Growing the Long Tail

Online retail allows that approach to be refined even further, with games like Singstar and Rock Band allowing companies to gradually build up online stores full of content. These items are purchased in small, single-item transactions, and are all in stock, all the time, without any of the worries of distribution or maintaining inventory, factors which would otherwise cause headaches for niche content and wide portfolios.

Then of course, there's World of Warcraft. We all know that WOW has created an amazing base of subscription revenue, of course, and plenty of other companies want a slice of the same action - but even discounting the amount of money that subscribers pay Activision Blizzard every month, consider the sheer volume of cash that will go through tills this week thanks to the Wrath of the Lich King expansion pack.

Two factors are worth noting on this expansion. First of all, it will be pirated - and Blizzard won't care. In fact, they'll be absolutely delighted for you to download a copy of the expansion pack from BitTorrent - because it's not the game disc that matters, it's the unique serial code that upgrades your account to give access to the content therein. Each code is single-use only, and Blizzard couldn't care less if you copy your disc, BitTorrent your disc, or season your disc and eat it for dinner, as long as you've got a legitimate code - which will, of course, be paid for.

(This isn't DRM, it's worth noting for the benefit of those who continue to try to expand the definition of DRM to cover every kind of copy protection under the sun - in fact, since there's no encryption of content and every byte of data can be freely copied, it's the opposite of DRM. Rather, it's the benefit of running your game like a service rather than a product, and while it won't work for every game on the market, it's certainly a mindset a few more publishers could do with grasping).

The second thing to note, however, is just how good Blizzard are at Collectors Editions. Like its predecessors, Wrath of the Lich King's "CE" comes in a large, sturdy, embossed box, features a full-size, full-colour artbook, and a host of goodies like an in-game pet, a soundtrack CD and making-of DVD, and some unique cards for the WOW trading card game. Compared to the common-or-garden Limited Edition efforts of most publishers, it's an amazingly well-presented set - and it's enthusiasm over that set which drove many of the crowds out on Wednesday night.

Blizzard doesn't need to do that - it doesn't need to give people a reason to buy its game rather than pirating it. However, other companies do need to watch and learn. In the music business, industry veterans Nine Inch Nails recently demonstrated the power of the special edition by releasing an album essentially for free, charging a little bit of money for higher-quality downloads, and then charging a lot of money for luxurious, well-presented "Special" boxes of various kinds. They sold vast numbers - by some accounts, exceeding their revenues from any standard album release. Yet the content, the media, was unprotected music that could be downloaded for free.

The lesson? If you have a reputation and a brand, people want a part of that brand - and they will pay for it. Put real thought and effort into your merchandising and special editions, and people will pay real money for them - both your dedicated fans who would have bought the game anyway (but are now providing more revenue for you), and those would-be pirates who are enticed by the physical products on offer. Blizzard proved the point this week - if you want to see the proof, just look at the bidding on Wrath Collector's Editions on eBay and Amazon Marketplace today.

All around the industry, the reasons for the continuing bright outlook are easy to spot. Pick a new business model, and it's almost certain that there's a company doing it right. From long-tail videogames through subscription revenue to ongoing content micro-transactions; from stimulating boxed sales with pack-in extras through to using retail expansion packs to turn a popular game into a business in its own right.

Innovation in gameplay is important, but for the business of games to keep moving forward, we need innovation in business as well. It's a combination of both that will keep videogames healthy through this recession - and on the strength of what we're seeing on the high street and online at the moment, it's full steam ahead for continued growth.