Our previous post described the combination of elements that allowed Apple to invade the Mobile marketplace, crush the vast majority of its competitors, and capture a large share of the profit in that marketplace. Today’s post examines a similar Alien invasion, a disruption of the category that drained the power of entrenched market players and changed the entire revenue generation process.
Just like Apple did in the mobile marketplace - Sony and Microsoft have changed the gaming software markets with the concept of “Downloadable Content” (DLC). In a few years revenue from DLC has completely changed the gaming software revenue from Console Hardware focused sales to Free-to-Play models where ‘microtransactions’, ‘in game currency’, and ‘DLC’ dominate. A simple surrogate example to shortcut the numbers: Free-to-Play games were advertisers in the Superbowl as early as 2015.
The Alien Invaders again used a similar combination of framework approaches to Apple’s invasion(s) to put themselves in the middle of the revenue and cashflow business models:
1) Large investments (now often exceeding the content creation costs of the movie and recording industries for a release) require models focusing capital investment and labor-intensive content creation.
2) Using existing ‘platform models’ expertise to participate invisibly in the transaction enabling and user experience models central to large revenue streams. (PSP, X-Box gaming, console features on very similar hardware from AMD)
3) Using ‘giant enterprise’ multi-generation product approaches to infest and reduce strong extant competitors where a single generation of advantage is not sufficient to determine long term success (Atari, Sega, Nintendo Wii, Activision – all used to be hardware focused product companies).
The continuity of relentless invasion has extended to continuums of gameplay (across console, desktop, and mobile platforms with technology providers such as Unity) to capture revenue in adjoining and related markets (game-vertising, gamification). A simple surrogate example is movies are now produced as promotions for gaming revenue instead of the reverse.
Global ‘invaders’ are now driving the advertising/DLC concepts into markets:
1) Tencent and other Asian-based market participants deploy local cultural content to develop and protect local market revenues.
2) eSports leverage gaming across many user experiences that build new monetization revenues (twitch, arena professional gaming, event gaming)
3) Multi-entertainment and gaming opportunities to construct content-centric branding (event movies, streaming content, franchise-revenue platforms, advertising brands)
4) Content creation and gaming commoditization leads to creation of new labor and content creation centers shifting cultural and geographic locales (New Zealand, Quebec, Korea, Iceland, China)
5) Live entertainment has been captured to create new revenue streams for Name-Image-Likeness (NIL) revenues capturing profits for platform providers (Madden Sports, NBA Games, Flight Simulators, Golf).
Common characteristics of the DLC platform invasions are:
A) Monetization of otherwise microtransactions into gigantic revenues
B) Disintermediation of channels (such as game resale) to provide longer tails of revenues
C) Ability to enter other cultural and geographic markets without first establishing expensive local presence and market mindshare
D) Extension of content monetization via creation of new mediums (Instagram, SnapChat, commercial Twitter, NFT)
E) Exploitation of monetization concepts with payment processing (gift cards to account debits, pay-for-play hours to free-to-play, transparent monetization from Ted Nelson’s Xanadu concepts).
Our third post summarizes the similar models for these two Alien invasions and discusses lessons learned.
If you’re interested in breaking the mold and capturing disproportionate profit and market share, you can find more about Alien Invaders at our blog – www.ekalore.com/alien-invaders
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