Piracy is one of the greatest challenges that content developers in the world today have to contend with. The television and film industry, according to a 2018 report by Coin Telegraph, is set to incur losses of over $52 billion over the next four years (Reiff, 2018). Apart from filmmakers, musicians and writers, game developers have found themselves losing a lot of money as a result of their game software being pirated and distributed illegally. This means that game-development companies would immensely benefit from technologies that provide anti-piracy protection for their games and in consequence stimulating an increase in both online and offline purchases.
Blockchain technology has emerged as a useful tool in securing transactions in the financial sector. The same technology can be applied in the distribution of gaming content hence ensuring that all games sold can be traced and none can be distributed without going through the proper channels. This will be done by combining two of the approaches discussed by Reiff (2018) which are content surveillance and bounty hunting. In content surveillance, blockchain digital watermarking will be used in all copies of developed games. The digital watermark will be encoded into the game just before purchase and so anybody who acquires the game through any other means will not be able to acquire the digital watermark meaning that they will not be able to play the game online. In the bounty hunting approach, players will receive rewards in Bitcoin for completing achievements from genuine games and this will be their incentive to purchase instead of pirating. Using that approach, there will be greater value in purchasing a legitimate game either online or physically than going for the pirated options.
Description of the Customer and Business Model
From the solution proposed above, it is evident that GamIQ will target game developing companies as the primary customer segment. GamIQ will focus on the creation of blockchain digital watermarks that will be incorporated in the games developed by these companies. Through its digital watermarking approach, GamIQ will guarantee that the gamers playing online are actually people who purchased the games. GamIQ, in collaboration with the gaming companies, will, however, need to reward the customers in bitcoin for different achievements in the game. This means that a different source of revenue to sustain the bounty hunting approach will be required. In that regard, with the wide reach, these non-pirated games will achieve, online games will be an important marketing tool just like social media marketing. For that reason, GamIQ will target companies with products that are on high demand among people under 35 years so that they can post brief advertisements during transitions when a gamer is playing the game online. Through offering marketing platforms, GamIQ together with the specific gaming companies will be able to raise enough funds to support the reward system for gamers.
Figure 1: GamIQ product & service delivery model
Data Collection
While there is generally a very vibrant gaming market globally, it is important to collect first-hand data so as to determine whether the proposed model would appeal to the market. GamIQ aims to introduce the following new features to the gaming market; the use of blockchain digital watermarking in differentiating legitimate games and pirated games and thus giving the former the right to play on online platform; an exclusive reward system for gamers with the digital watermarks, and higher returns for the game developer companies through the integration of advertisements that last for a very short time on the screen when the gamer is transitioning from one display to another. With these new features forming the main survey questions, the group of 27 individuals who are active participants in online games was interviewed. The following table presents the general response to each of the questions:
Question
General Answer
Frequency
%
What is your perception of piracy in the gaming industry?
Positive
0
0
Indifferent
3
11.11
Negative
24
88.89
Would you purchase a pirated game at a cheaper price if it works just like the non-pirated version?
Yes
4
14.81
It depends
11
40.74
No
12
44.45
Do you know about blockchain technology and cryptocurrencies?
Yes
18
66.67
Not really
9
33.33
No
0
0.00
Which game would you purchase a genuine game that rewards you with actual money for achievements or a pirated game with no such rewards at half the price?
Genuine
27
100.00
Pirated
0
0.00
Neither
0
0.00
In addition to the finding that 100% of the interviewed individuals would purchase a genuine game that has real monetary rewards, 24 out of the 27 respondents indicated that they disliked advertisements showing up on their screens even on the game settings screen. For that reason suggestions of how to include advertisements in the game were sought. 100% of the respondents were of the opinion that the ads would be more effective if they showed up on the screen during the login process. The next ad should be displayed during the logout process. This way, it was found that the gamers would appreciate the advertisements more as they would not be affecting their gaming experience.
Business Model
In the prototype, it was suggested that GamIQ should provide blockchain digital watermarks that can be traced to ensure that all games logging into the gaming servers are legitimate. The blockchain watermarks should also allow the gamers to earn rewards in bitcoin for achievements in the gaming process. However, this system required the placement of marketing advertisements for third-parties so that GamIQ can raise the required funds to sustain the reward system. The ads were supposed to be displayed during transitions from one screen to another. This concept has been replaced by one in which the advertisements are only displayed at the login screen and the logout screen.
From the refined model, it is clear that the GamIQ will still be charging game developers for protecting them from piracy using digital watermarks. GamIQ will also be charging third-party companies for inclusion of their advertisements on games thus giving them a targeted global reach. Finally, gamers will have the ability to enjoy online games with minimal disturbance from advertisements while making some real money in the process. The table below presents the value proposition for the different GamIQ customer categories:
Customer Category
Value Proposition
Game Developing Companies
Significant reduction of piracy and increase in genuine game purchases
Monitoring of geographical distribution of games hence GamIQ will advise on areas to carry out more marketing for the games
Third-party companies
Targeted marketing with a global reach
Gamers (Final Consumers)
Ability to make real monetary gains while enjoying a game
GamIQ will be able to guarantee that the gamers get genuine products as blockchain will enable easy verification
Financial Projection
According to Hertig (2018), the cost of transacting on blockchain, specifically bitcoin has fallen to $1.30. This figure becomes $1.69 per game when 30% is added for costs incurred in watermarking each game copy sold by a particular company. Thus far in 2018, the global online game segment has made revenue of US $13.55 billion, with the average revenue per user amounting to US $22.85 (Statista 2018). That means, in 2018 only, around 593 million games have been sold in the world. With trends indicating that the industry grows at 2.8% each year, the following are the projections for GamIQ from 2019 to 2022.
2019
2020
2021
2022
Watermarked game copies
500,000
1,500,000
4,500,000
13,500,000
Watermarking fee per game copy
$5
$5
$5
$5
Total Revenue
$2,500,00
$7,500,000
$22,500,000
$67,500,00
Cost of watermarking per game copy
$1.69
$1.52
$1.37
$1.23
Gross profit per copy
$3.31
$3.48
$3.63
$3.77
Total gross profit
$1,655,000
$5,220,000
$16,335,000
50,895,000
Operating expenses (20% of gross profit)
$331,000
$1,044,000
$3,267,000
$10,179,000
Profit before Tax
$1,324,000
$4,176,000
$13,068,000
$40,716,000
Launching and Scaling
The most important steps in the launching of a new product are identifying the target audience and establishing communication channels through which the value proposition can be communicated (Forbes Agency Council, 2017). With that in mind, the first step will be to identify a few gaming companies that will be engaged through word of mouth in meetings so as to take part in a pilot test of the products on a number of their games. At this stage, all the advertisements during login and log out will be displaying the GamIQ logo. Once the pilot study is successful, and the reward system elicits a positive response, an official product launching exhibition will be organized in which firms in the gaming industry will be invited together with multinational companies that will form part of the advertisement customer base.
When it comes to scaling, it is certain that financial constraints will be a major challenge in the first few months. In addressing this challenge Salter (2016) presents collaborating with players in the industry as a plausible option. In that regard, GamIQ will approach some of the major firms in the blockchain industry for infrastructural support and a number of technology investors for financial support in exchange for equity. With the infrastructure and finances, the company will be able to expand its operations by hiring more skilled IT experts and managers who will make sure the capacity to meet growing demand is always sufficient.
Team Composition and Organizational Culture
The founding team is composed of two IT experts with diverse experience in the gaming industry, and a business management professional with experience in finance and marketing. Due to the fact that blockchain is a highly technical field that is not yet very well known, the IT professionals will be useful in driving the technical part of GamIQ through coordination with the game developers of different companies. The business management professional will be tasked with establishing communication links with the companies interested in marketing their products through GamIQ. Because of the high dynamism in the technology sector, the company will adopt a transformational leadership style that will help in creating an innovative culture in the workforce that will be established once the business is running.
A number of barriers to success exist, with the most important one being competition. Despite the fact that the business is unique because no firm is providing the proposed service, technology firms will most likely copy the model and produce substitutes. The first step in dealing with this challenge is to take use the first-mover advantage to acquire a significant market share. With the revenues from the market, the next step will be to leverage economies of scale to offer the most competitive prices in the market.
Reflection
The single most important factor in leading innovation is technical know-how. I have realized that for the proposition presented above to work, the leadership team must be well versed with all technical aspects of the business so as to have a more focused action plan. Another important factor is knowledge on how to monetize innovation. While the proposition presented is unique and useful, determining how it will lead to financial returns is one very important consideration for the leader as a poor model of the value proposition and its link to financial return will lead to failure of the product.
Before embarking on this assignment, I held the notion that introducing an innovative product is all that it takes for a leader to achieve success for an organization. However, in the process of this assignment, I have been able to appreciate the fact that inspiring workers to innovate is only part of the process. Management, marketing, and inter-firm collaboration all play a critical role. In that regard, in my efforts to succeed in leading for innovation I will always strive to create multi-professional functional teams. These teams will ensure that the innovation directions are actually valuable and can be monetized resulting in financial returns for the organization.
References
Forbes Agency Council. (2017, October 24). 17 Steps to Take Before You Launch a Product Or Service. Retrieved November 07, 2018, from Forbes: https://www.forbes.com/sites/forbesagencycouncil/2017/10/24/18-steps-to-take-before-you-launch-a-product-or-service/
Hertig, A. (2018). How Much Should a Blockchain Cost? The Compelling Case for Higher Fees. Retrieved November 07, 2018, from Coindesk: https://www.coindesk.com/research-pay-more-for-bitcoin-blockchain-fees/
Reiff, N. (2018, August 10). How Blockchain Can Fight Piracy. Retrieved November 06, 2018, from Investopedia: https://www.investopedia.com/tech/how-blockchain-can-fight-piracy/
Salter, P. (2016, May 02). The Six Steps to Scaling a Business. Retrieved November 07, 2018, from Forbes: https://www.forbes.com/sites/philipsalter/2016/05/02/the-six-steps-to-scaling-a-business/
Statista. (2018). Online Games. Retrieved November 07, 2018, from Statista: https://www.statista.com/outlook/212/100/online-games/worldwide#market-globalRevenue
