Everyone seems to know what the revenue of movies are, the film "Jem" and the new biopic of Steve Jobs being pulled from theaters after disastrous receptions are well known, but less known is that the video game industry is bigger - and therefore the budgets for games are sometimes as big.
Monster titles like Halo 5 and Star Wars Battlefront might not seem to have a worry about when to release, just like the new Star Wars film and The Avengers might not, but games are actually a more complex process because in order to buy the game consumers must first own a platform it runs on, sometimes even an exclusive one, so game sales interact with platform sales. Halo 5 is an Xbox One exclusive while Uncharted 4 is only on Playstation 4. The new Star Wars game is both, which meant another unit of programmers and testers for an additional game system.
Research from the Robert H. Smith School of Business, at the University of Maryland, offers new insight into the strategies companies should use to maximize sales of their games. In general, the study finds, companies ought to weigh the tradeoffs between reaching early adopters of game consoles, who purchase more content (and more-sophisticated content), and later adopters, who buy less but who over time make up more and more of the population of console owners.
The study, by John Healey, a Smith School Ph.D. graduate now teaching at Tulane University's A.B. Freeman School of Business, and Wendy W. Moe, a professor of marketing at the Smith School and director of the Master of Science program in marketing analytics, looked at sales for games of the PS3, Xbox 360, and Wii, the generation of consoles that held sway from 2005-06 until a couple of years ago (when the Xbox One, PS4, and Wii U arrived).
"In prior studies, researchers have focused on how the number of people who have adopted the platform influences sales," Healey says. "We wanted to look deeper to investigate how the base of console owners changes over time and how these changes affect content purchasing behavior."
Healey and Moe focused on the shifting proportions of "innovators" -- early adopters -- and "recent" purchasers shifted over time. Earlier research and surveys have suggested that innovators tend to buy more games, over a longer period, and that they gravitate to games that push the limits of gaming technology. People who bought the consoles later in the cycle, in contrast, are likely to buy fewer games over a shorter period of time, and they likely favor more middle-of-the-road fare, including family-friendly games. The mathematical model that the authors developed to describe the expected pattern of game sales takes into account the shifting proportion of each type of gamer, as a console gets older, and as new holiday seasons arrive.
The study looked at console and game sales during the first 230 weeks that each console was available. (The Xbox launched in November 2005, the PS3 and Wii in November 2006.) They also looked at sales data for 98 game titles that were released on all three systems. The authors defined innovative console-purchasers in several ways --including the first 2.5 percent of buyers, and the first 15 percent. The role of later adopters was explored by examining "recent" purchasers -- those who had bought a title within the last one, two, three, four or five weeks of a given date. The general findings of the study didn't depend on how innovators and recent consumers were defined.
The proportion of "recent" console purchasers becomes more important as a console ages, the study found. Therefore, when game companies should release a given title "depends on the kind of people your game would appeal to," Moe says. "If yours is one of the innovative games that target the lead users, it might make sense to release it early in a console's lifecycle -- even at the same time as the console launch. If it is a more general-interest game, you might want to release it later."
As a more general observation, Healey suggested that companies tended to err by releasing games later in a console's life cycle than is optimal, because they underestimate the role in sales played by the innovators, and overestimate the importance of the sheer number of consoles sold.
Innovators tend to own the first holiday season when a console is released. But a few years into a console's lifespan, it is the recent adopters whose proportion spikes during the holiday season. A big uptick in "recent" purchasers also occurs when a console drops in price.