Video Game Industry Lessons For Product Managers

by drjim on September 2, 2009

Video Game Product Managers Need To Score Big To Survive

Video Game Product Managers Need To Score Big To Survive

So I can only speak for myself, but back in the day I used to be quite good at video games – you know, the big stand alone game units that you could only find in arcades. Since then, I’ve tried to keep up with the home game consoles, but I must confess to having lost my skills.

These days I have to confine myself to an occasional run at Half-Life just to reassure myself that I still have it. Which brings up an interesting point, wouldn’t be be great to be a product manger at a video game company?

The Video Game Industry

If you are the type of person who is easily impressed by big numbers, then try this one out for size. The video game Grand Theft Auto IV brought in over $300M in a single day when it was released. That was double what the most recent Batman movie brought in the day that it opened.

The video game industry and its product managers do have their challenges – things are getting tougher. The cost and complexity of developing video games are rising with every new release. Oh, and you can imagine just how fickle video game customers are – one bad release and your product line could be done for.

What Does It Take To Have A Successful Video Game Product?

Success in the video game industry depends on a combination of solid risk management and savvy research and development. This part of the business will never change. However, the way that video games are sold and how they are being distributed is undergoing a fundamental change that is affecting all product managers.

One new model for video game manufacturers involves subscription online offerings. In this product offering, users can download the game code for free and then they pay a monthly charge to be allowed to connect to servers that generate the game playing environment where all subscribers can play at the same time.

One of the largest video game manufactures, Activision Blizzard, already generates more than $1B in revenue and more than $500M in profit from its World of Warcraft subscription business. Clearly this is the wave of the future.

Another new focus is what gaming experts are calling the “casual” market. This is how video game product managers are trying to expand their potential customer base – they are trying to create products that appeal to game players who don’t have a lot of time to learn complicated rules. One of the better examples of a popular casual game is Guitar Hero.

Another key decision that video game product managers need to make is to pick which game console they will develop games for. For example. games made for the Nintendo DS can be developed more cheaply than those for consoles, manufactures can experiment far more cheaply in ways that they can’t do for the Playstation or the Wii.

The Future Of Video Game Products

The video game business is a rough business to be a product manger in. Publishers need to sell about one million copies of a game on the PS3 or Xbox 360 just to break even. This constant pressure to be successful is generating creative new ideas for product managers.

One new idea that has only just reciently started to show up in video games is the idea of in-game advertising. Sponsered ads can show up on billboards, on character’s clothing, or even as shopfronts in the environment. Because so many of these games are online, ads can be changed over time – nothing is fixed.

An additional way to make money that is just starting to be implemented is that the game is free for gamers to play, but they must pay for extra items such as new gear for their players. With certain market sectors, e.g. teen girls, this can produce rich rewards.

Final Thoughts

Every product manager yearns for the opportunity to be responsible for a product that is truly popular and video games sure seem to fit that description. However, the video game industry is a rough and tumble battlefield that punishes products that fall behind and insists on constant innovation.

Even if you are not working in the video game industry, you can still learn from what they are doing. Moving as much of your product support and update process online to reduce costs and boost customer interaction is one innovation that we can all explore doing.

If product mangers can find ways to work innovations from the video game into how they are managing their products, then they will have have found yet another way that great product managers make their product(s) fantastically successful.

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What We’ll Be Talking About Next Time

Product managers know that how they price their products can be the difference between runaway success and total failure for their products. There is often a great deal of outside pressure on product mangers to change their product’s price all the time. When should a product manger do this, and when should they not?

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{ 2 comments… read them below or add one }

Lieutenant Dan September 3, 2009 at 3:44 am

Funny that there’s no mention of the free-to-play/microtransactions supported business model. Subscriptions are old news, as is IGA. One look at the Asian gaming market (and to a growing extent, the ‘new’ North American model) clearly indicates that the future of the video game industry lies in this new business model, and NOT in subscriptions. IGA has it’s own merits, but has been struggling (Quake Live is a primary example).

For examples check – Nexon.com, EA’s Battlefield Heroes, and Turbine’s Dungeons and Dragons Online.

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Dr. Jim Anderson September 6, 2009 at 5:32 pm

Dan: you make a very good point. What’s interesting about the rapid development of new business models for video games is that it’s clear that the manufacturers are trying to find the model that will best fit their notoriously fickle customer base. I don’t know about you, but my biggest problem isn’t the business model being used, but rather finding more time to play the games…!

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