Alphafunding – A new business model in the video game industry?


Traditionally, game developers would not release an unfinished version of their game mainly to prevent software piracy and plagiarism. Instead, multiple in-house alpha and beta runs would be performed to perfect the game in an iterative approach. Nowadays however, fueled through success stories such as Markus Persson’s Minecraft, which made a whopping $33 million in alpha/beta sales (Orland, 2011) more and more (especially independent) game developers make use of the alphafunding business model on platforms such as Steam’s Early Access Market; Gamasutra even declared it to be one of the ‘5 trends that defined the game industry in 2013’ (Graft, 2013).
What is alphafunding then all about? And will it live up to all its hype or will it sink into an insignificant niche existence?

Alphafunding refers to commercially making a game available in its earlier stages of game development. In most cases, alpha-access will be sold at a discount in comparison to the final retail copy, and every participant will eventually receive the full version (once it is released) without extra payment. The idea is to provide game developers with enough liquidity to finish the development process while constantly improving/refining the game experience based on community responses (Kuchera, 2014). Other benefits are a more robust server stability testing if it is an online game, and easier and more complete software-bug detection (‘thousand eyeballs see more than two’) through automated error reporting mechanisms (Scougall, 2014). Additionally, by letting players ‘shape’ the game content to some extent, there is a greater emotional attachment and hence a greater user loyalty and player base which is especially important for mmorpgs. Last but not least, by releasing the game ‘twice’ the game developer is able to generate more ‘hype’ in hope for higher sales figures. Letting the customer pay to essentially be an outsourced ‘game-tester’ thus seems to be very compelling to game developers. Gamers likewise profit by being able to play the game earlier, influence the development process and pay a lower price in comparison to the finalized retail version. Sounds like a typical win-win situation or … is there a catch?
In contrast to game projects on Kickstarter, which will only be developed if the required minimum amount has been collected, money spent by users on Alphafunding will not be refunded whether the final game will be released or not. Additionally, alphafunded games do not have a schedule of deliverables (as opposed to crowd-financed projects), meaning that a) games could potentially be stuck in the development process for an infinite time and b) that the final product (which alphafunders have already paid for) will be radically different than the initial alpha-version. Several projects (e.g. ‘Prison Architect’) which have either failed to deliver a final product, or whose final product was objectively different than the alpha-version have already tainted the consumer’s faith in such a business model. (Scougall, 2014). Additionally, and in order to avoid story spoils through alphafunders or lack of long-term interest, alphafunding might only work with certain ‘types’ of games such as sandbox ( Minecraft) or survival (DayZ) games.

All in all, alphafunding is an interesting twist to the traditional gaming industry. Whether it will however become the dominant modus operandi will largely depend on the faith gamers have in developers and whether the developers will not abuse their (literal) ‘credit of trust’.

Sources:

Graft, K. (2013) The 5 trends that defined the game industry in 2013. Available at: http://www.gamasutra.com/view/news/207021/The_5_trends_that_defined_the_game_industry_in_2013.php, accessed 15.09.2014.

Kuchera, B. (2014) Unfinished, unfair and brutally difficult: What developers should steal from DayZ. Available at:< http://www.polygon.com/2014/1/2/5264192/dayz-early-access-lessons&gt;, accessed 15.09.2014.

Orland, K (2011) Minecraft Draws Over $33 Million in Revenue from 1.8M paying customers. Available at: http://www.gamasutra.com/view/news/33961/Minecraft_Draws_Over_33_Million_In_Revenue_From_18M_Paying_Customers.php, accessed 15.09.2014.

Scougal, R. (2014) The Early Access phenomenon: Care to buy a dream? Available at: http://venturebeat.com/2014/07/21/the-early-access-phenomenon-care-to-buy-a-dream/, accessed 15.09.2014.

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One response to “Alphafunding – A new business model in the video game industry?”

  1. 356319sl says :

    The concept of alpha funding is interesting. Like mentioned, one of the downsides is that you won’t get your money back the moment a project fails or gets cancelled. On the other hand, using your target consumer base to test and improve your product might work really well.

    The success of using alpha funding depends on a few factors, which I believe to be the following:
    1. The developer of the game.
    I believe the reputation of the developer of a game will influence the reaction of the crowd to alpha testing immensely. As a gamer, I am more likely to try out and participate in alpha testing a game from a game developer that’s well known. Such games tend to have a higher chance of actually being developed.

    2. What the developer does with the feedback.
    Joining in on a game when it’s in its alpha state is great, when your feedback is actually used. In some cases, games are released in alpha mode, allowing players to leave feedback on the game, but nothing is done with the feedback, resulting in the same bugs and issues showing up when the game goes live.

    I do agree with the statement that gamers might feel more attached to a game when they participated in ‘shaping’ the game content. This indeed will result in more loyalty and a greater player base. I am not particularly fond of the idea of using alpha funding for MMORPGs though. For MMORPGs, the alpha stages tend to be used by the programmers to create new content and add the so called ‘game balance changes’ (basically to program it the way it should be in their eyes). The newly proposed ideas can then be tested in the beta phase of the game. This is the part where I would look for input of your players. If you open an MMORPG in the alpha stages, many people will be annoyed and feel let down, as everyone will want something different out of the game.

    I do agree that alpha funding is an interesting twist to the gaming industry. I myself tried out games in the alpha phase and I did enjoy having that first look at a game. I highly doubt this would become the dominant modus operandi though, as most ‘big’ gaming companies like to offer their players a fully operational game.

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