Minecraft - Department of Telematics

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Minecraft
- A success story?
Associate Professor Harald Øverby
Department of Telematics, NTNU
TTM6 Tele-economics, advanced
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Outline
•  Sandbox games
•  Some economic effects in play
–  Peer-production
–  Free!
•  Small game culture
•  Minecraft
–  Economic analysis
Based on work by:
NTNU Msc student M. Bergquist (2011):
Economics in the Small and Independent Game Industry
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Sandbox games
•  Games that allow the player to freely roam the world
•  Enables non-linear paths to a goal
–  Multiple goals
•  Few constraints on what a player can do (within the
gaming limits)
•  Early examples include
–  Elite (1984)
–  Turbo Esprit (1986)
–  Metroid (1987)
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Sandbox games
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Sandbox games
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Small games (indie games)
•  Developed by individuals or small teams
•  No or little financial support
–  Limited budgets
•  Focus to creativity and innovative game design in
game development
•  Traditionally associated with the PC platform
–  No licensing
–  Availability of development tools and libraries
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Small game portals
•  An increased number of portals for small games
makes it easier to sell these games
–  Apple App Store (non-free business models)
–  Facebook (free business models)
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“Free” Business models
•  Giving away something for free, with expectations to
receive revenue via other means
•  Especially attractive in ICT industry
–  Marginal cost = 0
–  No marginal revenue loss by giving away
•  May be exploited for other industries as well
•  Has been used for a long time
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Basic concept of free
•  Cross-subsidies
–  “There is no such thing as a free lunch”
•  Money are shifted between
– 
– 
– 
– 
Products
People
Now and later
Nonmonetary markets
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1. Direct cross-subsidies
Producer
Product 1
(free)
$$$
Consumer
Product 2
(paid)
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2. Three party market
Ad space
$$$
Producer
Product
(free)
Products
(paid)
$$$
Advertiser
Consumer
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3. Freemium
Basic product
(free)
Premium product
(paid)
Producer
$$$
Many consumers
Consumer
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4. Nonmonetary markets
Producer
Attention
Reputation
Product
(free)
Consumer
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World of Goo
•  Indie game, developed by two
Ron Carmel and Kyle Gabler
•  Released in 2008
•  Develop using open source
technologies
•  No DRM protection
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World of Goo
•  Cost of development approx $100 000
•  Different pricing models
–  Direct sale at $20
–  iPad version for $5 (125 000 copies sold)
–  Pay-what-you-want, totalling $100 000 (57 000 copies)
•  No free models used
•  Piracy rate of 82 %
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Minecraft
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Minecraft gameplay
•  Create 3D structures by
–  Create blocks
–  Destroy blocks
•  Control an avatar building
the structures
•  Enables various game
modes
–  Suruvival
–  Creative
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Minecraft
•  Sandbox type game
•  Developed by Markus Persson
–  Established company Mojang
•  Unfinished versions released and charged for
– 
– 
– 
– 
Released alpha version in May 2009
Available for sale June 2009
Released beta version in December 2010
Full version November 2011
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Minecraft
•  Retail price model
–  Alpha stage – € 9,95 . Introduced 13.06.2009
–  Beta stage – € 14,95. Introduced 20.12.2010
–  Full version – € 19.95. Released 11.11.2011
•  Also a freemium version with limited capabilities
•  Currently 4.8m have bought the game (30.01.12)
•  Estimated revenue 32.1mEUR
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Minecraft
•  Cost estimates for developing and distributing game
totals to 3.3mEUR
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Minecraft
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Minecraft
•  Peer production used to increase awareness and
marketing the game
– 
– 
– 
– 
Mouth-to-mouth marketing effect
User manuals on youtube
Pictures/videos of impressive buildings
Press coverage
•  Utilizing the freemium business model
•  Strong network effects leading to positive feedback!
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Peer production in the game
industry
•  Users participate to develop game, with no financial
motivations
•  Need a framework and tools for value creation
•  Examples
–  Second Life
–  Custom games in Warcraft III, Starcraft 1 & 2
•  DoTA
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Minecraft
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• 
• 
• 
The Sims (16 million shipped)[1]
Lemmings (15 million, including all platforms)[2]
The Sims 2 (13 million)[3]
– 
– 
• 
World of Warcraft
– 
– 
– 
• 
• 
• 
• 
• 
• 
• 
• 
• 
World of Warcraft: The Burning Crusade [expansion pack] (at least 4.7 million; required to own Cataclysm)
World of Warcraft: Wrath of the Lich King [expansion pack] (at least 4.7 million; required to own Cataclysm)
World of Warcraft: Cataclysm [expansion pack] (4.7 million)[5]
Half-Life 2 (12 million; may include sales on other platforms)[6]
StarCraft (11 million)[7]
Battlefield 2 (11 million)[8]
The Sims 3 (10 million)[9]
Half-Life (9.3 million,[10][11] may include PS2 version)
– 
• 
• 
The Sims 2: Pets [expansion pack] (5.6 million)[4]
The Sims 2: Seasons [expansion pack] (1 million)[4]
Half-Life: Opposing Force [expansion pack] (1.1 million)[10][11]
Elder Scrolls V: Skyrim (7 million)
Guild Wars (6.5 million in North America, Europe, and Asia; includes Factions, Nightfall, and
Eye of the North)[12]
Myst (6 million)[13]
SimCity 3000 (5 million; includes Sim City 3000 Unlimited edition)[14]
Minecraft (4.8 million)[15]
…
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Summary
•  Small game industry has different economic
properties compared to big game developers
–  Less cost
–  Taking advantage of peer production
•  Minecraft is a small game with huge market success
–  Sandbox game
–  Very good profitability
–  Keep costs down
•  Don´t understimate human crave for creativitiy!