In Episode #48 of Hypercritical, John Siracusa gives a detailed account of Nintendo’s blue ocean strategy that culminated in the Wii (fast-forward to 1h:50m mark where the conversation starts). In the face of the technically superior competition – Sony’s Playstation 2 and Microsoft’s Xbox 360 – Nintendo accepted it’s hardware shortcomings and concentrated on a new mode of interaction. In the gaming console arms race which demanded high definition, high performance graphics, Nintendo instead bet on their new user interface.
For a deep dive, check out “Blue Ocean Strategy” by W. Chan Kim and Renée Mauborgne.
That motion controller interface proved definitive and gave rise to a new breed of game. Light, fun gaming titles as championed in the packaged Wii Sports appealed to a wider demographic; particularly segments that weren’t traditionally buyers of consoles and console games (consoles in retirement home anyone?). It was indeed blue ocean and Nintendo reaped the rewards.
Delving deeper into history, Nintendo was originally founded as a playing card company. In 1956, Nintendo’s president, Hiroshi Yamauchi, travelled to the US to meet with the United States Playing Card Company, the dominant playing card company at the time. Yamauchi was startled to find the pinnacle of card gaming companies operating out of a small, unimpressive office. Seeing the limitations of the industry, he set about changing Nintendo’s course.
20 Years of Magic
Card gaming is far from dead though. In 1993, ‘Magic: The Gathering’ was released; an elaborate, two player card game based on fantasy themes as can be seen in the artwork. Cards are collected for both form and function and with this combination of game playing ability and collectability, the card game caught on and continues to grow in popularity 20 years on.
Even if fantasy isn’t your thing (it’s not mine), the artwork is pretty good. Kev Walker is the current leader with approx. 345 card illustrations to his name.
The mainstay of Magic is still it’s physical cards but in 2002 an online version was launched with the aim of replicating the physical experience. While ‘Magic: The Gathering Online’ (MTGO) continues to receive mixed reviews, it ‘comprises 30% to 40% of the company’s revenues‘.
Recently, an offshoot version – Magic 2015: Duel of the Planeswalkers – was released for various platforms including the iPad to provide a lighter, more video-game-like playing experience. I’ve spent some time playing Magic 2015, many years after playing the physical version as a school kid during lunch breaks. A long time between drinks but a good vantage point to the evolution that’s made Magic into a $250 million/a revenue stream.
Given the inherent complexity, offloading the scoring and administrative aspects to a computer chip is logical. In selling a digital version, however, a simple business of selling physical goods for profit is replaced by a marketplace where the value of digital cards is not so understandable. The game opts for a series of in-app purchases which are used to some degree of success, but coupled with customer angst.
THE PHYSICAL WORLD
Magic requires a deck of 60 cards to begin playing. The easiest way to acquire these is with an intro pack for $10-15 USD. This is the minimum needed and if your attention is piqued, you’ll quickly be spending more. At the heart of Magic is ‘deck building’; improving your 60 cards by buying more through various booster packs and substituting in stronger cards to increase your overall deck. New series of cards are introduced each year and official tournament rules may invalidate older series (over 600,000 tournaments were held last year).
It’s a simple business model:
- Produce cards for a total cost of ‘X’.
- Sell cards for more than ‘X’.
- Create incentive to continue buying cards.
For some laughs between friends, no further purchase after the initial intro pack is required. If you play with the intention of winning, however, a basic deck will be hopelessly outmatched against one that’s been built up over time. Creating a competitive deck is not a question of ‘How much?’ but ‘How much are you willing to pay’. Like many things, there is no upper limit.
And for many players like Werbalowsky, that’s still the case. Playing the game two to four times a week at the Twenty Sided Store in Brooklyn, he estimates that he has spent between $500 and $750 on the game in the last year alone, and expects to spend the same amount next year.
- NBC NEWS
THE DIGITAL DIVIDE
What is the value of collecting digital cards when the marginal cost is zero? What is the effect of the reduced value of collectibility and card rarity given that any available card can be generated at anytime? What adaptations can be made to a successful formula when entering a new medium?
The previously sane John McAfee was the first to distribute software via the shareware model which took advantage of the zero marginal cost of software. He figured, if it cost nothing to produce, why not give it away for free and charge for licensing instead.
Magic is available in the App Store for free in a typical ‘try before you buy’ implementation. For $0 you’re given a basic deck to begin playing against the inbuilt AI. Incorporating AI opponents removes the friction of needing someone else to play against making it easier to onboard prospective players (getting prospective players to install the app in the first place is another matter). In fact, playing against the AI is the only thing you can do initially. While there’s a multiplayer mode where you play against other players, it must be unlocked by completing the built in levels against the AI. The first few levels are included with your $0 purchase. A $10 USD in-app-purchase is required to unlock the remaining; a similar cost to buying a physical intro pack.
Completing all the AI levels takes several hours. All in all there are enough levels to make the $10 quite worthwhile and with options for difficulty and cards in your deck, there’s scope to play through all the levels again. What’s intriguing, though, is the restriction of having to complete the inbuilt levels before being able to play against real people. Magic is, after all, a game meant to be played between two humans.
CONTROL THE MARKET
In practice, the inbuilt levels are esesentially a tutorial to funnel you towards multiplayer mode as that’s where the greatest chance of monetisation can occur.
As you advance through the inbuilt levels, you’re rewarded by unlocking additional cards. After you’ve played for several hours and completed all levels, you’ll have accumulated 30% of all the basic cards available. Unlocking the complete collection will require and in-app purchase of $20 USD. This is only for the basic cards. The more powerful premium cards will be an extra $2 USD per ‘pack’ of which you’ll need to buy 14 to collect them all ($28 USD in total).
By requiring players to complete the inbuilt levels against the AI, Magic ensures that there is a minimum level of competency before playing against actual people. There are no Letterpress style walkovers where you can demolish a player who has little understanding of the game but has managed to stumble onto the alphabet battlefield. Magic has made knowing the game a prerequisite and, in doing so, has increased the importance of your deck. When playing opponents of similar ability, the cards you have make all the difference. Unless you like losing, you’ll be at a significant disadvantage against someone who has spent the money to access the better cards. To lose against AI is one thing. To lose against another person is another. Magic has created their incentive.
At no stage do you have to make these in-app purchases. You can play against the AI for as long as you want. Once all levels have been cleared, you could increase the difficulty and achieve the ”I won on hard mode” badge or play again with different tactics or cards. My experience in playing, however, is that it edges you towards playing against other people. That is after all what Magic has always been about.
There have been a few annual updates of that virtual version of Magic, but mostly the virtual versions are designed to aid the physical game – by teaching the rules to players, for one. With 20 years and 14,000 cards, Magic is not that simple. […] “When we first launched Duels of the Planeswalkers there was a lot of nervousness among the retail community that we would be stealing players out of their stores and putting them in front of computer screens,” Purvis says. “But it has really been our strategy all along to use the digital medium as a way to reach gamers and educate them about Magic, teach them how to play, and then make them aware of what kind of communities are in their local game store.”
- FAST COMPANY
THE PHYSICAL LINK
Reviews of Magic 2015 have been lukewarm, bordering on negative, but professional reviews are written with a level of restraint to avoid editorial suicide. For more honest reflection, let us delve into the quagmire of comments on the internet. There are two areas of customer angst. The first revolves around the technical performance which involves frequent loading screens and deeply nested menus. The second is about the influence of in-app purchases on the game.
It’s like they are scared to simply make a good [Magic: The Gathering] game and allow people to build their decks with a full deck system and all the cards. They instead want to nickel and dime their customers and think they have to make it like real life and charge you for every little card and pack.
- STILER via GAMESPOT
In real life, improving your deck involves handing over real cash for booster packs in the hope of gaining better cards. Are these in-app purchases not a means to the same end?
Numbers-wise, yes, but to end up at the same result requires the customer to navigate through two very different experiences. In purchasing a physical pack of cards and ripping open the foil wrapper, you’ve acquired something that you didn’t have before. In comparison, when you’ve tapped in your password and spent some iTunes credit, you’ve just unlocked something that was always on the device. In Magic’s case, the cards you don’t have are in plain view beneath the glass countertop (there is an area in the game where you can see all possible cards and which of them you currently have). They’re very different responses to the same end result of parting with your money.
Talking Point #1
From the business’s point of view, microtransactions may present the ability for a customer to mimic real world spending behaviour. From the customer’s point of view, microtransactions present a different buying proposition inherent in the hazy nature of how they appear to them. Consider what needs to be done to compensate for the more opaque, less understandable nature of digital product purchases.
DOUBLE DIPPING
The company has stated that the goal of Magic 2015 is to raise awareness of the physical game. With the game being distributed across several platforms, the opportunity is there to advance on this premise. In practice, Magic 2015 tries to have its cake and eat it too. It’s mostly successful with its simplified, highly produced, video-game-like experience, but a strategy to ‘use the digital medium as a way to reach gamers and educate them’ doesn’t seem to mix with the frequent pushes for monetisation. It’s not quite the education to impart on potential new players. A seemingly sensible alternative would be to ask for one in-app purchase to unlock everything, but this was the case in previous versions of the game which they left for the current model.
Magic doesn’t need to find blue ocean just yet. Their physical cards are still going strong, but trying to replicate what has worked so well for them digitally hasn’t hit the mark and it shows in customer sentiment. You could say they’re succeeding with 30 – 40% of revenue coming from MTGO, but Magic relies on being the dominant playing card game of it’s kind with MTGO having no real competition. If you want to play online, you’ll have to grin and bear it.
To Bhatt, this is especially painful because he says the core, paper Magic: The Gathering game is at an all-time high. “The cards are the best they’ve ever been, and the game is selling the best it ever has in its 22 year history,” he says. “Their digital offerings are just complete failures.”
- SHIVAM BHATT via POLYGON