Video games are dominating the entertainment industry worldwide. They’ve proven to be more profitable than Hollywood movies, although they cost as much to make.
However, the concept of gaming is not just for entertainment. Games are an excellent platform for people to have engaging experiences that can transform any institution.
Call of Duty Got Me Back Into Video Games
Gaming consoles have always been known to be loss leaders. Companies like Sony and Microsoft are willing to take a hit on the sale of the console in order to secure the ongoing revenue from software sales. Sometimes they’re even willing to give it away for free.
A few years ago my dad had purchased a computer from Dell and with it came an Xbox 360 and Call of Duty: Modern Warfare 2. Technically, the Xbox belonged to my little sister, but my wife and I fell in love with the game.
I remember actually feeling betrayed and having dreams about a point in the campaign.This level was difficult to complete. After finally fighting through all the enemy contacts, my favorite characters in the game, whom I was playing as were taken out.
For me this was the most memorable moment from the campaign. Later we bought our own Xbox 360 with the next Call of Duty game, Modern Warfare 3.
Before this point, the last time I played games was around 2003, just after Sega Dreamcast was discontinued and Blizzard’s Warcraft 3 was hot. Almost a decade later, I found myself in a familiar world that had evolved well beyond what I had previously known.
Microsoft is leading the way toward the integration of family home entertainment and gaming. The game console is no longer just a gaming system, but a hub for all sorts of entertainment.
Shortly after my wife and I got our own Xbox 360, we canceled our cable subscription. We’d stream TV shows and movies straight to our Xbox. A lot of the hit talk shows like Ellen and Jimmy Kimmel source their content from YouTube and other social media platforms.
The quality of content produced by people on YouTube is now rivaling that of broadcast TV, some of that web content is even funded by major players like Microsoft.
Just to give you an example of the impact and influence web video and interactive entertainment has today, let’s take a look at the campaign for Halo 4.
I remember I had wanted to play the first Halo on the original Xbox, but never got around to it because I never got one. Since its release in 2001, the Halo franchise has sold over 46 million copies, generating more than $3 billion worldwide.
As you can imagine, that’s quite a fan following. However, Halo 3 was released about five years ago. That’s a long time to be out of the mind of the typical gamer, much less the public, especially with games like Call of Duty dominating the first person shooter space.
One of the core strengths that the Halo brand has is an online community dedicated to producing YouTube videos and web series like “Red vs. Blue.” However, if you weren’t a Halo fan-boy or fan-girl, then you probably didn’t care much for the user generated content.
When Microsoft announced Halo 4, they also mentioned that the original developers, Bungi, wouldn’t be producing the new game. This was enough to even make the dedicated folks a little weary about the upcoming game.
Microsoft’s answer was “Halo: Forward Unto Dawn,” a $10M production funded by Microsoft, distributed by Machinima, all to build anticipation for the release of Halo 4.
After watching the 5 episode web series, which ran about 90 minutes collectively, I totally wanted to play it. My wife ended up getting the game on the release day.
What Makes Games Addictive and Have Excessive Replay Value?
Games have become increasingly involved and social too, exponentially increasing the replay value of a game.
Great example is from Activition-Blizzard. Think of Blizzard Entertainment as the Pixar of video games. They’ve released one game at a time, and each one is a massive hit, making them a very profitable company.
The late 90s and 2000s is an era that’s filled with digital piracy. Whether it was music or video games, people could easily download stuff. Broadband internet was making it way to mainstream and access to content was becoming easier and easier.
I believe the reason for Blizzard’s success was due to the fact that they gave people a reason to actually buy the game and not just hold onto a bootleg copy.
With a game like StarCraft you can play the campaign and engage in the story with a bootleg copy, but what made you buy it was the awesomeness of online play. You needed your own unique CD-key to log on. If you shared your CD-key with someone and they were online, you couldn’t get online yourself.
If you have more than one computer in the home and wanted to play with siblings or friends online, you’d need to get multiple copies of the game.
Once online, you kept on playing against other people to level up your account. The more you won, the higher your level. Blizzard applied this to almost all of their games. They even started charging a recurring fee to play online for the massive multilayer role playing games like World of Warcraft. Once online you could also spend real money to purchase digital items to better equip your avatar.
After Blizzard merged with Activision in 2008, I’m sure the partnership brought about the sharing of some of these strategic assets and ideas.
How Activision-Blizzard and Microsoft Sidestepped Piracy and Maintained Profitability
One of the genius services that Microsoft offered when it entered the gaming arena was Xbox Live! The reply value in most games exists in online play. On Xbox, to play online you need access to Live! which requires you pay an annual fee.
Some people have whined about how $60 a year is expensive. It depends on how you look at it. For my wife and I, we were paying close to $30/month for cable. An Xbox Live Gold membership came out to about $5 a month. An awesome deal if you ask me. In the event I also want TV shows and movies, I can always subscribe to services like Netflix or Hulu which are about $8 a month.
Xbox Live! is easy to miss. It’s a $2 billion revenue business embedded within the $9 billion revenue entertainment/devices business of the $73 billion revenue of Microsoft overall.
If Xbox Live was a standalone business, its 40 million members would be dwarfed by user base of Linkedin, Twitter, Zynga and Facebook. But while Xbox Live’s membership is less than 20% of the size of Zynga (a comparable gaming company), it likely has nearly double the gross profit that Zynga generates.
When you login to Xbox Live!, Microsoft’s servers can check and see whether or not your game console is modded or “hacked” to play bootleg games. If the system detects that it is, that particular Xbox console gets banned from the system.
Now we also know that Microsoft lost the Blu-Ray versus HD-DVD battle to Sony. To me it seems like Microsoft in response said, “So what. content and games are going to be delivered via the cloud anyway.”
Turns out you can now buy all your games digitally via Xbox Live.
Where does Activision-Blizzard come in?
Let’s take a look at the multi-billion dollar franchise known as Call of Duty. Since Microsoft has provided a piracy deterrent system coupled with a great online experience, people don’t hesitate to actually buy the games.
Activision has applied some of the very same strategic principles to the latest Call of Duty games that Blizzard did to many of it’s games. As a player who’s new to the to the franchise, you come in playing the single player campaign which, although very linear, has a pretty good story that gets you engaged with the mechanics of the game play.
After completing the campaign, you begin exploring the special ops mission, which consists of mini-campaigns as well as a “survival mode” which kind of get’s you prepped for online play.
When you start playing online, you’re introduced to the whole concept of “leveling-up.” The more you play and win the more “experience points” you gain thus allowing you to unlock specific weapons and perks to help you play better. Then you realize there’s a second layer of “leveling-up” for your individual weapons where you unlock addition add-ons to make your weapon more effective.
After a few days of playing online, you’ll realize that people are interacting with each other via the use of headsets, which prompts you to purchase one.
Through engagement and cooperative play you start making friends online.This then later introduces you to a third layer of leveling up called “clan operations” where you as a team can level up and unlock perks that benefit the collective, such as gaining experience points faster for your self as well as your weapons.
Activision decided to introduce something called “Elite” with Modern Warfare 3, where you can track your progress in the game and compare it to your friends.
Within “Elite” they have a “Premium” feature, where if you pay an additional $60 for the year, you get addition content produced by Activision such as first access to new multiplayer maps, single player special ops missions, and broadcast quality web shows. All of this premium content keeps the game feeling fresh month after month, all the way up until the next game in the franchise comes out.
In today’s case, the next one being Call of Duty: Ghosts
Gaming Can Change the World
One of the greatest benefits of games is that they’re engaging. They provide a platform for interaction and a collaborative experience with friendly competition that builds relationships.
What if we were to implement these very principles in our institutions?