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Link to all bad ending threads: https://www.installbaseforum.com/fo...-for-the-video-game-industry.1998/post-228671
This might be your once in a lifetime opportunity to create a startup business with unicorn status i.e. A one-billion-dollar valuation to your company. You arranged a 5-minute meeting with a bunch of venture capitalists in Silicon Valley, you have to introduce yourself as an entrepreneur to give off the image that you apparently know what you're talking about. Here's one little tip for your pitch, throw in the buzzword of the day, in this case it's AI.
If I was pitching the business to these venture capitalists, this is how it would go: Uber revolutionized the world by creating the gig-economy, where they own their online platform and people can become contractors for the company by doing work which gives Uber a profit in exchange for not having those contractors' becoming employees of the company. This means that you don't have to worry about expenses like health insurance or providing a fleet of cars for the contractors to use, the contractor has to take care of all those expenses themselves.
While they expanded their services by creating Uber Eats, I would say that they were short-sighted. They did not go one step further in their business model. I am here to show you what that business model is, it is called the Prosumer model!
The prosumer model is very flexible, let me show you one example. You walk into a pizza shop and there's no one behind the counter, where are the workers? Actually, you good sir, the consumer who walked into the store is the worker. You use an app to make your order, you order a pizza and pay for it on the app and then our AI-powered doohickey spits out all the ingredients into a tray for you to assemble the pizza yourself and then insert it into the pizza oven, once your pizza is cooked, you retrieve it, box it and then walk out of the shop. The consumer pays us to do work to feed themselves pizza, the expenses from having to hire a worker who makes the pizza for the consumer is entirely removed from the service model giving us a massive margin in profit.
At this point of the presentation, you, the entrepreneur hopes that the venture capitalists are tripping over themselves to invest in your business model.
Let's say one of the VCs is skeptical and asks, "Why wouldn't I just go to a pizza shop where the AI itself can make and cook the pizza for me?", a very simple response to that would be, "To do that, you would need a robot and robots are expensive to assemble and maintain, by having the consumer who has intelligence and a body, they can go and do that work themselves, saving us money on capital expenses."
Another VC asks, "A pizza shop?..." and you respond by telling them how the prosumer model is very flexible, it can work in a coffee shop, how about a store where you design your own prints to print onto a t-shirt? All powered by AI. There is no limit to what kind of service that you sell where the consumer works to produce the end-product.
"How would your pizza shop compete with the other pizza shops?" asks another VC, it's very simple. You follow Amazon's model of building a monopoly that destroys its competitors by technological disruption. You make the pizza prices as cheap as possible to undercut the competition, there is no way that they would be able to compete because they have to pay wages to workers, there are no wages being paid in the prosumer model. Once those pizza shops close down, you take them over and build up more locations, once you have a monopoly in the region you can then raise prices thanks to monopoly rent and then you'll be raking in profits.
Another VC asks, "Does your pizza shop make use of Big Data?". This is where you have to bluff your way if you don't understand how Data Science works. Here's how I would go about it, "Yes, Big Data is very important to our pizza shop. When you use the app to make your pizza, you can either select from a list of common pizza flavors like pepperoni or Hawaiian. The prosumer has the option of designing their own pizza flavor, we collect the data from that, if we find out that the same prosumer orders that same customized flavor more than once, we add it to a list of pizza flavors where we suggest to other prosumers that this custom pizza flavor is popular in their region. This means that we don't have to hire someone to design new pizza flavors and instead, organic growth occurs with the discovery of new pizza flavors created by the prosumer."
At this point, you've already gone over the five-minute time limit for the meeting. The odds of those venture capitalists investing in you depends on luck and who you are. At worst, they might say, "This sounds interesting, but I don't think it will work", and then three months later those same venture capitalists steal the idea to get 100% ownership of the IP. What are you going to do as a poor entrepreneur? Hire a lawyer and take them to court? Are you sure you'll have the money to survive and settle the case in your favor?
There is a possibility that this idea has been pitched before, but I don't know. I can't guarantee that if you share this with your venture capitalist connections on LinkedIn that they will look at it and respond, "I like money, and this idea is making me think about money a lot."
There are also some readers who might be thinking, "This is so dumb, why would consumers do the work themselves and give money to the company for doing that work!?", we'll get there.
And that is the introduction to this thread about the prosumer model.
The term Prosumer (and also Prosumption) was coined by Alvin Toffler in 1980. It's a portmanteau of the words producer and consumer. I would have preferred the term consworker which blends the words consumer and worker, but it doesn't roll off the tongue as well. Don't tell me that worksumer would be better. I would also like to use the term conserker, which is a blend of the words consumer and berserker.
As technological change has occurred, you may have already experienced being a prosumer without even knowing it. You go to a grocery store to buy some food quickly; you find that the line is filled with customers, and you need to wait more than five minutes for the cashier to serve you. Suddenly, you notice something new, a self-service checkout. You walk up to it and learn how it works, you scan the products yourself and then you put your money into the machine to pay. You then walk out of the store with the food you bought.
Think about what just happened there, you did the work of the cashier. The grocery store didn't pay you for doing work, they didn't even give you a discount for the work you just did when purchasing those items. You gave the store your money and the execs far away said, "Thank you for doing the work of our cashier, now we don't need to hire more cashiers to pay them those pesky wages. Our margins on profits are soaring!"
There are plenty of other examples of being a prosumer. Ikea: you buy unassembled furniture and assemble it yourself at home. Building a PC is acting as a prosumer, you buy the parts and assemble it yourself. Buying ingredients from a grocery store to make a recipe. All these examples are Do It Yourself approaches. There are more examples in that wiki link above where they mentioned how the McDonald's business model makes the customer clean up after themselves by having them dump the food/packaging into the bin rather than having a worker go around and clean up after everyone as a waiter would do in a restaurant.
Getting to the 21st century, there are new prosumers that have emerged thanks to the internet. If you want to have a career as a Youtuber, you have to watch other YouTube videos to get ideas and then produce your own videos and hope that people watch them so that Alphabet pays you money from the advertisements running on your video. I'm not familiar with how prosumers make money off of TikTok but that is also a service where being a prosumer is encouraged. Similar to Uber, you are doing work for these companies, but you are not their employees. YouTube can get millions of people doing work for no wages, and you have to be lucky enough to get that share of advertising revenue which they can control how much they pay you.
Don't forget about economic rent, if you've been reading my bad ending threads then you should be spotting where unearned income for these companies are occurring.
Now to get to the point of the thread where this is related to video games.
There are companies producing live-service games and are failing because they have to compete with the likes of GTA, EA FC, NBA2K or COD for example. One of the biggest pain points of a live-service game are operating expenses that last the whole lifecycle of the game.
What is one way you could cut down on operating expenses? By implementing a prosumer model. You have the consumer doing video game development on the live-service game.
This is actually not a novel idea; it is as old as Warcraft III where the ability to create custom maps gave birth to Defense of the Ancients which led to the creation of League of Legends and DotA2 and that is when Activision Blizzard learned the important lesson of IP ownership because those were ideas created in their game and they did not own the IP. Pour one out for the person that created The Three Corridors which was a MOBA in the Warcraft III custom maps long before DotA existed and didn't do what the creator of League of Legends did.
What has happened since then? One of the biggest platforms out there follows the prosumer model, Roblox. I've already done a post about Roblox before if you want to look at that. How has Roblox been doing? Here are their recent earnings results:
Average daily active users were 71.5 million in the last quarter, and they have the ambitious long-term goal of obtaining 1 billion daily active users. Note: While they are making billions in revenue, they have not achieved net income yet as noted in the $1.1B net loss for the fiscal year. If you are wondering if Roblox did any layoffs recently, the first thing I could find was them laying off 30 staff from the company's talent acquisition team back in September 2023.
There is one other competitor you're probably thinking of that has entered the prosumer space, and that's Fortnite. I did a thread talking about Epic Games creating the Verse programming language and how there's a creator economy in Fortnite, take look at the thread if you haven't already. Using Unreal Editor for Fortnite, you can create games inside Fortnite and if people play your games, then you have a chance of making money as long as Fortnite is making money from microtransactions to pay you.
Also, in that thread regarding the Verse programming language which will be the foundation that Tim Sweeney envisions for the metaverse. He even has a goal as ambitious as Roblox, that the Verse programming language is scalable enough to have millions of developers working in the metaverse where the metaverse will have billions of concurrent users in a shared world. How do you get millions of developers working on the metaverse? By implementing a prosumer model just like Roblox did for their platform.
While some publishers are looking at using AI in game production to reduce their operating expenses and possibly speed up game development. Roblox and Epic Games are using a simpler model to reduce operating expenses, you.
I don't have a bad ending scenario to write because the premise was already simple enough to understand, technological change has made things easier for you to become both the worker and the consumer and that's one of the ways that businesses can go further in increasing their profits by rent-seeking while reducing wages.
This might be your once in a lifetime opportunity to create a startup business with unicorn status i.e. A one-billion-dollar valuation to your company. You arranged a 5-minute meeting with a bunch of venture capitalists in Silicon Valley, you have to introduce yourself as an entrepreneur to give off the image that you apparently know what you're talking about. Here's one little tip for your pitch, throw in the buzzword of the day, in this case it's AI.
If I was pitching the business to these venture capitalists, this is how it would go: Uber revolutionized the world by creating the gig-economy, where they own their online platform and people can become contractors for the company by doing work which gives Uber a profit in exchange for not having those contractors' becoming employees of the company. This means that you don't have to worry about expenses like health insurance or providing a fleet of cars for the contractors to use, the contractor has to take care of all those expenses themselves.
While they expanded their services by creating Uber Eats, I would say that they were short-sighted. They did not go one step further in their business model. I am here to show you what that business model is, it is called the Prosumer model!
The prosumer model is very flexible, let me show you one example. You walk into a pizza shop and there's no one behind the counter, where are the workers? Actually, you good sir, the consumer who walked into the store is the worker. You use an app to make your order, you order a pizza and pay for it on the app and then our AI-powered doohickey spits out all the ingredients into a tray for you to assemble the pizza yourself and then insert it into the pizza oven, once your pizza is cooked, you retrieve it, box it and then walk out of the shop. The consumer pays us to do work to feed themselves pizza, the expenses from having to hire a worker who makes the pizza for the consumer is entirely removed from the service model giving us a massive margin in profit.
At this point of the presentation, you, the entrepreneur hopes that the venture capitalists are tripping over themselves to invest in your business model.
Let's say one of the VCs is skeptical and asks, "Why wouldn't I just go to a pizza shop where the AI itself can make and cook the pizza for me?", a very simple response to that would be, "To do that, you would need a robot and robots are expensive to assemble and maintain, by having the consumer who has intelligence and a body, they can go and do that work themselves, saving us money on capital expenses."
Another VC asks, "A pizza shop?..." and you respond by telling them how the prosumer model is very flexible, it can work in a coffee shop, how about a store where you design your own prints to print onto a t-shirt? All powered by AI. There is no limit to what kind of service that you sell where the consumer works to produce the end-product.
"How would your pizza shop compete with the other pizza shops?" asks another VC, it's very simple. You follow Amazon's model of building a monopoly that destroys its competitors by technological disruption. You make the pizza prices as cheap as possible to undercut the competition, there is no way that they would be able to compete because they have to pay wages to workers, there are no wages being paid in the prosumer model. Once those pizza shops close down, you take them over and build up more locations, once you have a monopoly in the region you can then raise prices thanks to monopoly rent and then you'll be raking in profits.
Another VC asks, "Does your pizza shop make use of Big Data?". This is where you have to bluff your way if you don't understand how Data Science works. Here's how I would go about it, "Yes, Big Data is very important to our pizza shop. When you use the app to make your pizza, you can either select from a list of common pizza flavors like pepperoni or Hawaiian. The prosumer has the option of designing their own pizza flavor, we collect the data from that, if we find out that the same prosumer orders that same customized flavor more than once, we add it to a list of pizza flavors where we suggest to other prosumers that this custom pizza flavor is popular in their region. This means that we don't have to hire someone to design new pizza flavors and instead, organic growth occurs with the discovery of new pizza flavors created by the prosumer."
At this point, you've already gone over the five-minute time limit for the meeting. The odds of those venture capitalists investing in you depends on luck and who you are. At worst, they might say, "This sounds interesting, but I don't think it will work", and then three months later those same venture capitalists steal the idea to get 100% ownership of the IP. What are you going to do as a poor entrepreneur? Hire a lawyer and take them to court? Are you sure you'll have the money to survive and settle the case in your favor?
There is a possibility that this idea has been pitched before, but I don't know. I can't guarantee that if you share this with your venture capitalist connections on LinkedIn that they will look at it and respond, "I like money, and this idea is making me think about money a lot."
There are also some readers who might be thinking, "This is so dumb, why would consumers do the work themselves and give money to the company for doing that work!?", we'll get there.
And that is the introduction to this thread about the prosumer model.
The term Prosumer (and also Prosumption) was coined by Alvin Toffler in 1980. It's a portmanteau of the words producer and consumer. I would have preferred the term consworker which blends the words consumer and worker, but it doesn't roll off the tongue as well. Don't tell me that worksumer would be better. I would also like to use the term conserker, which is a blend of the words consumer and berserker.
As technological change has occurred, you may have already experienced being a prosumer without even knowing it. You go to a grocery store to buy some food quickly; you find that the line is filled with customers, and you need to wait more than five minutes for the cashier to serve you. Suddenly, you notice something new, a self-service checkout. You walk up to it and learn how it works, you scan the products yourself and then you put your money into the machine to pay. You then walk out of the store with the food you bought.
Think about what just happened there, you did the work of the cashier. The grocery store didn't pay you for doing work, they didn't even give you a discount for the work you just did when purchasing those items. You gave the store your money and the execs far away said, "Thank you for doing the work of our cashier, now we don't need to hire more cashiers to pay them those pesky wages. Our margins on profits are soaring!"
There are plenty of other examples of being a prosumer. Ikea: you buy unassembled furniture and assemble it yourself at home. Building a PC is acting as a prosumer, you buy the parts and assemble it yourself. Buying ingredients from a grocery store to make a recipe. All these examples are Do It Yourself approaches. There are more examples in that wiki link above where they mentioned how the McDonald's business model makes the customer clean up after themselves by having them dump the food/packaging into the bin rather than having a worker go around and clean up after everyone as a waiter would do in a restaurant.
Getting to the 21st century, there are new prosumers that have emerged thanks to the internet. If you want to have a career as a Youtuber, you have to watch other YouTube videos to get ideas and then produce your own videos and hope that people watch them so that Alphabet pays you money from the advertisements running on your video. I'm not familiar with how prosumers make money off of TikTok but that is also a service where being a prosumer is encouraged. Similar to Uber, you are doing work for these companies, but you are not their employees. YouTube can get millions of people doing work for no wages, and you have to be lucky enough to get that share of advertising revenue which they can control how much they pay you.
Don't forget about economic rent, if you've been reading my bad ending threads then you should be spotting where unearned income for these companies are occurring.
Now to get to the point of the thread where this is related to video games.
There are companies producing live-service games and are failing because they have to compete with the likes of GTA, EA FC, NBA2K or COD for example. One of the biggest pain points of a live-service game are operating expenses that last the whole lifecycle of the game.
What is one way you could cut down on operating expenses? By implementing a prosumer model. You have the consumer doing video game development on the live-service game.
This is actually not a novel idea; it is as old as Warcraft III where the ability to create custom maps gave birth to Defense of the Ancients which led to the creation of League of Legends and DotA2 and that is when Activision Blizzard learned the important lesson of IP ownership because those were ideas created in their game and they did not own the IP. Pour one out for the person that created The Three Corridors which was a MOBA in the Warcraft III custom maps long before DotA existed and didn't do what the creator of League of Legends did.
What has happened since then? One of the biggest platforms out there follows the prosumer model, Roblox. I've already done a post about Roblox before if you want to look at that. How has Roblox been doing? Here are their recent earnings results:
Average daily active users were 71.5 million in the last quarter, and they have the ambitious long-term goal of obtaining 1 billion daily active users. Note: While they are making billions in revenue, they have not achieved net income yet as noted in the $1.1B net loss for the fiscal year. If you are wondering if Roblox did any layoffs recently, the first thing I could find was them laying off 30 staff from the company's talent acquisition team back in September 2023.
There is one other competitor you're probably thinking of that has entered the prosumer space, and that's Fortnite. I did a thread talking about Epic Games creating the Verse programming language and how there's a creator economy in Fortnite, take look at the thread if you haven't already. Using Unreal Editor for Fortnite, you can create games inside Fortnite and if people play your games, then you have a chance of making money as long as Fortnite is making money from microtransactions to pay you.
Also, in that thread regarding the Verse programming language which will be the foundation that Tim Sweeney envisions for the metaverse. He even has a goal as ambitious as Roblox, that the Verse programming language is scalable enough to have millions of developers working in the metaverse where the metaverse will have billions of concurrent users in a shared world. How do you get millions of developers working on the metaverse? By implementing a prosumer model just like Roblox did for their platform.
While some publishers are looking at using AI in game production to reduce their operating expenses and possibly speed up game development. Roblox and Epic Games are using a simpler model to reduce operating expenses, you.
I don't have a bad ending scenario to write because the premise was already simple enough to understand, technological change has made things easier for you to become both the worker and the consumer and that's one of the ways that businesses can go further in increasing their profits by rent-seeking while reducing wages.
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