UK video game developer Mediatonic currently finds itself in a transitional phase where it is shifting away from a service (work-for-hire) model towards a product model. Facilitated by the advent of online distribution channels such as Facebook and Apple’s iOS, video game developer, Mediatonic’s transition to the product model will entail giving away games for free to end-user who can accelerate their game experience through various paid-for options (e.g., micro-transactions and downloadable content). This is in contrast to its work-for-hire model in which it creates customized games for larger companies, such as Disney, in a “taxi” approach. An example product from the product model is ‘Amateur Surgeon 3: Tag Team Trauma ’ released on iOS and Google Play. The game can be downloaded for free, but Mediatonic hopes players “spend some money on all the cool extra stuff we have in the game!” This write-up will focus on the work-for-hire business model.
HISTORY - THE EXEMPLAR FIRM AND OTHERS
Mediatonic was founded in 2005 using financial support from external investors. In many ways, the 60-employee firm is an exemplar of medium-sized video game developers. The firm was founded on the premise of developing high quality video games for traditional video game consoles (e.g. Sony’s PlayStation 3) using a work-for-hire business model. Upon meeting project milestones video game publishers paid Mediatonic an agreed upon lump sum fee. Other independent UK-based video game studios that are currently changing their business models include Auroch Digital and Quartic Llama.
CUSTOMERS - WHO THEY ARE
Mediatonic’s customers for the work-for-hire business model are either an established video game publisher that commissions a development project around an intellectual property (IP) the financier owns the rights to, or an external media IP holder who wishes to have a video game adaptation of one of its media properties. Examples of the latter include Disney and its unorthodox counterpart Adult Swim.
ENGAGEMENT - VALUE CREATION PROPOSITION
In its work-for-hire business model, Mediatonic deploys a “taxi” approach for customer engagement. It leverages its capabilities and expertise to create unique video games for different customers.
DELIVERY - THE VALUE CHAIN
In its work-for-hire business model, content development and video game design are done in-house, often in collaboration with the customer to ensure that the games have the correct look and feel and meet the customer’s requirement. The game is then delivered directly to the customer.
MONETIZATION - VALUE CAPTURE
Mediatonic receives agreed-upon lump sum payments upon reaching certain project milestones.
Written by Joost Rietveld and edited by James Knuckles under the direction of Prof Charles Baden-Fuller, Cass Business School, this case is designed to illustrate a business model category. It leverages public sources and is written to further management understanding, and it is not meant to suggest individuals made either correct or incorrect decisions.