March 11, 2016

The Price of Entertainment

What 1 minute of Spotify pays the artist, vs what 1 minute of mobile gaming pays the developer

It often strikes me that creative businesses have a lot in common with each other. Likely the clash of commercial demands and artistic demands often will lead to similar situations. A few weeks back, I wrote about what games can learn from storytelling in movies. Let’s expand a bit on that and have a look at several other “commercial arts”.

One thing that we will find across at least movies, music, games, books and ads (advertising counts as one of these arts!), is a tug of war between creative and analytic. (The same might apply to architecture, design, painting and sculptures as well, I have not checked.) For all of them, there is one faction arguing for making decisions based on cool data, while another faction ridicules them as unimaginative robots and praise creativity instead of conformity.

Let’s take advertising as the first example. One classic book on the art of selling stuff is Ogilvy on Advertising, where Mr. Ogilvy (founder of one of the largest ad companies in the world) explains how different ads work statistically. “People read headlines 5 times as often as they read the body. People remember ads with news 22% more than ads without news.” He also states: “If you are lucky enough to write a good advertisement, repeat it until it stops selling.”

On the other hand, you have e.g. Luke Sullivan’s “Hey, Whipple, Squeeze Thisarguing more for the creative side. The name of the book comes from an effective, but annoying ad from the -70’s, where Mr Whipple was selling toilet paper. That ad ran for a long time, as it just kept selling – exactly as Mr Ogilvy suggested. As Sullivan writes: “In 1975, a survey listed Whipple’s as the second-most-recognized face in America, right behind Richard Nixon… To those who defend the campaign based on sales, I ask, would you also spit on the table to get my attention? It would work, but would you?”

Ads are an interesting study that in a way is similar to games. Another I already wrote about is movies. There you can find long debates for and against the very formulaic script of “The Hero’s Journey” with Jungian archetypes on top. Or, have a look at how The Economist just analysed movies, here

They give a great formula for making a hit movie – but also end with the statement “ But do it for the money, not the plaudits: such a film would have just a one-in-500 chance of carrying off an Oscar for Best Picture.”

 

For music, I believe making a Billboard Top-100 hit has a lot of similarities with making a App Store Top 100 grossing hit. A team making mobile games can still be quite similar in size to the teams making billboard hits. And in both cases, the numbers guys churning out polished, but quite formulaic stuff will more often win the chart positions – with the occasional artistic rebel breaking all the rules and succeeding in spite (or because) of it.

The Swedish music producer Max Martin has the best track record in modern times. 54 of his songs have hit the Billboard top 10 chart positions! You really want to have read here on how he does it.

 

Let’s end this with an interesting comparison: what is the price of entertainment per minute for the different art forms?

Spotify claims to pay about 0.7 cents to the artist each time someone listens to a song.

With 3.5 minute songs, that’s 1 cent every 5 minutes or 0.2 cents per minute.

 

A good mobile game would follow “The Devil’s Rule” of 666, and make about 10 cents Average Revenue per Daily Active User (ARPDAU). As each player is then spending 6 times 6 minutes, or 36 minutes per day in the game, it comes down to 10/36 = 0.28 cents per minute. That’s less than 50% difference from what music pays per minute!!

Of course, not all games will have 10 cents in ARPDAU (believe me, I’ve made games with way less!), but then again, not all games will hit the 666 rule either. Less successful games not only have lower ARPDAU – they are also played less minutes per day.

According to Netflix’s quarterly report, their customers spent an average of 568 hours watching the service in 2015. That would cost the customers 12 * $7.99 or 0.28 cents per minute – exactly the same as for mobile games!

Movies and premium games still manage to ask for a much higher price per minute of entertainment provided. Apparently, the average price for a movie ticket last year in the US was $8.43. Let’s say the average movie is 2 hours long. That would make about 7 cents per minute – or about 25 times what mobile games cost.

A premium game is similar. It might cost $50 for some 10 hours of entertainment, which comes down to about 8 cents per minute – similar to movies, and much, much higher than mobile games. Of course, the variation is immense for premium games. Some people might play them a lot longer, and thus get a much lower cost per minute – but a lot of people also pay for premium games that they end up playing way less than 10 hours.

Why do premium games and movies succeed in charging so much higher prices for their entertainment compared to music and mobile games? I would suggest two things: Production costs for movies and AAA games are higher per minute of entertainment provided. A 2 hour blockbuster movie will likely cost more to make than 35 music singles (also about 2 hours).

Also, they require more focus from the consumer. Both mobile games and music is something that people do a bit on the side, with less than their full attention. Playing a match-3 while watching TV, or listening to music while working. In contrast, movies and AAA console games are immersive and will demand your full attention during several hours. They’re a more intense form of entertainment, and thus the price can also be more intense.

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