Generating ancillary income through Revenue Sponsored Entertainment

Over the last year, we’ve seen a lot of change in the airline industry - everything from emerging inflight Internet to paying for luggage. Most exciting though, is the increased interest in using the inflight entertainment platform as a vehicle for revenue generation. With ever-advancing changes in digital entertainment on the ground, airlines are poised to implement new content and applications that create strong revenue streams and provide value to passengers.

Game on

Web-based firms are using games to increase interaction with users while embedding revenue streams in the game. The Business Insider recently reported that Facebook game maker Zynga will turn in 2009 revenues approaching $250 million. Zynga’s revenues stem from the sale of virtual goods, such as tractor fuel or land in the game FarmVille, during play. Using virtual goods or per-interaction pricing schemes is seen by some as the holy grail of dynamic pricing, or pricing that is unique to a user based on his or her behavior over time.

So how do airlines take advantage of an industry that is expected to generate revenue in excess of $11 billion dollars in 2012? They can start by using the right games. In order to generate revenue for airlines, a game should encourage repeat play, allow sponsorship opportunities and have the ability to charge a user some nominal fee.

Delta Air Lines, for example, provides passengers with several free games, like inflight trivia against other passengers, as well as pay-to-play games. Recently, Flight Deck Gaming has emerged offering several revenue models, such as per-play pricing and sponsorships, which create a fully functional inflight gaming experience that also financially support an airline’s IFE program.

The great mall in the sky

Companies such as SkyMall, Inc. have been successfully driving product sales through inflight magazines for more than 10 years on U.S. based carriers. But many of these products are screaming for digital representation. Just as a display ad performs better than a text ad on a website, an interactive digital shopping catalog better engages the user and provides value to the retailer, airline, and passenger.

The Little Giant Ladder, a versatile 24-in-1 ladder, has produced some impressive videos that market the product very well. Little Giant Ladder paid to be featured in SkyMall magazine for a short time. The thing is, with a product like that, people need to see it in action. Had passengers been able to see the impressive functionality of one of these ladders through a short clip, then Little Giant Ladder would have benefited from more sales, the airlines using SkyMall magazine would have benefited from more revenue, and more passengers would have been given the opportunity to purchase a high value product.

A piece of the pie

I recently attended a conference where Jay Sorenson from IdeaWorks noted that other firms and industries are profiting from airlines and passengers while airlines themselves are losing money. That doesn’t make any sense. On November 30th this past year, or Cyber Monday, a projected 72 million U.S. consumers went online and spent an estimated $887 million on consumer products. Airlines don’t need to have WiFi-connected airplanes to capture a piece of that pie. But once they do? The sky is the limit.

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