item model: the future online business model? casuality - seattle june 2006 -- erik bethke item...

Item Model: The future online business model?Casuality - Seattle

June 2006 -- Erik Bethke

Item Model: The Future Online Business Model?

Yes.

Erik Bethke

CEO GoPets, Ltd.Seoul, Korea

[email protected]



Overview

● Korea the Front line in the Business Models

● Time line of Business Models● Inefficiencies of the Packaged Goods Model● Subscriptions Solve most Problems of the Packaged Goods

Model● Advantages of the Item Model● Types of Items● Fairness, Gameplay, Communism and Capitalism● GoPets Premium Subscription



Korea: The Battlefront

● Due to piracy packaged goods model died out circa 1997

● Large North American publishers still put up sales

offices from time to time and make noise about

combating piracy● Blizzard and a few other special titles make some

sales – never in ratio to the hit levels if it were to be

sold in a low piracy territory like Japan or the USA



First Generation Korean MMOs

1997 - 2000

● NC Soft – Lineage I● Nexon – Param e Nara● PC Cafe IP-based sales, very low end-

consumer payment collection



Rise of Casual Content

2000 – 2003

● NetMarble – Multiplayer Parlor & Arcade Games● Hangame – Multiplayer Card Games● Cyworld is launched – online community● 3D MMOs become crowded with Lineage and MU

clones● Prepaid Cards begin to become important



Advanced Casual Games

2004 - Current

● Nexon's Kartrider – definition of the category● Pangya Golf● Freestyle Basketball● Now these games command the highest attention from

the rest of APAC for licensing● Mobile Payment, bank wire, landlines – Payments are now fully

commoditized, cheap and convenient for content providers and

consumers



Rippling Ponds

● Taiwan – 18 months behind

● Philippines – 18 months● China – 2 years behind● Thailand – 2-3 years behind● Japan – 5+ years● USA – 5+ years● All Territories Catching up Fast



PC-OnlinePC-Online/MobilePC-Online/MobilePlatform

PPC, CC, Mobile,

Phonebill

PPC, CC, Mobile,

Phonebill

PPC, CC, Mobile, Phonebill

Types of Payments

Item Sales/

PC Café Premium

Item Sales/

PC Café Premium

Item Sales/

PC Café Premium

Revenue Model

KoreaKorea, Japan, Thailand, Taiwan, Philippines,

China, Indonesia, US, Canada, Brazil

KoreaServicing Countries

50,000~80,00020,000~30,000120,000~150,000Concurrent Users

(Korea Only)

13~25yrs old

(Male dominant)

15~25yrs old

(50% Female)

13~18 yrs old

(Children)

Av. User Age

Over 20 yrs. OldOver 20 yrs. OldOver 20 yrs oldPaid User Group

N/A

(Paran is 4th Portal)

4,000,000

(As of 3Q2005)

14,500,000

(As of 2Q2005)

# of Members

(Korea Only)

KTH-Paran

(Portal)

Hanbitsoft

(GSP)

Nexon

(GSP)

Publisher

1Q, 20051Q, 20042Q, 2004Release Date

15uk~24uk

($1.3M~$2.2M)

8uk~10uk

($750K~$950K)

40uk~50uk

($3.7M~$4.7M)

Average

Monthly Revenue

(Korea Only)

JC EntertainmentNtreev softNexonDeveloper

FreestylePangyaKartrider



Inefficiencies of Packaged Goods

● Retail markup

● Shelf space limitations● Physical Cost of Goods● Inventory and transportation management● Cartel-like distribution bottlenecks● High price point puts off consumers● Propriety formats● Sales tax● Loss of connection between content creator and content consumer● Lack of a free play experience



Advantages of Packaged Goods

● Expensive to market

● Expensive to distribute● Shelf space only to the top 10 or top 5 titles● In short, if you are the monster publisher with the

monster licenses, you like the packaged goods model● Only long-term piracy as seen in the music and PC

game categories will kill your business – as true in most

countries



Subscription Model

● Allows for Electronic Distribution

● Retail package for axillary sales● Neatly solves piracy (note: pirate servers)● Allows limited demo experience● Enjoy pre-payment of services from your customers● Organization thinks like a service company not like a

goods company● Perfect right?



War on Money

Korea: 2003 - 2004

● Dozens and dozens of 3D MMORPGs from

Western Fantasy to Eastern Fantasy to Cartoon

styled, female and/or children's focused● Classic Over Supply● Prices → zero → Free! ● Open Beta periods were extended from 2 months to

4 months, to 6 months to a year!



Birth of the Item Model

● Play my 3D MMO for Free!

● Forever Free!● Well not really...● (instant reincarnation only $2)● (swords that actually do damage only $5)● (spiffy armor $6)



Advantages of the Item Model

● Invisible transition from beta to commercial

● Eliminates the Beta Tribe phenomena of users

fleeing en mass from one open beta to the next as

companies pitifully attempt to monetize their

investment● Allows users to gracefully transition from freeloader

to nibbler to active consumer to great fat happy

customer!



Types of Items

● Appearance Changing

● Gameplay Effective● Permanent● Consumable● Rarity● Least valuable: Common Temporary Appearance● Most Valuable: Unique Permanent Gameplay



That's not Fair!

● Item model allows users to have differentiated play advantages based on their individual spending patterns

● Last time we saw this big time in the USA

was Magic the Gathering! (groan or cheers?)● Sony is inching their way in● MUD-Dev quote from a whiner



Communism vs. Capitalism

● Traditionally in sports it is okay to buy better equipment

● Traditionally in games you should compete on skill,

luck, or time – not money for some reason● MMOs are not really games – they are worlds● The 20th century consumed say 60 million people to

establish that Communism does not work in the real

world – nor does it work in online worlds



Premium Subscriptions

● What!? I thought you said subscriptions suck?

● Allows for a differentiated level of services to further

help your users feel a sense of status and

recognition● Robust and flexible services will slice up the

offerings to best suit the tastes of various markets



GoPets Premium Subscriptions

● Bonus Gold Shells at Purchase

● Bonus Gold Shells during the term for additional gold

shells● Limited Edition super item never for sale in our stores,

never to be duplicated (usually sells for $25+● User Customizable Texture Tool● Ring-tone like sound triggers for your pets● Premium Subscription supports further Item Sales



Why did I talk about this?

● Big NA console publishers – not listening to the beat of future drums – they will get smashed by open format online games

● The fairness (righteous) independent game developers

that are in it for the love of creation will vilify the crass

monetization of significant gameplay actions● Only people that will appreciate will be shrewed new

competition for GoPets in the advanced casual game

space ;-)



Hey great, I believe!

● So how long will it take for me to turn my

online subscription game into an item-based

game?● Creating item-based games requires higher

skill in game balance and needs to be built

directly from the beginning



Homework

● What is the next business model in the Korean Online space?

● If you turn in your homework early you will get a bonus



Thank you!

Thank you!

Questions?

Contact: [email protected]

item model: the future online business model? casuality - seattle june 2006 -- erik bethke item...

Documents