A very interesting and insightful visualization has been shared across a broad range of social media platforms recently. The graph shows the growth of the video market broken down by platform. Of course, one big thing that stands out is the proportion of revenue taken by mobile gaming. In 2020, mobile accounts for $85bn – over 50% of the total spend on video game. Another one that grabbed my attention was the evolving share of all different platforms. And the changes to the revenues generated by arcades.
Incidentally, that doesn’t necessarily mean it’s all one same homogenous “gaming” market. Although there are clear similarities in content – non-linear digital entertainment which requires user input and/or dexterity – the difference in media means there are significant differences in the mode of consumption and overall context of usage. What that means is that arcades and console are both video games. But they are not necessarily competing for the same share of “video games entertainment time”. Me playing a game of Street Fighter 2 while waiting for my order at Chuck E. Cheese is not competing for my video game time on my home console – it’s not like in that situation I can choose between those two options. In this example, my time on the arcade is competing with my time playing whack-a-mole or playing in the ball pit (or anything else available in the Chuck E. Cheese location I’m currently in).
Of course, the portable and ubiquitous nature of mobile devices means that mobile games are competing with every existing type of entertainment for users’ time. As long as I have some free time and I’m on the grid, mobile games are always an option I can turn to. Clash of Clans is competing for my entertainment time while I’m at at Chuck E. Cheese, or waiting for the bus, or lying in bed. Mobile devices even provide an entertainment option when the periods of idle time are short (or when I should in fact be doing something else). In addition, it can be superposed to other forms of entertainment: I can multitask my entertainment and play a mobile game while watching TV (you can’t do that while playing a console game). But that doesn’t mean playing a mobile game and a AAA game on PC is the same experience. Despite all the improvements in graphical and technological performance of mobile games, being focused and playing a game uninterrupted on my couch for extended periods of time is a fundamentally different experience than playing a game on my phone while multitasking. Mobile games can virtually fill in any entertainment time available. But it doesn’t replace the experience of other entertainment modes – including console and arcade.
I’m a big fan of arcades. There is the nostalgia of playing in the arcades after school, the unique form of socialization (associated to the game room rather than interaction via in-game content), and what used to be access to the best gaming experience available at the time. The history behind some of the companies that pioneered arcade games can provide some interesting insights into thinking about video game content, engagement and monetization. The company history of Taito – the maker many arcade games in the 1970s and 1980s, among which Space Invaders – is very telling in that respect. When the company first moved to Japan, it was involved in the sale of various goods and distilling Vodka. What’s most important here is that the company also started in the 1950s selling vending machines and leasing jukeboxes. In 1971, it acquired a vending machine company “with the aim of bolstering amusement facilities operations”. Seven years later it released Space Invaders. In a similar vein, Namco (the maker of Pacman) initially started its operations in 1955 with little rides for children located in department stores. Konami was founded in 1969 as a jukebox rental and repair business before it started manufacturing amusement machines for arcades in 1973. (disclaimer: I have never worked for any of these companies and this is my interpretation of public information)
What does can all this suggest about video games? The connection between juke boxes and vending machines and arcade games might not be evident when looking at the content. However, the similarities in the modes of distribution are the same. This direct lineage between arcades and vending machines can help shed in a new light some key decisions in the way arcade games were made and monetized.
There is a common business problem that unites vending machines, jukeboxes, kiddy rides and arcades: it’s how to monetize space. In addition, video games introduced a new problem that vending machines didn’t have. For a vending machine selling cigarettes or candy bars, the transaction takes just a few seconds. Purchase is virtually instantaneous, and once one consumer got the item desired the next consumer can make a purchase. When it’s about a game, the space sells an experience. And while one consumer is engaging with the game, others cannot play (and spend). Like vending machines, an arcade game is about monetizing space. But unlike vending machines, the time component is critical for arcade games. Good business performance means an arcade game must maximize both the time and the space. It seems fair to say that the branching out into video games fits into an overall mission concerned with monetizing space – but in the case of video games (like kiddy rides) it’s monetizing space for an entertainment experience that takes up time on the machine.
If you assume the business objective is to maximize the monetization of space in a bar, and only one or two people could be playing on a same arcade cabinet at the time, then optimizing the monetization of that space also means being conscious of the time players spend on the machine. So, monetizing the time played is a key consideration. You’re not simply monetizing space, you’re maximizing the $/min of that space. And that matches many key design decisions in early arcade games. You need an experience compelling enough to draw people’s attention – hence the epilepsy-inducing lights and sound and stylized arcade cabinet – a gameplay experience fun enough to get people to want to play (and replay) the game. And (average) gameplay sessions short enough to ensure a quarter doesn’t block the machine for 10 minutes – hence the high level of difficulty and dexterity needed to play those games. The monetization of arcades was very straightforward: you pay to get a chance to engage with the content. You pay per play, and design must ensure a) the experience is compelling and b) the experience is short. The fine balance between fun and difficulty helps make sure players don’t play too long, but they enjoyed the game enough to want to play again (and not be frustrated).
Netflix’s great documentary “High Score” highlights the importance of engaging and innovative content for success. At every juncture in video game history, great success and key changes were always associated to innovative and uniquely entertaining content. The content in itself was great, in large part because it introduced key ways to leverage technology and provide new experiences to players. Pretty much like any other form of entertainment, the motto “Content is King” applies to video games – and mobile games are no exception. What the arcades can teach us however is that while “Content is King” is a key requirement, good content in itself is not enough to have a commercial success. You need to make sure monetization is adapted to your distribution model.
Monetizing time and engagement was central to arcade cabinets – where the space is limited and the possibility of concurrent play non-existent. That disappeared for console games when players pay once to acquire the game and can play it as much as they want. And that is also reflected in design decisions. When gaming becomes a form of home entertainment, players can spend more time in the comfort and privacy of their home. Game experiences can be longer sessions and more in depth (and not necessarily as difficult dexterity-wise).
Mobile games provide yet another context for gaming and monetization. For console and arcade games, players must spend to engage with the content (either once to acquire the game or to every time to initiate a play session). Free-to-play mobile games are based on the promise of free entertainment. In other words, everybody can engage with the content for free. What that means is that gating engagement behind a paywall like in console or arcades is not an option. But even if it’s not all-or-nothing (play/not play), it’s a standard practice to monetize on the amount of engagement. That’s why the “fragmented solution” is the dominant model. Players can play a certain number of sessions within a given amount of time. There is a cap to how many games a player can play in succession (the stamina cap) and stamina regenerates over time (the stamina regeneration). If players want to play more within a given amount of time, they can spend to refill their stamina bar. Of course, games like Clash Royale have refined that model – there is no hard gating on engagement. In that case the time constraints apply to the gameplay rewards, not to the actual gameplay itself. But the idea of monetizing engagement remains – it’s more a difference between control and appeal.
In mobile like all other forms of entertainment, content is king. You need players to want to engage with your game and to want to make it part of their daily routine. However, while providing a compelling experience is a prerequisite to have a successful game, it’s not enough to have a commercial success. That’s because engagement is not directly tied to monetization like the arcade model or the boxed product model. Monetization will not naturally follow because the game is fun – the game must actively be built around monetization levers to capitalize on the enthusiasm it will generate.
There is a spectrum in mobile games between gameplay-driven games and content-driven games. Monetization in gameplay-driven games will mostly focus on monetizing engagement. Extra-moves in puzzle games are a way to monetize engagement and extend a play session – like the continue in arcades. For content-driven games like an RPG or a racing game most of the monetization will come from the direct or indirect sales of additional content. The bulk of monetization will come from content consumption more than gameplay consumption. And that’s why the fragmentation model is even more important when thinking about monetization and content in these mobile free-to-play games.
In content-driven games, everybody can play the game. That’s why mobile games must actively design their monetization around this fragmentation, and provide valuable and rewarding content players can spend to engage with. Because everybody can play for free, to be compelling monetization must be mostly about selling a different form of engagement. Speeding up is a way to make customers’ experience faster and less frustrating. But the key thing here is that it doesn’t make it better – it makes it less bad. Adding artificial frictions in a game to afterwards sell the “solution” doesn’t sell a different experience.
To be rewarding and provide a compelling reason to spend, successful monetization involves leveraging in-game content in a different way than arcades or boxed products. For monetization in mobile free-to-play, you can enjoy the game differently if you pay. You spend to have a different experience of the game, to enrich your experience of the game. That’s where content fits into the monetization model of mobile free-to-play games. It’s almost as if there needs to be a vanilla version of the game, and an enhanced version of the game players can spend to engage with. Monetization design involves implementing content that provides a different form of engagement. You monetize a different form of engagement. And that’s also why making that content exclusive to paying users can be very valuable. The item you are monetizing is making the game different and better. In addition, exclusivity helps make payers feel good about their purchase, and provides a clear message about what spending is for.