Free-To-Play For Any Game?

Free games coming soon...

When you're looking at different business models for gaming, one of the ones that usually pops up is "ad-supported." Meaning that advertisers would pay to present games to customers, who could then play for free. It's the network television model, where you fast-forward put up with some commercials in order to watch a show.

Now online game marketplace Gamersgate is attempting to bring that model to PC games with a new service, Freegames. A closed beta is opening up later this month, with the service expected to roll out in September. There'll be ads on the site, and ads while you download, and ads before and after you play. Like most of these ads, users will probably quickly learn to ignore them. Well, that's OK if they can still line up advertisers, I guess.

A more useful model would be the sponsored game, where some advertiser sponsors some downloads in return for the recognition and warm feelings a free game will generate. I think this sounds like a more useufl marketing tool.

Gamersgate is expecting to launch with some 200 titles, and is still busily negotiating with publishers over exactly what titles will be available. It's worth keeping an eye on this to see how it goes.

I expect it's going to be more helpful for larger publishers with established titles; advertisers are unlikely to rush in to support your unknown indie title until you've built some audience for it.

100 Million Free iPhone Games... In March Alone

In-app purchasing is becoming very popular, very fast.

That's the amazing number from a study by Xyologic, which has been combing through App Store data. A full 40% of those titles have in-app purchases. Over 80% of all apps downloaded in March were free apps. Obviously, free-to-play is the wave of the future, right?

Maybe... or maybe not. The dark underside of this wave of free apps is the pay-per-install method of marketing your app. Seems there are lots of places where you can pay a fee per installation to get your app installed in thousands of phones... in order to drive up your numbers so you can appear on Apple's best-seller lists. This can run upwards of $30,000 or so, but the payoff can be considerable; being in the top seller list is about the only way to get noticed in the App Store since Apple's tools are so feeble.

Now Apple is cracking down on apps that offer this cross-marketing opportunity. Which is also shooting down more legitimate cross-marketing efforts. It's really a mess right now, and hopefully Apple will take charge and solve the fundamental problem: App discovery. It should be a warning sign when developers are gaming your system to be able to sell games on your system, if you know what I mean.

Apple may be facing some real retail competition when Amazon really gets rolling selling Android apps (and their own Android tablet... and maybe an Android iPod competitor? Or an Android phone?). Which is exactly why Apple should really be working hard to improve their shopping tools right now.

F2P Means $$$

Turbine's little experiment with moving their MMORPGs from subscription to free seems to be working. That's a pretty big understatement, according to Turbine. The move has resulted in Lord Of The Rings Online tripling its revenue. The player population has increased, and so has the level of activity. The success isn't limited to LOTR, either. Implementing the same model on Dungeons & Dragons Online in 2009 has shown a 500% increase in revenue, according to Turbine.

Certainly competing with the World of Warcraft juggernaut is difficult, but the free-to-play mechanism seems to be working out extremely well for Turbine. This certainly seems like the way to get some traction for MMORPGs in the current environment. It will be interesting to see if some of the new MMORPGs that have launched with subscription plans continue to hold onto that, or make the switch sometime during the year.

Of course, the landscape will alter in a big way when WoW itself makes the transition to F2P, but I don't expect that until 2012 at the earliest.

Age of Empires Goes Free

Microsoft is bringing back Age of Empires, but now it will be free-to-play, according to their announcement at GamesCom  this week. The product won't appear until 2011, but they are taking signups for the closed beta on their official website. No, it's not from Ensemble Studios, which was disassembled some time ago. But it sounds interesting if you were a fan of the original.

The interesting thing in general is Microsoft entering the free-to-play arena. Other publishers have been making moves in this direction, too, such as EA. But will we see this business model appear on consoles? On the downloadable game part, you'd guess. That may be too radical a step for now, but after a few more months or years of down sales, you may see more willingness to experiment.

Let's hope that change happens more swiftly than not... for the industry's sake.

Free-to-Play Forecasted to hit $7 Billion

Free-to-play is a business model pioneered in Asia that's taking the world by storm. This article highlights info from analysts forecasting the market to double to $7 billion in revenue by 2015, about twice what it is now. Interestingly, while social games in the US get maybe 1% of users to pay, in Asia games get over 10% of users to shell out money. It's not all virtual goods, either; enhanced subscriptions are another tool used. Again, the game design becomes critically important to this marketing tool, and analytics are key to refining your design. Both design and marketing become a process; your effort shave to be ongoing, informed by the data coming in.

It's very different from the fire-and-forget style of game design and marketing used for decades by American publishers, which is no doubt why bigger publishers have a harder time switching to this model than new, small companies. Free-to-play is a powerful marketing tool that actually puts piracy to work for you. Essentially, your servers end up tracking each individual user, which means piracy becomes useless.

This business model has implications beyond electronic games, though. It could turn the paper-and-pencil RPG industry around. How? Give the rules away, and  sell a steady stream of add-on products. Of course, this doesn't work economically if your products are paper ones sold through retail stores... but it could work if your products are e-books distributed electronically. And perhaps the physical and electronic products could dovetail nicely... it's worth some thought.

Facebook: Threat or Menace?

It looks like the Facebook Credits are hitting the windmill.  I could see this one coming for a while; once I heard that Facebook was planning to implement Facebook Credits, where Facebook would offer a universal currency for virtual products offered on Facebook games, I could see the trouble brewing. Facebook Credits (or Facebucks, as some have dubbed them) give a sweet 30% rakeoff to Facebook. Of course, they do make it easier for players to spread their virtual spending around to a variety of games, particularly to less well-known games from smaller companies. So they will probably result in some more sales for the obscure games, perhaps enough extra to compensate for the loss of 30% of the profits.
That situation doesn't describe Farmville, however, since it's the most popular game on Facebook (78 million users!). The Facebook Credits represent a straight loss of 30% of Farmville revenue; it's pretty clear that few new users will be attracted to the leading game (by far) just by offering Facebook Credits. Now, when Facebook announced this, they didn't say in so many words that Facebook Credits would be the ONLY way games on Facebook could take your money. But that was pretty obviously the way things were heading.

And now it appears the shoe is dropping, at least from the rumors hitting the intertubes. TechCrunch says Zynga is lawyering up and getting ready for battle as negotiations head south; the scuttlebutt is that Zynga will leave Facebook entirely in a few weeks. Zynga's talking about how they are diversifying away from Facebook (here and here and here).

This follows on the heels of a drop in users because of Facebook's change in the way they handle notifications; Farmville lost 4.4 million users in one month because of it.

It's a difficult transition for Zynga, but a necessary one. Right now they're at the mercy of Facebook; it's hard to deal with a sudden 30% loss of revenue. And who's to say next month Facebook won't decide that, hey, maybe 40% is a better deal? Now, Facebook should be careful about losing 80 million players, too. With Facebook's recent privacy shenanigans, they are certainly causing more negative publicity. Ultimately, I guess that Zynga and other companies will still have games on Facebook, but they'll be sure to have plenty of alternatives... and try to push users towards alternatives where the game company makes more money. Facebook may think "Hey, Apple can take 30% of all app sales, and nobody complains about that, so we can do it too!" But the difference is that Apple sells hardware that makes it possible... if you don't own Apple hardware you don't buy apps. With Facebook, there's no real need to conduct the game through Facebook when with one click you can be on somebody else's web site. One where the game publisher doesn't have to pay a 30% tax.

Which all means Facebook will become more of a marketing vehicle and less of a platform, and by making the platform more annoying they are making competition a little more possible. They may look invincible now, but Myspace looked that way once...

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.

Piracy Gets Real

Piracy has long been a favorite bogeyman for electronic game publishers (and the music industry, too). THe tough part has been actually quantifying the size of the piracy problem.  Ars Technica has a post on the government's attempts to really look at what's known about piracy. It seems that when you look at it more closely, the claims about economic impact are impossible to quantify, and the numbers that have been bandied about before aren't to be trusted.

Really, I've found the whole piracy debate (which has since become important in traditional publishing and paper gaming as well, with the spread of e-books) to be missing the point. To me, the salient facts are that (1) piracy exists and (2) there is no way to prevent it, technologically. (Despite many attempts.) That being the case, I think publishers have two choices for constructive action about piracy. They can (1) Ignore it, or (2) Use it. How do you use it? I think we're seeing that with the free-to-play model, for one example. If the game is copied and distributed freely, that helps the publisher make money. Another variation is the free version that you can upgrade to a paid version. Give the customers a taste so they know what the product is, thus satisfying curiosity that might otherwise lead to piracy.

Bottom line: Make piracy work for you.