News, research and discussion on virtual goods, currencies and economies globally.

Mindtrek ’08 & Revenue model innovation in Chinese online game market

Reporting in from Tampere, Finland. I am here at Mindtrek, or should I say, I am ON a Mindtrek. Mindtrek is an annual mediaweek with variety of events and competitions for new innovations and products. Since last year they have also had an academic conference beside all the other wide ranging activities. I also participated in Mindtrek in 2000, which was on the primetime of the dot-com bubble. This year the themes are ranging from games to social media and to ubiquitous computing. Anyway, today I’m here in my original hometown taking part to the academic track on games.

This track consists of three main themes: 1) creativity engagement and algorithms in games 2) games in education, learning and health care, and 3) policies in game industry. All of these are intriguing topics, but what I’m especially interested in is the final presentation/paper about "Revenue Model Innovation in the Chinese Online Market" by Jessie Qun Ren and Philip Hardwick.

Coincidentally, it seems that in the paper Ren and Hardwick have taken a perspective of dynamic business models, which is a concept that I myself have been considering lately. The concept emphasizes the changing nature of business models due to changes in surrounding factors of a firm, like changes in the market, financial horizon and technology. Dynamic business model concept in general is best covered in the works of Harry Bouwman and Ian MacInnes. In my opinion this perspective to business models in contrast to static business models is highly valid and a needed angle. It helps to better grasp the developments of business models for a given corporation or industry and gives frames to really follow the life cycle and determinants of business model adaptation. Unfortunately Ren and Harwick have not explored the dynamic business model framework in detail.

In the paper the shift from the conventional time-based revenue models to item-based revenue models and beyond to mixed models is discussed. According to Ren and Hardwick prior to 2005 almost all of the MMO operators in China used time-based revenue model with a high emphasis on using pre-paid cards. In 2005 the industry experienced a revolutionary shift steered by a company called Shanda, who released three highly profitable free-to-play games. According to the paper, in 2008 69% of Chinese online games used free-to-play revenue models. The CEO of Giant Interactive states that the revenue of the whole industry market increased by 70% annually during last three years because of the shift from time-based to item-based revenue models.

Nevertheless, according to Ren and Hardwick, Chinese operators started to adopt diversified and time-based revenue models again now in 2008. The authors present a couple of reasons for this shift including games lacking unique content and features, high-quality support and service, which presumably are due to too small revenues. Also, according to the paper, operators are lacking capital for exploring new distribution channels. Other determinants for revenue model changes are weaknesses of item-based revenue model. Ren and Hardwick state that a weakness of item-based revenue model is the problem of players feeling frustrated due to other players spending more money and thus promoting unfair circumstances between players. Thus, operators try to address this by providing both alternatives; item- and time –based billing.

Ren and Hardwick also provide some good insights to Chinese online game industry. One of the interesting details is how Shanda(the supposed revenue model pioneer in Chinese industry) names the free-to-play model as “Come-Stay-Pay”. I think this name nicely sums the different goals a free-to-play game operator has. Come as in acquiring a massive user base by marketing. Stay as in having a continuous engaging game by designing and publishing new content. Pay as in monetizing as many users as possible with the interplay of marketing and propitious game design that supports item sales.

I would have hoped for further details on the determinants affecting revenue model changes as well as a rigorous framework for categorizing and further conceptualizing the determinants. One good way of doing this could be using the framework provided by Harry Bouwman and Ian MacInnes in “Dynamic Business Model Framework for Value Webs” in 2006.

Other hastily written notes from other presentations on the games track:

First presentation was on boredom, engagement and anxiety as indicator for adaptation to difficulty in games by Chanel et al. The research done in this paper was quite similar to the study conducted here at HIIT. Respiration, blood pressure, temperature and GSR were monitored between different game difficulties in a tetris game. Similar research has also been done at HIIT with FPS games, where analogous indicators were used to adjust game difficulty. Actually, Kai Kuikkanieni, who has been doing this research at HIIT, was also present in the games track.

Third presentation was on a novel paradigm for educational games by Sisler et al. They introduced a turn-based-augmented-learning-MMO-strategy game. The game is being tested and implemented in eight high-schools in Czech to teach issues related to Europe.

The game in the third presentation reminds me of Civilization games. This brings me to think of Civilization-type game with virtual asset sales. How could we incorporate virtual assets sales into such games? Come to think of it; I can’t remember any Civilization-like game that utilizes virtual assets sales. There probably are such games in Asia. Can you point me to some of them? There is of course Travian, where player can buy boosts and so forth to increase village growth, but these can not be traded between players. It would be interesting to have a currency system in place in a game such as this and have players trade and manage RMT-economy. Really use money to grow their civilizations and really preserve the freeform essence of these games. This scenario would arise some very interesting ways to use currency and items that would be sold with real money. There could be many different implementations where the currency could be used. For example Combat Arms by Nexon has some novel ideas for chargeable items, e.g. items which reset player’s status. Same kinds of items in civilization management game might work. Also items/services that enhance diplomacy and other complex dimensions in these games would be interesting. Anyway, I think this is an idea worth exploring further.

Fifth presentation was on exploring how to combine promoting health awareness and engaging gameplay by Sulhonen et al. Ah, the usual problem: how to combine fun, gaming, learning and behaviour promotion.

I think there are couple of differing dimension to combining these: 1) how to support learning by gameplay 2) how to use learning as an element of more interesting gameplay? 3) how to use for example incentives to stay fit as incentives to play games or use services (selfish) or perhaps 4) how to incentivise people to do things they wouldn’t otherwise do, for example preserve energy. (unselfish)
1) Learning games.
2) Many adventure games incorporate learning only for entertainment purposes. For example in Nancy Drew adventure game series a player must learn real-world things in order to progress in the game.
3) Nokia sports tracker / Chorewars
4) EcoIsland

Seventh presentation was on interactive multiplayer gaming by Thorsten Blum who is cooperating with SUSIGAMES. He introduced their space invaders implementation of "hemispheral" playing. The idea is best summarized here. Very interesting stuff. Check it out.



can be found here.

The paper by Quen Ren and Hardwick is now available in VERN bibliography as well.