by Matthieu Saint-Denis
Even if F2P business models have existed since 2002 on mobile – and I was lucky enough to belong to the company that pioneered it on Java – we have to acknowledge that it’s only been widely adopted by developers in the last 3 years, when Apple brought in-app purchases.
Since then, the games industry has been obsessed by the 3 goals: acquisition, retention & monetization. It seems to us that one of those 3 pillars, monetization, is less advanced than the other ones. As acquisition & retention methods have been previously deeply explored by web community players for a decade, monetization has been less sophisticated as it has relied mainly on the declining ads business.
The game monetization model today is based on 2 major sources of revenues, advertising and in-app purchase, however we’d like to emphasize an almost untapped third source: merchandising. For many of us, it’s still (almost) zero but for some others, such as Rovio, it’s 45 % of their revenues… which means there is definitely room for improvement!
To put things in perspective, let’s take a look at what merchandising accounts for in the entertainment industry:
- Movies: The most successful movie merchandiser, Star Wars, made $1.8 billion at the box office, while the total revenue including spin-off products exceeded an impressive $4.5 billion. For the industry as a whole, movie merchandising reached $147 billion in 2010 and it has exceeded the box office revenue globally in 2011. In the US 25% of toys are sold under a movie licence!
- Music: In the music industry merchandising accounts for $2.2 billion worldwide (total gross revenue is $16.6 billion). Vivendi Music claims that their merchandising royalties make up 5.4 % of their income.
- TV: On TV it’s more difficult to get figures but a Japanese survey demonstrated recently that among the audience of the most popular TV series, it is common to have >5% people buying physical goods related to the show.
In the video games industry, despite some shiny examples like Rovio and also Final Fantasy, Raving Rabbids, Moshi Monsters, etc. we are still far from those figures. There are some obvious reasons for that and it is pretty much on the supply side: just remember your last visit to a museum or your last dinner at a “grand chef” restaurant. You’ve been delivered a great service and at the end you’ve been offered some physical goods to buy as an additional pleasure. The museum shop is systematically placed at the end of the tour (where you can’t avoid to visit it), and at the cash desk of the restaurant you can find the books and the videos of the “Chef”. They have understood that it’s when you feel happy and receptive towards their content that they have the best chance to sell you something.
We, game developers, have not yet understood this. Some make some good old non-personalized t-shirts to be found in a 3rd party website, which typically requires gamers to leave the gaming experience to buy them. And this is our first mistake. If we agree that gamers have more chance to buy merchandising from the game when they are proud and happy, then we should embed the shop within the game. It is the first obvious rule to apply… just like Jurassic Park merchandise madness has started with street sellers on the pavement in front of theatres. That’s what we call IN-APP MERCHANDISING. It may be one of the next big things for monetization.
But it’s not enough. One of the biggest trends of our industry is the personalization of the gaming experience. Nowadays you will find that in many games, players can deeply customize their character, car, village, farm, city, etc. It makes gamers all unique and creates a deep link between the users and the game. And it’s a great opportunity for merchandising, because finally production technology of customized goods is able to quickly and at reasonable cost produce fully unique products:
- 3D printing first. Everybody knows about it but few of us have realized that today, high-tier machines are able to print (read “manufacture”) in high definition and full colours a faithful figurine of players’ character. Additional elements such as nickname, score, trophies and medals etc. can be added on the fly. One can hardly argue against the value of offering a player who has invested time and emotion in an RPG or a customization game (SIMS like) the ability to make physical versions of his or her avatar to make it real.
- 2D printing. There are various machines that in a few minutes are able to print unique personalized t-shirts, posters, mugs, mobile case, caps, etc at very decent costs. Rather than selling another game poster, it seems smarter to sell the nice map view of player’s village, built with care and love during hours, days and weeks, right?
It leads us to a straightforward conclusion: we believe that the combination of an embedded shopping experience and a personalized custom goods offer can easily generate from 5% to 10% of additional revenues for all kind of games and obviously even up to 40% when the game is well suited to merchandising (character driven, ready to print 3D, etc.)
At FabZat we offer a full service chain, starting with a plugin ready to be embedded in an iOS or Android code and taking care of production, billing, shipping and customer care. As we 3D print ourselves we guarantee high quality of any products leaving our workshops. While we deliver worldwide, we position ourselves as the first “in-app merchandising” service provider in the mobile game industry. We would be delighted to get your comments and questions at matthieu@fabzat.com. Thanks for reading, talk soon.
Mathieu Saint-Denis is the CEO of FabZat. He has a long track record in consumer marketing, and over 10 years of experience the mobile industry.
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