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Freemium: Is it evil?

Tue 26 Jul 2011 10:54am GMT / 6:54am EDT / 3:54am PDT
BusinessDevelop 2011

Is the Freemium business model the future, or a one way ticket to player manipulation?

Every conference has its hot-button topics, and at Develop it was unquestionably the proliferation of the Freemium business model.

It seemed that, in any given room at any given hour, some designer, programmer, producer or CEO was discussing the monetisation of products that are ostensibly given away for nothing. Some were tales of triumph, some were tales of woe.

Clearly, success is possible with Freemium, but it's far from simple, and the difficulties involved have led to a glut of games and products that have been branded - by no less a figure than Braid-designer Jonathan Blow - as "evil".

The veracity of that claim was the subject of an interesting debate between Dan Keegan, general manager at OpenFeint, Tracy Erickson, developer relations manager at Unity, Jas Purewal, a commercial lawyer at Osborne Clarke, and James Parker, a freelance designer working with Mobile Pie.

Erickson, in particular, showed no hesitation in agreeing with the sentiment. Prior to joining Unity he was an editor for the iOS section of mobile and social games website PocketGamer, and he claimed that many games he encountered were "borderline predatory" in the way they coaxed the player into spending money.

"In terms of some of the content I've seen, [Freemium] has been a little evil," he said. "I think there's a number of games - a number of publishers, to be quite frank - that have used the Freemium business model to essentially manipulate gamers into buying content that they're not necessarily enjoying."

"One game I can think of in particular that really irked me was Star Wars Imperial Academy from ngmoco. It was a particularly bad title from a gameplay perspective, but also...in the way that the freemium elements were integrated into the game."

"Every few rounds you had to purchase energy to get back into the game. It was a complete disconnect with the the license, and also it was at odds with the style of gameplay."

When you're embarking on a project you've got to ask yourself, 'Would this would better as a Freemium title?'

James Parker, Mobile Pie

The problem is that developers have started to view Freemium as a design philosophy, and not just a business model. For Mobile Pie's James Parker the potential benefits of Freemium are self-evident, but he warns that it needs to be the bedrock of the design, and not just a way to generate revenue.

"You can't just click the Freemium button," he said, "When you're embarking on a project you've got to ask yourself, 'Would this would better as a Freemium title?' Because if you don't ask yourself that question you're as foolish as the people who say all games should be Freemium. It's not an assumption. It's a decision you have to make."

Erickson agreed. Every project should begin with the desire to create a good experience, and if the idea supports a Freemium model then it can be a valid creative choice.

"But if you're going out of the gate with the objective of making a Freemium game, that causes me a little bit of heartburn," he added. "Because I wonder if you're in it just to make a bunch of money. There has to be a creative aspect that drives the design process."

The problems aren't limited to design. In the view of Osborne Clarke's Jas Purewal, the Freemium model is "powering some tensions" in the industry that have yet to be addressed. The first relates specifically to micro-transactions: ownership.

"Consumers really think they own these things," he said. "They buy a cow in Farmville they really think it's theirs; they purhcase Facebook credits they think it's theirs. The only reason that they're purchasing these things is because the business model is set up in that way... but what happens if a business decision is taken to shut one game down and focus on the other?"

"Using Zynga as an example, their business strategy involves choosing which games are doing well, and the ones that aren't doing well get cut down or are removed altogether. So someone loses all of their virtual goods... People who are buying virtual goods think they own them - that's a tension, and we don't quite know yet how it's going to be resolved."

The other problematic area is data, which is one of the key drivers behind the astronomical valuations of social game companies. A large player base is now every bit as important as revenue or product quality in dictating perceived value.

"It means you've got data, you've got metrics, you know things about your customers that you can work with, but again there's a disconnect because players don't really understand that everything they do is being monitored. All of the details are being used in some way, shape or form to make a better game, which then indirectly leads to more sales of virtual goods and more money."

You can get people to buy loads of virtual goods by monitoring their bahaviour, then shut the game down and shuffle them off to something else

Jas Purewal, Osborne Clarke

Purewal beleives that many players don't understand the way their data is being used to influence future behaviour, and a lack of transparency about the process on the part of many companies leaves them in ethically shady territory.

"That's why [Freemium] sometimes gets branded as 'evil' - if you can get people to buy loads of virtual goods by monitoring their bahaviour, then shut the game down and shuffle them off to something else."

Parker agrees that social games, in particular, tap into powerful forces that require a greater degree of moral responsibility on the part of the developer. To some extent, Freemium games rely on a small handful of players to spend a large amount of money - both to fund the game and make the game world a more attractive place - but designers should be aware of how damaging an absence of limits can be.

"One of the greatest compliments you can pay a game designer is to say that their game is addictive, so when you combine that with the possibility of someone spending money effectively in an unlimited way, then you start to get quite a complex issue of responsibility there," he said.

"You need to know from the get-go where your social and moral responsibility is on that. You need to put in limits on people's spending to make sure they're not running wild, because at that point you are the bad guy - you're doing something remiss."

Openfeint's Dan Keegan was the panel's one unwaveringly positive voice. Ultimately, Freemium has empowered a new generation of developers, and will play a vital role in how a significant number of games will work in the future.

"What's being described here are just natural growing pains that occur at the start of any new business model," he said. "Coming from a mobile perspective I think that, as an industry, we self regulate now. Maybe there have been some mistakes, but I would encourage any developer right now to embrace Freemium stratight away."

23 Comments

There is no truly free (games) model. Fremium is ultimately a con to get 2% conversion.
And hence ultimately evil in concept and execution

Posted:3 years ago

#1

Kingman Cheng
Illustrator and Animator

945 161 0.2
Nothing is truly free. :D

Posted:3 years ago

#2

Jo Hibbs
Studying Newspaper Journalism

1 0 0.0
I'd rather pay more for a title and get a good gaming experience than play a dire social game that's designed to tempt people (usually children) to short cut for a price. I've reviewed games like Tapzoo and Trade Nations, not only are they dull, they offer virtual goods for up to 100..

Posted:3 years ago

#3
In my view freemium creates similar ethical concerns as gambling. The games are manipulative by intent. They can be played responsibly, but there is a clear connection between greater sophistication at encouraging irresponsible engagement and greater commercial success. Probably regulation is needed as with gambling and alcohol, so that minors cannot be targeted and so that operators are liable for any grave social harm they do.

Posted:3 years ago

#4

Mike Kennedy
Founder | CEO

20 2 0.1
I do not want to worry about "keeping track" of what I am spending while playing a game. I will happily pay upfront the full purchase price of a game, no matter what it is, if it is quality and I enjoy it. Freemium is a buzz word and business model that needs to die a quick and painful death :)

Edited 1 times. Last edit by Mike Kennedy on 26th July 2011 5:55pm

Posted:3 years ago

#5

Zidaya Zenovka
Blogger, Writer

41 8 0.2
Mike, with all due respect, there IS a way for developers and publishers to have their cake and eat it, too. Look at what Turbine has done with their freemium setup. They give both free players and premium/lifetime players a lot of benefits, and have their cash shop set up so that the game isn't 'pay to win', it's pure convienience. Just because YOU don't want to have to keep track doesn't mean that others mind. I think it's silly to wish death to a concept that is so different from game to game. Figure out a way to implement it that you think is fair and actually have a chance to reap some of the rewards...or, shoot yourself in the foot and cut off your nose to spite your face, just because you don't feel like taking to time to think up a fair and profitable way of doing it.

Posted:3 years ago

#6
@Klaude: I agree completely - the model seems designed to maximise the manipulation of the user. At the least, freemium games need to be upfront about their titles - they should NOT be allowed to use the "free" term, and should provide "average" estimates as to what a typical spend is, and how much a user needs to spend to enjoy the majority of the game.

I'm getting sick of the number of "free" games I install on Android, only to delete a couple of minutes later as they request me to install other apps or purchase credits.

Posted:3 years ago

#7
let me also point out Freemium is different from Free to play.
Ultimately, up front costs is all a consumer wants to know without any hidden clause or in game purchasing method for fear of ratcheting up debt without realising.


There needs be a GIANT BOLD LETTERs PROCLAIMING the purchase of VIRTUAL GOODS for REAL world CASH.
lets hope it catches on one day

Posted:3 years ago

#8

Peter Ohlmann
Technical Director

22 6 0.3
Does anyone remember the distribution concept called Shareware?

I am curious why that doesn't work anymore on modern platforms like iOS/android/facebook. Sure, it limits the player spendings to a reasonable sum of money, but it did work (DOOM anyone).Furthermore, it has been the first Freemium model ever.

Posted:3 years ago

#9
perhaps a shareware approach could work, however the current crop of game biz are very focused on monetization and accruing profits integrated as the game design rather than game first, success and the side effect of success as profits

Posted:3 years ago

#10

Peter Ohlmann
Technical Director

22 6 0.3
If you compare a Freemium game to a football/soccer stadium, we would have cheap and pricy seats there. The VIP Area subsidise the cheaper seats like "Whales"/Superuser subsidise non-paying user in Freemium Games.

But: nobody would ever change the basic football/soccer rules for the purpose of improving the entertainment quality of the upper class audience.

The bottom line is: if people sacrify their creative intention to monetization, game designers would become salesmen.

Posted:3 years ago

#11
Good grief. How is asking someone to spend $60 on a disc or 800 points on an XBLA title that has been heavily promoted and advertised by the biggest and best marketeers around not evil? But asking someone to spend pennies on micro transactions if they are enjoying the game is evil?

Honestly, the quality of debate here is very low. I played the FREE trial of Braid. It was good enough to get me to buy the game. Which turned out to be a completely different experience for me (in that it was hard and unrewarding) leaving me feeling cheated by the easy and enchanting trial that led me to spend money on the full game. The freemium business model is no more open to abuse than the trial/full game system.

Most people who spend $60 on a disc don't finish the game. But we charge up front for all the content in case they do. That sounds more evil to me than the pay-as-you-go freemium style model where you only ever pay for stuff you actually use and/or see.

The bottom line is that in order to earn a living we charge for things in a variety of different ways. Zynga might not be everybody's favourite company and their games are too low brow for most gamers but they are not the only people making freemium games and plenty of people enjoy their games.

We are a creative industry which means we celebrate the artistry of games like Braid and Limbo. But we should also celebrate the fact that we are a valuable industry that employs thousands and entertains millions.

Posted:3 years ago

#12

Egle Bojarskaite
business development manager

1 0 0.0
I agree, that the biggest moral issue is, from players/users side, what would happen with their goods, bought for real money, after game will be restarted/closed. I believe, a little bit :), that one day this will be the part of some regulator activity.
And about the manipulations with the players/users data/records - how about the real world? All the CRM systems... I think it's the same :) The question is, how mentioned the participants of this discussion, how this data/records will be used - to improve the game or to gain "quick money". And yes, the "quick money" way is the dirty gambling way. Just this is also should be regulated, I think :)
Freemium games - it's a good description of this wave of games, especially of on-line games. If the game creators are working fairly and are really passionate about what they are doing, you would see a free game. Well, ok, maybe with some advertisement "inserts" :) Player will be able to play for free, if he/she has a lot of time and patience. If not, he/she will be able to buy some premium things. The game still remain free for these players, who have not money/wish to pay.
Well, but maybe I'm wrong :)

Posted:3 years ago

#13

Peter Ohlmann
Technical Director

22 6 0.3
Traditional approach: create a game which is fun and entertaining.
Freemium approach: create a game which can be monetized through virtual goods.

Both intentions are fundamentally different from each other, because any game design decision is now serverely limited by sale mechanism.

Posted:3 years ago

#14

Nicholas Lovell
Founder

183 166 0.9
Evil is a foolishly emotive word to use in this context.

The free-to-play/freemium model (and confusion reigns about what these two mean) tends to mean that 95% of players play for free. Of the five or so per cent. who spend, Flurry estimates (specifically on smartphones in the US) that average transaction value is $14 (although 15% of revenue comes from a tiny percentage of users who spend $50+).

Compare that with the annual spend of an Xbox gamer on his hobby. The console, the accessories, the Xbox Live subscription, the games (including ones that, like Andrew above) he never finishes...

The market is changing to where we get most of our gaming content (certainly on smartphones and on the web) for free. For certain games, where we are deeply involved and engaged, we spend a lot. I'm not sure this will see, on average, total consumer spend on games to go up: it is just redistributed to the games that each individual consumer really loves.

And I don't see anything evil in that.

Posted:3 years ago

#15

Nicholas Lovell
Founder

183 166 0.9
@Jo

And do you have any evidence for that parenthetical aside that free-to-play games are aimed predominantly at children. It seems like an emotive, lazy assumption. I would have hoped that a journalism degree would encourage you to focus on research, not assumption.

Posted:3 years ago

#16

Terence Gage
Freelance writer

1,288 120 0.1
I actually really agree with Nicholas' post a couple above -- I don't like the freemium model and based on limited experience on my smartphone it's not something which appeals to me, but I wouldn't label it as evil any more than I would call a casino evil or, say, product placement in a kid's TV show.

Posted:3 years ago

#17

Pablo Santos
Developer

23 18 0.8
I agree with Nicholas about the "Evil" label, it is somewhat inappropriate.

There are ways the Freemium/Free-to-Play model is executed that are highly unethical. The classic example is where it incites players to spend real cash for virtual goods without any form of limit or control. That is no different than inciting gambling (as pointed out by Klaude) - which is illegal in some countries for good reason. Of course, there are also successful executions of those models, and Turbine's DDO is a nice example of a Freemium model.

I would say the problem is not the model itself, but they way it is implemented in the game.

Those are my 2 cents.
Sorry for the bad english - not my primary language ;-)

Posted:3 years ago

#18

Stephen Richards
Game Deisgner

68 28 0.4
I think a lot of noteworthy points haven't yet been made yet.

Firstly, the claim of "evil" is ambiguous as it suggests not only harm to players but malicious intetntions on the part of developers. I'd like to think the latter isn't too widespread, but the former certainly occurs in the cases of people who spend hundreds or even thousands on single games. Of course, that in itself doesn't place blame on the developer. People spend money far more wastefully than on freemium games, which they presumably at least get a kick out of.

Yes, freemium models are based around maximising profit. I don't think that makes them evil. And there's a clear disanalogy with gambling: games don't give you the chance to win your money back. That's not to say they aren't addictive, but I don't think the evidence is there to put them on par with gambling.

I think bigger problems are being overlooked. For example, that freemium games create an expectation in consumers that all games should be free, thus non-AAA traditional paid games will struggle to sell, and piracy will increase. If freemium games are shutting down they can always give their players advanced warning, give them refunds, etc. I don't see lost money on in game currency as a serious problem.

Posted:3 years ago

#19

James Parker
Script Writing and Design

1 0 0.0
"the model seems designed to maximise the manipulation of the user"

No, that's simply not true. The model simply creates a framework for which a game can earn money in an alternative to the classic "payment up front" model - it isn't inherently anything. There are lots of examples of games that manipulate their users in heinous ways, but it's the creators of those specific games who are doing the manipulation of the users, not the business model itself.

It should be the responsibility of designers to make quality games that appeal to their audiences and earn enough money to keep themselves and the companies they work for in jobs... as they have always had to do.

Posted:3 years ago

#20

Peter Stirling
Software Engineer

25 7 0.3
The responsibility to meet user the expectations is an ethical question, much like marketing in all other aspects of the modern world. To describe Freemium model as evil is overly simplistic.

Posted:3 years ago

#21

Krasimir Koichev
Producer

35 0 0.0
Fremium is no more evil than MLM (multilevel marketing). It was once considered that MLM will take over the world, or at least, the marketing function in corporations big and small.

However, it turned out that MLM is not well suited for most industries. What's worse, it attracted the wrong people (short-term thinking, etc). End of story.

I suspect the same fate awaits fremium and free-to-play. It generally attract people who are anxious to show off incredible revenues/profits to shareholders. No fremium game has won awards and I doubt it will.
In classic pyramid-scheme style, the first will become rich (IPO). The rest will get their faces in the dirt for following a discredited "model".

Edited 1 times. Last edit by Krasimir Koichev on 3rd August 2011 12:45pm

Posted:2 years ago

#22

John Blackburne
Programmers

41 0 0.0
Lord of the Rings Online won awards, both before and after it went free to play. There's nothing about free to play that precludes making a quality game, and because of the payment model it's far harder to make money off a bad game.

It's quite possible to make a poor quality console game and through clever/cynical marketing sell far more copies than the game deserves: buying up supermarket shelf space, targeted advertising, denying review copies to journalists, even bribing them. It all happens.

You can't do that with free to play as the players get to play the game first before they pay you money. The amounts involved are usually quite small, much less than normal retail prices, so players need to be persuaded to make multiple purchases, and so kept interested and involved for extended periods, for the game to be successful. This is very different from retail where the focus is getting the player to buy the box and it largely doesn't matter whether they play the game for five hours or fifty.

Posted:2 years ago

#23

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