Game Publishing - old economy against new economy
The games industry is divided: Even before Games Convention Online and GamesCom it was clear that there are large differences between free-to-play online games and retail games. However the question is not where the obvious differences between these branches lie, but rather why the large, traditional retail publishers have placed so little value on the blossoming business in the free-to-play online games segment.
Our expert columnist Andreas Stock knows the answers, as he has over 15 years experience in marketing and business management positions (at Sega, Games Academy and Activision, among others). In a series of professional articles, Andreas will identify and explore the major differences between the traditional retail publishers and the publishers of free-to-play online games.
Why traditional publishers are (still) not active in the publishing of browser games and are content leave it to the “newcomers.”
Marketing of offline games: Then and now
In the days of the Game Boy, whose screen only allowed black and white, marketing was still very simple. There were a few great game magazines to buy from the newsstands, sales were primarily conducted via toy retailers, and there were only a limited, manageable number of titles available. Pirated copies were a rarity. The only thing that it had in common with today is the debate about how dangerous games are.
Nowadays there are more console platforms, more handheld devices, mobile phone games, online games and offline games. The game magazines are having a difficult time of it, increasingly losing gamers to the internet. Today only a small portion of sales are through the toy retailers. These days you can shop at Mediamarkt and co., or you just download it directly from home, and pirated copies make it difficult for the PC games market to survive. Marketing budgets are primarily spent on television advertising and the support of store-based retailing. Even though internet advertising is increasing, it is still a very small part of the total budget.
Traditional publishers
Traditional publishers have become sluggish regarding the marketing and business models of their primary business. And this in one of the fastest and more innovative industries in the world. In principle, everything is still conducted as it was 15 years ago. After a game is finished (2-3 years production time), it is brought to the stores (slight improvement: nowadays you can also download the game), and marketed. After that there are add-ons and sequels in intervals of 1-2 years. 80-90% of revenue is still earned exactly like this. Why is this and why is no one interested in the lucrative browser games market?
First, the industry has finally become what it always wanted to be: a mass market. Thanks to the Ninteno Wii and the Nintendo DS, gaming has taken on a mainstream character world-wide. TV adverts now find themselves in an expensive advertising environment in order to reach their target groups. Here energy and advertising money is focused on only a few top titles. A FIFA title and Call of Duty can generate global revenues of more than 100 million Euros in the first three months. Anno 1404 alone sold more than 100,000 copies in Germany in the first week. That means retail revenues of 4.5 million Euros in one week! These numbers make investors happy and increase share values. This total concentration on the main business leaves little time and personnel for fringe business such as browser games.
Secondly, the headquarters of these international publishers are staffed by the same personnel as the other large companies. Their current employees come from Coca Cola, Mars, etc. They bring with them enormous knowledge about the marketing of mega-brands, and they are experienced at dealing with marketing and budgets of millions of Euros. How can someone like this market an online game using social networking, or with only a 5-figure budget? That means that the personnel at the large publishers are not suited for such a task. For comparison, below are two lists of sample marketing measures:
1. Marketing by traditional publishers (EA, Activision, etc.)
- Market researchMarket research
- TV advertising (40-50% of the budget)TV advertising (40-50% of the budget)
- Retail (25-35% of the budget)Retail (25-35% of the budget)
- PromotionPromotion
- Advertising allowanceAdvertising allowance
- POS materialsPOS materials
- PrintPrint
- RadioRadio
- CinemaCinema
- PR (events)PR (events)
- Trade fairsTrade fairs
- Online marketingOnline marketing
- WebsiteWebsite
- External hotlineExternal hotline
- Joint marketing with other brands (Coca Cola, Adidas)Joint marketing with other brands (Coca Cola, Adidas)
Conclusion: There is hardly any direct contact with the end user. The focus is clearly business-to-business: the mass public is reached primarily through TV and retailers. Time line: The business plan is fixed 1 year before release (production lot, prices, marketing plan), the product demo is 1-3 months before release, advertising is concentrated on day 1, and then on mid- and low-price target groups, or around Christmas, Easter, or the release of the feature film.
2. Browser game publishers (freemium)
- Online marketing (Google Ads, banners, etc.)
- Still not much TV
- Little market research (trial and error)
- Employee marketing (Xing, LinkedIn)
- Community
- Website
- Affiliate marketing (cooperation with other websites)
- Youtube
- Mouth to mouth
- Trade fairs
Conclusion: The game itself is the marketing and it is constantly being improved. The player is thus involved and helps to market the game (virally) and improve it. Direct contact with the consumer leaves more money for acquisition of new customers. Try before you buy.
Thirdly, nearly all publishers are listed on the stock market and thus have the typical “quarterly” mindset. The shareholders are initially not very open to new business models like freemium. This view will only change when the browser game market has reached a certain volume world-wide. Then browser game companies will be bought out and publishers will develop their own games.
Outlook
I see the browser games market as a very large growth market, one which the traditional publishers will not pass up. There will be a process of concentration, as many small companies are currently entering the market and this will lead to an overabundance of games. However, the possibility to reach players in Peru or Saudi Arabia who want to play but would never buy a console or an offline PC game enables marketing of a whole different dimension. And this close contact to the players creates a strong bond for retaining customers.
