UK video game developer Mediatonic currently finds itself in a transitional phase where it is shifting away from a service (work-for-hire) model towards a product model. Facilitated by the advent of online distribution channels such as Facebook and Apple’s iOS, video game developer, Mediatonic’s transition to the product model will entail giving away games for free to end-user who can accelerate their game experience through various paid-for options (e.g., micro-transactions and downloadable content). This is in contrast to its work-for-hire model in which it creates customized games for larger companies, such as Disney, in a “taxi” approach. An example product from the product model is ‘Amateur Surgeon 3: Tag Team Trauma ’ released on iOS and Google Play. The game can be downloaded for free, but Mediatonic hopes players “spend some money on all the cool extra stuff we have in the game!” This write-up will focus on the product business model.
Mediatonic was founded in 2005 using financial support from external investors. In many ways, the 60-employee firm is an exemplar of medium-sized video game developers. The firm was founded on the premise of developing high quality video games for traditional video game consoles (e.g. Sony’s PlayStation 3) using a work-for-hire business model. Upon meeting project milestones video game publishers paid Mediatonic an agreed upon lump sum fee. The company hopes to achieve greater customer engagement through its product model, which it reasons will lead to higher adoption rates and longer content lifecycles. On the other hand, monetizing end-users is challenging and there will no longer be secure income from external project financiers to fall back on. Examples of the latter include Disney and its unorthodox counterpart Adult Swim. Other independent UK-based video game studios that are currently changing their business models include Auroch Digital and Quartic Llama.
Mediatonic’s customers for the product business model are video game players, with a particular focus on those with access to a smartphone or tablet. The company will develop different games to target different types of players.
Learn more about the Product Business Model
A dyadic transactional relationship where your good or service can be designed and delivered without prior interactions with the customer.
Engagement — Value Creation Proposition
In its intention to move away from a work-for-hire based business model to a product model, Mediatonic aims to continuously improve on its value proposition. Selling video games directly to the end user allows the firm to constantly monitor end-user behavior and to build games with an investment in long term revenue. Closely monitoring how players react to creative and business-led choices that are reflected in the game allows Mediatonic to better serve their user-base post-release. This continuous refinement of the firm’s value proposition not only creates benefits for the firm due to enhanced monetization capabilities and improved consumer insight, but players also stand to benefit from this approach as they constantly receive updates and new content after a game has been released.
Delivery — Value Chain
Mediatonic’s games are distributed on a variety of platforms including Apple’s iOS, Google Play, Facebook, Steam, PlayStation Network and Xbox Live Arcade. Nevertheless, in a recent interview, the firm’s Production Director acknowledges the fit between content, revenue streams and platforms to be “hugely important”. For example, the firm’s adventure game Monsters (Probably) Stole my Princess was targeted at an audience of core video gamers and was sold at a premium price on PlayStation Network and Microsoft’s Xbox Live Arcade. This stands in marked contrast with the lighthearted Amateur Surgeon 3: Tag Team Trauma that is targeted towards a more casual audience and was released as a freemium game on Apple’s iOS and Google’s Play platforms.
Monetisation — Value Capture
In Mediatonic’s intended product business model, value is captured in large part directly from the end-user. End-users can engage with the content free of charge and are offered complementary paid-for options to accelerate their progress. These paid for options come in the form of increased capabilities (e.g. extra lives) or additional content (e.g. level packs) within the game. Sometimes Mediatonic charges end-users a small fee in order to engage with the content in the first place, and offers the aforementioned paid for options to deepen players experience. Mediatonic alters the configuration of the revenue streams deployed and their weight in accordance to the type of content it commercializes.
Disclaimer — Written by Joost Rietveld and edited by James Knuckles under the direction of Prof Charles Baden-Fuller, Cass Business School, this case is designed to illustrate a business model category. It leverages public sources and is written to further management understanding, and it is not meant to suggest individuals made either correct or incorrect decisions.