Business models shaping the digital game industry
The brick and mortar video game selling business model is long gone. Over the years, a number of business models have helped videogames make it big in the app economy.
The user gets a free version of the game and can later purchase new upgrades through in-app or in-game purchases. Companies find this model most profitable as it attracts a large number of consumers and this initial wide base of users is used to reap profits later, through upselling of premium services to them.
2. Pay to Play:
The users can download the game on their mobile or PCs in exchange for payment. This form of distribution is usually used for online game downloads (PC and mobile games)
3. Player to player:
In this model, the digital currency can be exchanged for real currency and vice-versa. Game manufacturers retain a cut from the purchases taking place inside the game.
In this model, advertisements are allowed within the game, for which the game developers earn a revenue. The advertisement can be played before the game begins or after it ends. The advertisement can be inserted within the game in the form of a banner or the entire footage can be played in between levels. This model is most commonly used in online games.
The customer is charged a fee for playing a game for a given period of time. Players all over the world, connect to a single central server and do not stop their subscription in order to keep the game continuously available to them.
At present, this business model is gaining massive popularity and widespread adoption. Consumers are needed to purchase additional digital content for their games. These include new game challenges, in-game items, new avatars, etc. The trend towards personalizing the gaming experience has ensured this business model remains a favourite among the crowd.
Lack of investment acts as a major roadblock to the mobile gaming industry. In the absence of funds, access to world-class infrastructure and talent becomes limited. The continuous need to create content that will capture the audience’s attention too is becoming an issue, as gaming experts say that all possible innovations and methods of gameplay have been explored. In spite of such limitations, digital gaming is still thriving and new business models are being explored to reap maximum benefits.