Liam Hall (Senior Research Analyst)

The expansion of the games-as-a-service model is happening, but it isn’t the harbinger of death for traditional games development and publication, or for annual lifecycles of games.

With Fortnite showing no signs of slowing down almost three years after its initial launch, and GTA V being announced for a THIRD generation of consoles, it is abundantly clear that extended lifecycles of games have become normalized.

These ongoing live support models are one aspect of the growing prevalence of games-as-a-service (GaaS), the other being an element of monetization beyond the initial game sale. This monetization can be in the form of subscriptions or in-game purchases, often referred to as microtransactions (MTX).

GaaS is not a new phenomenon. MMORPG’s such as World of Warcraft and RuneScape have supported a live support model through monthly subscription fees for 15+ years, while MOBA’s like League of Legends have utilized payed cosmetic MTX’s to support their F2P models.

More and more this model has been bleeding into the AAA console/PC games market. Actually, it is now rare for a game not to include any additional (typically optional) transactions after the initial purchase, especially if the game has an online component.

Whether it’s a “Battle Pass” in Call of Duty, XP boosts in Assassins Creed, or Ultimate Team Packs in FIFA, additional paid content has become part and parcel of modern gaming.

Companies are Moving to Post-Sales Monetization Models

The average sale price of a AAA game hasn’t seen a major increase since as far back as 2005, when the Xbox 360 was launched. In this time, the costs associated with R&D, development, and publishing have all risen exponentially to take advantage of the leaps in technological capabilities of the newer systems.

Game companies are still profiting, they have just shifted revenue models to be more focused on post-sales monetization, namely through the aforementioned MTX’s. But with this shift, there is a growing importance on player retention and engagement — they need a consistent active player pool, and attractive in-game purchasable content to ensure an ongoing stream of revenue.

This is where a live-service model can offer an attractive proposition.

 How Does the Game-as-a-Service Model Work?

First and foremost, from a publisher’s perspective the GaaS model is a safer, more cost-efficient revenue model. It’s cheaper to provide ongoing support for a game than it is to create a new one. Also, it comes without the upfront risk of a tepid reaction or total flop killing a game before it’s barely out of the gate.

Second, ongoing support means that content can be constantly updated to be fresh and engaging, keeping the user-base engaged. This is particularly important for games with a competitive element where maintaining balance amid the introduction of new content is essential.

What’s more, keeping staff onboard rather than letting them go upon completion of the game helps maintain a strong and consistent talent pool. It also fosters a stronger relationship of trust between the gamers and dev team, who can more directly implement their feedback, further aiding in player retention.

This shift is already underway for some major video games companies. Ubisoft, for example, has been vocal about its transition away from the traditional games sales model towards the support of live games, citing that second-year revenue generation has proven to be 3x more profitable.

It is still in EA’s best interests, for example, to maintain the annual seasonality of FIFA to refresh gamers’ progress with their Ultimate Team and encourage a fresh round of MTX’s to build them back up. There will also still be a market for compelling story-based games, although these will be unlikely to benefit as strongly from ongoing revenue streams.

Finally, not all video games companies have been as gung-ho as Ubisoft in their approach to the GaaS model for their franchises, but there will likely be increased experimentation with hybrid approaches. This means an ongoing live-supported version of the games franchise will be supported alongside annual releases. For example, Activision Blizzard will likely support Call of Duty Warzone alongside the next iteration in the CoD franchise.

 

Read more here:

Development Trends and Risks in the Gaming Market

Digitization: Leading Games Into the Digital World

Gaming in Lockdown: Good for Cloud?

If you want to learn more about this topic or have any questions, please contact Liam Hall, or head over to https://uk.idc.com and drop your details in the form on the top right.

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