Read the full interview HERE
We interviewed the Former Senior Director at Take-Two Interactive Software and NCSOFT on how the value of gaming IP is evolving in a free-to-play world.
- Why mobile-first companies like Zynga have an advantage in a free-to-play world
- How the traditional publishers can adapt intellectual property for mobile free-to-play
- How the barriers to entry are lower but barriers to success higher for free-to-play games
- The comparison of Fortnite and PUBG intellectual property versus traditional publishers
- How the Chinese work with Western publishers and risks of West losing power in the gaming industry
How do you look at the IP of King, for example?
So the first part of your question was, in terms of owning that IP and the value of it, I think it’s critical at this point. There will be original IP that will come out, that will potentially shake up the top-grossing charts. But I think IP, especially when it’s coming from somewhere that is already well-recognized, it’s invaluable, at this point. Whether it’s coming from traditional or it was an IP that was originally generated for a free-to-play platform, I think having it is super, super critical, because it allows you to then franchise and break of from that IP, to do other things.
A really good example of this is, look at what Tencent has done. Back in 2002, Tencent went and bought some share of a company called Riot Games, the guys who made League of Legends. But then, over time, they went out and fully acquired them and so now Riot is part of Tencent. It is no surprise that, after their acquisition, or during the latter part of it, they developed what is, essentially, a League of Legends clone, on mobile, called Honor of Kings. Honor of Kings became one of the top-grossing mobile products on the planet. One can say, sure, they made a new IP, but I think we all know that Honor of Kings is, essentially, a reskin of League of Legends. It just goes to show the power of that IP and being able to leverage it.
On the same example, Tencent again, they went and bought a studio called Supercell and they were really famous for building games like Hay Day and Clash of Clans. Let’s look at Clash of Clans as an IP. They took that IP, cash cow, a really well-built product and they turned Clash of Clans from what is, essentially, a build and base-building battler, to a straight PvP, mobile-lite product, called Clash Royale, using the same IP, characters, art style and so on. Do I see more and more companies doing that, with IPs that they own? Absolutely. Do I see existing franchises being transformed from what they were originally, into potentially, other genres? Absolutely. We’re going to see more of that in the near future, I guarantee it.
Although we might have seen the MAUs of King decline, year on year, for the last few years, the value of the IP and the brand recognition and the core user base, still enables the IP to be developed or built on or changed, to keep driving growth, in that segment?
100%. If you take a look at King’s portfolio of products, they’ve actually been implementing that strategy. They started off with Candy Crush, then it became Candy Crush Saga and there is another version, called Candy Crush Friends. They’re spinning off, slowly but surely, and having multiple titles in their portfolio, even though it’s the same IP; they’re just adding 10% change here, 10% change there and they’re migrating their enormous player base from one game to another to another. I don’t see them stopping doing that. If anything, I feel as if they are going to stretch even more horizontally and maybe even explore other avenues, outside of Match 3.
Just going back to the question of IP and who is going to capture the long-term profit pool in the industry. It seems as if, even though there is going to be an explosion of content and, arguably, the barriers to entry of building and launching a free-to-play game is quite low now, but the power still sits with the large publishers, with the IP. Do you think they are going to keep maintaining that? How do you look at the risks of them being dislodged?
It’s a really complex question. On the one side, when you can make a very interesting product with original IP, there are obviously huge advantages there. You might come up with something original, you’re not tied to anything and then you’ve developed it and you wholly own it. Going back to Supercell, look at those guys; look at that studio. Dave built original IP across the board it is considered one of the best products on the planet, when it comes to free-to-play. We have yet to see, I would say, a traditional IP coming in and really disrupting the market. The one that I would probably point to, that’s a traditional IP, is Pokémon. Pokémon, traditional IP, has been around the gaming industry since handhelds were created. That game came out and it really blew the lid off what traditional gaming IP can do. There is something to be said about that.
COD: Mobile is another really good one. They took the Call of Duty IP and brought it out. I think it’s a balance, to be honest. I don’t think it’s a, one size fits all or one winner take all market. Fresh, interesting and original IP can compete just as well with existing IP and there’s pros and cons on both sides. For the existing IP, the con could be, there’s a certain expectation. If you’re used to playing a particular product, on the traditional HD side, and there’s a certain expectation of what you want that game to be, but you can’t get that one to one conversion on mobile, are you going to be disappointed, even if it’s for free? Possibly. There’s a lot of juggling that needs to happen but, at the end of the day, I think both sides have an opportunity to take market share.
Just looking at the unit economics from developers, it does seem very difficult, as it should be, for a new game to be a big hit. It’s very, very difficult.
100%. Let’s say you’re a smaller, indie publisher and you came up with some amazing IP. You have beautiful art, you have fun game mechanics, you have a really interesting core loop, all those things that you are supposed to do, to make a game fun and let’s say you nailed it. But then the challenge comes from the business aspect, as well, on actually publishing the product. How are you doing marketing? What are your marketing assets? What are the channels you can get involved with? Are you doing PR? Who is doing your user acquisition strategy? Do you have an advertising strategy, for branding purposes, but do you also have other vehicles to monetize your product? These are all the things that larger publishers, with huge liquidity, are able to throw at the various products that they have, versus an indie publisher or a small to mid-cap publisher, who just don’t have that type of competitive power or liquidity in their marketing budget, to compete.
More often than not, as we were talking about earlier, around marketing costs, it’s continually going up. Let’s say your marketing budget is $30 million and you’re really trying to put your game out there. But if the timing of your launch runs up against an Activision Blizzard, like when they were launching COD: Mobile and you have a shooter and they have a shooter and their marketing budget is three times yours, who do you think is going to end up getting the market share? Most likely, it’s going to be the publisher. It’s absolutely challenging to be a publisher, in today’s market.
You said earlier that getting into free-to-play games, potentially publishing it, the barriers of entry have been lowered. You’re absolutely right. If I’m an indie publisher right now and I have a game that I’ve coded and built out, I can go to Apple, I can go to Amazon, I can go to Google and I can self-publish, no problem; easy. But to actually scale that, is super challenging.
The barriers to entry are lower but the barriers to success are much higher?
Exactly; you’ve hit the nail on the head. The barriers to success are that much higher, because the complexity around actually running the business of that product, has become infinitely more complex.
Read the full interview HERE