When and how to introduce live streaming for video game? Consumers’ trade-off between buying and watching

Abstract

Video game industry has developed as a significant sector of entertainment, with game providers now exploring new business opportunities as the industry matures. Among them, the emerging trend of live streaming has captured considerable attention. However, the interaction between video game and video game live streaming forms a nuanced relationship of coopetition — live streaming expands the market while cannibalizes it, which has sparked numerous debates on game providers’ motivation to introduce live streaming. In this paper, leveraging a sequential game-theoretic model in which there is one game provider and one livestreamer that consumers can experience the game by purchasing it or watching live streaming, we study the game provider’s live streaming introduction and revenue sharing decisions and their impact on the profitability of the game provider and the livestreamer. In contrast to the finding of prior research that live streaming always benefits the game provider, our study reveals that the game provider may not introduce live streaming when her initial informed consumer base is large. However, revenue sharing mechanisms, including the game provider sharing revenue and the livestreamer sharing revenue, can effectively increase the game provider’s profitability, inducing her to introduce live streaming. And both the revenue sharing mechanisms under their specific conditions would become the game provider’s optimal choice. Interestingly, different from prior research examining coopetition within supply chain management, we find that the game provider can benefit from giving up her whole market share in the sales channel with the livestreamer sharing revenue. This outcome highlights the experiential nature of video game products. Furthermore, both mechanisms may lead to win–win situation for the game provider and the livestreamer.