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BCG Medium Product Pricing Business Model Selection Profitability Analysis

The Pricing Games

#Technology #Gaming #E-sports
ProHub Comment

This is a comprehensive pricing and business model selection case that tests market sizing, financial analysis, and strategic thinking. The case progresses logically from TAM estimation through profitability calculations to qualitative factors, requiring candidates to synthesize quantitative findings with market research data to make a defensible recommendation.

Estimated Time 15 minutes
Difficulty Medium
Source NYU
50 / 100
Your client is Next Level Gaming (NLG), a start-up in the E-sports and computer gaming industry based in Los Angeles, California. NLG is planning to launch its first game – an online, multiplayer role playing game that is unlike any existing franchise. Being a new player in the industry, NLG’s CEO, Bobby Beck, has asked for your help in deciding its business model. The company is considering 3 alternatives: a subscription model where players pay a monthly fee; a retail model where players pay full price at initial purchase, and a free-to-play model where the game is free to play but charges players for in-game merchandise. How would you advise NLG to proceed?

Clarifying Information

  1. Time frame: NLG is looking to launch immediately.
  2. Competition: The online gaming industry is dominated by 3 major players who control 35%, 25%, and 20% share respectively. There is a long tail of smaller gaming companies.
  3. Target Market: Based on preliminary market research, NLG expects the majority of players to be between the ages of 21 to 40.
  4. Geography: NLG is planning to launch its game in the US only.
  5. Platform: NLG’s game is compatible for both Apple and Windows computers
  6. R&D Cost: NLG spent 10 million USD to develop its first game (the candidate should recognize this as a sunk cost and not factor it into the decision)