The Item Business Model and the Rise of the Advanced Casual Online Game

The Item Business Model and the Rise of the Advanced Casual Online Game

<o:p> </o:p>Here in Korea there is a phenomena that is sweeping away the traditional 3D MMORPGs and that force is the stunning success of the Advanced casual games in just the last 18 months.  These games, notably Kartrider, Pangya Golf, Freestyle (and cough the author's GoPets) are free to play, however they are monetized by offering the player the value proposition of paying ala cart for particular items that affect gameplay or to pay for a premium service plan.

<o:p> </o:p>The significance of these games is that the revenue that these games are producing up to nearly $10m USD a month clearly rivals that of the most successful 3D MMOs, and yet the costs to produce these games is still in the modest 7 figures and while 3D MMOs have reached well into the upper half of 8 figures.

<o:p> </o:p>Being able to make just as much money with a $5m investment as a $50m investment will get anyone's attention from the business side.  However, players and game designers are also drawing sharp attention to the idea that a player no longer is required to develop skill in a game to gain advantage but rather may simply purchase an advantage.

<o:p> </o:p>Beyond the players and the game designers, corporate managers, in house counsel and class-action attorneys are also very interested in navigating the disruptive transition as digital items take on true economic value.

<o:p> </o:p>Buying a new pair white patent leather shoes of a virtual flavor in a comical online Korean game of golf so that your balls fly farther may seem like a triviality – but it is actually the harbinger of perhaps the most profound change to humanity of the 21<sup>st</sup> century.  Those are some fat words, what could I possibly mean?

<o:p> </o:p>What we are witnessing is the very transition of the nature of material reality.  What is more important – do I buy a pair of patent leather shoes so I can golf better on a real course – or online in Pangya?  In the case of Kartrider, more Koreans participate in actual racing than spectate in all other forms of racing.  Think about that for a moment.

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These games are leading us into the age of cyberspace that Neal Stephenson and Tad Williams have been writing about. Think about the blogsphere, most of the technically literate people I know have far more meaningful relationships with their online communities than their neighbors where they live.

<o:p> </o:p>But now, we are entering an age where online games are no longer a mere game – they are becoming the more important side of our reality.

<o:p> </o:p>It is then only natural to see that the games industry has progressed from packaged goods to subscription to now the item model (well at least in Asia, the North America is still stuck for the most part in the packaged good model, but I hear in the last two years that I have been out here in Korea that the cell phones are getting better now stateside – color I hear... :-) ).

<o:p> </o:p>What the games industry is doing is moving to a model where time and money are freely traded and the virtual items prices are set by what the market will bear.  The whole issue of having an unfair in-game advantage due to money is an archaic concept when games were a pure space not a part of the regular world.  Now, games are an extension of the fabric of the world, and going forward into the future I believe we will be playing games online for the bulk of our time and it will be reality back in the meat bag that will seem like the weird distraction.

<o:p> </o:p>But why did advanced casual games lead this progress into the item model and not the big 3D MMOs?  The reason is that the cost to develop the big MMOs has now reached between $25m and $100m depending on your labor market and the scope of your game.  The successful MMOs all involve very costly licenses and simply the managers funding these games must be extremely conservative when the stakes reach this level.

<o:p> </o:p>Due to this required conservatism, the 3D MMOs, which were once disruptive to the packaged goods market have now relinquished their lead and have handed it over to the Advanced Casual Games.  These ACG simply look at any gaming experience and from the ground up design the game so that anyone could play for free, but everyone would rather pay to have advantage.  The average paying Kartrider player is rumored to pay $40 and I have it on good authority from the guys at GoPets that the average paying player is paying more that $20 a month – this is in considerable excess of the amounts that are the typical subscription fee.

<o:p> </o:p>These ACG thus have a huge advantage over the big MMOs as virtually their entire catalog of the the back titles in the game industry is ripe for an item model overhaul such as taking Nintendo's Mario Kart and turning into Kartrider.

<o:p> </o:p>In the future, or was it today – no I think it was last year - the users will care more about the price and the function of their Sword +5, than the price and function of their microwave ovens.

<o:p> </o:p>Try designing an item model online sushi shop game!

<o:p> </o:p>Were is reality?

<o:p> -Erik </o:p>

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Originally posted on LiveJournal