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This chapter is from the book

This chapter is from the book

Show Me the Money: Micro Game Business Models

If you are a commercial game developer, then you are lucky indeed. You get to spend your days hacking, designing, and creating objects of joy and entertainment. You get to be a kid for a living.

But if you want to stay in business, you'll need to make money. Clearly, the business model you choose will differ depending on your end platform and upon your target audience.

Additionally, business models are strikingly different in the United States, Asia, and Europe. In Europe and Asia, for example, carriers such as NTT DoCoMo offer a profit split with content providers: The more a user chooses a particular piece of content, the more the content provider gets paid. This model is exciting, because it encourages thousands of developers to take their best shot at entertaining the masses.

To date, few North American carriers have been able to offer such a deal. Instead, most content providers must approach specific carriers and strike specific content deals. This makes it difficult for small developers to compete or earn any real revenues.

NOTE

United States carriers such as Cingular Wireless, Sprint PCS, and Nextel have expressed interest in creating profit-splitting services within the next year.

The Business Outlook

Datamonitor predicts that the wireless gaming market in the United States will have grown to $3 billion in 2006, with 125 million players hungry for good new games.

Advertising and Sponsorships

Advertising and sponsorships are probably the easiest business models to implement, but the most difficult in which to achieve solid revenues.

The idea is simple and well-known: Find a company that has a message, put that company's name, logo, or other creative elements within your game, and you've created a valuable vehicle for the company's message.

In fact, many companies have opted to create their own mobile phone games in order to deliver their brand to a cutting-edge audience.

Often, advertisements change from day to day. Ads appear below or to the side of game content. Alternatively, a full screen ad "interstitial" can be shown to the player before or after the game session.

Some of the best advertisements don't even seem like ads at all. For example, many racing games include logos "painted" on the racecars, and football games often include ad banners on the side of the stadium. This touch of realism actually makes the game better, while providing a permanent and well-seen home for a lucky advertiser.

The problem with micro devices, of course, is that there is not a lot of room for ads. Company logos are often small and washed out, and it is often hard to track the number of times a given ad is seen.

As screen resolutions improve, however, advertisements and sponsorships will likely become a smart choice. Top games will be able to charge hefty fees for ad placement. After all, if a mobile phone game really takes off, it has the potential to be experienced by more people, and more regularly, than any television, radio, or print ad campaign.

Content Deals

Wireless service providers, cable companies, and other companies that provide the infrastructure for small devices have a lot to gain if a popular game comes along.

Because most mobile phone providers charge their users per minute, the longer a user is connected and playing a favorite game, the more minutes are being used up.

In addition, games could come with incentives. For example, if you pass a certain level in a game, you could get a coupon for 50 free minutes of mobile airtime. Players would work on the game for hundreds of minutes trying to earn a slight discount.

WARNING

Because some carriers charge a flat monthly fee for Internet use, these carriers desire games that don't stay connected and waste precious bandwidth!

But the point remains that carriers have invested more than $100 billion to create a faster, next-generation wireless infrastructure known as third-generation (3G). Current networks run 9.8 kilobits per second. A 3G network will run up to 50 kilobits per second—almost as fast as a computer's modem.

Clearly, carriers are counting on faster and richer applications, such as games, to attract new users and get a good return on their investment.

Currently, there are an estimated 16 million wireless game players in the United States alone. The ARC Group predicts that by 2006 there will be 280 million players. In Japan, NTT DoCoMo recently announced that 52% of wireless Internet revenues are due to games.

Several game companies have been able to strike content deals with major wireless carriers. If you have created a game that you believe will appeal to the masses, it's definitely worth talking with major carriers and figuring out a deal that makes sense for everyone.

Pay-For-Play or Subscription

Charging players for a subscription to play a game is a clear path to revenues. For example, a player may be willing to pay $10 per month, $1 per game, or an additional 10 cents per minute.

However, most current users aren't willing to pay anything for mobile phone games. The main reason for this, of course, is that while there are many nice micro games out there, there are few that are so darn fun, so darn special, so darn enthralling, and so darn exciting that users would be willing to part with their cash.

This will change.

Bigger and more colorful screens, better audio capabilities, quicker network access times, and faster processors will allow for better games.

Additionally, carriers will begin to offer content providers more ways to bill users. Carriers and phone manufacturers are already beginning to create portals whereby users can use their credit cards to purchase and download Micro Java applications.

Someday soon, a company will create a micro game so good and so addictive that people will have to play it. Paying a buck or two per game will become second nature. The company that does this will make a fortune, and the world of micro gaming will be changed forever.

Perhaps that company will be yours.

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