Game Marketing Tips, Analysis, and News

Monday, May 3, 2010

Free-to-Play Makes Serious Money

I talked about League of Legends before, as an example of how the free-to-play business model can succeed. Gamasutra has this interview with Riot Games' Marc Merrill about how the game is progressing. In short, it's growing very strongly... they are up to 90 employees now. All of their revenue comes from the sale of virtual goods; they don't charge for subscriptions, or have advertising, or anything else. Just virtual goods.

This model is working well for League of Legends, which is a real-time strategy (RTS) style game. It also seems to be working well for social gaming and MMORPGs (the free-to-play segment is the fastest growing part of the MMO market, and there's no need to talk about just how amazing Zynga's growth curve has been). I'll note here that Blizzard made a couple of million dollars in an hour just by selling a virtual steed for World of Warcraft. So even the classic subscription model is getting a boost from virtual goods.

How far can this model go? Will it replace traditional retail games? Possibly... I suspect that some of the erosion in average sales of retail games is due to customers finding more value in all the free or low-cost content available online. The free-to-play model even has implications for the traditional paper game industry. What if you gave away the rules, but sold downloadable adventures? Well, that already happens to some extent. I think that the adventure game industry would be well-advised to look into new business models... that's where more growth opportunity lies, rather than in game design innovations. I think Magic: The Gathering's most important innovation was really in the business model, rather than the game design... collectability was key, and then the whole idea of regular releases is still going strong.

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