Archive for the ‘Digital Distribution’ Category

Re-blogged from A-List: Why Publisher 2.0 is M.I.A.

Feature: Why Publisher 2.0 is M.I.A.

Re-blogged from the A-List, great article by Steve Fowler on the current state of games publishing and where the future is headed. The original article can be found here:

The video game business is changing rapidly thanks to growing access to and appetite for digital games. They’re everywhere, in your pocket, on your tablet, in your social network, even on your console. Look closely, however, and there is a disconnect in the digital game marketplace.

The audience for digital games, whether online, social or mobile, has continued to grow. Recent forecasts only point upward. There are quality products, and ever more sophisticated types of games. Yet there are an underwhelming number of bona fide hits, and evidently little marketing support for all but a handful of titles.

For nearly three decades the main source of revenue in the game industry has been packaged games sold at retail, and primarily for video game consoles. Early on these games were relatively inexpensive to make and could be completed in short periods of time. As technology advanced and the popularity of games grew, so did their complexity and sophistication. The perception that video games were toys shifted to seeing them as serious, and seriously lucrative, forms of mass entertainment. The business of games, from product development to sales and marketing processes, became scientific, formulaic, and with decision-making ever more reliant on predictability. It was increasingly beholden to major brick and mortar retailers as the predominant distribution channel, and with more and more real estate at stake inside these stores, distribution costs also began to soar.

As time went on, the industry became more risk averse. Once games settled into their role as mass market entertainment served through costly, controlled channels, they were like their Hollywood counterpart. The business evolved into primarily big risk and reward, with the chase for “mega” hits needed to offset investments. The side effect of this approach to creative enterprise is that it excludes many participants. It is more closed off to new ideas and anything seen falling short of having mass appeal. For games, these limitations meant fewer products coming to market serving segments of the core, or “mid-core” games, which have historically spawned game play innovations and new game IP.

Today, traditional games are more complex and expensive than ever. Console games can exceed $100 million in development costs and $50 million in marketing. For decades now the big publishers have scaled their operations to accommodate these “mega-games,” building massive infrastructure with huge overhead costs. Meanwhile, their interest in the “mid-core” market has shrunk drastically. They see successes in the category as contributing too little to their bottom line to be worth the effort. For the rare instances when they take on a mid-core game, their need to cover their risk introduces situations disadvantageous to the developer, usually with deal qualifiers such as complete IP ownership and exclusivity on future titles. These are risk mitigation tactics, essentially positioning the publisher so that it’s not left empty handed if the product or deal is doomed, even if it leaves the developer that way.

Without a channel to get their games to consumers, even if they had the means to turn their ideas into products, development talent was forced to fall in line. Then came digital distribution and things changed. Digital gave game developers direct access to players, hundreds of millions of them. It presented unprecedented diversity in gaming platforms, from hardware and interfaces to new types of games people were willing to try. The result has been a demand for innovative experiences unlike anything the industry has seen since the days of arcade cabinets.

Now that game makers of all stripes, from garage groups to crowd-funded industry legends, have made the jump to digital there should be a consistent string of hits. It hasn’t happened. The demand is there. The good games are there, and more by the day. Unfortunately some of the best experiences to ever target a gamer’s twitchy nerves are lurking out there with little to no following, or making a ripple when they should have made a splash.

It started with a bang. What happened?

Early on in the life cycle of these emergent digital platforms, if a developer had a great game it got noticed, and gamers likely told their friends about it. Remember when it was a novelty to see one of your friends had reached level 10 in Farmville. Suddenly people were asking, “Wait there are games on this Facebook thing”? Or when you got your first smartphone and immediately installed Angry Birds because it was the only must-have game. Now with over 700,000 apps on iOS and what seems like a new Facebook game every day, those days are over. Clutter is rearing its ugly head in every digital game marketplace, even in the free to play market where some mid-size developers are making big-time bets.

The problem starts with discoverability or awareness, which has become significantly more difficult for digital games. That’s the first step, followed by a series of successive ones critical in generating and sustaining an audience for any piece of entertainment. Taking people on a journey to drive consideration, investigation, fondness, and purchase intent. Strengthening customer relationships through brand building, customer engagement and community relations. Establishing lasting affinity that translates to fandom and evangelism. These are about making people care, evoking an emotional connection to the product if possible. More than anything, the marketing presentation itself has to be compelling, even entertaining.

There are digital publishing and marketing entities who say they understand the landscape, that they’re the industry’s publisher 2.0. But they’re forgetting these fundamentals. They simply stop at solving the discoverability issue and call it marketing. They’ll partner with a developer and check off boxes, helping submit their game and guiding it through certification, if necessary. Then they might put out a press release and chase it with some PR, at most spend a little money with a media referral partner. If this is the new formula of success in digital games, then why are so few people making any money?

What about the very innovators hoping to establish digital and get a foothold, could they be hindering its growth? It’s true for some of them. “Self-publisher” has become a favorite categorization for indie developers. It’s a powerful label for what’s going on in the industry, emblematic of the haste with which many of them are shunning and running from the old publishing model. Ultimately, it’s a bit of a misnomer. It’s technically true that even a single individual who releases a game into a digital platform has now published that product. What they haven’t done is the most important aspect of entertainment publishing, building an audience.

Is there a fundamental shift in marketing digital games versus traditional boxed games? Yes. Is digital a new marketplace environment that traditional publishers and even the savviest marketers are struggling to adjust to? Yes. Does this mean developers should walk away from all of it and expect to succeed? No way.

There’s a way to blaze this trail into digital games and escape stagnant old models without running off of a cliff. The nature of digital distribution, including its reintroduction of a viable market for mid-core games and building an appetite for free-to-play, presents new fundamentals that allow for close, symbiotic relationships between game makers and marketers. There’s no more appeasing that self-interested entity known as retail. What’s more, there are unprecedented levers for efficiency, accountability and agility when it comes to marketing these games. These lead to a lot more transparency and relationships structured around mutual benefit for developers and marketing.

That’s what I’ll explore in the coming weeks in a series of articles for [a]list daily. I’ll look at not only tactics and strategies for this new approach to publishing, but give concrete examples for analytics driven, highly cost-effective and efficient ways to market games. Included in my analysis will be how the fundamentals of brand building still apply, with approaches that create an emotional response from and connection with the consumer. Let’s discover what publisher 2.0 is supposed to be.

Steve Fowler is a thirteen year veteran of the interactive entertainment industry. He is responsible for the brand identity and launch of the Halo franchise at Microsoft Corporation, Inc., and has held marketing and business development roles at Interplay, Sega Sammy Holdings, Inc., Square Enix, Inc., and Take-Two Interactive Software, Inc. He is the chief architect of the one of its kind annual industry conference the [a]list summit, and has been incubating new digital game publisher [a] list games internally at Ayzenberg Group for the past year. For more information on [a]list games,


Traditional Publishers and the MMO Challenge

Eddie Vedder once said ‘Wake up or die in your sleep’. He was referring to the general state of the world back in ’91, but it’s solid advice for traditional game publishers in 2011. By traditional I mean the ones that still put a CD in a plastic case and send it to a retail store; EA, Ubisoft, Namco, THQ, etc. The only real exception is Activision because they made the extremely smart call to do a power rangers style move and join forces with Blizzard several years ago. Putting them in a strong position in both the online and console space. In Q1 this year alone their net revenue was $503m, in large part due to the on-going success of their World of Warcraft franchise.

Most other traditional publishers have online strategies that vary between non-existent to clueless, naive and embarrassing. However you can’t really blame them and expect a overnight change to the entire of foundation of what made them successful in the first place. Much like the music and film industries they are struggling to grasp the wide reaching implications of digital distribution quickly enough and clinging on to what they know works. Their biggest failure lies not in the un-willingness to change but in the un-willingness to truly understand the online space and MMO games and adapt their infrastructures to suit a new focus. We may think the MMO industry is huge but in the grand scheme of things we are still a niche within a niche industry and there’s a massive knowledge gap.

Here are some of the fundamental challenges traditional publishers face:

1) Retail focused Infrastructure – Traditional publisher are built around retail. They have manufacturing teams, operations teams, sales teams. They schmooze Buyers from Walmart, Best Buy, Gamesstop, etc., they print manuals, manufacture CDs, design, proof, copy, get ESRB ratings, and work on submissions with the console owners. All this takes manpower and money, even though retail sales are decreasing you still need all those resources to produce less units. So you the overhead remains but the profit diminishes.

2) Community – Historically big publishers are not used to in-depth community interaction, with the rise of social media this is slowly changing and even the most backward publisher will have a community or at least a social media team.  But by the nature of the box distribution model the process is one-sided and not as organic as with a MMO. With the lack of a beta phase there is limited consumer feedback pre-release. There is little involvement from the community in shaping the final product, often this beta phase can be a critical part of a MMO launch on where you build your grassroots community that drives your positive word mouth. Get this wrong and any product will struggle to recover.

3) Marketing – Most large publishers have over-inflated marketing budgets that use a scatter-shot effect to reach out across multiple mediums: outdoor, TV, events, radio, online, viral and social media. Large scale campaigns like this make a lot of noise but are not necessarily ROI friendly or effective for a more specific demographic. If you’re trying to reach a niche audience such as subscription based MMORPG gamers you need to consider: they need the right PC spec to play your game, must have a credit card, probably be male between the ages of 16-35, etc. The point being you’re not going to best reach that person with an outdoor billboard on Sunset Blvd or the London Underground. You need more focused marketing efforts with a close eye on your conversion rate and cost per acquisition (CPA). Big publishers need to tone down their marketing efforts and make them much more focused on conversions vs brand awareness and noise.

4) External dependencies – Creative Agencies, Media Agencies, PR agencies, manufacturing suppliers are all part and parcel of modern games publishing. The issue is much like the traditional publishers infrastructure  these suppliers are setup to work on big launch campaigns and one off projects. Not necessarily on long term ongoing acquisition and retention marketing campaigns that a MMO with a life of 4 to 5 years requires. Retaining these companies of long periods is extremely expensive and cost prohibitive. Once you have contracts in place and have established relationships it’s not easy to close the doors on those overnight. And this is exactly why most online publishers will fulfill a lot of these function in-house themselves.

5) Timing – dictated by all of the above. The usual cycle of pre-release reviews, teasers, tightly embargoed exclusives all work differently for an online product. For example with an open-beta it’s much harder to embargo things, you can’t send press a review copy because the servers aren’t actually live yet. Not all the marketing should be front loaded, you need to think about the first 30 days when the subscription kicks in, you need to think about patches updates and what activity you need in-place post launch. You need to structure deals for pre-orders, head-start events, all things that usually do not need to be considered for a boxed product.

So what can these publishers do to better prepare themselves for continuing shifts in the industry?  Well, step 1 is acknowledging you have a problem. You need to accept you need to change to survive, once you’ve managed that the rest is down to practicalities. Build a knowledge base quickly, bring new talent into the management/executive ranks that understand the online space and have experience in it. Make the hard decisions sooner rather than later, focus on result oriented implementation, build effective data tracking tools for things like marketing and monitor those closely. Focus on digital distribution strategies either by relying internal systems or partnering with online distributors like Steam. Figure out future revenue models based on something other than pure box sales. And finally be brave enough to step away from retail.

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