The Impact (Effect) of Networks in Genshin Impact
On September 28, 2020, chinese game developer miHoYo released their forefront MMO that took the world by storm – Genshin Impact. In its first six months, the game “made more than $1 billion from mobile phone users alone” (BBC) and “now makes more than $6 million per day,” also excluding PC and console users (IndieWire).
Fantasy MMOs aren’t an innovative development, especially to the chinese game industry. Because of censorship laws that prevent excessively violent or political games from publication, most Chinese developers found themselves “making free-to-play MMOs and pay-to-win mobile games” if they weren’t outsourced to global studios. Despite fitting into this homogeneous population, Genshin Impact made a large impact on the chinese and global video game scene. Several network effects contributed to Genshin Impact’s rise to popularity.
With its high quality graphics, open world RPG style that mimics Breath of the Wild and Sword Art Online – both critically acclaimed intellectual properties – consumers of Genshin Impact value the game very highly. Part of what makes Genshin Impact so attractive is how it “feels like it should cost $60 but is instead completely free” (PCGamer). The user population of Genshin Impact value the game highly, but the actual price of the game is lower than their valuation – thus, the consumers have a positive payoff from playing the game.
At a given price, the fraction of consumers using the good has two equilibrium values that we can mark z’ and z”, with the former being a ‘tipping point.’ If the fraction of consumers passes this ‘tipping point’ equilibria, the population of consumers increases, the fraction pressured upwards to meet the next equilibria. This is because the population of consumers between z’ and z” value the game more than the price of the product, so they tend to drive demand up. If we lower the price of the good itself, the distance between these equilibria increases: the tipping point equilibrium lowers, so it is easier to pass and drive demand upwards. The eventual size of population z” increases, making eventual returns higher than before. Many free-to-play mobile games, including Genshin Impact, utilize this strategy, pricing their game to grow their user population and profits.
https://www.indiewire.com/2020/12/genshin-impact-video-game-industry-analysis-1234603048/
https://www.pcgamer.com/how-chinese-free-to-play-rpg-genshin-impact-conquered-the-world/