Game Companies Aren’t Tech Companies Part III: The Content Problem

Part 1 is here, while part 2 is here.

The only Content Problem worth saving. Do it Reed!

So maybe game companies aren’t tech companies. But as much as game companies seem to borrow from tech firms there’s even more to be said for the opposite. If Netflix, a subscription service with over 10,000 movies and TV shows, has its biggest competitor in a single game, Fortnite, then perhaps there’s more for tech to learn from games. And how games deal with The Content Problem is it’s defining characteristic. Of all forms of entertainment, games present the most compelling answer to the problem.

The Content Problem

The fundamental axiom of economics is that there are unlimited needs and wants and only limited means to fulfill them. The parallel for entertainment might consider that core content demand nearly always outstrips supply. For example, large swaths of Game of Thrones and Harry Potter fans are underserved by a couple books, movies and TV seasons. Executives try to fill the void with licensing: Harry Potter backpacks, Game of Thrones beer, etc. But filling the core content demands are impossible: it takes far more than 1 hour to produce 1 hour of Game of Thrones while the same it not true for games.

Consider the following:

The content consumed in a game like Overwatch or Clash Royale is the pursuit of strategy equilibrium and/or mastery of mechanics. A new unit in Clash Royale changes how players organize their decks, even if they don’t use the unit directly (they must counter it). This can provide hundreds of new hours of content to consume relative to the near 1 man-week of labor to produce the new unit. Therefore, the marginal content output of a given member of the 16 person (!) Clash Royale team is astronomical.

Furthermore:

The genius of PvP (Player v Player) environments is how they necessitate the emergence of a meta-game. In mathematics, Player vs Environment (PvE) resembles the field of optimization where strategies are static – one and done. PvP environments, however, resemble game theory models where it has been shown strategies evolve in an evolutionary process. This means equilibrium in PvP environments is constantly reshuffled with each balance change; the search for dominant strategies in an ever shifting equilibrium is the game itself.

The marginal product of labor for a given game developer completely outclasses a given producer on a movie or TV show by virtue of the medium, not the individual. Unlike games where assets are infinitely replicable, movies and TV face fixed constraints: Emilia Clarke or David Benioff can only be in a single place at a given time. They must also eat, sleep, socialize (sigh). Meanwhile, Captain Price faces no such constraints. There’s no more Game of Thrones to consume after the last episode cuts to black while there’s always another hour of Fortnite to play. How can Netflix and others adapt to the reality of these mediums?

The most straightforward strategy is a content arms race. Netflix continues to spend over $17B a year on original content while scooping up oodles of back catalog content. Of course, viewers must be interested in this content for it to be “effective” and the recommendation engine plays a strong role in this. But the the last episode of Stranger Things is just that, the reco engine cannot find fill the void while operating on the same indifference curve. The “more bodies” strategy to solving the content problem is expensive to execute and as we’ll see in part 4, struggles to achieve Marginal Cost = Marginal Benefit.

Reality TV is a response: less writers, editors, and CG needed to produce a given hour of content. Shows like The Amazing Race, Big Brother and Survivor can do 20+ seasons of 22+ episodes while Game of Thrones struggles with 7 seasons of 10 episodes despite having so many more crew members. Netflix’s speed of investment here is breathtaking. But the addressable audience is more limited in scope then traditional dramas. Netflix needs a bolder evolution to combat games: TV-as-a-service.

The forgotten genre of soap opera TV provides a near perfect blueprint. For those unfamiliar, soap operas are near year-round weekly serialized television shows. The unrelenting pace has resulted in popular series like General Hospital having 14,000+ episodes over 57 years. Netflix needs to heavily invest in moving shows to a similar formats: year-round production with weekly releases. There’s always another piece of content to consume right around the corner while the back-catalog for a given show is continually expanding for newcomers. In many ways, this mirrors match-3 level production. The number one reason why players churn from match-3 is a lack of new levels and a quick glance at community pages confirms this.

Sugar Rush or something, right?

King mitigates this increasing difficulty for example. This increases the time to completion but could also result in churn. Reality TV faces no such option. Another strategy is also possible however: branching narratives.

Increasingly, Hollywood is shooting movies back-to-back. It’s cheaper to continue production rather then stop and go. Why not do something similar to produce more content? In this case, shoot multiple perspectives in a given series simultaneously. Lord of the Rings production operated in a similar way with two production crews, but with a singular end product. Game of Thrones also operated in this way from a production standpoint, but again the end product was single episode. Why not dedicate an hour to each perspective? This easily multiplies a 10 episode season to 30 while holding down cost. Netflix can’t solve The Content Problem, but it can mitigate it.

Interestingly, Youtube has solved most of this problem via a two-sided marketplace. The sheer smattering of volume helps the supply-side problem even if a particular creator has a finite number of video (remember, you can still play a given game for an unlimited amount of time without “running out” of content). Youtube has encouraged users to subscribe to many different creators so regular release cadence is also accounted for as well.

Diminishing returns for linear content are extremely steep, few users will watch a film or movie more than once. Deepening the LTV of a viewer primarily come through more linear content: an extremely expensive proposition. To compete with games, TV and movies need far more supply. If technology and business models can really change creative product rather than be a vehicle for it, now has never been a better time to explore changes in storytelling.

Author: S. Becker

Games are cool. Economics is cool. Game Economics is just beginning.

Leave a Reply

Your email address will not be published. Required fields are marked *