Gaming Industry : Revenue Models

Category: Games

The video gaming industry is unquestionably one of the most significant and forward-thinking sectors deploying new technology and innovation. Interestingly, the gaming industry has seen considerable growth over the past years and has outperformed even the Box-Office ($42.5b) and Music ($20.2b) combined last year to emerge as the most prominent form of entertainment. Analysts predict gaming to generate more than $260 billion in revenue by 2025, and no surprises why technology giants Google, Facebook, and Apple have made plans to enter the gaming industry. While the gaming industry’s growth prospects are undoubtedly astonishing, the competition to gain a piece of the revenue is intense, and consequently, less than 5% of all games produced each year become profitable. Gaming companies generate revenues through one of these four models. For the upfront payment model, game publishers use services like XBOX Live, PlayStation Network, Steam, App Store, Google Play, etc., as their source of revenue generation. In advertising, subscription, and hybrid models, the revenue is generated through in-app advertising, in-game purchases, or charging a small periodic fee. But generating revenues through these models requires companies to acquire new customers and ensure that these customers repeatedly play games and make in-app purchases. Historically retaining players has been challenging for gaming companies as the games retention levels rarely surpass 50% on day one, 20% on day two, and by the end of the month, on day 30, the retention level is unlikely to exceed 5%. To over this challenge, gaming companies have extensively started using data analytics. Let’s look at some case studies to understand how gaming companies leverage data to acquire and retain players to drive business growth.