As recently as the 1980s, analysts thought the gaming industry was nothing more than a fad. Now, just a few decades later, it has surpassed both the music and film industries combined in terms of general popularity and financial prospects.
Gaming is not only one of the most profitable sectors on the planet; it’s consistent, recession proof, and growing at a significant rate: Not bad for an industry built on competitive thumb movements. Video games truly are the ultimate art-form, incorporating every discipline into one creative medium. And the big leaders in gaming have been changing how big business works. They’ve been inventing new ways to recruit, exciting ways to keep employees productive, and unconventional methods of promoting imagination and innovation among their talent.
The following ten companies are gaming’s best examples of just how innovative the industry can be – not just artistically, but also commercially.
Valve is the owner of Steam, the most popular Internet distribution platform in the world. They also have their own development team, delivering AAA titles such as Half Life and Counter Strike. Valve has set the bar unbelievably high, yet they use a counterintuitive business model that simply should not work: At Valve, everybody is the boss. There is no chain of command, no hierarchy, and no rules – in theory, the intern has as much authority as the CEO.
Owners and founders, Gabe Newell and Mike Harrington, have given everybody the right to choose their hours, hire employees, start projects and work at their own pace. Even the furniture at Valve’s offices is unusual; desks are foldable, allowing employees to wheel themselves away and clip in to another workstation if they want a change of scenery. This bizarre business model often raises the question, “What if someone abuses their freedom?”
To combat this issue Valve has developed a ranking system where employees rate each other’s productivity, technical skills and contributions to each project. This information is then used to calculate a “leader-board” which determines how much workers are paid. Over the years the powerhouse that is Valve has proved that the manager-less system isn’t just a gimmick, but a serious weapon.
9. Riot Games
Riot Games are the masterminds behind League of Legends, the online gaming sensation that’s free to download and has amassed an active user base of 27 million players. The company relies solely on micro transactions to make a profit – which seems to be where the video game industry is heading these days. But that’s not what makes them unique.
More interestingly, high profile players are kept on the payroll. This allows them to dedicate 14 plus hours of play time every single day. Like a coach grooms an athlete for the Olympics, Riot Games grooms players for competitive League of Legends competitions, which attract thousands of fans in person, and millions online. Although tickets are usually priced around the $15 mark, due to the one million dollar winning prize these competitions operate at a loss; however, what they provide is a phenomenal level of exposure, and the opportunity to include what can only be described as in-game product placement. For example, the players may use characters that feature new cosmetic upgrades that can be purchased by the general public for a small fee. Over time, with consistent repeat exposure, this can generate far more profit than the conventional flat-rate approach.
8. Bluepoint Games
The video game industry is notoriously nostalgic, yet it’s awful at preservation. Bluepoint Games has made a business out of repackaging and revamping old classics for new media, rather than letting them languish on dead hardware. With growing concerns about an impending “digital dark age,” Bluepoint Games could be the true saviors of the video game industry.
It’s not uncommon to see once widely available retro games fetch hundreds of dollars – possibly thousands – on auction sites. For years there has been a huge market for the classics; however, other game companies were too blind to see it. Bluepoint Games’ real innovation is their lack of innovation; they have a business model that saves them the trouble of creating their own by revamping dated technology.
They’ve skipped a massive corner, yet remain credible, respectable and hugely profitable. They’ve tapped into a massive dying market that was in dire need of saving… sometimes the most innovative ideas are right under our noses.
One of the main reasons why Stockholm-based developer, King – creators of Candy Crush Saga – manage to keep players so engaged with their social media games is because they treat them as a constant work-in-progress. The loop of feedback from the players is a big part in the development process. In fact, the role of this “big data” is just as important to their business model as the designers themselves, influencing everything from the mechanics to the visuals of a game.
Most video game companies will design the mechanics, build the bulk of the game and use the play testing phase to tune-up what they’ve already accomplished. King take the opposite approach by publishing concepts for games on their website, analyzing player usage, and then making the necessary tweaks before the “real” launch on Facebook. If all goes as planned and the game proves worthy, they’ll port it to mobile. King isn’t just a one-trick-pony known only for Candy Crush Saga; their other successes, Pet Rescue Saga and Farm Heroes Saga – which both use the work-in-progress business model – are slowly moving up the ranks and contributing a huge portion of their estimated $915,000 daily profit margin.
Nobody would’ve predicted that “let’s plays” would become a huge multi-million dollar industry. With more than 35 million (as of May 2015) channel subscribers; PewDiePie is the most popular YouTube personality in the world. Thousands of unknown names have since followed suit and attempted to jump on the “let’s play” bandwagon, though few have succeeded.
Twitch is a spinoff of Justin.tv, and primarily focuses on video game related content, such as walkthroughs and competitions. The culture of Twitch is affecting the video game design process worldwide, causing developers to not only think about playability, but also spectatorship. This is especially important for small-time indie developers as building “buzz” during the early stages is often the key to success. With over 50 million monthly viewers, each engaging with Twitch for an average of one and a half hours per day, their viewing figures can literally dictate which games will make it out of development and onto the shelves.
Steam made it possible for indie developers to stand a fighting chance in the world of digital distribution. While its Greenlight feature almost guarantees some level of exposure, for many developers the whopping 30% distribution fee is a major turnoff. Steam is great, but for all those developers that don’t get the Greenlight or aren’t happy giving up a major share, Itch has been there to pick up the pieces. That’s not to say that their games are worse; they have some top quality titles, such as Super Star Path and Spirit Parade.
What’s unique about Itch is that they give developers the chance to upload their games for free and sell them at whatever price they choose. In addition, if the “Fees supporting itch.io” option is switched off, they waiver their cut altogether. Itch can also generate promotional codes that can be used for crowdfunding giveaways, allowing developers to pursue other methods of funding through the same platform. Fundamentally, services like Itch wouldn’t survive without indie developers; therefore, they treat everybody – from single person operations to large corporate entities – with the same level of respect and diligence.
Zynga are the masterminds behind some of the world’s most popular social networking games, such as FarmVille, CityVille and Mafia Wars. Zynga have amassed their fortune using a freemium-based business model. Anyone with a Facebook account is welcome to play their games completely free of charge; however, for the extra special in-game treats players must spend a fictional currency. Players can earn this currency the old fashioned way through time and diligence, or by simply typing in their credit card details and buying a “top up.”
While the micro-transaction model is nothing out of the ordinary, unlike other companies in a similar boat, Zynga also targets the high street. Over 12,000 stores across the United States now stock their prepaid gift vouchers that can be used to purchase in-game goods. And that’s not to mention the $153 million they made last year (2014) in in-game advertising.
It seems like virtually every indie video game company uses crowd funding to get their foot in the door. When Kickstarter and IndieGoGo became the funding platform of choice for most new developers, it was just a matter of time before a specialist video game platform was created. Gambitious was one of the first in line.
Unlike its older cousins, Gambitious offers equity shares, allowing backers to donate as little as 20 euros for a piece of the pie. Like Kickstarter, it has an all-or-nothing model; therefore, creators must raise all of the funds to receive payment. Gambitious also invest together with public backers and work alongside developers with their team of industry experts, ensuring everything from the project management to the marketing and distribution runs as smoothly as possible.
2. Failbetter Games
Failbetter Games are known for their interactive playable novels. Random House has even leveraged the platform to showcase new authors and diversify its business, most notably with Bob Sherman’s Black Crown Project. The caliber of writing is so high that they were even commissioned by BioWare to write a prologue for Dragon Age: Inquisition.
Their own ever-expanding in house gothic horror Fallen London, is the jewel in the Failbetter crown and has gained critical acclaim in the indie world. According to CEO Alexis Kennedy, Failbetter’s priorities are defined as safety, fun and profit – in that order. After a rough start and some experimental methods of operation, the company refuses to operate outside of the free-to-play business model, choosing slow growth and quality over profits.
1. Humble Bundle, Inc.
The pay-what-you-want business model rarely works, but when it’s structured properly, it can yield phenomenal returns. While it’s been tried and tested sparingly throughout various media industries since the early 2000s, the Humble Bundle service is the first to truly “nail it” with video games.
Humble Bundle puts the buyer in complete control, allowing them to allocate their chosen donation (providing it exceeds $1) to either charity, the developers of the game, or the Humble Bundle maintenance team. Bonuses may also be distributed to gamers who pay more than the average donation, providing an extra incentive to donate a little more.
The original intent of the Humble Bundle was to promote unknown indie games; however, as the service grew it began including AAA titles as well. Larger companies like Electronic Arts – who used it to distribute Dead Space 3 a year after its official release – benefit by squeezing more revenue out of games that have lost momentum. They also acquire extra revenue and exposure from buyers seeking other titles. On the other side of the fence, the Humble Bundle team gets a more attractive title to add to the mix. It’s a win-win for everybody.
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