Alternate Reality Games: Business Models (Part IV)
ARGs excel at providing a rich and rewarding cross-media experience to players, usually with a uniquely strong story and enthralling gameplay. Their creators rarely have problems coming up with ideas and content, but a frequent early problem is that of how to secure income to support the creative process.
Image credit: The start page of the ARG PerplexCity
Without a traditional retail box (as per mainstream computer games) and little or no out-of-game relationship with the players (as per any broadcast content) it can be hard to see how to monetize the content being produced and delivered.
In the first, second and third part of this research we analyzed the technical and social aspects of ARG. This section looks in detail at the past, present, and possible future business models that are driving the ARG industry forwards, and offers some analysis on how and when each may be appropriate.
Since the first ARGs in 2001, there have been many innovative attempts at producing ARGs. Amongst the successful ARGs, there have been approximately four waves of similar types of model, starting at first with very low-risk but low-reward models. As developers have become more experienced with ARG production and learnt from the experiments of their own and other games, the lower risks have allowed them to try less conservative models with greater and greater potential upside.
There is always a mix of the different types of model in play at any given moment, but generally speaking the trend over time is away from flat profit and short-term products towards sustainable, high-margin products.
Obviously there will always be a market for each of the different types, and which model is most appropriate for a game is a function of the team developing the game and the game experience they are aiming for, but there is an increasingly wide variety of examples to look to for guidance.
First Wave: Marketing Campaigns
The first successful ARGs were marketing efforts for other products. In particular, their revenue came from a corporate client in the form of a fee for running the game. This is a very stable business model, providing instant revenue, guaranteed payment (often up-front or in the form of milestones), and a cost/profit that can be chosen before the game launches (the client is charged according to the cost of producing the planned game).
These games are intended as marketing vehicles and as such tend to seek out significant attention from the press. Marketing efforts for separate entertainment products often use intellectual property belonging to the client, though this is not always the case.
There is an argument that the day of the marketing ARG is coming to a close, because an increasingly savvy audience will become cynical and lose interest in the ARG model. As of yet, there is little evidence that this is actually occurring, and it seems just as likely if not more so that marketing ARGs will become a permanent option in the array of devices used by marketing agencies.
The Beast/I Love Bees/Last Call Poker
These three games are all offerings from very similar production teams, and all shared the trait of being marketing efforts for a second-party entertainment product. The Beast is famously the first successful marketing ARG, and it was produced by a small team in Microsoft in 2001 as a marketing effort for the Steven Spielberg film A.I. I Love Bees and Last Call Poker were both marketing efforts for Xbox games; Halo 2 and GUN, respectively.
Art of the Heist
Art of the Heist was one of the first marketing efforts for a physical product. In this case, the game was a part of the North American launch of the Audi A3. The game was designed and executed by Haxan, and was most notable for a series of live events in which small selected groups of players were instructed to "steal" SD cards from specific Audi vehicles left in prominent venues such as the Coachella music festival and E3 (the annual computer games conference).
Second Wave: Non-profit Games
The first ARGs provided such a rich and rewarding experience for their players that, as they drew to a close, many players were inspired to start work on their own non-profit games, providing new entertainment for those now bereft of an ARG to play. Known widely throughout the industry as "grassroots" games, these have comfortably run alongside the first-wave games ever since, providing a very complimentary gameplay experience.
Grassroots games are the freeware, shareware, and demo reels of the ARG world all mixed together. These games owe much of their genesis and success to the way that ARGs of great incidental complexity can be produced at very low financial cost (the cost in developer time still tends to be very large).
Typically costing around $500-$1000 at the low end, and around 1-4 months part-time pre-production work for 2-4 people followed by a further 3-6 months of part-time work whilst the game is running, grassroots games are well within the grasp of pretty much any group of friends with dedication and good ideas.
Generally there is no steady revenue stream to speak of, though some do accrue very small income through advertising or affiliate relationships. Grassroots games typically have short run times and small budgets. They rely on free services, volunteer work from writers and developers, and whatever funds that the development team feels it can spare out-of-pocket in the interests of the game.
Grassroots efforts often provide a more personal experience to the players, as the audiences are typically smaller than commercial efforts; as a result, difficult-to-scale experiences such as email or IM and phone conversations have a more limited role in these games than in commercial ARGs.
Many grassroots designers have gone on to subsequently join commercial ventures.
While some grassroots efforts create their own intellectual property, some borrow IP from existing material from other sources, in the manner of fan fiction, such as Metacortechs (based upon the first film of the Matrix trilogy).
The grassroots games go through periods of being viewed with some suspicion in the ARG player community, because they vary so wildly in quality and because a significant number of them derail midgame and end without giving the audience the closure they might desire. Some players, though, prefer the intimate feeling of a smaller-scale ARG, and the number of grassroots games being produced continues to increase steadily year on year.
Third Wave: Productized mini-ARGs
With the first wave of ARGs demonstrating largescale player numbers and the presence of funding up to around $1million for marketing-based games, and the grassroots games showing a relentlessly growing and widespread interest from the player community, several companies looked at ways of monetizing gamers directly.
ARGs were loosely defined in terms of features and content, and the first challenge was choosing what to focus on in any new game. One recurrent feature of ARGs at the time was the notion of an interactive plotline driven towards a climax by puzzle-solving on the behalf of players -something generically recognizable as a traditional treasure-hunt, only played out in public on the internet.
In the past, many organizations had run puzzle-based treasure hunts in real-life, ranging from one-day affairs such as Easter-Egg hunts all the way up to the best-selling Masquerade book, whose solution identifed the location of a buried gold necklace in the shape of a hare, worth almost a hundred thousand dollars. One of the problems of these hunts was scaling up to more than a hundred or so players, and ARGs provided inspiration to several companies for a more modern way of doing this.
Generally, however, the successful players in this area are rarely considered - even by themselves -as ARGs per se, and prefer to be categorized as games that mix public life with private play. Terms used include: "street games", "hybrid games" and "mixed reality games". This also contributed to an unfortunate blurring in the press between the concept of ARGs and live-event games to the extent of frequently misidentifying one as the other, or attempting to subsume all live gameplay as "just a form of ARG".
Whilst each game took its inspiration in different ways, examples of productized games that do consider themselves ARGs are treasure-hunt based games such as Push, Nevada and Perplex City, both of which provided actual cash prizes to the first person to solve the final puzzles.
This lead to much debate within the player community over the possibly destructive effect of a single prize upon the highly collaborative gameplay of ARGs to date, and the possible destruction of inclusive, collaborative player communities.
In the long run, this doesn't seem to have proved a problem so far, with most players taking the perspective that the game is played for the fun of the game. A frequently presented comparison in the player community is made between the treasurehunt grand prize and a lottery ticket: you know you won't win, but you don't mind buying-in since there's always a small ray of hope - someone has to win, and it might just be you.
Fourth Wave: Indirect Revenue
Despite the low overall cost of previous models and the critical successes of the games produced, a remaining problem was the lack of any long-term sustainable revenue streams from ARGs. In particular, the profit from any given ARG remained constrained by the core feature of the bespoke business model: you only got to charge a small margin on top of the cost of producing the game.
Taking some lessons from mainstream media, where the merchandising of a primary product can often earn more income than the product itself, several ARG companies have recently tried similar direct-to-consumer, indirect-revenue models for their businesses.
These games are run with the intention of selling to the players a secondary product -hence the revenue from the game is derived indirectly from the game itself. These games differ from marketing efforts, however, because the game and product are produced by the same company.
Because the ARG company is reliant on only itself, sales of the product must support the ARG content; a merchandising ARG that sells $5000 of merchandise but incurs $50,000 in development fees each month will not last terribly long.
One interesting side effect of an ARG intended to move a product has been seen in the anticipated play time of the games in question. In both major merchandising ARGs to date, game duration is Come Out and Play Festival: "dedicated to street games. It is three days of play, talks, and celebration, all focused on new types of games and play." measured in years rather than mere weeks or months. This is presumably because a prolonged run time gives the actual merchandise a longer opportunity to achieve distribution and market penetration.
Perplex City was the first successful merchandising ARG. Perplex City is the product of Mind Candy, a British company that has tied in the ARG elements of the game to the sales of a physical set of collectible puzzle cards. The game's content launched in earnest in March of 2005, and the first season is still running as of September of 2006. Mind Candy has publicly acknowledged that a second season of Perplex City is already in its planning stages.
EDOC Laundry is a merchandising effort that is intended to drive the sales of t-shirts and other personal apparel. The items are designed with coded clues in them that direct players to online information telling a story of rock and roll and politics in the America of the 1770s.
In parallel with the clear waves of models in the industry, several other models have surfaced briefly, and are worth considering as possible major players in the future.
The earliest of these is the subscription, or "pay-for-play", model. In this model, the revenue stream is a set fee from each player, as is commonly found in MMORPGs. This model has a poor reputation in the ARG community because of the fate of Majestic, often considered a bomb within the industry. However, more modest efforts have been springing up in recent months, presumably involving smaller development teams and lower overhead per game. The rebirth of the subscription model is concurrent with a dawning interest in video gaming as a whole in episodic content.
Majestic launched in 2001 after Electronic Arts spent an estimated circa $20-30 million on development. The game was arguably one of the most significant advances in the history of video gaming, and in some ways was too early for its market.
Majestic has been much derided, but the team was really striking out into unknown territory, and many of its mistakes are only clear in retrospect. For example, a prime complaint that many players had in Majestic was that only a very limited amount of playtime was available each week, and after a fairly short period of participation, players were forced to wait until enough realtime had elapsed to make the next phase of the game available. Interestingly, this is a model attracting new interest in the video gaming world as the idea of episodic content becomes fashionable.
Majestic's pricepoint of $10 per weekly episode is also considered too high for the volume of material provided. New speculation suggests that Majestic's primary error was not in providing episodic content, but in providing insufficient content per episode to satiate the player until the next episode was ready and make the player feel he had received sufficient value-for-money.
Majestic was shut down in Sept. of 2001 after concern that the Sept. 11 plane hijackings would render the game too controversial or threatening to continue.
Another model is the private ARG, generally of a much smaller scale (as few as 20 players), but otherwise almost identical to a traditional ARG. These are a distinct entity from the smaller streetgames and similar that do not consciously follow the conventions of ARGs, and provide an exeprience closer to a LARP or Murder-Mystery evening.
There is arguably a significant market for private ARGs, run as corporate team-building or educational efforts. Because these games are targeted at smaller and more specific markets, they rarely garner as much press attention as other kinds of games.
Private client-based games are by nature much shorter than other kinds of commercial venture, and would ideally make heavy use of reusable elements to keep design and production costs down.
The Go Game
The Go Game is a product of Wink Back Inc., and is primarily a single-day limmersive live event. In the Go Game, competing teams from a single organization work to fulfill missions, and in a postgame event, all the teams are brought together to determine a winner.
Development and Production Costs
One of the common features of ARGs is that they tend to be extremely cheap to run. Further, with ARGs "cheap" rarely means "low quality", and new developers are often pleasantly shocked at how much previous ARGs have managed with how little resource (measured in terms of exposure, depth of gameplay, effect on players (emotional, educational, or otherwise), etc). Certainly the budget for an ARG does materially affect the overall quality, but the effect tends to be substantially exceeded by that of an experienced and creative development team.
The main effect of budget tends to be not to limit what the ARG can do, or to reduce the quality substantially, but to limit how much can be done at once, or within a given time frame. The primary distinguisher between ARGs of radically different budgets tends to be the volume of content being pumped out each week, or the number of different story-arcs that are running in parallel (each with their own independent player/actor interactions).
Generally, the largest cost for an ARG is the manpower needed to invent, research, design, and run each part of the plot. Unlike many forms of entertainment, there is often as much time spent actually running the pre-made content as making it, so that the content reacts as much as possible - and as realistically as possible - to the unpredictable actions of players.
For instance, conversations between in-game characters and the players are rarely scripted, rather they are storyboarded in broad terms and then it is up to the developers to invent the actual conversation on-the-spot once they are talking to the players (posing as the in-game character).
Fortunately, many techniques have been developed to provide content for large numbers of people (from hundreds up to tens of thousands) with relatively little effort from the developers. The overall effect is again to reduce or even eliminate budget as a major issue for the business model.
Finally, one of the fundamental features of ARGs, that of spreading virally by word-of-mouth from player to player, is extremely hard to retain in the presence of a heavily-monetized experience. Unfortunately, even models that extract relatively small amounts of money from the average player tend to massively harm or destroy the effectiveness of the ARG's viral marketing, with the net result that a lot of extra money needs to be set aside to fund the marketing and promotion of the game. This is a cost that usually is not present for an ARG, and in the context of the other generally-low running costs can inflate the overall cost by a large amount.
Revenue Streams - Service
Most of the interest and experimentation in ARG business models is with how they bring in money - and how much. Although the grassroots games are largely unaffected by these issues (due to the extremely low costs of running an ARG), even they often attempt to generate some revenue to fund occasional richer and more detailed arcs within the game. At the generic commercial level, ARGs are fundamentally a service, rather than a product, and this affects all the revenue streams.
Services are easy to charge for, but have high ongoing costs and generally scale poorly in terms of number of consumers and ease of satisfying demand, which substantially limits the growth potential for a business. The only major attempt at a subscriptionbased ARG, EA's Majestic, proved both a critical and commercial failure, despite many strengths as a game, and this appears to have dissuaded most developers from following that model.
However, Majestic only very narrowly missed-out on being the first major ARG, and as such was experimenting with many different things, only one of which was the business model. By comparison to The Beast, it fared poorly in the market, and the subscription model was one of the most obvious differences, but only one of many fundamental differences in the games.
Recently, as ARG developers have become more experienced, confident, and understanding of their art, there has been renewed interest in the subscription model. Although this seems a natural choice if you assume the service-nature of ARGs, other issues suggest that focussing on ARG-as-service is not necessarily the best way to go.
The features of ARGs that mark them out as a service include:
- Lack of a constrained and/or clearly delineated (e.g. single-medium) consumer experience
- Lack of a concrete physical product
- No part of the experience is a standalone entity that -once purchased -can function without
further invovlement of the manufacturer/developer.
Each of these is part of the core value of an ARG to the players, from the lack of constraints to the inherently cross-media experience, and the reactivity of a game which is run in real-time by the authors.
Problems with providing ARGs as a service include:
- Any direct-billing service model implicitly delineates the boundaries of the game (between that which is chargeable and that which is not)
- Pay-to-play, generically, reduces the eagerness of players to recruit friends and reduces the inclusiveness of the player audience
- The "this is not a game" element of ARGs, although generally not considered essential, is weakened to the point of complete destruction by the use of a direct-billing model
To date, some ARGs have successfully used ARG-as-service models, but generally by avoiding the billing aspect. For instance, Xenophile Media's Regenesis uses the broadcast-TV model where the core of their game is a TV show, and their service is syndicated to different TV networks, but provided free to the consumers.
Revenue Streams - Product
The main alternative to service business-models is product models. As noted previously, the typical ARG is not inherently a product in this sense, which can cause a lot of difficulties with these models. However, the pay-off for using product revenue models with an ARG and getting them to work is that the core gameplay manages to happily co-exist with the needs of a commercial entity (profit, scalability, etc).
The third and fourth wave ARGs both take this approach. Treasure-hunts simply pick a sub-part of the ARG service which is clearly itself a product, and then charge for it or fund it appropriately. Merchandising games instead take the approach of trying to use the ARG as the primary IP to drive sales of a secondary product -merchandise -in much the same way that modern films can make more money from selling toys and branded stationery than from the ticket receipts.
With both routes, the revenue is effectively coming from an indirect source - rather than monetizing every consumer, only a percentage of consumers is being tapped. This is how these models circumvent the problems of direct-charging. Because a substantial portion of the playerbase will be playing "for free" the ARPU (Average Revenue Per User) for those that are paying needs to be substantially higher than with any direct model in order to make up the difference.
Equally, the playerbase usually needs to be a lot larger in order for the minority of customers who do pay to generate enough revenue to go above the minimum threshold to keep the game self-sustaining.
Audience Management and Plot Control
Distinct from the core issues of profit and expenditure, yet still extremely important to the choice of business model, are issues surrounding the nature and context of the game itself. The first of these is the relative youth of the ARG genre, such that each new game has to cope with as many as 50% or more of its playerbase being people who have never played - or even heard of - an ARG before.
This places many requirements for consumer-education upon the ARG, and these need to be woven into the business model, particular in terms of the marketing, target audience, and product-positioning of the game.
This need to educate the audience can lead to an assumption that the audience will be reluctant to embrace the new form of entertainment. Games such as The LOST Experience show some of the potentially fatal dangers inherent in this: provided as a link between successive seasons of the TV show LOST, the ARG did not in any way significantly advance the plot and provided only very limited interaction with the few core characters that were even present.
The game ended up leaving many people feeling let down, both ARG players and LOST fans alike, probably because it broke a cardinal rule of ARGs: artificially restricting the game within a set of media and a small set of plot directions. The ideal approach from an ARG perspective would have been to allow the story to flow freely through the game, although this would have forced TV viewers to at least read summaries of the game if not actively participate, merely in order to carry on watching the next season.
It was already a risky and brave decision to run something as uncontrolled as an ARG for such a major IP as LOST, and "making the ideal ARG" was almost certainly far from being a driving issue for those managing the LOST business model. However, this underlines the need to be careful with ARGs, and not to assume that the game can and will conveniently sit within external artificial boundaries.
A related issue that comes up quite often with people moving into the ARG space from other media industries is that of audience and plot control. Generally speaking, ARG developers can only control the broad plot direction, and can exert little if any control over the details. There is little they can do, for instance, to prevent any one of the potentially hundreds of thousands of players from befriending a key character then betraying them by emailing their enemies.
This is not a problem that traditional novel authors and screenwriters are used to dealing with! There are many examples of this happening in the games to date, and a wide variety of tricks have been employed by the developers to try and limit the damage done -including sometimes simply running with the betrayal, and weaving it into the larger plot.
The range of successful business models for ARGs is still increasing each year. New models continue to come both from evolution of existing models and from previously untried approaches. Whilst we cannot predict what will come next, we can make some broad observations about the directions the industry is currently moving in.
Less adherence to This Is Not A Game (TINAG)
This phrase was originally coined at the start of The Beast, within the game itself, and quickly became strongly associated with ARGs in general. As one of the major differentiators between The Beast and Majestic (see earlier), with the former a runaway success and the latter comparitively a severe failure, the TINAG concept gained a reputation for being core to any successful ARG. The underlying concept was that the game itself must never in any way recognise that it was, indeed, a game -it must consistently pretend to be real. The Lead Developer, Elan Lee, later explained the intended meaning:
Players were never meant to believe the "This is not a game" rhetoric, he explained, but rather to be baited by it. "It was obviously a game," Lee said. "There was nothing we could do about that. What we could do was make it a game with an identity crisis. If I know it's a game, and you know it's a game, but IT doesn't know it's a game, then we've got a conflict."
Of late, ARG developers have become less obsessive about this concept, certainly driven on the commercial side at least by the need to provide a more inclusive gaming experience. For instance, several games have started to provide developer-created introductions to the game and plot summaries whilst the game is still running.
These directly contravene the most orthodox interpretation of TINAG since they inherently sooner or later (usually sooner) reveal "secret" information that is not known to the in-game characters - or by directly referencing the out-of-game activities of the players. Usually, such summaries quickly end up providing things the players know about the characters but which the characters themselves must not hear (such as current plans by the players to entrap an enemy in-game character).
So far, this lessening of the TINAG experience seems to have had little or no negative effect on the games themselves, whilst greatly increasing the ease with which new players with no prior ARG experience can get into the game.
Greater use of different media
ARGs are inherently a cross-media product with content spread widely and wildly through many different media. Unlike almost any other form of entertainment, it is not only expected that an ARG could switch from the web to a phone call to real-life to a TV-advert, etc -but a lot of the play experience derives from this free-form use of any and all available channels.
As the industry matures and the risks and costs of development drop (due to more experienced, better resourced developers) games have branched out even further across the different media. In the past year alone we have seen extensive use of YouTube (TheHumanPet), Podcasts (Perplex City - The Story So Far), social networking sites (Perplex City - The Scarlett Code on MySpace), and even published books (Cathy's Book). Some of these media are clearly very cheap to provide content for, making them almost an inevitable path for ARGs to tread sooner or later.
Others require much more time and effort, but the repeated use of them suggests that ARG developers are finding them cost-effective to produce. It would appear that we can expect upcoming ARGs to explode even more widely across different media, gathering more players and attention with each branching out.
Advertising ARGs still strong
The last year has seen a clutch of successful new private-client/marketing campaign games, such as Ocular Effect, Who is Benjamin Stove, and especially Last Call Poker. The business model that started the ARG genre appears to be as robust as ever, and set to be a permanent part of the ARG landscape.
As well as proving the continued low-risk (albeit low reward to the developer) of these types of games, this is good news for the industry as a whole. A stable market for high profile, low risk games will ensure there is always a straightforward way for new, relatively inexperienced, companies to break into commercial ARG development.
End of Part IV
Read part II: Alternate Reality Games: Genres And Categories
Originally published on 2006 by the IGDA Alternate Reality Games SIG as "2006 Alternate Reality Games White Paper" on the IGDA website.
About the authors
This paper by the IGDA was created and written by volunteers on behalf of the community at large. The editors of this fourth part are Andrea Phillips and Adam Martin.
The IGDA Alternate Reality Games SIG -
Reference: IGDA [ Read more ]
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