The Effect of Clash of Clans on the Economy

Sam Queen

Mr. Reuter

10/15/14

Economics B-2

The Effect of Clash of Clans on the Economy

In the past few months, a new MMO game has taken the Apple and Google Play app stores by storm. This new game has quickly become popular in PHS, and in a large variety of smartphone users, ages ranging from 12-24, with the game being the most popular with people in their 20’s. This game is known as Clash of Clans, or CoC. As this game shoots up the leaderboard for most popular app, its popularity increases which demands for this game to be analyzed. More specifically an analysis on the effect of Clash of Clans, and its sister game, Hay Day, and how these games and the creator Supercell are hurting or helping the economy.  

Both Clash of Clans and Hay Day are time based games designed to draw the player in initially by making them active in the initial building of their village or farm. Supercell (creator of CoC and Hay Day) has been hailed as finding the perfect formula for creating a popular game. First, they create a tutorial that is creative, attention grabbing, but short, and not to extensive. Then you a way in which hard core players are able to mingle and co-exist, then you keep making updates to the game to keep the veterans of the game happy while keeping the new players from quitting due to an overwhelming amount of information. Both CoC and Hay Day have done a great job with this, but there are some areas in which CoC out does its older sister game. Clash keeps people active by supplying them with incentive to keep logging in and check on their village by allowing different players at different levels to be able to retain and harvest the in game currency, which is elixir and gold.

But, as you continue to grow your village and progress through the game, the collectors and mines that provide you with exiler and gold are not able to keep up with the amounts required to upgrade your buildings and other structures. Eventually, you reach a point in the game where it is impossible to advance without paying money, which is where gems come into play. You can purchase gems to fill up your respective storages for the two main currencies, or you can build time shields to protect you villages from getting attacked, both with gems. The going rate right now is $5 for 500 gems, 1200 gems for $10, 2500 gems for $20, 6500 for $50, and 14000 gems for $100. So by increasing the gem to dollar ratio, Supercell is trying to entice their players by getting them to believe that by spending more money, they are increasing their marginal benefit by getting them to buy more gems than they initially wanted to buy, or by causing them to buy gems in the first place. Supercell has been quoted as saying “That 90% of CoC players do not spend one cent on the game.” Meaning that they receive all revenue from around 10% of their players, who tend to be the best worldwide.

Supercell has reported that they generate 982 million dollars annually in revenue, around 2.4 million dollars a day. That is around 400 million dollars profit before taxes.It is reported that Clash of Clans alone generates 4.6 million dollars a day in 2014. This is a staggering figure, as Supercell is feeding off of the small amount of big time players who are addicted, much like a casino receives most of its revenue from those who gamble too much. Now, how does this relate to the economy. While Supercell does not provide many people with jobs, as they only employee 110 people, with the amount of profit that they generate, most goes back to the people as Supercell pays more than they are required for taxes each year in Finland. Which is great, but does it really help. Since many of the users who play CoC are smaller children, they may not be able to grasp the idea that in app purchases cost real money, and they may end up spending a lot of real money without even realizing it. Obviously this is harmful in any economic situation, with the opportunity cost being anything that the money that was spent on gems being used on something else.

In conclusion, Supercell is one of those companies that seems to have found the perfect formula for producing quality games while still being able to turn a large profit. Personally, I think that if you want to spend gems and buy things inside the app, go ahead, I am not one to judge. As a current clasher, I see the value of doing something like that, but after doing research and seeing just how much Supercell makes off of people partaking in the purchasing of gems, I don’t won’t buy gems, because in my case personally, the marginal cost outweighs the marginal benefit by a landslide.

Works Cited

Spencer, Evan. "'Clash of Clans' Developer Supercell Reports $829 Million In Revenue And A Desire To Support The Finnish Community." Forbes. Forbes Magazine, 21 Feb. 2014. Web. 17 Nov. 2014.

Dredge, Stuart. "Clash of Clans and Candy Crush Saga Dominate Apps 'superstar Economy." Www.theguardian.com. The Guardian, June-July 2014. Web. 17 Nov. 2014.

Smith, Julie. "Millions of Children Play "Clash of Clans"" Kids and Teens Online. Kids and Teens, 9 Sept. 2014. Web. 17 Nov. 2014.

Brustein, Joshua. "Finland's New Tech Power: Game Maker Supercell."Bloomberg Business Week. Bloomberg, 05 June 2014. Web. 17 Nov. 2014.

Smith, Steven. "Gyrovague." Gyrovague. Gyrovague, Jan.-Feb. 2014. Web. 17 Nov. 2014.