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Ask HN: My Revenue Model- How does it sound?

7 points by waru ↗ HN
Hi, I'm working on a video game start-up in Athens, Georgia. I was asked about our revenue model, so I did a formal write-up and was wondering how it sounds. Any feedback would be greatly appreciated.

Here goes:

Our game will be released in two versions: a free, Lite Version (where users can play endlessly, but upgrades necessary to advance above a certain level are locked) and the Full Version, which will cost one dollar. It is hard to predict sales, but we expect about 50,000 copies in 2012. The App Store keeps 30% of each sale.

The other part of our revenue model is merchandise. One thing that sets our game apart from other restaurant simulations is the simple, expressive, and numerous characters (rather than the boring, generic characters of many other games in this genre). We are focusing on creating popular characters that will re-occur in multiple games and be featured on merchandise. These re-occurring characters will not only boost the familiarity and popularity of each game, but also add to people's desire for merchandise.

In Japan, where I lived, worked, and studied for four years, they have perfected this process; in the development of an animated TV series or video game, for example, there is a large focus on creating high-quality characters (simple, highly graphic, and visually appealing) that can cross over into other media, produce spin-offs, and be featured on merchandise. This ends up generating far more profits than the sales of the original product. I think that many American video game companies do not appreciate the importance and potential of high-quality, appealing characters.

In terms of platforms, our game is planned to be released for the iPhone/iPod Touch, but could easily be ported to the iPad, which is number one on our list. If successful, it could also be ported to the Android. In addition, we would like to make it playable on PCs and Macs, though without the touch-screen, gameplay might take a little reworking.

...So, how does that sound? Thanks in advance for any feedback.

(The game I am talking about is actually an active project on Kickstarter right now, with one day left to go. You can see it here: http://www.kickstarter.com/projects/bts/cafe-murder)

21 comments

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patio11
You do not have access to the channels which make e.g. Naruto a cross-platform megasuccess that captures the mind of half a generation. I would suggest unlockable premium content instead.
waru
I don't expect to jump straight to the level of Japanese corporate networks, but it's an area that deserves further exploration. I think that the "cross-platform mega-success" and "merchandise of awesome characters" model can be used at lower levels, too.
patio11
I wish you every success, but think that you're running a business model based on three unlikely events all resolving in your favor. (#1, game is a hit. #2, massive demand for goods. #3, you turn out to be good at merchandising.)

Any one of these propositions seems sufficiently challenging to focus on, to my point of view.

waru
I don't expect our first game to necessarily be a hit, but we'll be working towards what I explained above. It'll probably take time to build up to your 1, 2, and 3 (unless we get lucky and they all resolve in our favor).
[dead] 0ffw0rlder
So from what I understand you are looking at a game that incorporates characters that are much more re-marketable than the standard fare of video games in the United States. Having the ability to re-market characters could really build up a brand or series identity... Some American game studios have already thought of making characters like Laura Croft and Gordan Freeman and even making these characters into a series of movies, but I don't know about how it has been applied to iOS/casual gaming.

How are you going to do pricing of upgrades aka DLC?

Have you considered pricing it at ~>=$1.99 instead of $.99 depending upon how much content is included in the original game?

hboon
What's the marketing plan?
waru
Still working on that, but making a really fun game seems more important than anything else, since popular iPhone games spread quickly by word of mouth and social networks.
hboon
If you believe that, include making it easy to spread by word of mouth and social networks a part of the product.
rmc
making a really fun game seems more important than anything else

Really? That's a very rosy-eyed view of the gaming world. "If you build it, they will come"?

waru
Do you know any small indie games that succeeded because of an amazing marketing strategy and NOT because of word-of-mouth/social media and the fact that their game is really, really fun?
rmc
Social media is a marketing strategy. For popular start up game, I'd offer Nashville.
rmc
The should obviously be "Farmville". Damn you autocorrect.
bmelton
I think you're being a tad critical.

In all fairness, having a really fun game IS more important than anything else. Definitely more important than marketing at this stage, where the game is not yet developed.

It's hard to make money marketing a game that doesn't exist.

bandhakavi
is there a way you can enter the users iphone from outside the App Store? If such a hack exists you can price your game say only 50 cents (for some limited levels) so that Apple gets to keep only 15 and open up the remaining levels or in game merchandise by charging the remaining 50 cents after the game has been downloaded. So in effect you can keep 85 cents of the dollar instead of 70 through a bullet subscription...
waru
Well, games can't be priced less than 50 cents. What you're suggesting seems to be strictly prohibited by Apple, so that developers can't get around it. They always get 30%, it seems.
chalst
The model you need to work is different from the freemium model, which says you earn money by getting people engaged enough to pay for upgrades. Here you want to make the game cool enough so that players want accessories to advertise their association with it. It sounds like more of an all-or-nothing proposition to me.

I don't think, pace patio11, that the game needs to be blockbusters to generate decent revenue, but you do need your players to feel that they belong to a community of gamers. I have the impression that merchandising generates decent revenues for some B-list webcomics: you might contact some of these to learn about their experiences. Who knows, maybe you can have your game characters appear as guests in their webcomics and vice versa?

I think being a startup has advantages here, since startups are cooler than corporations.

waru
Contacting webcomics was a good idea; thanks. I have already been thinking about cross-promotion through webcomics, too.

It is kind of an all-or-nothing proposition. We just have to hit that sweet spot of a really cool product/game/characters.

And I agree that being a "cool start-up" has some advantage over corporations, too.

rmc
We just have to hit that sweet spot of a really cool product/game/characters.

Sounds like you're banking on winning the lottery. If you want to be a world famous creator of this, then that's what you should aim for. However if you want to run a business, and allow yourself to work full time on this, then you don't need to be a rock star. You can, in fact, support your business fulltime without having to 'strike gold'.

waru
Well, I didn't necessarily mean being a rock star or the next Angry Birds, but there is a general sweet spot of "cool, desirable product" that I want to hit.

You mean that with a good marketing strategy and a self-sustaining business model, we don't need to have "the next big thing" in order to support ourselves and do this full-time, right?

rmc
If you charge more than $1 you don't need to be the next big thing, since you need less customers.

I am a little confused by your question about marketing. Do you think marketing and a business model are optional? You aren't going to have a mega hit or a small successful business without marketing.

That doesn't mean you must act out scenes from Mad Men or do boring PowerPoint presentations, you can be unconventional, like notch's "oops my server is broke, everyone gets a free copy", or talking about your business model on HN.

waru
To clarify, I don't think marketing or a business model are optional, and I don't expect to have a hit or a small successful business without them. I would like to try something unconventional, so we'll see.