This document discusses lessons that digital media properties can learn from social gaming about monetizing their fanbases. It notes that while the digital entertainment market will reach $134 billion by 2014, existing revenue streams are struggling. It outlines 8 lessons: 1) social gaming economics can provide an accretive revenue stream; 2) properties don't need to create the next viral hit but can "gamify" existing content; 3) fan communities already display social gaming behaviors; 4) properties already have invested fans and super users; 5) they have high quality existing content; 6) they understand e-commerce principles; 7) fans respond strongly to virtual currencies; and 8) fans will follow their favorite properties to new experiences. The document

1. Digital Media Properties
Lessons from Social Games to Monetize
their Fanbases
Nima Pourshasb
VP, Strategy & Corporate Development
December 1st, 2010
npourshasb@livegamer.com

2. Live Gamer Overview
Micro‐transactions: Complete solution
for virtual goods and digital content e‐
commerce
Billing & payments, virtual currency &
e‐wallet, storefront, merchandizing,
analytics, player‐to‐player trading
Offices in NYC, Palo Alto and Seoul
90 publishers, 150 titles
Focus on online games. Now moving to
l
other digital entertainment
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3. Digital Entertainment MT opportunity is still
nascent
US Digital Media & Entertainment
g
will be $134BN by 2014 (PWC)
Music, Sports, TV/Cable, Print
Music Sports TV/Cable Print
Any IP with fan base community
Now at inflection point with
respect to microtransactions and
virtual goods
virtual goods
8 lessons digital media properties
have learned from observing social
gaming
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4. 1. They like what they see…
Economics
‐ Revenue run rate
‐ COGS of virtual goods
‐ Upfront investment: $120K
f $
to develop Farmville
‐ Derisking a content business
Accretive revenue stream
Existing revenue streams are
struggling
Source: Barclays Capital 2010

5. …and they know they need to move in that
direction
Digital transition continues
g

6. 2. Don’t need to make the “next Farmville”
Don t next Farmville
Initial wave of M&A activity
targeted at purchasing game
developers
‐ Disney buys Playdom ($763MM)
‐ Warner Brother buys Turbine
‐ MTV buys Social Express
Light game mechanics and
dynamics
“Gamify it and they will come…and Source: BunchBall
they will stay…and life will be
better
better”
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7. 3. Their fan communities already display
behaviors that drive virtual goods commerce
commerce…
‐ Competition: Who is the biggest
fan?
‐ g/
Gifting / enhanced communication
‐ Self‐expression
‐ Insatiable demand for content
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8. … and the social gaming framework fits directly
into the online fan community experience
EASY TO PAY COMMUNITY COMPETITION
INSTANT CLEAR
GRATIFICATION GOAL
SUPER USER
S S
THE 1% THAT PAYS
SOCIALIZE SELF-EXPRESSION
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9. 4. They already have the whales & the super
users
Already invested in: user acquisition, user retention,
engagement, transition from passive to active to paying
j p g $ ,
Whale: Bonjovi VIP package: $1,750
Conversion to paying users > 1‐5%
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10. 5. They have high quality content
Archive libraries, cut scenes,
behind‐the‐scenes, interviews
y g p
Content is dynamic: e.g. sports
results, tours, new albums, new
editions, new season
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11. 6. They get e-commerce
Merchandizing & sales optimization
Importance of payment methods
Familiar with reporting challenges
(e.g. artist royalties)
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12. 7. They really like earned virtual currencies
Strong incentive rewards for fans
Long list of desired behaviors
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13. 8. They know that fans will follow them to the
experience
Marketing channels: Email groups,
fan websites, PR, events
g
Interaction with the IP is significant
part of the experience
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14. New wave in MTX: Monetization of fanbases
Just starting
Opportunity for entire social gaming ecosystem: gamification,
microtransactions, virtual goods, game design and development,
, g ,g g p ,
advertising
Important implications on market size and definition of social gaming
Important implications on market size and definition of social gaming
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15. Thank you!
Nima Pourshasb
VP,
VP Strategy & Corporate Development
npourshasb@livegamer.com
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