INTRODUCING THE INDUSTRY CIRCLE SERIES
We are pleased to introduce the first article in our series around our new initiative, the Industry Circle, which aims to acknowledge the achievements and challenges in the growing social impact games industry. We hope you enjoy the following article from Kognito’s CEO and co-founder Ron Goldman, and that we’ll see you at G4C’s Google Hangout Q&A with the Kognito executive team on August 24! Register here.
What is the State of
By Ron Goldman, co-founder & CEO, Kognito
During the 2015 Games for Change Festival in NYC, together with Asi Burak, president of Games for Change (G4C), I organized a panel discussion entitled State of the Industry: A Town Hall, as part of the inaugural Industry Circle. The panel included executives from some of the leading companies involved in the G4C community such as Amplify, BrainPOP, Global Gaming Initiative, GlassLab, Filament Games, Schell Games, and Kognito. The goal was to have a candid discussion about where we stand in the process of transforming social impact games from a niche movement into a self-sustaining, growing industry.
We want to continue to discuss with the G4C community where we stand, where we should go, what critical challenges we face, and what we should be cautious about on this journey. We welcome your perspective, insights, criticism, and questions — even challenges about whether a mission-driven community like G4C should even try to become a self-sustaining industry.
To start this conversation, we have described what we refer to as “The 7 Keys to G4C Success,” which were a constant theme during the panel discussion at the G4C Festival. The companies that participated on the G4C panel will author future articles, each providing their unique perspectives on the issues.
The 7 Keys to G4C Success:
- Business Model: A critical component of building a sustainable, scalable business is the ability to develop your own content/IP and then sell or license it directly or through third parties to numerous clients at a price above your costs. A SaaS (Software-as-a-Service) subscription-based content delivery model best meets the need for small companies to attain recurring revenues and higher profit margins that they need to grow. Today, an increasing number of companies are investing in building a portfolio of owned games instead of creating client-owned content/IP in work-for-hire projects, but we are still a long way from this being the dominant business model. Current estimation is that the majority of companies generate more than 75% of their revenue from work-for-hire projects.
- The Type of Change Games Aim to Achieve: The “change” in G4C can be defined in many ways; however, we can probably all agree that the basis of any G4C should have at its core a social mission. Initially at G4C, the majority of games were educational software concerning school curricula around math and science learning skills. While games clearly present a way to revolutionize how math and science are taught in school, many don’t view teaching math as a social topic but as an educational topic. Over the past few years, we have seen an increasing number of games dedicated to core social change issues such as supporting vulnerable populations, mental health, civics, human trafficking, and discrimination. This shift is a clear indicator of an almost holistic understanding of where developers and clients now envision the potential of games to change perception, attitudes, and behaviors around social and health topics. This is a key factor in the value proposition that we are all offering the market.
- Diversification of Funding Sources: Early-stage industries tend to rely on foundations and government grants as sources of funding. For example, the Robert Wood Johnson Foundation supported Games for Health through its initial years. Multiple government research grants secured by companies in our field are also great examples of short-term wins that we can all reference. However, relying on these sources for too long is perilous, as awards are usually designed as work-for-hire and don’t offer the recurring revenue upside to act as long-term, on-going financial support for an emerging industry. Long-term G4C members are all painfully aware of outstanding teams of game designers that closed up shop due to foundations or government grantors shifting their priorities. While some G4C companies have been increasingly successful in securing more of their revenue from long-term sources (e.g., content licensing), foundations and government grants still account for the majority of funding secured by our community members.
- Venture Capital/Investors: While foundations and government research grantors are comfortable taking risk on unproven approaches, investors cannot and do not. Investors do not invest in niche categories with marginally profitable products based on limited clinical science. Investors must consider the scalability and clinical validity of products and solutions. Now, as angel investors and institutional venture capitalists begin to invest in G4C companies, they are sending a clear message that we are a viable industry. We should celebrate every investment made in our space. We must examine these events more closely and incorporate and leverage similar business strategies in our own organizations to attract even more investors to our space. The success that members are starting to experience is not a false positive. Things are moving. Investors are interested. We are addressing the need. Investors know this.
- Prove the Change: Changing perceptions, attitudes, and behaviors is a difficult task, and while game-based experiences are superior in achieving such changes when compared to traditional PSAs, flyers, and lectures, this won’t count as long as we can’t prove it. Conducting empirical research to prove the efficacy of games for change has been a discussion for several years and groups like the Health Games Research at USC and the Impact with Games: A Fragmented Field report from G4C are great — but rare — examples. Our conversation about success is still defined by how many people accessed the game or how many articles were written on it in the media.
- Companies Solely Committed to Selling Games for Change: When someone asks you what you do, what do you tell them? It’s an important response. As the spotlight on our industry increases, the number of companies that are truly dedicating their efforts to G4C will become a critical element to our credibility and viability. Our community is built of nonprofits, foundations, and companies that vary in size and in the role that G4C really plays in their daily activities. Some companies can be viewed as educational software companies only. Some produce a portion of their work that can be defined as G4C. Whether more and more companies in our community will be able to allow G4C to play a dominant role in their daily activities and revenue to the point where 100% of their efforts could be defined as games for change, is an important indication of our ability to back up our claim of becoming a self-sustaining industry.
- Successful and Diverse Use Cases: As with any emerging industry, we need a few great examples that showcase the ability of game-based experiences to drive meaningful change. Examples like Half the Sky and the media coverage it received are critical and essential. We are seeing more acceptance by the media to cover such projects and the number of users is continuously increasing. Still, considering point #5 above, these success stories should not just be about number of users, but also about being able to prove the change they generate so that strong ROI (return on investment) cases can be created.
This is a conversation we must have now before it is too late. Yes, it will likely create some strong feelings among those who feel that G4C should never think about money or commercialization, but what we can all agree on is that we don’t want in 10 years for people to say, “Oh, remember those games for change people? I wonder what happened with them; it looked so promising, but then it just faded away.”
What we do is real. What we do works. What we do is better than many traditional approaches to changing attitudes and behaviors that companies and governments spend billions of dollars a year on. Let’s have a candid discussion. Let’s claim our place.
The author of this post is Ron Goldman, co-founder and CEO at Kognito, with contribution from Stephen Shinnick, CFO at Kognito.