An (overly) simplistic analysis of a new release model - RaychelSnr's Blog

RaychelSnr's Blog

An (overly) simplistic analysis of a new release model

Posted on January 21, 2010 at 12:15 PM.

(16)

I'm going to dive into this issue a bit further tomorrow, but today I just want to play with some numbers so we can see how feasible a subscription based model might be for sports games. It seems there is a populist kind of movement starting by sports gamers where we want companies to focus on quality and go to an every other year release cycle while using some sort of DLC/subscriptions to fill the gap on the year a game isn't released. So let's look at some simplistic math drawn from arbitrary numbers to see how feasible such a model really is.

Scenario 1
The current setup, where we have yearly releases at $60 a pop. We're going to say the game sells exactly 1 million copies each year of our two year cycle for $120 million in revenue. It's not exactly that simple of course, but for the purposes of this exercise, we're making it that simple.

Scenario 2
This is an every other year release cycle with charges on DLC and a subscription based model for some features. The game would sell for $60 a pop up front, and we will estimate we sell roughly 1.4 million copies over a two year period -- a bit over our 1 million copies per year in scenario one (I told you this was simplistic). That results in $84 million in revenue.

So a company would be dealing with a roughly $36 million shortfall in both models. As the virtual simplistic CEO, I'm going to offer a roster, uniform and stadium update pack for $10 which 20% of my customers will purchase, which results in a $28 million revenue pop. I'm also going to charge for access to our advanced online gaming features, which we used the extra time to really do a great job on. We are charging $5 a month for these features and given the transient nature of customers on subscriptions, we're predicting we'll get 100,000 customers (about 7% of our customers) worth of 12 month subscriptions out of this...giving us a $6 million further advance in revenue. Thus, we have now made up $34 million of our $36 million shortfall.

Conclusions
Using some very conservative estimates and simplistic conclusions, I was able to come up with a reasonable scenario where a subscription based model could actually be close in terms of revenue production to our current model. Granted, the profitability of such a measure is a much more complex calculation, and the realities of the market are also far more complex. However, I think it is false to say an every other year release cycle that relies on subscriptions/DLC can't be as lucrative as a yearly release cycle if a company actually does do it right.

So while my math was simple and my numbers were largely best guess estimates, we came to a point where both models could realistically be just as lucrative revenues wise. So what say you? Do you think it could work? Throw out some of your own arbitrary math, it's both fun and gives you a (false) sense of importance! Sound off now!

Comments

# 16 FASTEREST @ Jan 24

BAD MATH!!! 20% of 1.2 million users is 280,000. 280,000 users paying $10 for DLC is $2.8 million, your facts state $28 million. Geez, use a calculator next time. Based on your hypotheticals, this will never work for the publishers.

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