Casual games business models

Casual Connect Magazine had pretty informative article on casual games business models. Here are some points from the article. The article described 6 business models for casual games.

1) Advertising-Supported Games. There are four alternatives: 1) In-Game, 2) Around-game, 3) Product placement and 4) Advergames. In-Game Ads refer to dynamic advertising containers in the game. Around-game advertising cover ads which appear on top of, before or after the game experience. E.g. banners belong to this category. Product Placement -- yep, game character use Nike shoes and drink Pepsi and Advergames are games that serve as advertisements. Burger King advergames are one of my favorite ones.

Benefits of advertising-supported games are that they are dynamic, interactive and they overcome the payment barrier. On the other hand push-back from players is a very real worry. Many gamers feel that ad supported products should be cheaper. When doing badly they can also disrupt the game experience. Also not every game really suits to advertising. Think about WoW type of games having advertisements of modern products hangings from the trees.

2) Retail games is always an option. Game publishers sell the games, one by one, to consumers. In this digital age physical brick-and-mortar can become a challenge. Then again Nintendo Wii and other physical game consoles and games are doing very well at the moment. From the viewpoint of casual games which are often smaller games (shorter, smaller file size etc.) fit better to digital distribution. According to Casual Connect the audience fragmentation has resulted in the emergence of specialty online stores which are dedicated to specific genres of games.

Retail games (physically and digitally distributed) have a broad audience. According to the article 200 million people play casual games and spend over $2.5 billion on them in 2008. Retail represents a channel for getting games in front of people e.g. at department stores. Weakness might be the challenges of retail (price, logistics etc.). Would casual games hit the premium shelf at the store - maybe not? Retailers need to stock fast-selling inventory and are unwilling to take unknown genres or lesser-known brands.

3) Subscription services is the third alternative. For a regular monthly or annual fee, the subscriber gets unlimited access to certain content, usually in the form of deluxe downloadable games. On the positive side only a small portion of people purchase more than one game via the dominant trial-to-purchase model whereas subscription services can enable ongoing revenue streams. On the negative side subscription services require maintenance.

4) Virtual object purchase has been in the headlines for several years already. Some claim that to be already bigger source of income than in-game advertisements or similar. The strengths: high margin model for developers.

The most expensive part of game development is the initial product launch. New content can bring people back to a title or keep them interested. Digital objects give gamers the ability to control their purchasing experience by presenting options for content. Downloadable content can also be a welcome break and boost to team morale after the time intensive development processes associated with core titles. Weaknesses include payment methods. Margins are easily eroded by credit card transaction fees. A large catalog of digital goods can create a paradox of coice. It can also add complexity to the game (grey market, selling-buying etc.).

5) Skill gaming referring to games which is determined by player's skill is yet another alternative. Standardized IP and existing market are strengths of this alternative. Weaknesses include regulatory threats and possibilities for fraud. Real money increases the attractiveness of skill games for hackers and cheats. It is proximity gaming after all and moral as well as political debate is undergoing.

6) Pay-per-play maps a game session to a cost just like in game arcades. The pricing model is flexible which makes players spend easily several quarters for the game focusing just on games like. One can try before buying the game. Weaknesses include cannibalization, consumer comfort and mode complicated purchasing.