What is a business model?
A business model is the plan for successful operations within a business, they are on going and planned a head of product distribution. Business models include details such as intended customers, product details and financial details. It is only an abstract representation of an organisation, the people involved in a business model are payed according to how well a product sells, and how much involvement they had in the process. (Source http://www.investopedia.com/terms/b/businessmodel.asp)
What makes a business model?
A business model is make up of small components and 3 major components, the major components are The Product Strategy, The Distribution Model and The Revenue Logic.
The product strategy is what describes the product itself, describes the value to the customers and describes the various design choices which are related to the game players experience. The product strategy is the foundation of a product, because it maps out all of the essential information. The product strategy is comprised of 3 things; Vision, Goals, Initiatives.
The distribution model describes how the company markets the product and gives the customer access to it. The distribution can take place to customers directly or can be taken through other businesses or processes to improve the chances of the game selling well.
The revenue logic is states how the company generates revenue and how it brings in finances for the operation. They look for business opportunities in advertising, marketing and try to gather more business partnerships. (Source: http://www.gamasutra.com/blogs/AaronGoenen/20131216/207087/What_is_a_business_model__A_definition_for_the_video_game_industry.php)
Business Models in Game
In the game industry there are two different business models. One for core games and one for casual games, these models are both constantly being expanded to allow players to play the games on more platforms, we started with cartridges, then CD's, and now we are on to downloading games from thee internet for faster and more convenient play.
In online free casual games, the company will include several advertisements and in-game purchases to help fund the game which people are now playing for nothing. Casual game models also include try-and-buy games, which allows the user to play a demonstration of the game before willing them to buy the full version.
Core games like MMO's are available to a wider range of people which generally means that more people begin to play them with their friends or just as a friendly competition online with strangers, These games are bought in stores or online which all means that the creators on the game including promoters, designers and marketing all get their asked pay for the involvement if the game is successful in reaching its target number of players. There are 3 types of core gamers. core, mid-core and hard-core.
All business models start with the game developers, these sell the game on to the publishers of the game. After publishing the game gets passed down to the distributers then the retailers who all take a profit from each game that is bought by the consumers after the games release. These teams are not the only people who make a profit from the consumers. There are also people who handle advertising, the whole team who make the game (Art, programming, audio ect...). (Source: https://newzoo.com/insights/articles/global-games-market-reaches-99-6-billion-2016-mobile-generating-37/)
Evolution of business models
While most proven business models can be profitable for a long time, it is just as important to realise that they evolve. The 3 reasons for a business model evolving are technology distributions, commoditization, and competition.
Technology distributions change how the consumers buy product, they are often aiming to buy the latest and best technology and gaming software, which means that the games companies need to re-program their games so that they are playable on the next available console. The newer the console means that some customers are willing to pay more money for a game which is available to that console for the first time, or in the first few months of the console being released. Some games companies work with the makers of the new consoles so that the console can be released with the designers new game for a slightly cheaper price than what the two would be worth separately.
Commoditization is when a product or service lacks tangible value, it becomes a commodity that simply competes on price alone. When a business model is commoditized, it will be forced to sell on quantity to scale the business. When a business model is commoditized it means that the consumers have access to a wider range of products which have had to be lowered in price because there are rival companies releasing similar products at reduced and more appealing prices to the customer. The game business then needs to try and win it's customers back by offering up deals, lower prices and game bundles.
Competition between games companies can help to promote the company but at the same time can lower the companies popularity with the public. Competition can work the same s the "tortoise and the hare". A company could shoot far ahead it's rival and feel as if they need some sort of rest. But when the leading company lowers its guard the rival may come up with a new console or game which instantly pushes the now lower rival further down the popularity ladder. This means that all companies in rivalry, for example PlayStation and Xbox, need to keep up their guard and try o stay 3 steps ahead of their competitor at all time, even if this requires having an amazing product hidden away until the company needs it the most. (Source: http://www.designdamage.com/why-business-models-evolve-and-how-to-stay-on-top/#axzz4RaSLdjWJ)
Keeping on Top
For a business company to keep its models on top it needs to focus more on the customer retention and satisfaction, strengthen the brand and build equity in the business, not always rely on technology (Design on paper works too), execute broader visions, and reach out further to the public, wanting to know what the customers wan to see from the games company. The best ways for a company to become even more successful is to listen to the customer and work with strategic, reliable partners. (Source: http://www.designdamage.com/why-business-models-evolve-and-how-to-stay-on-top/#axzz4RaSLdjWJ)