Casual Biz Models No. 6 – Subscription

In a nutshell
Consumers pay a fixed monthly fee in return for feature-complete games. The subscription fee may also buy access to special community features and privileges.

Pioneers
Subscription services are as old as capitalism – think book clubs and cable TV – but it is EA’s Club Pogo that’s credited with proving supposedly ‘casual’ gamers would pay for the privilege of locking themselves into a particular range of games.

Launched in 2003, Club Pogo charges $5.99 per month or $34.99 per year for free access to 100 games (36 exclusives), without any intrusive advertising. Over 1.5 million of Pogo.com’s 15 million users have signed up, and the site is spectacularly ‘sticky’, with users playing for up to an hour a day. Adding insult to injury for competitors, EA says subscribers are more predisposed to buy further premium add-on content, too. A UK version of the US-focussed Club Pogo was recently launched with special local graphics and other options for British casual gamers.

Club Pogo’s owner Electronic Arts is the gorilla of gaming, but some smaller companies are using the subscription model, such as Three Rings, the developer of YoHoHo! Puzzle Pirates, a popular casual MMO. Most other big portals now also offer some form of subscription option, including Big Fish Games, RealArcade, and Shockwave Unlimited.

In detail
The various flavours of casual game subscriptions are easily understood by considering their real world counterparts.

EA’s Club Pogo follows the ‘all you can eat’ model of cable TV, where you pay a fixed fee for monthly access to however much media you want to consume over that period.

The alternative subscription model, employed by the likes of Big Fish Games, is more akin to a mail order book or wine club, giving gamers several free games a month and offering reductions on further purchases.

Just as important as the games for subscription service are the community features, such as customisable avatars, chat, and multiplayer offerings. Here the real-world equivalent would be the fees paid to social organisations such as dining or Rotary clubs.

All subscription-based casual games services also offer free gaming, which partly acts as a teaser for the subscription service. Plenty of free games are usually available, and the non-fee paying gamers are usually monetized through advertising. (The absence of these ads is frequently a key subscriber benefit.)

Subscription typically costs $5-$10 a month. The revenues are shared with the games’ publishers, distributors and/or developers according to the different games’ popularity, by considering the number of times a particular game is loaded over the month, say, or the hours logged playing it.

Advantages

• Predictable and recurring revenue stream

• Can monetize gamers who will pay for community features but would never pay for a game download

• Captive market for other products and services

• Greater potential for a portal to distinguish itself from competitors with unique content, look-and-feel, and/or community features

• Potential for more overall revenue from a gamer to be captured by a particular service, as opposed to being spread across several retailers or lost entirely to the casual gaming industry

• Incremental improvements to community features are more sustainable than focussing on churning new games

• Extremely hard to establish

• Scale issues: a big subscriber base with the associated community benefits is a selling point, but, as that implies, a new or limited subscriber base isn’t an attractive proposition

• Subscription services can feature exclusive content, which can boost the loyalty of gamers but may restrict the overall earning potential of the game for its developer (though that’s a gamble for that developer to take).

• Conflicts of interest can arise between growing an overall user base – including free users – and supporting the premium subscription service, which could drive uncommitted users to rivals

• Could haemorrhage revenue from gamers who were prepared to pay for Try Before You Buy game downloads by enabling them to sign up to cheaper bulk deals, reducing the overall revenues achievable per gamer

• Amounts due to publishers and developers are less transparent than in some other models, such as Try Before You Buy or advertising-supported

Future developments
With revenues from the Try Before You Buy model reportedly falling and only so many advertising dollars to go around, any portal would welcome a large subscriber base. However the difficulty of establishing significant revenues from subscriptions cannot be underestimated, with Club Pogo virtually unique in reporting huge numbers, and even its growth seems to be stalling.

The subscription model is least popular with games developers, who believe they see less revenue from their work under a subs-based regime, compared to other business models. One possibility is that this could be flipped, however, with games developers offering their content exclusively via their own subscription channel, focussing on smaller niche audiences with strong community features, and making significantly healthier margins due to the absence of middlemen. This is already being done by some more hardcore browser-based strategy games.

Bottom line
For portals with large audiences and numerous similarly positioned rivals, the subscription-based business model offers the great promise of locked-in consumers who are unlikely to visit (or spend on) other portals and predictable streams. Equally, they’re great value for those oxymoronic-sounding casual gamers who want a constant supply of full downloadable games. They’re not easy to establish, however. Developers argue they’re disadvantaged by subscriptions, though they could risk all on establishing a service for their own content.