This week has been enlightening from a business point of view. My professor asked me to think of how a business model could make a product bigger, better, faster, and stronger. Since I am pursuing a career in web development and coding, my thoughts turned to some of the most successful online businesses I know of and at the top of that list sits the video game industry.
Over the past few years, the most successful video games have generated an enormous revenue by using what was traditionally considered an unconventional business model.
If we look at the history of video games, they were sold using the same methods as VHS tapes, DVDs, toys, etc. Physical copies came in boxes or cases and were sold at stores. With the rise of the Internet, video games were available for purchase online and could be downloaded onto a console or PC. For a period of time, MMORPGs (massively multiplayer online role-playing games) dominated the scene as video games that required a monthly subscription to play. Today, the most popular video games have taken that subscription model and revolutionized it in an unconventional way.
In the past few years, some of the video games that have generated the largest revenue in history have been free-to-play. League of Legends, Pokémon GO, and Fortnite are a few that come to mind. All of these games have been massively successful, and none them cost a cent to play. These games make their money by offering optional purchases in game that are often as simple as changing the way your character looks.
Brother Scott asked how a business model could make a product bigger, better, faster, and stronger. These games instantly become bigger because more people are playing them since they don’t have to purchase them and they have nothing to lose. For most, free is better than $60 upfront or $15 per month. Free-to-play games are faster because they can be downloaded directly and don’t have to be picked up physically from a store. Lastly, these games become stronger because they have such a large community which propels them to succeed.
How is it possible for a video game that is free-to-play to generate unprecedented amounts of revenue? Riot Games, the developer of League of Legends, summarized their business model in four values.
#1: Care about making a great game (or product), above all else.
#2: You can be the best player in the world without spending anything on the game.
#3: You spend because you want to, not because you have to.
#4: We will keep evolving and improving.
This business model offers the same service a subscription model game offers, but makes it free-to-play. They incorporated a merchant model by becoming an in-game bit vendor that offers optional services that are not required to play or even become the best.
This shows me that above all, if the product is truly great, then conventional business models can be broken. In fact, it should be so great (bigger, better, faster, stronger) that people spend their money not because they have to, but because they want to.
– Mathew Behling