HTML5 gaming business models. Why a single fee license isn’t the only way.
It has been about 3 years since HTML5 gaming gained interest of developers and publishers as a new gaming platform. I wrote a few entries about the monetization of mobile HTML5 games in the past, and in one of them I described our experiences with mobile advertising based monetization. But I have never before commented on one of the most known models – single fee license.
Why this model isn’t the only way to develop your HTML5 gaming business?
When HTML5 gaming was very young, the most common business model was to license games on a single fee basis. It worked practically the same way as it did for the Flash gaming market. But let’s think about it. Did this model really let developers achieve a stable income and development of their business? It is possible that some of the developers used this model as their main source of income, but in my point of view it is unlikely to bring the expected growth. Why is that?
Almost 3 years ago, prices for some HTML5 game licenses could reach even a few thousand dollars (even for the simplest games). This amount sounds unbelievably high comparing to today’s standards. In the past, market was in the stage of early development and there wasn’t very many developers and publishers. The saturation of the market wasn’t as high as it is now. Since the market has grown, there has been a large push for development and more games have been created. Today’s license per simple games varies around 250 to 500 dollars.
Many simple HTML5 mobile games are made quickly just to be sold quickly. This affects the quality of content and pricing itself. So here is the danger. Creating low quality graphics and engines by making a ton of simple and quickly made games produces products considered to be cheap overall. This way the market creates new standards. This is risky in my opinion because other simple games which are made with higher effort and quality can also be viewed as cheap games.
And here is another argument why I think that single fee licensing isn’t the only way. There are also developers who don’t use simple ways to build games, and they wouldn’t agree to sell the game license cheaper than it costed them to develop their product. In such cases, developers prefer to find stable income rather than a one time fee without long term partnerships and revenues. Why? Because it is important to know the quality of your product. You should find the best way to monetize your products and have a passive consistent income to develop your gaming business further.
Imagine if you keep selling simple, cheap games all the time, and all of a sudden the licensing market becomes saturated to the point that a single fee license becomes insufficient for you to keep your business going. What do you do then? Do you have a plan to change your model of cooperation with publishers? Did you change your games the way they would fit new standards and business solutions? Think about it.
So what is the conclusion?
From all the arguments comes my last thought against relying only on single fee licensing. Focusing on one licensing type doesn’t let you develop your skills in game development because you only keep to one standard. You may of course run your gaming studio this way and focus only on quickly made games and sell them the same way, but you may find yourself in a trap some day when it comes out that producing games for such licensing may become inefficient for you business.
I mean that I don’t see a problem with the licensing type itself. It works simply, quickly and easily. But it still only makes the market continue to be used to it, so much so that developers may not be looking toward the future and a change to their approach. Imagine that new markets and publishers would arrive and find HTML5 gaming interesting, but relying on only one model doesn’t open the door for new opportunities and business solutions.
It isn’t a model that works passively to earn income for your future business development. For the future, I think other types of monetization will overcome singe fee licensing. We should now try to find the best solution for us. We should experiment and talk to publishers if both sides want HTML5 gaming to grow.
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