Money Making Machine

consoles-drop-inAlthough I haven’t had much time to play them recently I love games and so do millions around the world. I’ve got an Xbox 360 and a PS3 both of which offer the ability to download content.

On the Xbox Live marketplace You can download films, music videos, games and updates. These features are also available on PS3 but I have not used them much so for the purpose of this post I’ll concentrate on Xbox.

As I did yesterday I want to keep thinking along the lines of the ways in which brands can adapt, evolve and diversify their offering using the network to enable their consumers to be reached and by monetized by the brand in new and exciting ways, which add value to the ownership of the product and the brand in question.

In April 2004 I wrote my university dissertation about games. It was entitled “Does Non-Linearity Improve or Diminish the Player’s Experience of a Narrative Within a Videogame?”

It concluded with the following paragraph

Instead of being a projection of our feelings, which a completely non- linear narrative would be, a prescripted narrative gives “us something safely outside ourselves (because it is made by somebody else) upon which we can project our feelings.” (Murray, 2001: 100), prescripted narrative does not diminish but enrich the experience of a narrative.”

Me, 2004
Murray, Janet H. Hamlet on the Holodeck, 2001.

Essentially as players, readers, watchers and listeners we always need an author outside of our self to have a satisfying unexpected narrative experience.

This is still true and for games publishers is brilliant news in the current climate because their networked products allow consumers to access media at their convenience and without any middle man, which means the price point is reduced while maintaining a healthy profit margin, essential to allow the flow of revenue into a business when prohibitively high prices drive people away from investing £40-50 a time in a new game.

Microsoft have perfectly positioned their Xbox business for changes in the economic climate and have an incredibly diverse set of consumer offerings available to help their business and their consumers a way to ride out the storm while still making money and enjoying narrative content.

I am really interested to see how GTA IV: The Lost And Damned sells when it is released soon. It’s an expansion pack which requires that the gamer has purchased an copy of the original copy of the game, so have already made a sizeable investment in that narrative. Those investors are now required to make an additional payment to download the expanded narrative content over the Xbox Live marketplace. GTA is the fastest selling game of all time shifting over 6 million copies in the first week alone, I’d estimate that the game has now sold in excess on 20m units (I will check this with Rockstar tomorrow and update) so the potential market for this expansion pack HUGE.

Microsoft paid Rockstar $50m in order to make the expansion pack exclusive to Xbox 360, it will not be available on the PS3, a wise investment in trying economic times? YES.

More games are following suit with expansion packs being released for Fallout 3 and others which extend the life of the product (Microsoft made a mistake in not planning an expansion pack for HALO3) whilst taking more revenue which traditional online play offers the opportunity for.

Couple all of that with the ability for consumers to pay small amounts to download movies and Microsoft have created a networked money making machine.

The Departed Didn’t Stand A Chance

woolworths-drop-inThere is a lot of talk about the businesses that have already gone into administration as a result of the global credit crunch. The truth is they were never going to survive long term because they didn’t adapt to serve their digitally evolved consumers.

I used to go to Woolworths about 10 years ago, there is one smack bang in the centre of my home town of Frome in Somerset. It was probably the biggest shop in the town. The last time I went past a Woolworths I had a look inside and it was exactly the same as I remember it being 10 years ago, selling exactly the same things in exactly the same way. Although Marks & Spencer are not in great shape they have completely changed their consumer offering while maintaining brand values.

The fact is Woolworths, which some people look at as a national institution, was an incredibly badly run business because they didn’t talk to their consumers and as a result had no any idea about the way their spending habits and lifestyle had changed. Why? Because they are not networked.

Had they over time become a digitally networked company that diversified the way their business made money they wouldn’t have been forced into administration. The same is true of Zavvi. Why would one of the country’s most successful entrepreneurs want to sell a business? Because the asset doesn’t have the potential to deliver a return large enough to sustain itself let alone deliver a profit.

  • I am aware that both businesses had websites. But they didn’t offer consumers a serious alternative to the quickly established new boys on the block of digital entertainment sales.

Reading a piece David Cushman, Director of Social Media at Brando-Digital, wrote on Monday about fear in 2009 got me thinking on these paths. I commented on his article at the time.

At £50 a pop it will be interesting to see how games sales hold up this year. I suppose the marketplace on Xbox Live, which allows users to download cheaper additions to games, like the upcoming add on for GTA, will help diversify their revenue streams which will hold up a possible downturn in hard copy sales.

Reading this morning about the success of the iPhone app store http://tinyurl.com/7q6wy8 reinforces your point about business models that don’t fit the networked world. This one does and it will be HUGE in ’09, perhaps helping to balance out their hardware business, which is in decline.”

Me on Who’s afraid of 2009?http://fasterfuture.blogspot.com

It is businesses that have diversified their offering which allow for changes in consumer behaviour that will not perhaps prosper in the current economic climate but certainly ride out the storm and not get themselves into the same trouble that Woolworths did by staying exactly the same.

I’ll finish with a quote (sales pitch) from Duncan Stewart that resonated with me today.

During recessions, the companies that follow bold strategies and make significant investment decisions are the ones that succeed when the economy recovers”

Duncan Stewart, Director Research Technology, Media and Telecommunication at Deloitte Canada

Duncan’s words are well worth taking heed of for companies that need to adapt and invest wisely over the next two years in order to emerge on the other side of the current economic downturn with a diversified range of offerings that are again primed to deliver serious dividends.