The most substantial opportunity for game makers lies in locking up a recurring revenue stream via a subscription model. Currently, consumers buy few game titles, fearing that they may have to keep a game they do not enjoy. At thirty-nine dollars a title, this represents a significant level of “buyers’ remorse.” Game makers can help alleviate this concern by offering games on a rental basis. They should also provide consumers the option to purchase the game should they enjoy it, and wish to add it to their personal library.
Console manufacturers can facilitate this new business model in two ways: by marketing games directly to consumers by embracing the Blockbuster/Netflix.com model,105 and by providing online access to a proprietary emulation website.106 By working with companies like Blockbuster, which could offer gamers unlimited rentals with no deadlines for a flat monthly fee,107 video game manufacturers can reach a wider audience. Blockbuster and other video/game rental establishments provide a substantial distribution channel for game manufacturers and the manufactures could arrange to receive a small percentage cut. Moreover, by allowing people to sample games before making a thirty-nine dollar commitment to purchase, programs like Blockbuster’s generate visibility for games, which, in turn, drives purchases.
A Netflix.com-like model for gaming software distribution would allow consumers to access all of the games available from manufacturers as well as discontinued titles for a monthly fee. The revenues could be shared among the game developers, publishers, and console manufacturers (and the retailers’ share of rents could be equally divided among the aforementioned players). Such an outlet could also be used to drive game sales, as new games could be pre-released on a television channel to encourage consumer adoption. With this type of model there would be fewer incentives for paying customers to download discontinued game ROMs. Eventually, as broadband adoption expands, consumers will be able to test and play games on demand, decreasing the need to ship video games back and forth from a Netflix type entity.108 A menu providing access to a library of video games on demand, similar to a “Movies On Demand” channel, would afford consumers an additional avenue to experience games and to drive revenue for the game makers.
http://www.blockbuster.com; (last visited July 4, 2004) Netflix, Inc.,
http://www.netflix.com (last visited July 4, 2004).
indefinitely and may cycle the titles they hold. According to Forrester Research, eighteen percent of American households will have connected 108
gaming consoles ready to play games online by 2007.
The authors are not aware of any console manufacturers that utilize this model. Under the Netflix model, customers may rent up to a fixed number of titles at one time, may keep them
(last visited July 4, 2004).
Appendix Exhibit 5: Consumer Broadband Adoption and Online
Explore Alternative Business Models
Console manufacturers should also improve service and maintenance for purchased games by replacing broken CD-ROMs and cartridges at no cost. Better service and maintenance agreements would diminish consumers’ justification for ROM downloads.
Improved Customer Service