Intellectual Property and Future Business Models

Miscellaneous Topics
#1

Faced with the possibility of one day not being able to charge people for software that I might produce, I wonder what sort of pricing plans can be thought up to give consumers the products they want, while still allowing business to be profitable. I turn to you, the forum members, to drum up some ideas that perhaps we can all benefit from.

And I start with a dialog that occured recently between a friend and myself:

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Friend: “People shouldn’t have to pay for software, or music, or any other form of digital content, because (especially with the advent of peer-to-peer networks, and their success), the cost of production on the side of the owner of the digital content is almost completely zero.”

Me: “Yes, but major software systems, and even today’s advanced games require millions of dollars in funding to get off the ground, and to produce such quality. Are you to deny companies of the ability to reclaim such invenstments?”

Friend: “I don’t think people should be in it for the money, like the large businesses. I think that they should keep the costs low (like their salaries) in order to maintain profitability.”

Me: “But you yourself are a big movie fan. Do you really think that some of the greatest movies, some of which also happen to require very large budgets, could have been done without the vast income of the large studios?”

Friend: “No, I don’t. But my point really is that content should be free, because people are perfectly willing to bear the cost of duplication of the content, as evidenced by the large file sharing community that exists on the internet today. The companies who make their business by reproducing digital content (largely in the form of CDs and DVDs), at this stage in the game are literally nothing more than middle-men.
On the other hand, services cannot be duplicated. I think the really successful future business models surrounding the sale and use of digital content will revolve around the sale of services, rather than a ‘pay-per-song’ or ‘pay-per-view’ model.”

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I thought about this for some time. I even thought, “This makes sense. Why aren’t people doing things similar to this now?” And then I realized that MMORPGs are on the verge of this, and many already provide their client software as a free download from their site, because the bulk of their income comes from the subscription fees to the gaming service.

Now, I would like to open up the floor for discussion (not only of the MMORPG market), but other potential business models that might be put into place for the independant developer who, sort of naturally, wants to give the product away (because they’re likely doing it for the love, and not entirely for the money), but would like to be able to do it for a living.

#2

I would also make the claim that businesses that are still using such “digital middle-men” will, within the next 5 years, find themselves facing a market that no longer wants them, as their usefulness will be shown to be completely nil.

EDIT: corrected some incorrect spelling

#3

I agree with you and your friend in that services and subscription should be charged. Personally, I don’t develop anything that could sell anyways :-/ so I haven’t really thought about the biz side of programming.
My opinion was completely from the perspective of a consumer.

Also, I assume you were talking about something not to be sold to developers/enterprises, i.e. something for the average online surfer? (doesn’t really matter)

#4

[quote]Faced with the possibility of one day not being able to charge people for software that I might produce,
[/quote]
Why not able to?

#5

[quote]Friend: “People shouldn’t have to pay for software, or music, or any other form of digital content, because (especially with the advent of peer-to-peer networks, and their success), the cost of production on the side of the owner of the digital content is almost completely zero.”
[/quote]
The 40-50¤/$ you pay for a game aren’t for the cd/dvd and the nice package.

Producing tons of high quality digital content costs s***loads of money. 100 people working fulltime over 3 years. Of corse they wanna have food n stuff. “I don’t think people should be in it for the money” my ***. That’s so right. You shouldn’t work for the money… you can live from love’n’air.

It’s that typical warez user “I’m not a bad guy” bull****ting. Heared that a million times.

Really. There aren’t fairys next to the assembly line, squint and pooof there is a new game. Everything is produced by hard working usual people, who usually have to support a family.

What he’s actually saying is that service stuff is the way to go, because no one (eg. he) could steal it.

Tell him it’s his fault that there will be a Fifa2097 and a Tomb Raider 29. Say yes to remakes of sequels of ripoffs. Yes to low risk, yes to the masses. Say goodbye to innovation and yes to TCPA.

ahem ::slight_smile:

One way to force everyone to buy stuff are online only games. Q3 for example would be one of those (kinda). The bots are just too stupid for beeing entertaining. The offline key check validated only 1-2 features and the keyservers did a full check (of all x features). This way no one was able to produce a keygen (the source for the simple offline checking is btw a part of the mod source).

Oh and they (id) also pulled a funny stunt. After about 1-2 years they turned the keycheck off. The number of players increased drastically and then they turned it back on and alot of people bought it then :wink:

So… the options are:
-paying per month for an account (like most MMORPGs do)
-primary online with keyservers
-browser games (money through banners)
-advertisement games (Games were advertising a product is the main motivation - copying is explictly allowed.)
-ultra hard games were you get the money through selling hint books (concept ripped of by a 3d modelling software called blender)
-adware/spyware (aww)
-games wich cause epilepsy (sponsored by the pharma industry ;D)
[…]

Ok. The first 3 looks perfectly valid. Number 4 is ok, but getting a contract might be hard. Number 5 is somewhat perv. Number 6 is moral offensive and number 7 was a joke.

#6

You have forgotten about another option (unless you put it into ‘advertising’ point)- making Army believe that giving a game for free to bunch of 13 year old boys who teamkill each other on sight will reduce their failed recruiting efforts and thus reduce overall costs. I’m of course taking about Americas Army here and they claim it is indeed successfull - cost of few millions per year is neglible. Interesting thing - they do not look at AA as much as recruiting tool, they look at it as counter-recruiting tool. They plan to save money by not having to train people who will quit Army in middle after discovering that bullets and mud is involved in this job.

Maybe sponsoring from other industries can be acquired ? From mining companies, showing that being a miner is hard and dangerous job, prone to economic failure, so miner schools can save money by not training people ? :wink:

#7

[quote] Why not able to?
[/quote]
I think services are also the way to go…so who will buy the product when the industry standard becomes subscription services. Will this actually happen? I don’t know, just throwing a hypothetical situation out there.

[quote] The 40-50¤/$ you pay for a game aren’t for the cd/dvd and the nice package.
[/quote]
I know that. However, you’re missing the point. I’m not looking for reasons to keep the current system, or explanations of why the current system exists…I’m asking for ideas on how to expand into new areas.

[quote] Tell him it’s his fault that there will be a Fifa2097 and a Tomb Raider 29. Say yes to remakes of sequels of ripoffs. Yes to low risk, yes to the masses. Say goodbye to innovation and yes to TCPA.
[/quote]
Give me a break. When it comes to innovation versus risk, you’re wrong my friend. Just flat wrong. That’s paramount to claiming that anything which costs money, and eventually becomes free would be completely devoid of innovation. Is it a factor? Yes, but there are developers out there with the vision to “shake things up” once in a while. Apparently you don’t consider yourself as one of the masses, so why do you care what the masses are doing or buying?

Consider this: if subscription methods could be made to be the norm, then regular subscribers (being the constant, fairly regular flow of income) could create a stable base from which companies could draw to build future projects.

For example, if people say subscribe to your site to access your library of games, or to use your online servers, then adding additional games takes on very little risk - because if you’ve already got a stable base, then adding a game isn’t going to detract from that flow of income. It’s only going to add to it. Perhaps it won’t add enough to justify the costs of production right away, but at least over time you’ll earn your money back if you’ve got other successful games on your subscription service. This is in direct constrast to the current model, where if you have a flop of a game, and it doesn’t even sell enough copies to make up your production costs, then you’ve lost money.

Your argument of “risk vs. innovation” collapses, if there is a system in place where the amount of risk you take (and I figure you mean how much innovation you try to incorporate into your game) doesn’t effect your income in a negative way.

Think of MSN’s Zone service. It’s mostly free. If I had a service like that where I charged people a nominal fee for playing the wide variety of games availble, AND it was popular, then adding more games doesn’t mean that my site becomes less popular, and therefore less profitable.

It also means, if this service was based on a flat-fee system, that people would be even more likely to try my radically designed game, because it costs them nothing extra.

Would this not be a good way to build popularity, bring together a large community of people with varying game genre interests, while collecting a flat fee from all of them, even if they only play 3% of the games on the site?

  1. Subcription fees feed future development.
  2. Radical game designs are turned into low-risk investments
  3. The cost of playing 1 game or 500 games is the same for the consumer, where the current model has you paying for each game you try, and absorbing the cost if you can’t return it to the store.

Providing “demos” of your game can aleviate some of the consumer frustration from #3, but providing full access to a game, I think, is a more likely way to gain loyal players (read: customers).

#8

Furthermore, while I don’t think stealing software (via P2P networks or warez servers, or anything else) is ethical, I do believe that in a free market, consumers are supposed to be able to have a say in how much they pay for products, and how their services are delivered to them.

Some would argue (though most are just punk kids in my experience) that P2P networks are the consumer’s answer to big business models that people grow tired of. The company that will win in this disagreement between consumers and digital content producers of all kinds, is the one that can remain highly profitable while consumers get what they want too.

Someone will figure out a better way to do this (for every kind of digital content), and when they do, it will completely change the way companies and consumers interact and exchange money for product.

That’s the whole point of this topic…to try to drive us to that point. To create ideas that will lead to a system that is more equitable to everyone involved - and opens the door more widely for independant developers.

#9

…and in a flash you remove most of the incentive to produce any new games. Why is it that MSN fails to produce any games of more than 5 minute attention span (addictive, but mind-numbingly dull if you have a real life and are dragged away long enough to come back to them fresh)? Well, because there’s no point spending money making anything great…

Time has shown that in all industries as soon as an incumbent is printing money for no risk, the executives start spending more time on the beach. Figuratively speaking.

That last statement doesnt’ make sense: if you develop a new game, it still loses you money: if it cost you $5 million to write the code (this is typical) then you don’t magically get a free $5 million just because you’ve got a subs service - you still spent that money, and you still lost money on it.

#10

[quote] That last statement doesnt’ make sense: if you develop a new game, it still loses you money: if it cost you $5 million to write the code (this is typical) then you don’t magically get a free $5 million just because you’ve got a subs service - you still spent that money, and you still lost money on it.
[/quote]
Hm. I see your point. The point I was trying to make here goes back to my statements about risk vs. innovation, which you didn’t approach.

And yes, you’re argument about Zone.com has a point.

What I’m trying to do here is bring it back home to us - the independant developers. Do you think your motivations to make games comes from the desire to make large sums of money? Don’t you think that a system like the one previously explained would give you a certain sense of freedom, having the knowledge that you don’t have to worry about where your next meal is coming from? The freedom to spend your working day pursuing the game ideas you’ve always dreamed of?

As for all the rest of this argument, we can spend all day thinking of exceptions to each other’s statements.

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Let us focus on the heart of the issue, as I originally intended it (perhaps I ask for a miracle):
What is the current state of digital content distribution, and where should it go to best benefit both comsumers and creators?
Any suggestions are welcome - not just service-based answers (though they are also welcome).

#11

The reason I put it that way was solely because I wanted to dramatize it a bit :wink:

I just can’t wrap my head around that “paying per month for an account” thing, is because it doesn’t do the trick for me. I wouldn’t ever pay for something like that and I know only about a handfull of people who actually did that kind of stuff. However, buying games (either the real thing in a box or a download) seems pretty “natural” nowadays.

Sure, things will change - they always do that.

Hm. Well, you could also combine the current shareware model with that “per month” thingy. If you already use expiring keys it should be pretty easy to test that for awhile. Finding the perfect pair of timespan an price tag could be quite tricky.

Let’s say… a demo, a one month limited fullversion for 9.99 and a unlimited fullversion for 19.99. Upgrading from limited to unlimited would be 10$ then.

Hm. Could that work?

#12

;D You are basically describing the popcap model (not quite the same, but it’s in the same “family” of business models).

#13

In all fairness, I’m not an indie developer. Although we do partner with indie developers to write games, our focus is on providing technology and services for studios.

But despite that, I’m pretty sure I appreciate where you’re coming from.

From a business perspective, this is never going to dominate. However, I can see it occupying a substantial niche: if you could get it just right, perhaps 20% of games might be developed and purchased this way.

Grex was founded partly to save game-developers from themselves: all those who had great ideas for MMOG’s but then shot themselves in the head by trying to build an MMOG from scratch.

Equally, I started JGF with the vision that some day it could become a system that provides for indie developers the benefits you describe. At the moment, I’m just waiting to see how well it grows in the current climate without providing a means for developers to charge for their games. It might just sputter and fade away, or it might never grow beyond the 50 unique visitors per day that it’s currently getting.

If I see evidence that it really can serve as a convenient gateway for players to find good (java) games, e.g. with thousands of hits per day (which means it’s not just being viewed by games developers!) then I intend to work with others (some of whom I’ve already approached) to turn it into a system that makes it easy for indie and hobbyist developers to get rewarded for their work - without having to learn the promotion, marketing, sales, etc side that Kev (and many others) don’t want to get into.

There’s no great consensus on how this should or could happen, so JGF is in a way a testbed, to see what people find useful, and how many people use it.

And, of course! it will always be free, both for players and developers - the “charging money” side would just be an additional channel for additional content. E.g. if people are submitting commercial games which are marketed, billed for, and credited to the developer’s bank account, then one of the conditions is that they also provide a free demo.

But hey - maybe this is barking up the wrong tree, and JGF will end up going in a completely different direction. For now I’m just going to keep responding to people’s requests and comments, and see where it goes.

DCD at the moment sucks, because people from other industries see the money available in 10 years time, get greedy, and try to sell $50 games right now. To persuade people in the industry (e.g. the big studios) to release games they have to offer huge value-add. Ultimately, this makes the produce too complex to provide, and they fall flat on their faces. Give it 5 years and they should have ALL the problems ironed out - IFF they don’t go bust first.

There are major problems with any DCD and marketing. People like EA understand that their dominance is based upon CRM (incidentally which is a reason why Butterfly and Jeff’s Sim Server both are doomed business models) and they will never use someone else’s DCD system - it’s suicide.

So, DCD takeup is hampered because everyone’s insisting on building their own at the moment. That said, the systems aren’t too difficult technically, but if you don’t build it right the first time you’ll probably never recover (it’s a bit like mobile-phone billing-systems: easy to get right if you employ an expensive system architect. If you don’t, you’re screwed).

#14

From the recent java live chat:

So, perhaps in a few years Sun might get involved too.

#15

I did? Thought I know what PopCap is doing :slight_smile:

Basically they do pretty games wich are simple to learn (often with mouse only/LMB controls). They do a web version first (flash/java) and if it gets popular enough they produce a “deluxe” version, wich is basically the same game written in C, fullscreen, better sounds(?) and better graphics… and sell those for 15-20$ or so.

The thing I meant was just an additional step between demo and fullversion. You often hear that games sell bad if they are too cheap… this way you won’t really make it cheaper, but you’ll add an additional opportunity to sell a game to those who are not that sure and/or think it’s too expensive.

Logically it sounds pretty good, but then again… this kind of stuff is more art then science. It all depends on your target audience. I’m pretty sure that there are rather big differences.

Well, the pattern itself is something were some people are already used to. Several video stores do it that way with video games: if you buy it, you’ll get part of the fees as refund.

I think it’s something worth to think about once you’ve got enough titles to sell.