Comments on: Free Games and Naievete http://blog.chroniql.com/2007/10/25/free-games-and-naievete/ The Wide World of Funware Explored Sat, 05 Jul 2008 10:32:35 +0000 http://wordpress.org/?v=2.2.1 By: Vembl http://blog.chroniql.com/2007/10/25/free-games-and-naievete/#comment-508 Vembl Tue, 06 May 2008 20:32:04 +0000 http://blog.chroniql.com/2007/10/25/free-games-and-naievete/#comment-508 In the Czech Republic where I live, sales of MMOG have been rising for more than two years in a row. The reason is that people rather want to play co-operative online games and fight "human" enemies than playing against a computer. In the Czech Republic where I live, sales of MMOG have been rising for more than two years in a row. The reason is that people rather want to play co-operative online games and fight “human” enemies than playing against a computer.

]]> By: gabe http://blog.chroniql.com/2007/10/25/free-games-and-naievete/#comment-457 gabe Mon, 21 Apr 2008 23:54:47 +0000 http://blog.chroniql.com/2007/10/25/free-games-and-naievete/#comment-457 Nikhil (Free Games): I think every game should have a free version. There is no reason to design *anything* today without a "free to play" angle (even if it's just a demo or entry level version), but we should remember very clearly that people need to get paid for their work. And ultimately, there are a number of conditions under which truly free just doesn't work. At some point, someone has to pay for the developers effort, and there's no way around that. Gabe Nikhil (Free Games):

I think every game should have a free version. There is no reason to design *anything* today without a “free to play” angle (even if it’s just a demo or entry level version), but we should remember very clearly that people need to get paid for their work. And ultimately, there are a number of conditions under which truly free just doesn’t work. At some point, someone has to pay for the developers effort, and there’s no way around that.

Gabe

]]> By: Free Games http://blog.chroniql.com/2007/10/25/free-games-and-naievete/#comment-455 Free Games Tue, 15 Apr 2008 05:41:05 +0000 http://blog.chroniql.com/2007/10/25/free-games-and-naievete/#comment-455 You are saying that developers cover cost in one or another aspect even if they provide games free of cost. Then my question to you is why every game is not distributed as a free and why users get demo games often and not the full free version games. You are saying that developers cover cost in one or another aspect even if they provide games free of cost. Then my question to you is why every game is not distributed as a free and why users get demo games often and not the full free version games.

]]> By: gabe http://blog.chroniql.com/2007/10/25/free-games-and-naievete/#comment-33 gabe Fri, 26 Oct 2007 22:54:43 +0000 http://blog.chroniql.com/2007/10/25/free-games-and-naievete/#comment-33 Great points! I am very into the idea of digital distribution changing the paradigm...I did basically give up most of my twenties to the cause. :) Sorry for misunderstanding your points. As for the marginal cost issue - you're right - the distribution margin is between 30 and 50%. Once you account for everything, on average, a title at retail is 50% publisher, 50% retailer. But therein lies the issue: it's very hard to distribute games directly from creator to consumer, except in extremely rare cases. DD mostly helps developers (by making publishing less relevant), and the the boom in game-related VC interest also helps (alternate sources of completion financing) them. But none of these trends are positive for the publisher. Retail channels online insist on similar margins (they can be as high as 70% when it's just a dev-retailer model), basically ending up with devs clearing a bit more money (10-15% of gross), but not substantially more. So DD, so far, has actually fattened the "retail margin". Imagine that! As you can probably tell, I've given a couple of "online games value chain" talks at GDC/CGA. ;) Happy to dive into this further with you anytime. Gabe Great points! I am very into the idea of digital distribution changing the paradigm…I did basically give up most of my twenties to the cause. :) Sorry for misunderstanding your points.

As for the marginal cost issue - you’re right - the distribution margin is between 30 and 50%. Once you account for everything, on average, a title at retail is 50% publisher, 50% retailer. But therein lies the issue: it’s very hard to distribute games directly from creator to consumer, except in extremely rare cases. DD mostly helps developers (by making publishing less relevant), and the the boom in game-related VC interest also helps (alternate sources of completion financing) them. But none of these trends are positive for the publisher. Retail channels online insist on similar margins (they can be as high as 70% when it’s just a dev-retailer model), basically ending up with devs clearing a bit more money (10-15% of gross), but not substantially more. So DD, so far, has actually fattened the “retail margin”. Imagine that!

As you can probably tell, I’ve given a couple of “online games value chain” talks at GDC/CGA. ;)

Happy to dive into this further with you anytime.

Gabe

]]> By: Chris Anderson http://blog.chroniql.com/2007/10/25/free-games-and-naievete/#comment-30 Chris Anderson Thu, 25 Oct 2007 21:30:16 +0000 http://blog.chroniql.com/2007/10/25/free-games-and-naievete/#comment-30 Excellent points and I agree on almost all counts. I think you were slightly misunderstanding my point, however. I'm not saying that people won't pay for games or that games should all be free, only that digital distribiution means more and more games can have free *versions* that maximize their reach. Of course the hope is that some people will convert to pay, whether it be in items, susbcriptions, or full versions, and clearly the market for pure ad-supported games is limited. But I do think that the shift to online distribution and play (both on PCs and consolues) is going to change the economics of the business, and I was hoping you'd get more into that. One last point: I don't understand how you can say that the marginal costs of a disk-based box is $2. Are you including manufacturing, wholesale distribution, wharehouse overhead, retail overhead and returns? For a box retailing at $40, I would expect all the marginal costs throughout the supply chain to be at least $20 and usually more, when you include both the wholesale and retail economics. After all, that's what ultimately determines the price to the consumer, and that's what gates demand. Best, Chris Excellent points and I agree on almost all counts. I think you were slightly misunderstanding my point, however. I’m not saying that people won’t pay for games or that games should all be free, only that digital distribiution means more and more games can have free *versions* that maximize their reach. Of course the hope is that some people will convert to pay, whether it be in items, susbcriptions, or full versions, and clearly the market for pure ad-supported games is limited. But I do think that the shift to online distribution and play (both on PCs and consolues) is going to change the economics of the business, and I was hoping you’d get more into that.

One last point: I don’t understand how you can say that the marginal costs of a disk-based box is $2. Are you including manufacturing, wholesale distribution, wharehouse overhead, retail overhead and returns? For a box retailing at $40, I would expect all the marginal costs throughout the supply chain to be at least $20 and usually more, when you include both the wholesale and retail economics. After all, that’s what ultimately determines the price to the consumer, and that’s what gates demand.

Best,

Chris

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