Innovation in business models in the video game industry: Free-To-Play or the gaming experience as a service

Abstract

The shift from physical to digital platforms has turned entertainment from a commodity into a service. The video game industry has embraced this evolution for many years. However, until recently it was mainly confined to the digital distribution of games (such as subscriptions for MMO games; or multi-games platforms with new services such as playing with friends, automatic updates on Steam or Battle.Net platforms). Recently, a new prevailing business model known as Free-To-Play (or F2P) has completely reversed the logic of the traditional value chain, and therefore the relationships between players and developers. How does this F2P business model work, and just how organized is the new value chain? What is its economic structure? This paper proposes a conceptual framework for analyzing the micro-economic properties of the business model. It shows that the new value chain is structured around gaming experience as a service, and considers it‟s the managerial consequences.