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Feb 27, 2017

Retail can benefit from the emerging Games as a Service model

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Games as a Service (GaaS) is a term gaining significant traction within the video game marketplace, for good reason.

These types of games, which frequently include digital add-on components such as downloadable content, virtual currencies, micro-transactions, consumables, cosmetic items and, of course, season passes bundling these items, have dominated the sales charts in recent months.

Titles like Grand Theft Auto V, Overwatch, Tom Clancy’s The Division, FIFA 17, and Destiny are among the games that feature a model of consistent digital updates and additions that work towards keeping players returning to the games.  This has resulted in longer selling tails, higher engagement rates, and significantly more digital content spending than more traditional games.

Perhaps there’s no better example of the possibilities presented by the GaaS model than Tom Clancy’s Rainbow Six Siege.

Despite a slow start when launched in December 2015, Tom Clancy’s Rainbow Six Siege has accomplished what most game makers and publishers only dream of: steady growth in its player base, even more than a year after launch, and continued growth in its revenues driven by add-on content.  In its most recent earnings call, Ubisoft announced that Tom Clancy’s Rainbow Six Siege achieved 15 million registered players, with record daily active users, more than a year after launch.

Intuitively, one may assume that this is bad news for traditional retail.  That assumption would, however, be incorrect.

At retail, nine of the top 10 selling packaged video games in 2016 featured a GaaS model, with over a quarter of all retail revenues from those nine games coming from premium-priced versions of those packaged games.  These premium versions frequently included digital items such as downloadable content, and virtual currencies or cosmetics, among other digital items.

These premium versions of the games offering this additional content were most often priced well above the standard $59.99 MSRP.  Sales of these versions were also embraced by consumers, as significant sales growth was seen on these premium-priced versions of GaaS games when compared to last year.

So, what can retail do to ensure its getting its fair share of the emerging GaaS market, and thus capitalizing on digital?

Carrying more copies of these higher priced SKUs in a retail assortment mix is one, as a dollar spent on digital products at retail is purely incremental to normal, baseline retail demand.  Second, offering exclusive versions of these premium versions of GaaS games could offer some differentiation between retailers.  Finally, and perhaps the most dramatic path, a retailer could consider carrying these premium versions of GaaS games exclusively, refusing to carry the lower-priced SKUs that do not offer digital content components.

Consumers have quickly adopted the GaaS model, with such titles showing a significant portion of sales coming directly from digital add-on content.  Retail can take advantage of the GaaS model, and thereby capitalize on digital, by ensuring that premium versions of GaaS model games become and remain a merchandising priority.



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