The primary business model of the PC gaming industry is in the development and delivery of actual games. As I mentioned earlier, one of the current trends that affects development is the licensing of movie titles and famous names which has become increasingly more expensive over the last few years. Secondly, the delivery of PC games has been marred by rampant piracy. Given these two views of the industry its no wonder the PC gaming industry has not done well since its high in 2004. Rather than boring you with how games are currently made and sold I’m going to talk about new sources of revenue, how the PC gaming industry is capturing lost revenue from piracy through a new form of distribution, and an opportunity in gaming that is under-explored.
New Source of Revenue – Advertising
As mentioned in the introduction section gaming is just beginning to see advertisements come into the picture. In gaming advertising comes in three forms: billboards, featured products (both are common), and where the game is an advertisement.
1. Billboards – similar to real world billboards, game developers have various locations throughout the game where advertisers can bid for (if it’s a standalone game) or rent (if it’s an online game) a given amount of space to place their logos, catch phrases, or commercials. In one of the games I’m currently playing, Need for Speed: Carbon you can see from my screen capture the Autozone advertisement.
You'd never buy McLaren parts at Autozone, but then again McLaren owners don't play need to play this game.
2. Featured products – what is meant by this is that real world products could be modeled after and used in the game. This turns the licensing market on its head: while developers had to pay licensors for the rights to a name, other licensors will have to pay to get into the game. For example, in Need for Speed: Carbon, now that I beat the game one of the features I find myself spending hours messing around with is the customization tool. In the early days of computing these tools were reserved for real designers and engineers, but today anyone can make something worthy of a museum. In the game you get to own all kinds of cars that you’d never dream of purchasing, and you get to do things that you’d never dream of trying (ie: going off ramps, crashing through walls, and driving faster than the Bugatti Veyron). Since computers are fast and have sophisticated tools to mimic realism today, why not customize your ride to something you’d never do or afford in reality? With the customization editor I can put on identically rendered bodykits, rims, hoods, etc. with real-life manufacturer’s modeled parts. Although it can’t be done in this game, designers can in the future add special in game benefits if a featured product is used. This can be used to bring some rarity and prestige to luxury goods. (Envision this statement: “After spending 3 days of playing, I finally saved up enough money to wrap my Ferrari in carbon fiber which gives me +5 happiness and +10 sex appeal!” ) Ofcourse, if manufacturer’s want their products in top games then they have to pay up.
Don't like the stock rims on my McLaren? Perhaps the BBS GT's look nice...
3. the game is the advertisement – an example of this is a free PC game called America’s Army. Given Dick Cheney’s shooting record and the low morale in and outside of the military, this game was created to stimulate interest in the virtues of the American military, in hopes that not people would join the armed forces. If the message is strong enough, or developers are able to integrate advertisers well into the game, why not have them subsidize the game or give it away for free in hopes of getting a return on your investment in alternative forms?
New Distribution – Online downloads
With piracy running rampant in the PC world, it is very difficult for developers to determine who actually paid for their software. This becomes particularly important when you offer customer support or the ability to play through online servers. The traditional boxed game with CD-key offers little assurance of this because it is a static defense. Within days after the release of any PC game, cracks that bypass the authentication process and key generators are available on the web. The developers at Valve have overcome these problems with an online distribution system called Steam. After installing Steam and logging into the server, the user can pay for and download from a catalog of currently 156 popular and classic titles thanks to a strategic alliance with other top PC developers, including Activision. The user also benefits from this system because the Steam application automatically keeps your games up-to-date on the latest patches. Since users login and Steam keeps games updates, this opens up new revenue streams for targeted in-game advertisements. This would also bring in revenue streams from smaller game studios who don’t have the capital to build or haven't established the relationships to manufacture games, or are creatively deterred by the rampant piracy in the world. Although Steam has many problems to work out (for example: on the first day of Half-life 2’s release they were not able to keep up with user demand), if all the PC game developers move to this model then piracy may become a problem of the past in nations with an internet connection.
Under-explored
Yea, you’ve heard of this before with children’s games, but hear me out first. Today the strategy games in PC gaming is infinitely better than console games. Why? Tools in both hardware and software. If you’ve ever watched a good Warcraft 3 player or played counterstrike, you’d know that you need a massive amount of programmed shortcut keys and both hands (one on the mouse and one on the keyboard) to keep up. This is my hypothesis on why the top 10 games in the PC world are mostly strategy based (Civilization 4, Age of Empires 3, etc.) and why the top 10 games in the console market (Madden 07, Fight Night Round 3, etc.) are sports based, and why top hits in the console market don’t make it to the top of the PC market and vice-versa.
The primary reason why PC games and education go hand in hand is the fact there is established infrastructure: every school has at least one. In my school district (and I’m sure many others) there is an initiative to get a computer in every classroom. (Try convincing your principal of doing that with consoles…) Internet doesn’t exist in a lot of classes (so online games are out of the contention) because of infrastructure costs, but at least a computer is there. Problem is, outside of academic software not that many good PC education titles exist to fully utilize that computer or keep the student’s attention.
So with users able to dynamically process and interact with the PC why not bring that into education? The real world does not operate in a vacuum, but we are taught to learn in fixed domains, so why not give kids a chance integrate them all. Take, for example, the game Civilization. This series is a top PC hit, and takes the user from 4000 B.C. to modern times. Throughout the game the user must balance economics with politics, culture, technology, military, and the environment. Furthermore it’s turn-based and fixed on a map, so it’s like playing chess on a different level. If this and other strategy games had a little more of an educational twist inserted, they’d make great learning and money making tools.
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