Classroom Companion: Business

Digital 
service
Type of business model
Payment method
Fundamental 
properties exploited
World of 
Warcraft
Subscription
All users pay a fee for 
using the service
Zero marginal cost, 
network effects
Spotify
Freemium
Some users get the service 
for free. Other users pay 
for using the service
Long tail, network 
effects
Facebook
Ad-based free
The social network service 
is free. Advertisers pay for 
user-targeted ads
MSP, zero ARPU, zero 
marginal cost, network 
effects
Wikipe-
dia
Commons-based peer 
production
No fees for readers and 
authors. Revenues based 
on donations
Public good, CBPP, 
MSP, zero ARPU, zero 
marginal cost
Airbnb
Multisided digital 
mediation platform 
supporting non-digital 
service
Users pay for the 
mediation services 
provided by the platform
MSP, network effects
 
Chapter 19 · Digital Business Models

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19
 Case Study 19.1 World of Warcraft
Blizzard’s online game, World of Warcraft 
(WoW), is an example of a digital service 
based on the subscription business model. 
Here, customers (or subscribers) pay a 
periodic (e.g., monthly or yearly) fee for 
accessing the service. Without subscrip-
tion, customers are not allowed to access 
the service. If a customer terminates the 
subscription, the customer also loses 
access to the service.
WoW is a massively multiplayer online 
game (MMOG) released in 2004. The 
game had over 12 million concurrent gam-
ers (subscribers) at its peak in 2010. WoW 
features a persistent 3D world, where gam-
ers can interact, solve quests, and perform 
tasks in collaboration with other gamers. 
New content and upgrades are continu-
ously added to the game by Blizzard’s 
team of game developers. Blizzard offers 
access to several servers—each featuring a 
persistent world—to ensure load balanc-
ing and optimal performance of the game. 
The persistent worlds are divided into sev-
eral geographical regions.
The BMC and the SRM of WoW 
are outlined in 
.
Figs. 
19.4
 and 
19.5
, 
respectively. The value proposition of 
WoW consists of giving gamers access 
to the game and the persistent world’s 
content (1). The only defined customer 
segment is gamers (2). The gamers pay 
monthly subscription fees to access the 
game in addition to purchasing the game 
itself. Both the subscription and the 
game purchase are done via Blizzard’s 
battle.net website. The game can also be 
purchased at a physical retail store. The 
main source of income from the game 
is monthly subscriptions, which are pro-
portional to the number of active gam-
ers (3). Another source of income is the 
product sales from the WoW game itself.
The key activities needed to offer 
WoW is creation of content and game 
development. These activities are the 
Key partners
Key activities 
Key resources
Value proposition
Cost structure
Customer segments
Revenue streams
Customer relationships
Channels
World of
Warcraft
Gamers
Monthly
subscriptions
battle.net
Game purchase
Content and 
game
development
Data centers
ISP
Game
developers
Game
development
(fixed)
Running the
game
(variable)
Retail stores
Retail stores
Game
infrastructure
2
3
1
4
5
. Fig. 19.4 World of Warcraft modeled using the BMC. (Authors’ own figure)