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Whales, power laws and the future of media<br />Nicholas Lovell<br />GAMESbrief<br />
Nicholas Lovell, GAMESbrief<br />Author, How to Publish a Game<br />Director, GAMESbrief<br />Clients include Atari, Chann...
Mythbuster 1: Publishing is about content	<br />10%<br />90%<br />Books<br />15%<br />85%<br />Newspapers<br />$200m<br />...
Publishers add value used to add value through distribution<br />
Publishers add value used to add value through distribution<br />
Publishers add value used to add value through distribution<br />
The Internet has made distribution easy<br />
Great news for content creators<br />Content distributors, not so much<br />Ballpark, I estimate 50% of people in content ...
Mythbuster 2: All users are not created equal<br />Circulation<br />Units sold<br />Audience<br />Platinum disc<br />
Users come in all shapes and sizes<br />Grazers<br />Buyers<br />Sneezers<br />Spenders<br />Browsers<br />Socialisers<br ...
The price/demand curve<br />In an era of physical distribution, you need to set a single price<br />For games, around $40<...
Now we let users set the price<br />Hypothesis: Allow users to choose how much they spend on your product, and your revenu...
LOTRO and Everquest II going soon</li></ul>$3<br />$5<br />$5<br />$1<br />$5<br />$3<br />$10 MMO subscription<br />$3<br...
WRONG!<br />
Allowing users to choose how little to pay is not the secret<br />We all knew that 95% of users played for free<br />We no...
Doh, we knew this all along<br />“90% of gamers don’t finish a game”<br />A forum community is typically <10% of purchaser...
Darkwind – an indie example<br />Mean: 107 events<br />Median: 60 events<br />Mode: 1 event<br />
Find the whales<br />
So how do we make money from the power law<br /><ul><li>Loyal repeat users
LTV: $247
Hardcore users
LTV: $1,000</li></ul>Lords<br />Kings<br /><ul><li>First month purchasers
LTV: $46</li></ul>Knights<br /><ul><li>One time purchasers
LTV: $12 </li></ul>Commoners<br /><ul><li>Free players
LTV: $0 </li></ul>Peasants<br />
Or as I put it, focus on the whales<br />
Mythbuster 3: People pay for content<br />
It’s deeper than that<br />
People pay for status, for emotions, for feelings, for progress<br />People will pay to:<br />Fit in: “everyone else has g...
You promised you would talk about something other than games!<br />
What happened to music?<br />Say 90% of users want to pay nothing<br />10% would happily pay $100<br />So 90% pirated and ...
It didn’t have to be that way</li></ul>$10 album price<br />Demand<br />
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Whales, power laws and the future of media

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The emergence of free-to-play games has revealed new truths about media consumption. Not all users are created equal. Some have little interest in a game and will only play it for free; others are so committed they will spend tens, hundreds, even thousands of dollars on a single title.


Drawing on examples from the music and games industries, GAMESbrief’s Nicholas Lovell charts the end of the “one price fits all” business model, the emergence of high-rollers as the primary driver of revenue and the dire consequences for games and media companies that fail to adapt.

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Whales, power laws and the future of media

  1. 1. Whales, power laws and the future of media<br />Nicholas Lovell<br />GAMESbrief<br />
  2. 2. Nicholas Lovell, GAMESbrief<br />Author, How to Publish a Game<br />Director, GAMESbrief<br />Clients include Atari, Channel 4, Channelflip, Firefly, nDreams and Rebellion<br />@nicholaslovell / @gamesbrief<br />
  3. 3. Mythbuster 1: Publishing is about content <br />10%<br />90%<br />Books<br />15%<br />85%<br />Newspapers<br />$200m<br />$50m<br />Games<br />Publishers add value through DISTRIBUTION<br />
  4. 4. Publishers add value used to add value through distribution<br />
  5. 5. Publishers add value used to add value through distribution<br />
  6. 6. Publishers add value used to add value through distribution<br />
  7. 7. The Internet has made distribution easy<br />
  8. 8. Great news for content creators<br />Content distributors, not so much<br />Ballpark, I estimate 50% of people in content distribution will be out of work over the next decade<br />BUT many more content creators will be able to make a living from producing and distributing their own content<br />
  9. 9. Mythbuster 2: All users are not created equal<br />Circulation<br />Units sold<br />Audience<br />Platinum disc<br />
  10. 10. Users come in all shapes and sizes<br />Grazers<br />Buyers<br />Sneezers<br />Spenders<br />Browsers<br />Socialisers<br />Gawkers<br />Influencers<br />Recommenders<br />Passers-by<br />
  11. 11. The price/demand curve<br />In an era of physical distribution, you need to set a single price<br />For games, around $40<br />PRICE<br />“It’s great <br />value, I’d have paid much more”<br />“That’s too expensive for me”<br />Demand<br />
  12. 12. Now we let users set the price<br />Hypothesis: Allow users to choose how much they spend on your product, and your revenues will go up<br />PRICE<br /><ul><li>DDO revenues up 500%
  13. 13. LOTRO and Everquest II going soon</li></ul>$3<br />$5<br />$5<br />$1<br />$5<br />$3<br />$10 MMO subscription<br />$3<br />$3<br />$3<br />$1<br />$5<br />Demand<br />
  14. 14. WRONG!<br />
  15. 15. Allowing users to choose how little to pay is not the secret<br />We all knew that 95% of users played for free<br />We now know that 80-90% of revenues come from 0.5% of users<br />PRICE<br /><ul><li>Spending $50 - $10,000 or more</li></ul>Demand<br />Free: 95%<br />Paying: 5%<br />80-90% of revenue from 0.5% of users<br />
  16. 16. Doh, we knew this all along<br />“90% of gamers don’t finish a game”<br />A forum community is typically <10% of purchasers<br />We knew it for time; we didn’t make the obvious leap to money<br />
  17. 17. Darkwind – an indie example<br />Mean: 107 events<br />Median: 60 events<br />Mode: 1 event<br />
  18. 18. Find the whales<br />
  19. 19. So how do we make money from the power law<br /><ul><li>Loyal repeat users
  20. 20. LTV: $247
  21. 21. Hardcore users
  22. 22. LTV: $1,000</li></ul>Lords<br />Kings<br /><ul><li>First month purchasers
  23. 23. LTV: $46</li></ul>Knights<br /><ul><li>One time purchasers
  24. 24. LTV: $12 </li></ul>Commoners<br /><ul><li>Free players
  25. 25. LTV: $0 </li></ul>Peasants<br />
  26. 26. Or as I put it, focus on the whales<br />
  27. 27. Mythbuster 3: People pay for content<br />
  28. 28. It’s deeper than that<br />
  29. 29. People pay for status, for emotions, for feelings, for progress<br />People will pay to:<br />Fit in: “everyone else has got a Santa Hat, I want one too”<br />Stand out: “Look at me with my twin flaming swords of Poinsettia”<br />Fit in AND stand out: “Hey, we’re the guild where everyone wears purple”<br />Build friendships: “Here, let me give you some flowers as a sign of our friendship”<br />Flirt: “Here, let me give you some flowers as a sign of things to come...”<br />
  30. 30. You promised you would talk about something other than games!<br />
  31. 31. What happened to music?<br />Say 90% of users want to pay nothing<br />10% would happily pay $100<br />So 90% pirated and 10% paid $10 = revenues falling 90%<br />PRICE<br /><ul><li>There was no mechanism for the whales/high/rollers/true fans/kings
  32. 32. It didn’t have to be that way</li></ul>$10 album price<br />Demand<br />
  33. 33. Bands and managers are waking up<br />Nine Inch Nails<br />$300<br />First 2,500 only<br />OK Go<br />$25<br />Live recording of gig you’ve just been to!<br />U2 by U2<br />$30<br />Coffee table autobiography<br />Mos Def<br />$40<br />T-shirt with code to download The Ecstatic<br />
  34. 34. One-size-fits-all pricing is dead<br />Revenue opportunity<br />PRICE<br />Marketing opportunity<br />Demand<br />
  35. 35. Mythbuster 4: Free players are freeloaders<br />Free users are insanely important<br />They are:<br />Potential converts<br />Eyeballs for advertising<br />Leads for lead gen deals<br />Influencers through virality and word of mouth<br />Gawkers<br />Every single player has value<br />
  36. 36. Morph – a though experiment<br />Business model 1<br />Make an iPhone App<br />Offer a Lite version and a 99¢ game<br />Business model 2<br /><ul><li>Make a free iPhone App
  37. 37. Incorporate ads for a limited edition, 1,000-only print of the original Morph, framed for your wall for $999
  38. 38. Conversion rate of 0.1% = same revenue (oh, no 30% to Apple)</li></li></ul><li>Power laws are the future of media<br />The era of “all users are the same” is over<br />The music industry has suffered the tsunami and barely survived<br />Blockbuster games *may* survive, but nothing less than Quadruple-A will cut it<br />Other games will need to adapt to the power law or die<br />Television ...<br />
  39. 39. My advice<br />If you don’t have a way for whales to spend unlimited amounts of cash, you’re in trouble<br />Look after the whales<br />Treat your freeloaders with love and respect; they never stop being valuable<br />All users are not equal. Tailor your products accordingly<br />Sales, marketing, revenue generation. These are all part of the creative process now. Have fun. <br />
  40. 40. Thank younicholas@gamesbrief.comFollow my blogwww.gamesbrief.comBuy my book<br />
  41. 41. Sources<br />Going Free Boosts Turbine's DDO Revenues 500 Percenthttp://www.gamasutra.com/view/news/27416/Going_Free_Boosts_Turbines_DDO_Revenues_500_Percent.php<br />What’s the lifetime value of a social game player?<br />http://www.gamesbrief.com/2010/06/whats-the-lifetime-value-of-a-social-game-player/<br />

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