Follow the Leader: How and Why Media Companies Should Adopt Social Games Monetization Strategies - Andrew Schneider - Live Gamer

When Mark Zuckerberg told eG8 forum attendees that the music movie and book industries could be quotrebuilt from the ground up with socialquot in May my thought was that this is exactly what execs at the major media and entertainment companies need to hear nowAt Live Gamer we39ve spent over a decade helping video game companies generate revenue through microtransactions and virtual goods amp8211 the business models that have made the social gaming industry an unparalleled success More recently we39ve seen interest from magazine and book publishers record labels and movie studios that want guidance and solutions for monetizing their digital content The conversation typically starts with quotPeople are spending millions of dollars on things that don39t exist in a farm game Can we do that tooquot We follow up with quotYou certainly can Here39s a glimpse into why and howquotBroadband distribution disruption First the why Call it broadband distribution disruption Broadband access has disrupted the traditional media distribution controls of scarcity and exclusivity Once content is released there39s no such thing as quotunavailablequot to any consumer in any part of the globe as long as they have a broadband connectionThe music industry39s tale of woe is wellknown but entertainment studios are struggling with shrinking release windows and most print publishers struggle to get people to pay for their content on the web unless it39s on a Kindle Piracy is also a continued issue Knowing that consumers can download content from any number of sites for free and at increasingly large file sizes forces media companies to charge far less for their content than they39d likeThe good news is there is a model that works for monetizing content that analysts expect to reach 5 billion over the next four years By applying the quotfree to playquot gaming model to entertainment content monetization media companies can actually use broadband distribution disruption to their advantage In practice this means looking at content as a connected service rather than a standalone product and creating business models that cater to individual audience membersHow the quotfree to playquot model worksThe freetoplay model says that 10 to 15 percent of the total audience will typically optin to pay for premium content In social gaming the average revenue per paying user is 57 per month with more enthusiastic online gamers that can rise to around 30 per month These figures are the sum of multiple mictrotransactions per user each month For example a player may spend 30 per month in a game but each individual transaction may only be worth fifty cents This is the amazing thing about microtransactions amp8211 individuals optin at the price point that makes sense for them amp8211 and they keep coming back for more due to the small perceived transaction size The good thing for digital content publishers overall is that those little amounts add up very quicklyWorth noting is that advertising still plays a vital role in monetizing both the premium and nonpaying content consumers These models are accretive not exclusive And for the broader entertainment industry we believe that these dynamic monetization models will thrive when applied to any type of contentShift your thinking But before major media and entertainment companies can start applying these onlinesocial gaming business models to their content a big shift in thinking also needs to happen around distribution Historically there39s been a very healthy tension between the roles of content creators and distributors But because broadband allows for full directtoconsumer distribution and the free to play microtransaction model facilitates monetization companies need to start thinking of themselves as directtoconsumer content distributorsI don39t think the senior executives at media companies have wrapped their heads around this yet because most are still using their directtoconsumer channels amp8211 the new author39s Facebook page the band39s Web site or the movie39s Twitter account amp8211 for marketing purposes alone Why not monetize the communities that have sprung up around these channels directly instead of driving them to make a future purchase That39s core to the onlinesocial games modelTake all of the Michael Jackson fans on Facebook for example They39re passionate they39re vocal and they39re sticky posting status updates and comments and sharing content and links with their friends The retail and marketing team39s first inclination might be to use an online community to promote the new CD box release or new physical merchandise but if all of those fans were monetized with microtransactions like a social game the community could be worth 18 billion dollars by some estimatesCash in on the communityThe opportunity isn39t just limited to Facebook Media and entertainment companies can apply the same social games monetization tactics to other passionate communities through other channels Look at American Idol and its huge digital following Fox FremantleMedia and 19 could offer premium quotsuperfanquot content in addition to the usual photos and videos on the American Idol site and if just one to 10 percent of the community paid to show off their loyalty the franchise could generate millions in incremental revenueMost social games would kill to have the community that a Top 10 pop artist or upcoming new film release has but most media and entertainment companies are barely conscious of how to leverage it The 100 million or so people who play social games each month are being trained to pay for digital content in increments media companies can leverage this behavior by offering them microtransactions and virtual goods in the context of being fans and advocatesNeed proof There may be some resistance to the thought of monetizing an audience or digital content in this way and even arguments that what works for games may not actually work for other media To that I say look to South KoreaIn 2001 highspeed broadband and fiber optics hit critical mass in South Korea Great for consumers terrible for game developers because every game they tried to sell on a shiny plastic disc was pirated High speed broadband made it as easy to pirate games and movies as DSL made it easy to steal music Enter the freetoplay business model which let game companies make the content a service and virtual items the business model Our Korean subsidiary Live Gamer Asia powered those first microtransactions in 2001 and we begin powering the model here in 2007 A decade later the market is thriving and game companies around the globe have fully adopted the modelShift the focus to media and entertainment companies Munhwa Broadcasting Corporation MBC one of the largest broadcast radio and digital TV providers in Korea now offers some of its content on a microtransaction basis Viewers can pay with MBC Credits amp8211 a form of branded virtual currency amp8211 so MBC is essentially selling VOD the way we sell social games to consumers now Live Gamer Asia is proud to enable this functionality for MBC and we see the same model coming to fruition here in the USWhy so bullish Our global presence means we39ve been able to observe contentconsumption and monetization trends in more advanced broadband markets across a variety of mediums Five years ago the thought of a company like Zynga prepping for a billiondollar IPO would be ludicrous Now it39s clear that the freetoplay business model is extremely lucrative and there39s no reason that media and entertainment companies can39t successfully adopt similar monetization strategies So yes Zuckerberg was right and Korea is the proof It39s just going to take the right combination of thinking and platforms to make it happenAndrew Schneider is CoFounder and President of Live Gamer He has been a digital entertainment industry leader and catalyst for emerging business opportunities at the crossroads of media and technology for over 14 years Andrew can be reached at aschneiderlivegamercomCheck us out on Facebook at MediaBizBloggerscomFollow our Twitter updates MediaBizBloggerThe opinions and points of view expressed in this commentary are exclusively the views of the author and do not necessarily represent the views of MediaBizBloggerscom management or associated bloggers MediaBizBloggers is an open thought leadership platform and readers may share their comments and opinions in response to all commentaries

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