New Business Models, New Opportunities

by , Mar 6, 2009, 3:15 PM
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There's a new, emerging trend in core video game business models: the downloadable content (DLC) "tail."  Most recently, Microsoft announced that the expansion for "Grand Theft Auto IV, The Lost and Damned," trounced previous sales records for the first day release of DLC.  While company didn't release specific sales figures, still the event was clearly a shift.

What do the following games have in common?

 

  • "GTA IV"
  • "Fallout 3"
  • "Mass Effect"
  • "Fable II"
  • "Left 4 Dead"

They actually have two things in common: they were critically acclaimed upon release, and they have, and/or will be, releasing substantive add-on DLC.  In fact, so far in 2009, many of the titles most acclaimed by the gaming press have been these add-on releases.

The model makes a lot of sense for game developers.  Add-ons don't cost nearly as much to produce as building an entirely new game, they cut down on the rental and used game markets by providing utility to titles well past release, and they introduce a new potential revenue source based on an already successful property.

The new model also presents an interesting opportunity for marketers.  Static in-game advertisements, which typically allow greater creative integration -- but at the cost of an expensive and time-consuming process -- are a big gamble.  The success of the campaign is directly tied to the success of the game release, and if the release date of the game gets pushed, tough luck for the campaign.  As a result, we've seen a drop-off in static in-game executions, down from what was already a less-than-popular practice.  But DLC offers a new opportunity.

It's quite likely that the bestselling titles of 2009 will have expansion packs in development before the original title is even released, based on how popular this business model seems to have become.  Marketers can then watch the success of titles that contextually fit for their brand, and approach the developers to integrate a static campaign into the add-on content.  This ensures at least (a) a built-in potential audience for the content; and (b) that while the content of the game is up in the air, the controls/graphics/gameplay is solid.  Both of these dramatically reduce the risk associated with static in-game ads.

I doubt static in-game advertisements will suddenly become the hot new thing, but this shift has certainly added some ideas for marketers to consider. 

[Full Disclosure: Josh Lovison works for the IPG Emerging Media Lab, which works with Universal McCann. Both Microsoft and Sony are agency clients.]

0 comments on "New Business Models, New Opportunities".

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  2. Sean Ryan from Loki Partners
    commented on: March 6, 2009 at 5:10 p.m.

    Not only does follow up DLC reduce the risk of in-game advertising, but it also creates an additional appetite for virtual goods sales since the publisher knows that the content will be successful - it should be a great lever to drive incremental virtual item revenue above and beyond the additional advertising revenue, even if the DLC content is free itself.

    Sean Ryan, Loki Partners

  3. Ken Ripley
    commented on: March 17, 2009 at 10:42 a.m.

    The value to advertisers in sponsoring the DLC as a free download is significant. Gamers understand that many times significant downloads are so expensive to make that they must be paid for in order to play them. However, if a marketer takes on the cost for the publisher/developer to create the content and then provides the DLC as a gift from the sponsor, the halo effect of the promotion can be significant. Additionaly, players in that partuicular game's communinty will appreciate the benefit of the advertiser providing them something of real value for free. For the advertiser, they will now be engaged with an opt-in, permission-given consumer. Sophisticated marketers who can align their brand's psychographics with a game franchise's player base will benefit greatly.

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