vili l game ecosystems

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  • 1. Game EcosystemsBusiness Model Innovation in the DigitalEntertainment Sector: Implications for PolicyDr Vili LehdonvirtaLSE Innovation Co-Creation Labvili.lehdonvirta.comTwitter: @ViliLe

2. Why Games? $65 Billion industry, bigger than music or cinema Digital game companies are pioneers in innovationsthat drive todays digital economy Games have contributed to the worldwidedevelopment of computer hardware more than anyother application What can we learn from business model innovationin the Finnish game industry? 3. Finnish Game IndustryTurnover 165 M 90% from export(2011) Represents ~0.25% of Finlands total exports CAGR 22%! (2004-2011)1300 employees(2011) Average employees per company: 16 Young males 4. Business Model Innovation 1: Digital Distribution Source: Neogames, The Finnish Game Industry 2010-2011 5. Business Model Innovation 1: Digital DistributionHurdles:1. Fragmented e-payment infrastructure2. Fragmented e-commerce regulation3. Fragmented taxation systemsIntegrated distribution platforms (App Store, Steam)solve this but at the cost of 30% of revenues toCalifornia Policies aimed at creating a seamless digitalmarket 6. Business Model Innovation 2: Virtual Economies Consumer sells Consumer buys content to other Virtual Currency consumers to earnConsumer uses money/VCVirtual Currency to buy content /Developer redeems Consumer earns Creates content Virtual Currency Virtual Currencythrough gameplay for earnings fromor adspublisher From credit card payments to stored value and micro-payments (virtual currency) Users and third-party developers not only consume butalso create value (user-created content, microwork) Users and third-party developers can redeem virtualcurrency for real money 7. Business Model Innovation 2: Virtual EconomiesRegulatory hurdles: Virtual currencies unclear regulatory/tax status (closedloop/open loop, accounting rules, breakage, ...) Micro-employment not recognized in employmentregulation Electronic payment infrastructure does not facilitatepayments back to consumers PayPal solves this, but at the cost of ~5% of earnings to California Explicit policy development on virtual currencies andmicrowork 8. Business Model Innovation 3: CrowdfundingKickstarter.com 9. Business Model Innovation 3: CrowdfundingRegulatory hurdles: Donations-based crowdfunding Regulations designed for physical donations Global digital online donations Investment-based crowdfunding Heavy regulation of investment offers Number of investors can be 10,000s Policies aimed at frictionless donations andmicro-investment 10. Finnish Game Ecosystem The biggest business model innovation in the Finnishgame industry is the ecosystem The ecosystem is vital for talent, technology, investmentand innovation Consists of developers, universities, industry events &organizations, informal networks, angel investors, publicR&D support, gamers, gamer events, media Most important component is game culture: highacceptance of digital gaming in Finnish society &history of hobby game programming competitions Policies aimed at promoting grassroots digital culture! 11. SummaryPolicies needed for: Seamless digital market Virtual currencies Digital micro-employment Digital donations & micro-investments Game culture! Thanks for listening! vili.lehdonvirta.com Twitter: @ViliLe