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How to succeed in the mobile game space by Lloyd Melnick

Day: May 15, 2018

Finally, a new approach to monetization in free-to-play games

I am excited that the latest gaming phenomenon, Fortnite, is not only a hit game because of its content but also because it has brought a unique monetization mechanic to the mass market. For over ten years, people have been optimizing the free-to-play model, improving monetization primarily through in-app purchases. We have all talked about finding new or additional revenue mechanics but there have been no dramatic changes. Many companies have gotten better at getting players to pay more (or more players to pay) but nobody had changed the paradigm. Yet, as I have written many times, the real opportunity for growth is to find a blue ocean, do something your competitors are not.

Why Epic

Epic Games has overcome this challenge with Fortnite, creating a monetization mechanic previously seen only in niche titles. Initially, I have to admit I was particularly surprised this innovation came from Epic, as I frequently wrote that traditional game companies ( most recently Nintendo) could not succeed in the mobile space because they were too wedded to the old monetization model of discrete purchases. Epic is definitely a company that has benefitted mightily from the old model, from Unreal to Gears of War to their other hits, they have made billions of dollars from selling great games in pretty boxes. Now, though, they have disrupted the free-to-play space.

In retrospect, it is not that surprising that innovation did not come from a mobile game company. Just as traditional game companies could not embrace the free-to-play model fully, the “what are now” traditional free-to-play company cannot discard their in-app purchase (IAP) optimization strategy fully. Thus, Epic, which did not have the IAP optimization baggage, could look holistically at the opportunity and come up with a new approach.

What Epic did

Fortnite’s Battle Pass system is a unique approach to drive monetization that is showing great results. According to a recent article by Adam Telfer and Joseph Kim, Fortnite has generated $126 million in revenue, including $5.3 million mobile revenue in its first 10 days.

The Battle Pass is a mechanic that avoids pay to win (spending to get a competitive advantage over other players) but finds a way to get players to pay significantly for cosmetic benefits. Traditional thinking in free-to-play is that cosmetic accessories (avatars, skins, emotes, etc.) can only generate limited incremental revenue. With Fortnite, however, they have made the cosmetics the only way to show success and progression, so players are motivated to acquire (and show off) more and better items, and subsequently monetize to get the great cosmetics.

Battle Passes are largely a challenges mechanic, and even in traditional IAP games challenges are a proven monetization mechanic. They are a great way to drive player activity, guide them to specific activities and provide a sense of completion. It’s not surprising that the evolution from challenge systems to Battle Passes yields a new monetization mechanic.

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The first key element is that there is not a leveling or stats system. Thus, you cannot show others how skilled you are by pointing out you are level 5,274. Instead, status is conveyed by how great your cosmetics are. The more, and better, cosmetics, implicitly the better Fortnite player you are.

The second key element is the Battle Pass, a series of challenges to earn cosmetics. The Battle Pass is a series of challenges with each one providing cosmetic rewards.

The third key to the Battle Pass is offering multiple paths. In addition to the free path is a premium path that provides significantly more rewards. Epic is also very loose in providing rewards for the premium path, players feel they are getting an incredible value.

Fourth, each Battle Pass only lasts a season. Each of these seasons has its own cosmetics, so if you miss a season you never get them. This creates an incentive for the player to play each Battle Pass so they do not miss any content forever.

Fifth, and a key difference with traditional IAP models, players can pay to skip ahead in tiers. Since tiers are not levels, players are not actually paying to win anything, just to get to higher value cosmetics.

Sixth, if you fail at a challenge, you need to start the entire path again unless you monetize. Critically, if you die during a challenge (which happens to most players of Fortnite), you have to start at the beginning of the challenge. Thus, there is a strong incentive not to lose your progress (and plays to people’s loss aversion). People do not want to start from zero repeatedly.

How you can use Battle Passes

Battle passes effectively change monetization from the core game loop to the challenge mechanic. By eliminating levels and points, you can move monetization from interrupting gameplay to super-charging it. Challenges work in many genres but the Battle Pass takes it to the next level. Zynga credits much of its current success with Zynga Poker to challenges. Virtually any PvP game, and even some single player games, can integrate a challenge system. The key to success though will be recentering monetization on this system rather than the traditional IAP model, making it the source of showing progression and providing a VIP path.

Key takeaways

  • Fortnite is one of the biggest gaming successes ever, and it is being driven by a monetization system previously not seen in mass market free-to-play games, Battle Passes.
  • Battle Passes allow players to earn cosmetic rewards, which have a high value because they are the only way players can show progress in Fortnite.
  • By centering your monetization on a challenge system, you can develop a similar mechanic as Battle Passes.

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Author Lloyd MelnickPosted on May 15, 2018May 13, 2018Categories General Social Games BusinessTags Battle Pass, epic games, Fortnite, free to play, monetization2 Comments on Finally, a new approach to monetization in free-to-play games

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Lloyd Melnick

This is Lloyd Melnick’s personal blog.  All views and opinions expressed on this website are mine alone and do not represent those of people, institutions or organizations that I may or may not be associated with in professional or personal capacity.

I am a serial builder of businesses (senior leadership on three exits worth over $700 million), successful in big (Disney, Stars Group/PokerStars, Zynga) and small companies (Merscom, Spooky Cool Labs) with over 20 years experience in the gaming and casino space.  Currently, I am on the Board of Directors of Murka and GM of VGW’s Chumba Casino

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