Many digital distribution platforms such as the iOS App Store and Steam have allowed content producers to operate the freemium business model. In this model, consumers can download a barebones version of a game or app for free, but then have to pay for additional features such as downloadable content or enhanced functionality. The freemium business model removes consumers’ barriers to adoption and allows consumers to more flexibly pay the exact amount of money they are willing to spend. Not surprisingly, the freemium model has taken off in the last few years: in 2016, 76% of all apps on the iOS App Store and more than 11% of the games released on Steam operated the freemium business model. We do, however, know very little about how the choice of this business model affects consumers’ willingness to spend time and money on digital content.
Joost Rietveld
Associate Professor in Strategic Management
UCL School of Management
Posts Tagged ‘research’
Fighting the Console Wars (Google Ngram)
Posted byThe first generation of video game consoles was launched in 1972 with the Magnavox Odyssey. Today, almost four decades later, we are in the eight generation (Wii U, PlayStation 4, Microsoft Xbox One). In every generation, the producers of video game platforms are said to engage in a console, or standards, war. By Wikipedia’s definition, standard wars describe competition between mutually incompatible proprietary formats (i.e. video game consoles) that compete for the same market (i.e. gamers). Standard wars are often characterized by political and financial influence on content producers (i.e. game publishers) by the manufacturers of the technologies (console producers). Generations of video game consoles are usually typified by a clear winner (e.g. Nintendo’s NES in the third generation, or Sony’s PlayStation 2 in the sixth generation), due to strong (cross-) network effects that accrue to the platform with the most users. After all, a surge of gamers on a platform will attract even more gamers as well as producers of video games.
The Google Ngram above nicely documents the relevant video game console producers in the period 1975-2008 and how their fortunes fluctuated between different generations of consoles. This period includes generations one through six and clearly illustrates the rise and fall of Atari as a major console producer in the 70’s and early 80’s. After the video game industry crashed in 1983, Nintendo was praised for singlhandedly reviving it with the launch of the Nintendo Entertainment System in 1985 (in the US). The graph also illustrates the intensity of the ‘war’ between Sega and Nintendo that followed in the 90’s, and the latter’s firm’s demise after the Dreamcast failed to gain traction. Lastly, the graph shows how “new kids on the block,” Sony and Microsoft, have steadily gained market presence since their entry in the industry with their PlayStation (’95) and Xbox (’01) brands, respectively. The graph below adds and collapses the individual graphs to paint a strong picture of the video game industry’s growth over the last thirty some years. Enjoy!
PS. Google Ngram let’s you do lots of cool things, and you can use their source data of millions of books, too! Click here for more info.
ESA Video Interview
Posted byThis week I spent some time in Washington DC to give two invited talks to members, employees and lobbyists of the trade association for the US video game industry, the Entertainment Software Association. To fans of video games, the ESA is most well known for organizing the yearly E3 conference in Los Angeles. Their Vice President of Government Affairs, Erik Huey, also did a nice video interview with me on my work as a teacher and researcher. In the video I talk about platform economics for the console video game markets as well as the transition into digital distribution, both topics that are close to my heart and research. You can watch the interview above. For more information on the ESA check their website and Twitter accounts (@ESAGovAffairs; @RichatESA).