LogInTo dive deeper into how software developers work and make money, the 80 Level Research team interviewed software developers experts about monetization models.
Nowadays not a single AAA game can do without outsourcing software plugins. Small developer teams sometimes create distinctive solutions for the market and provide unique expertise. To dive deeper into how software developers work and make money, the 80 Level Research team interviewed software developers experts about monetization models. You can find some highlights from our report down below. Don’t forget to download the full version of the report here.
The Monopoly of Marketplaces
Currently, most software plugins are distributed through marketplaces: the Unity Asset Store, Unreal Engine Marketplace, and several alternative ones such as Gumroad, Blender Market, and ArtStation. Marketplaces have strict EULAs and significantly limit developers in a variety of monetization models.
For developers, only a fixed payment or subscription model is available. To be able to work with the revenue share distribution model, developers need to distribute plugins on their websites or small marketplaces without strict EULAs.
CEO at Zibra.AI Alex Petrenko, Head of Growth at Zibra.AI Kostyantyn Tymoschuk, and Technical Director at Zibra.AI Alexander Puchka:
The Zibra Liquids solution is currently distributed on the Unity Asset Store, and will soon be available on the Unreal Engine Marketplace as well. The purchase of a tool is carried out at a fixed price due to marketplace restrictions (only developers or publishers who join the Unity VSP Program can sell goods on a subscription basis, they use their own infrastructure for this).
The next step will be joining the VSP program, transferring the products to the company's website, and selling technologies and solutions on a subscription model.
Most developers want to buy assets for a fixed price. Indie developers try to find free assets. All large companies resort to the use and integration of external tools. For example, for cutscenes, everyone buys video codecs.
Alternatives: Revenue Share Monetization
The revenue share model is an effective distribution tool mainly for the B2B segment where large companies are interested in custom integrations and have the resources to use the system. 80.lv’s Instagram poll shows that 69% of plugin creators consider revenue share as an effective distribution tool.
The concept of revenue sharing allows software developers to participate in narrowly-focused projects from enterprise companies and avoid the risk of working for nothing while a big company makes “millions of euros” using a paid plugin as the core of their product. The interviewees consider the possibility of using the revenue share system, but none of them have fully implemented this model.
The crucial conditions of using the revenue share model if the plugin provides unique and technically attractive mechanics and features that could be the core part of the future game, long-term trusting relationships with partners, willingness to receive money later, and the possibility of performers to manage their budget. From a legal side, the customer and contractor should agree on the revenue share percentage and the profit threshold at which point payments would start. They should also have a clear reporting structure.
The Zibra.AI Team:
Revenue share may be interesting for large companies that will require custom integrations. Revenue share is attractive when a tool is part of the game's core mechanics, as well as when the studio itself can manage its own budget and isn’t just sponsored by the publisher. When a developer agrees to revenue share, it is usually a B2B deal.
For ZibraAI, a revenue share is an option that allows it to have more flexibility regarding the pricing of its products. Nevertheless, it is not the primary monetization model, and the specifics of each deal depending on the client and its project.
Roadblocks to Revenue Share
Interviewees point out the roadblocks of working with the revenue share model: the main problem is that making a profit depends on the success of other people. There is no guarantee that the project will be successful and won’t be canceled before its release. The second significant problem is the profit calculation and financial transparency when it comes to percentage-based payments. Checking and verifying profits requires a lot of extra paperwork, which overloads small development teams.
Founder and CTO at Machina Infinitum Matteo Scappin:
Matteo supposes that the revenue share system doesn’t work because, in the end, a platform gives away plugins for free and doesn’t hear back from a user.
Founder and CEO at Simul Software Roderick Kennedy:
The challenge with revenue share is that it involves extra paperwork on the back end. You've got to be able to audit what the revenue is. As a small company, we don't really want that. Revenue share is something that you need to track to be able to verify the revenue. So, that incurs an overhead by having to verify numbers from the customer.
The Zibra.AI Team:
One problem is the difficulty of predicting a constant revenue flow. It is impossible to determine in advance whether a game will sell, and tools are sold at the content creation stage, which also makes it difficult to predict. There is no guarantee that the use of a certain tool will change the attitude towards the game and improve sales.
A huge number of different factors influence whether the project will succeed. Using advanced tools can save time, which can be focused on solving other issues; or improve performance in scenes, making it possible to add more content to a game, expand the installation base, or reduce the development costs.
All of this increases the chances of success but does not guarantee it.
The revenue share monetization model will become more popular if developers will solve issues with data analytics, profit calculation, and payment security. Developers will need marketing support for promoting and distributing plugins through the developers' own websites. Such a wide range of conditions is not feasible in small development teams, so this is a great opportunity for third-party service companies to start a partnership.