Why are videogames so successful?

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In case you are lost

Markets
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How time flies
·
What is GAAS?
Cloud Gaming
CUSTOMER LOYALTY
·
Mobile Game Industry
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A final word

How time flies

A few days ago, I played with my brother a MOBA shooter with characters with different abilities. My 7-year-old brother is amazed by the “Battle Pass”, a paid monthly downloadable with content and resources of the game, and the “skins”, cosmetics, of his favorite characters. He says to me “Nano (that’s what he calls me)! Isn’t it great that this game is free?” To which I replied that he had to pay a lot of money in microtransactions in order to get all the content. He rebutted me by saying that you can get it by saving up the in-game currency, but of course, it will take you an exceptionally long time to get everything you need, and you will always have to play with the “burden” of not having your favorite character customized with an exclusive skin or reaction.

This made me realize how much video games have changed in just a few years, they went from being a product in which the video game box was a fundamental component that excited you and you were eager to insert into the console to start playing and enjoy the experience, that product was yours.

Nowadays things have changed, the same games that are sold digitally are licenses that you acquire from the company, they are services and not products.

What is GAAS?

Games As A Service is the evolution of historical games into more advanced social experiences where developers benefit from monthly fees and microtransactions.

Even after launch, the game can continue to be promoted and updated because the monthly fees paid by players and the micropayments are more than enough to finance the maintenance of the servers and the creation of the latest content.

Here we enter a big problem about what micropayments are, although, of the word itself they are low-cost transactions, these can become macro-payments, precisely because they are designed for that from a consumer psychology point of view, which gives for another article exclusively talking about the psychology behind micropayments and game design.

This new business model serves to reconcile the costs faced by users (price for the content they will enjoy, i.e. the amount of time they will be able to invest in the game) and the participation of users in the form of community.

Cloud Gaming

The clearest example of these services is Xbox cloud gaming (we also find the game pass), Google stadia, Apple Arcade, NVIDIA GeForce Now, and Amazon Luna are the greatest exponents of the Gaas, although companies in the streaming video sector such as Netflix have already begun to move in this area. Nonetheless, the cloud gaming industry still faces some issues:

  • Latency
  • Graphics
  • Catalog

NVIDIA and Xbox are currently the best valued options in the market and the ones that have the best loyalty programs.

Here we can see the segmented revenues and it is expected to pass $300 billion by 2025.

CUSTOMER LOYALTY

Subscription not only makes the starting cost of traditional marketing methods disappear, but the fact also that acquiring a membership already gives you belonging to the project and, consequently, to the community being developed. This process is complicated to conduct

Well-functioning servers, effective communication between company and player, consistent quality content, fair micropayments, and non-abusive content unlocking conditions are some of the activities that companies use in Gaas to leverage loyalty programs, and they work exceptionally well.

Mobile Game Industry

This is a sector that we should deal with in several separate posts because it is the fastest-growing sector in the gaming world, and it is also the one that brings in the most revenue annually. We are talking about an industry with more than two billion active players, total revenue of $180bn in 2021, and accelerated audience growth in the Asia-Pacific region (more than 50%). In addition, this is where the largest number of microtransactions in the entire video game industry is concentrated, we only have to look at the success stories such as clash of clans, clash royale, diablo immortal, stumble guys, etc.

With all this data in our hands, we see how the market for games for mobile devices is growing and companies know it. The productions are getting better and better and with bigger budgets, which added with the concept of cloud gaming we have a perfect combination to exploit this market segment.

A final word

Video games are a product with a high potential for growth and profitability, but they are also very costly due to the number of elements that can be mixed to launch a video game, and companies know it. The transition to a service format instead of a conventional product allows us to boost customer loyalty programs, exponentially increase revenues and extend the life of the game for many more years turning the conventional designs into much more profitable projects.