Valve try out new episode based business model with Half-Life 2
Yesterday Valve released the first in a trilogy of episodes for Half-Life 2. The episode one will cost $20 and be available on Valve's steam platform and in shops. The trilogy will conclude by Christmas this year.
This, while exciting to Half-Life 2 fans like myself, is also a foray into a new business model for game developers and publishers. Episodic content revenue.
So how do Episodes differ to expansion packs?
I think the analogy is Movies and Sequels (Games and Expansion packs), although you could argue Half-Life 2 was the sequel to Half-Life, so perhaps expansion packs are similar to straight-to-TV movie sequels (and often as bad). Whereas Episodes are similar to a TV series.
I'm very excited about the draw that the prospect of episodic content will have, as story lines can be developed and changed by the game developer in response to community feedback, creating a closer relationship with the audience.
Fans will pay for the episodes as long as they continue to be compelling. A lot of the same rules that apply to a TV series will apply to the game episodes. In much the same way TV programs like Lost engage the audience by ending on a cliffhanger, computer game episodes can leave the gamer wondering how they'll handle the next challenge. And with games like Half-Life 2 that feature characters that the player forms relationships with as they go, Valve can also play with character development. All this will help create demand for the next episode.
If other game developers follow this model, then we may eventually see episodes for different games competing against each other for your hard-earned green.
What's not clear at this stage is whether you can skip an episode or you have to buy all of the previous episodes in order to play the next.
Valve's Steam platform is a competitive advantage to them, as it allows them to sell directly to their audience, online and cutting out the publisher. It's also valuable to the customer, who can pre-order a game on Steam. Steam will download the game in encrypted format before the release date, and then the moment the game is officially released, the decryption keys are made available through Steam, and it will allow the end-user to play the game within minutes of its release.
The pricing of episodic content, at $20 per episode is quite high, when you consider the price of a traditional "monolithic" game is $30-$40. But I don't think its unreasonably high, one episode will provide 4-6 hours of entertainment, so it's better value than the cinema or a DVD if you're talking in terms of hours of entertainment per dollar. Although it's not as social.
Blizzard will continue to dominate the online massively-multiplayer market with World of Warcraft and their monthly subscription model, so it looks like Valve will pioneer the single-player model.
The nice thing about Blizzard's revenue model is the onus is on the players to create the entertainment through interaction in the massive virtual world. Blizzard simply provides the platform. Therefore their costs should be lower.
But on the other hand, where is Blizzard really adding value?
It's really interesting to see how game companies are innovating with new business models in order to drive revenue.
I'll be interested to see how the combination of game episodes and in-game advertising will pan-out. Could gaming become far more commercial in the future? Will you sit down and order an episode of Half-Life 2 on your Sky box? Then load it up only to find the G-man has started wearing a Rolex and drinking Dr. Pepper...
What's the worst that could happen? :)
