1. Game Design & Business Models Neil Harris neil@heroengine.com

2. HEROENGINE 3D ONLINE GAMES 2

3. MY LIFE IN ONLINE GAMES 3

4. LESSON I WISHED MY FATHER HAD TAUGHT ME NEVER FALL IN LOVE WITH YOUR BUSINESS MODEL! THEY ARE FICKLE AND WILL LEAVE YOU BROKE AND BROKEN HEARTED. 4

5. BUSINESS MODELS I HAVE LOVED ❤ Pay-by-the-minute ❤ Monthly subscriptions ❤ Buy the box, pay no more ❤ Microtransactions 5

6. BUSINESS MODEL IMPACTS GAME DESIGN AUDIENCE SIZE DEMOGRAPHICS 6

7. ISSUES FOR GAME DESIGNERS TIME VS MONEY REVENUE VS FAIRNESS ADVANCEMENT SPEED VS CONTENT PRODUCTION 7

8. BUY THE BOX AND PLAY FOR FREE 8

9. ONE-TIME PURCHASE ADVANTAGES LOWEST SERVER COST FITS STRENGTHS OF PUBLISHERS 9

10. ONE-TIME PURCHASE DRAWBACKS No Recurring Revenue: Frequent Expansions & DLC Heavy Focus on PvP = VERY Hard Core P2P = Instanced = Hacking/Cheating 10

11. WHY I LOVED PAY-BY-THE-MINUTE More Fun = More Time More Time= More Money 11

12. PAY BY THE MINUTE 12 $60 ARPU!

13. BAD GAME MECHANICS TO MAKE MONEY Increase Travel Distances Slow Healing Training Separate from Combat Punish Players 13

14. #1 DESIGN CHEAT IN ONLINE GAMES BY SLOWING PLAYER PROGRESS DESIGNERS WORK LESS HARD TIME BECOMES LESS FUN 14

15. DISADVANTAGE OF BY-THE-MINUTE HIGHEST ARPU BUT SMALLEST AUDIENCE 15

16. ANNUAL REVENUE POTENTIAL 16 BY THE MINUTE –High ARPU, Audience 1,000-50,000 SUBSCRIPTION –~$15 ARPU, Audience 50,000-millions FREE-TO-PLAY MICROTRANS –<$1 ARPU, Audience potential tens of millions

17. BUSINESS MODEL IMPACT: SUBSCRIPTIONS ARPU HAS A FLOOR AND A CEILING No chance to benefit from “whales” Low value for light users HAPPIEST USERS = LOTS OF TIME 17

18. PREMIUM SUBSCRIPTIONS GEMSTONE INCREASED ARPU TO $27 –PREMIUM SUBSCRIPTION AT $40/MONTH (35% of audience) –SPECIAL EVENT TICKETS (up to $100 each) 18

19. SUBSCRIPTION GAME DESIGN ISSUES SLOW DOWN PLAYERS = GRIND HUGE WORLD = HUGE EXPANSIONS = HUGE COST PvP END-GAME (LESS CONTENT REQUIRED) WoW IS SPEEDING UP ADVANCEMENT TO BROADEN AUDIENCE 19

20. FREE TO PLAY + MICRO TRANSACTIONS Huge Audience! –More Casual –Needs Low Hurdle Balance Paid Goods with Fairness –Annoyances + Cures –Speed or Convenience –Vanity Items –New Areas / Content 20

21. MAXIMIZE REVENUE & FUN IN FREE-TO-PLAY A MODEST PROPOSAL WHAT IF…? YOU COULD DIVIDE YOUR PLAYERS INTO SEGMENTS AND OFFER EACH GROUP ONLY THOSE ITEMS THAT THEY VALUE MOST HIGHLY? CONJOINT ANALYSIS 21

22. CONJOINT SURVEY EXAMPLE 22

23. CONJOINT METHODOLOGY CHOOSE ATTRIBUTES –Damage, XP, Specials, Speed… DEFINE ITEMS AS COMBINATION OF ATTRIBUTES –Sword, 5 DPS, Fire Spell, etc –Attributes can include appearance 23

24. SEGMENT PLAYER AUDIENCE PER BARTLE: –ACHIEVERS –EXPLORERS –SOCIALIZERS –KILLERS 24

25. MATCH ATTRIBUTE VALUES TO SEGMENTS BEAUTYDAMAGESPEED TOTAL VALUE ACHIEVERS$4$3$2 $9 EXPLORERS$2$4$5 $11 SOCIALIZERS$5$2$1 $8 KILLERS$1$5$4 $10 25

26. HEROENGINE 3D ONLINE GAMES 26 neil@heroengine.com

27. Game Design & Business Models Neil Harris neil@heroengine.com