I read about how AppleTV will enable Movie Rentals with great interest. The Movie industry is of course quite mature and they have learned a thing or two about how to maximize the money from their movies.
Consider the following revenue sources:
- Pay Per View
- Cable Movie Channels
- Network TV
Now consider those sources in terms of time. They don't happen all at once. The movie industry uses their value chain to make the most money they possibly can. When they started looking at making movie rentals available through AppleTV, the industry had to figure out how to make more money out of the value chain, and so movie rentals through AppleTV were timed to occur 30 days after the DVD release.
I think it is very fascinating especially in consideration of casual games. I've mentioned it to some degree before, but it bears further consideration. How does the casual games industry monetize itself?
- Premium online sale
- Reduced price online sale
- Monthly subscription
- Free with ads
That's true for the majority of games though for hits you can usually add in retail and very likely extend the list with mobile and other platforms. That's not a problem. The problem I think the casual games industry is running into is the growing pains of figuring out the timing of each item on the value chain. The movie industry sees that they can maximize revenue over time by making the offering available in different ways over time. From day one casual games are available at full price and at a discount as well as in most subscription services. Free with ads is delayed in most cases, but that may change.
The danger I think is in the focus on trying to maximize all the customers right away instead of creating value over time at distinct points. My guess is that the industry could increase their revenue by:
- First releasing the game at a premium price, making it unavailable for the discounts that are immediately available nearly everywhere in the industry
- Second making the game available through the discount programs
- Third making it available through subscription programs
- Fourth making it available as free through ads
I think the time frame involved is likely to be 6 months from step one to step four and the value of the content and the revenue from it is likely to rise. The current system amplifies short sales windows for each game and decreases lifetime revenue under the guise of trying to maximize profit in the 4 week period after a game's release. It's especially difficult for the smaller developers who are for the most part just along for the ride.