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Watch&Play Reinvent Your Fun
Dok Yong Kim Jae Jun Lee Hwa Sung Choe Rachel Dwiayutia
February 2008
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Watch&Play
Start-up Business Proposal /February 2008
Table of Contents Brief Company Introduction
2
I.
Industry Overview
2
II.
Market Overview & Segmentation
3
III.
Target Market Segment Strategy
4
IV.
Opportunity Overview
4
V.
Business Model
6
Ⅵ.
Product Development Plan
8
Ⅶ.
Financial Figures
9
(Appendix) Milestone
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Watch&Play
Start-up Business Proposal /February 2008
Brief Company Introduction Watch&Play, with its base operation in Seoul, is a newly established company whose vision is to reinvent the way people enjoy home entertainment. Watch&Play core focus is to developed variety of games to be played directly on TV without any console, a new unexplored segment emerged just several years before. Furthermore, full dedication and commitment is devoted to produce only cutting edge and creative games. Unique and innovative ideas are nurtured throughout the company culture. Watch&Play also strive to improve its products by designing games with high ease-ofuse and play to appeal and serve generations who do not associate much themselves with the computer era so they could experience the joy of entertainment as well.
A. Industry Overview Our products are computer game software specially developed and designed for IPTV. IPTV stands for Internet Protocol Television, an advanced version of VOD (video on demand) technology emerged mid-July in 2006 in South Korea. IPTV relied heavily on internet connection, which is the main difference with cable TV, to transmit the audiovisual to be displayed on TV screen. A set-top box is also needed as a hub for the network. HanaroTV is the pioneer in IPTV market by providing various choices of TV shows contents similar to cable TV followed by KT with its Mega TV. Soon, LG will also join the market. IPTV basically is a computer in a form of television. Henceforth it provides all computer related capabilities geared with internet connectivity. Viewers can control the shows as they desire, including fast forward or even watch last week show. This is possible as a high capacity server is established to store content files thus enabling streaming at anytime. Viewers can also obtain information provided by servers about the current shows they watch in real time. Additional various services are also supported such as internet shopping, karaoke, and also TV gaming. The last is the opportunity seen by Watch&Play as a much simpler way to play game can be facilitated by IPTV which equipped with set-top box. Watch&Play and IPTV can work together to reinvent the way people enjoy entertainment on TV as to be more convenient, fun and hassle-free for all generations.
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As TV penetration is extremely high and much easier to enjoy than computer for most people, Watch&Play realized that customer pool could expand dramatically.
B. Market Overview & Segmentation Watch&Play customers are the subscribers of IPTV which typically are the people who spend most of their time at home enjoying the service. Such customers include but are not limited to: young children between 3 to 15 years old, house wives, and elderly people or senior citizen over 55 years old. These customers are unlikely familiar with the internet game and other hightech devices used in gaming industry. However, they desire a convenient and affordable way to access the online game as alternative way for fun and educational purpose. According to the 2007 researched data by Hanaro Telecommunication, there are 1,459,485 IPTV households as of 2008 (average 3 people/household) with average 18% growth rate of subscribers in every year although it will slow down in later stage. Within these householders, we will target three groups of active users particular which would be about 4% of subscribers. [Market Segmentation] Potential Customers
Year 1
Year 2
Year 3
Year 4
Year 5
Young
31,525
45,153
59,344
92,479
111,249
House Wife
96,326
109,657
126,428
147,282
153,447
Elderly People
47,287
60,204
72,244
102,755
118,922
Total
175,138
215,013
258,016
342,516
383,618
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Start-up Business Proposal /February 2008
Young
House Wife
Elderly People
350 300 250 200 150 100 50 0
Year 1
Year 2
Year 3
Year 4
Year 5
C. Target Market Segment Strategy Watch&Play’s target market covers a wide range of ages and for those three market segments, we will approach with different games and unique marketing plan: The1st segment we target for is young children from 4 years old to 15 years old who will grow up surrounded by TV and computers. Several games exist online might have the same target markets but being online is one of the disadvantage as young children and elderly people have to learn how to use the computer first and log in to designated website to play. This might be very time-consuming and inconvenient. Therefore, although these target market have desire to play game, they will have to postpone it (for young children) or just leave it behind (for elderly people). Those young users desire for very active and trendy games just like online games they have played. The 2nd segment we shoot for is housewives who spend their free time with TV mostly rather than internet or other outdoor activities. The game for these users should be very easy-to-access and easy-to-play in order to remove barrier that internet game has. The 3rd segment we plan to target for is elderly people who are definitely analogue generation. The TV is one of their closest friend and in order to attract them to game channel from other programs we need unique game features for this Seg. and should use mouth-to-mouth marketing strategy since they are not as adventurous as young user or housewives although they have strong desire to enter.
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E. Competition Watch&Play recognized existing two kinds of competitors according to main role in this game industry. First is the one which develops contents by itself and the second one which aggregate contents and publish it through channel such as internet and IPTV network. One way that Watch&Play can anticipate competition from these firms is by building entrance barrier. As the first comer, Watch&Play will build infrastructure for IPTV. This infrastructure or platform will be exclusive made for IPTV, therefore reduce the flexibility for IPTV to switch content provider. Potential Competitors:
Microsoft – famous for its XBOX but powerful in resources
Activision – the most recognized company in the world game industry Hanbit Soft – distributor of StarCraft in South Korea and managed a game online website named Hanbit On. Sonokong – distributor of WarCraft III Nhn – known for its internet business and running Naver website. CJ Internet – operating Netmarble.net
Another threat come from these big established online game publishers as they already operated numerous games and might appeared more beneficial for IPTV to form potential strategic alliance. Therefore, being the first mover and secure contract in IPTV will be crucial factors. However, The following are the several differentiation strategy for Watch&Play: - First Comer: Exclusive Platform with Distribution Channel (IPTV) - High Switching Cost for gamers: a. Game Property (avatar, cyber money, items) - whether it’s a board or casual game, gamer will use their account to play thus accumulating points or money. Once they have collected these ‘assets’, they might be reluctant to switch to other game provider.
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b. Game Pattern and Rule - it is very essential for Watch&Play to establish a favorable game rules and patterns that will increase customer satisfaction. Gamers might try other game by other provider but it is unlikely for them to learn new rules and patterns because it is troublesome. Customers just want to play instead of learning new things. Once we developed a very high-rating game, we locked the gamers to our service, thus prevent them to change to other game provider, which is also an advantage for IPTV provider as their subscribers will remain loyal.
D. Opportunity Overview IPTV game section is currently underdeveloped as the provider only includes it as additional services thus no further improvement has been dedicated for this section. Henceforth, Watch&Play is established to fill in this opportunity. People can enjoy our products as an integrated part of subscription service of IPTV since Watch&Play will offer partnership with any of IPTV provider. People can access thru our services by selecting menu button on TV screen using the TV remote controller just like selecting other channels such as movie, cartoon and sports. Computer game industry can be divided into 5 main categories: arcade game, console, online game, mobile and stand-alone package game. The game for IPTV can be perceived as new category. IPTV alone might not be able to allocate resources to develop game sections as their main priority at initial stage is to improve their own TV contents service. Watch&Play helps IPTV provider to improve service in game section. As Watch&Play concerns about how to secure a contract with any of IPTV provider, Watch&Play identifies several key of attractiveness based on market situation, IPTV current state, and also services it will provide: 1. Expert Supply - TV and Game business may look the same on the surface but in fact they are significantly different in terms of infrastructure and contents. In this situation setting up infrastructure for game service with Telecommunication Company will be a very huge opportunity. Therefore, IPTV provider might not have the know-how resources about game service. Thus,
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Watch&Play will provide this expertise by recruiting highly qualified developers and engineers. 2. Specially designed game contents - Watch&Play has the clear vision and understandings about IPTV provider users compositions, therefore all the games Watch&Play will provide are carefully designed based on each user category needs and preferences. This is where Watch&Play positioned itself as an innovative specialized game provider by creating unique games. Watch&Play also come out with Edutainment concept for all games. This is especially to solve parent dilemma, of which parents usually restrict their children to play game. With Edutainment concept, every game that is constructed will hold educational value, not only for children but for every type of users. 3. Differentiation Asset – HanaTV as pioneer in IPTV might soon expect challenges from new comers such as LG and KT. While TV contents service will relatively similar to each other, game section can be developed to be differentiation tool from competitors. Thus, IPTV can attract new customer as well as retaining existing customers. 4. First Mover Advantage – Watch&Play possess the advantage to be their first provider, thus it has the opportunity to set the distinct standard for game operating system of IPTV. Therefore, it will create time-distance for other similar game provider to catch up technology-wise. 5. Free Initial Maintenance Fee - Watch&Play realizes the risk IPTV consider in investing in game section, therefore Watch&Play will offer free initial maintenance fee for several period of time. Thus, the risk is removed from IPTV provider to Watch&Play. 6. Profit Sharing Scheme - Aside from the risk sharing, Watch&Play will offer attractive profit sharing scheme around 60-40 (40% for IPTV provider) for all revenue sources Watch&Play obtain from users. To summarize, the following are the jobs that our services (game content) can be hired for: 1. Provide fun and entertainment for relaxation time 2. 3. 4. 5. 6.
Killing time, activities for idle time Edutainment Community Interaction Base Differentiation Advantage for IPTV provider Attract new subscribers 7
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Start-up Business Proposal /February 2008
7. Retain current subscribers (lower churn rate)
F. Business Model Watch&Play will serve as an outsourcing software company serving game sections for IPTV providers. IPTV industry is still at introductory stage and so far there are only one provider (HanaroTV) and two potential comers (KT and LG). Thus, the main objective for these providers is growth, which can be accomplished by attracting new subscribers and retain them as long as possible. Watch&Play believed its services will support the growth of IPTV providers with distinguish game contents which offers differentiation advantage. Being an outsourcing company, Watch&Play realized the strong need to be creative with its products and revenue stream management in order to sustain long term business. Basic game services will be provided free-of-charge. Therefore, alternatives revenue streams are crucial. As the nature of the product is a software game, the following are the expected sources of revenue: 1. Cyber Money – Watch&Play will create a virtual game world which has its own currency. All the games will be included in this world and a gamer can create an avatar of its own. Certain games need the virtual money to be played, such as card game where a gamer will play against another gamer and have to play bet. Initial amount of cyber money will be given free and if gamer runs out of money they can purchase the money and then be charged on monthly bill together with IPTV bill. Cyber money can also be used to purchase accessories for avatars.
2. Game Items – Other genre of games will also be provided to capture various interests of gamers. Adventure action or similar type required gamers to level up their characters. Therefore, many items with various functions and benefits will be put on sale for gamers.
3. Special Game Subscription – aside from the ordinary game that will provided free-of-charge, Watch&Play will also develop special games with more
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sophisticated design for example role playing game genre. To keep its exclusivity, subscription fee will be charged to gamers.
4. Advertisement – another potential source of revenue will be from advertisement. There will be plenty space available for advertisement. For example, Adidas can advertise by putting their item on sale for avatars or other companies can put their logos on many spaces on game layout. Advertisement might be one of the biggest revenue sources
5. Maintenance Fee – this revenue is expected to come from IPTV provider as the fee for providing game service. Based on contract, the amount and terms of payment can be determined later depending on the agreement between both parties. Based on the research and benchmark we obtained, we expect to earn revenue with the following proportion: [Revenue Breakdown & portion]
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Start-up Business Proposal /February 2008
Item Sold (Virtual money & Items)
Special Game Subscription
Advertisement
Maintenance Revenue
100%
80%
60%
40%
20%
0% Year 1
Year 2
Year 3
Year 4
Year 5
G. Product Development Plan Game contents and its accessories will be our core focus. We realized that to produce a widely accepted game, it heavily depends on the design, such as interface, layout, speed of response and flow of the game actions. This required highly qualified technique and understandings of gamer preferences. Most importantly, considering that our target segments are those who have least knowledge to use technology then the format of the game have to be adjusted by not compromising level of fun. We will develop and provide 4 different games at the launching stage. First is targeting senior person who may enjoy card game such as poker and chess. And another is a board game for house wife who might demand less complicated game but high standard in fun. Third one is a casual game for students who are under 15 years old. And the fourth will be edutainment purposed game dedicated for mom and toddlers.
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The game for senior (Exhibit1) is a kind of puzzle game such as Korean chess (BADUK). since senior persons may reluctant to play action game, we will develop a game which is turn based game and that game may accelerate brain working for elder people to protect them from degenerative disease.
The game for housewife (Exhibit2) is a game which can be played with familiar rule. Almost every housewife may familiar with the rule of Korea traditional card game “Hwa-Too”. And also we will make it to boost network with others game users. Housewives really love to chat over with other gamers while playing.
The game for students (Exhibit3) must be very trendy and exciting. So we have a plan to develop a sports game. Particularly, since statistically sports genre is most well selling product and soccer is very popular in Korea, we will make soccer game which have real data. Young customers can control their favorite soccer team.
The game for mom and toddler (Exhibit4) is carefully designed to strengthen relationship between mom and toddler. By playing game, they can easily interact through the game. This kind of game is very easy to play with just one button.
H. Financial Figures Underlying Assumption: -
From the game developing milestones, we plan to launch 4 board games in mid year 1. 60% After channel fee – Watch&Play expect to have partnership with IPTV provider by offering profit-sharing 60-40 for all revenue sources (items, special game and advertisement).
A. Revenues 1. Items on Sale - Consist of Virtual Money and Items. - To estimate the potential future demand, number of subscribers is used as the projection based. The following is the formula:
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IPTV Subscribers X Number of IPTV user x % Estimated game user x ARPU
IPTV subscribers = obtained from estimated data by Hanaro Telecom and Kyobo Security Research Centre Number of IPTV user = one household consists of average 3 IPTV service users Percentage of Estimated Game User = based on planner assumption, as much as 4% ARPU = Average Revenue per User, amount of KRW user spend on game features.
2. Special Game Subscription - Special game best described by RPG (role playing game) genre. - The development of this game will take 3 years to be finished, thus it is expected to be fully launched on Year 4. - It is estimated that 0.5% of IPTV users will subscribe to this service. - Watch&Play expects to charge KRW 12,000-13,000 monthly
3. Advertisement - It is expected to generate advertisement revenue on first year around KRW 50,000,000. - As the active game users grow yearly, the advertisement revenue is also expected to increase. 4. Maintenance Revenue - Watch&Play expects to receive maintenance fee from IPTV provider as the service compensation.
B. Expenses 1. Market Research - The cost of market research is expected to be KRW 40,000,000 in initial year
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and increasing by 3% yearly. 2. Software/Hardware - These costs increase along with the increasing number of hired developers. - In the Year 5, Watch&Play intend to renew software as well as hardware. 3. Developers - 4% inflation yearly is considered to take effect henceforth the salary will be adjusted 4. Marketing Expense - About 7% increase per year is estimated. 5. Office Space & G&A Expense - Office space rent is expected to increase 10% annually. - G&A expense is linked with number of employees including developers. The annual cost of G&A expense is KRW 2,500,000 for each employee and the increasing rate is estimated about 3% per year.
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EXHIBIT1) For senior person
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(EXHIBIT2) For housewife
(EXHIBIT3) For students
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(EXHIBIT4) For mom and toddler
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[Appendix 1] START
3 month
6 month 2 Designs
2 of board game
9 month
12 month
15 month
18 month
2 G&P
2 of board game
Launching
Game Design
Graphic
(3month)
Programming
Launching
(3month)
2 game
2 game at 12month
at 6month
2 of Casual game
2 of Casual game
Game Design
Graphic
(6month)
Programming
Launching
(9month)
2 game
Use engine Developing
at 15month
Use engine
Game Engine
Upgrade Engine
Upgrade Engine
(3month+3month)
for casual game
for MMORPG
Keep upgrade Use engine 1 Big game
1 Big game
Graphic
Game Design
Programming
(12month)
(24month)
It will take 2 years Launching at 36month
