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iOS price slashing prompts indies to move to freemium

Wed 30 Nov 2011 8:28am GMT / 3:28am EST / 12:28am PST
Business

Fuse Powered working around big publisher's extreme discounts and huge marketing spend

Extreme discounts on the App Store by large publishers are prompting smaller companies to move to freemium models rather than compete with cheap paid apps and their huge marketing budgets.

Last Christmas Electronic Arts dropped prices for a majority of its branded games on iOS platforms, flooding the top slots in the charts and saturated marketing channels on the App Store.

The practice was criticised by rival publisher Gameloft, but companies like Canadian publisher Fuse Powered saw it as an opportunity to change its entire approach to the mobile games business.

"That's one of the things that motivated us to transition our business model," said CEO Jon Walsh in an interview published today. "That idea that a big publisher can drop prices, take a hit and fill up all those top slots."

"That said two things: paid games are always going to have that risk. The big publisher is basically selling at an extremely low cost to gain market share and if it works for them they are going to continue to do it. So we can either complain about it or make sure our business model works around it. That's where the freemium model works for us."

For Fuse Powered, which has so far published titles such as Dawn of the Dead and Jaws Revenge, the company hopes to build a dedicated network of players by releasing multiple titles on a regular basis. It can then cross-promote its games within its own network. With six titles planned for the next three months, the company hopes to have 24 games out by the end of 2012.

"It also said to us that we need to go towards a publishing model where we have a base of really avid players that are enjoying our games so that when we bring out more stuff we don't need to get into those top 25 positions in the App Store, we can deliver directly to the existing player base," offered Walsh.

"That will be a continued risk for people selling 99 cent games."

The full interview, in which Jon Walsh also discusses the journey from independent retailer, through to console publisher, skill-based gaming company, developer and eventually publisher of mobile content, can be read here.

14 Comments

Bruce Everiss
Marketing Consultant

1,716 598 0.3
In further news the Pope has announced that he is a Catholic and bears have been discovered to do their business in the woods.

Posted:2 years ago

#1
I found to my chargrin that free to pay games appeal to the addictive personality when one of my relatives ended up stacking up £20 on in game gemstones for Dragonvale lately. And of course with the recent launch of Adventure Indy-land tie in, the whole monetization process was so blatant at every corner (swipe swipe, slash - run out of energy - would you like to buy more, oh look a new mcguffin - would you like to pay more...and so forth)

(Whilst in the Background, thousands of game designer stars explode as the tidal wave of micro transactions substitute decent gameplay for farming scams...)

So all in all, it could be a viable biz for smaller indie companies, but it sure as heck doesnt feel like a legitimate game. Can I have my standard steak, medium rare with Frites please, without all these new fangled fusion food (games)

Posted:2 years ago

#2

Sandy Lobban
Founder and Creative Director

319 177 0.6
In my own personal opinion.....

a race to the bottom on pricing isn't good for anyone in the industry, but I guess thatís what comes with a business model like apple's. Also, once you start giving things away for free, free becomes the expected, and it is already expected on iOS sadly.

Whilst stating the obvious, freemium on the app store also means you have to invest all of the work and money up front before giving your product away in the hope that it will be noticed amongst an ever increasing and uncontrolled list of other products.

I realise there are different ways to make money and thatís fine, but my personal view on longevity for anyone making decent quality games that grab your attention for more than 5 minutes. is to aim for higher quality and higher price points in order to retain a value chain.

I realise its about gaining attention, but flicking from free app to free app becomes a bit like cable tv with a 1000 channels. More hopping takes place than the actual viewing of something of value, a lot of the time.





Posted:2 years ago

#3

Greg Wilcox
Creator, Destroy All Fanboys!

1,993 902 0.5
+100, Sandy!

At this point, the freemium model is only a big scheme old-timers like me hate to death while the casual crowd and folks who should KNOW better eat it up like chocolate covered birdseed. I'd rather pay the $20 and up for a premium product that I can OWN and play offline when I want without the social aspects than buy into a credit farming scheme that sucks my funds dry because the game requires constant payments in order to get to the good stuff.

Whatever, this bubble is dangerous in a shitty economy and I bet none of these micro-transactionists has a plan for what to do when people can't afford to buy into the crap they want them to anymore. You can't just move on DOWN that ladder, as you're already in the damn basement with your pricing and business model. I give it another 3 years at the most before things come crashing down, but that depends on when consumers wise up and stop falling for this nonsense.

Posted:2 years ago

#4
Having played god ole final fantasy 6 again, the joys of gaming with its own in game econmy instead of hidden real cash transactions makes me want to replay all the retro games and ports for the next few months whilst fremoum can go dump itself in its own excrement :)

Posted:2 years ago

#5

Adrian Cummings
Founder and Owner

18 5 0.3
What Sandy said pretty much^^^

Posted:2 years ago

#6

Neil Freeman
Retail Consultant

4 0 0.0
New platforms , technique as old as the hills (well as old as the arcades anyway).

PLEASE INSERT COINS TO CONTINUE...

Posted:2 years ago

#7

Nicholas Peterson
Founder, CFO

5 0 0.0
Sure this is a booming industry and there are many typical economics 101 things happening, but there are also some major changes in the mindset of potential customers - and it started long before Apple brought out the first iPhone. We as customers are are getting used to getting something for free or for under value, and then paying for use/ additional stuff as we need or want them. We do it with mobile contracts, printers and even automobiles to an extent. This booming market attracts many and eventually will clean itself out as customers start becoming more selective, and as bigger players start to move into it with their strengths and weaknesses.. Then we will see a economics 101 typical phase of consolidation as the longterm profits levels make it tougher to survive. At the end of the day or decade it will be interesting to see how well this market does. I personally believe all the do it for the money "sharks" will eventually fall by the wayside and companies that grow a deep understanding of what makes their customers happy will survive and survive well.

Posted:2 years ago

#8

Brian Lewis
Operations Manager

97 38 0.4
I think the comments on this are interesting.

F2P is a consumers market. The Business must cater to the customer, else it will not get a return in its investment.

P2P is a business market. The Consumer must risk the money up front, with no guarantee that they will enjoy the product.

In the down economy, F2P is the result of companies fighting for every cent from the consumer. When the economy becomes more robust, then business can get away with charging a premium via P2P.

Posted:2 years ago

#9
Personally, I find freemium games terrible: the more freemium the game, the more "unplayable" it is. The good freemium games are the ones that won't do as well financially - as they are playable without inserting silly amounts of real-world cash.

In the long term, I wouldn't be surprised to see laws come up governing how freemium games work, and their minimum requirements: showing total player spending, warning people that they are spending real money on virtual items, and possibly even limiting the spend per hour/day/month a game can impose on a player.

Most of the freemium games I have played are *not* games of skill at all (that would drive away the casuals!): this is moving them ever closer to the shady territory of crossing over with traditional gambling. All we need now are some freemium games where the player can *make* money... (does Diablo III fall into this category?).

Posted:2 years ago

#10

Tim Carter
Designer - Writer - Producer

538 224 0.4
"a race to the bottom on pricing isn't good for anyone in the industry, but I guess thatís what comes with a business model like apple's. "

That "business model" is simply called supply and demand.

As supply goes up, demand - and with it prices - goes down.

Posted:2 years ago

#11

Tim Carter
Designer - Writer - Producer

538 224 0.4
Everything is contingent on the game being good.

I don't understand why so much emphasis is placed on business model. I think it's an influence from non-game people, like internet VCs.

This is an *entertainment* industry. You create demand not by business model, but by making a damn good game (whatever its business model). F2P makes the creative element even more important - the idea with F2P is that if the demand is very high, customers will keep paying and paying. Obviously, if the core game is no good, they won't.

Posted:2 years ago

#12
It never ceases to amaze me, the degree to which some of us in the industry can mimic ostriches, or luddites so convincingly.

1) As Bruce points out -- this is **old** news. Wondering if Matt's suffering the same problem as others with stale headlines showing up in his Facebook wall. Moreover, it's a headline/article written specifically to be comment-bait, as it conveniently ignores the reality that the top 100 grossing games in Apple's App Store (can't find reliable Android numbers) all monetize with in-game purchases. In the broadest context of this business model, it is irrelevant whether the initial game is $0.00 or $0.99, since let's face it, nobody's getting rich at $0.99, nor believes that price is accurately representative of quality. (Sorry Michael -- I just don't see much of a qualitative jump between $0.00 and $0.99 games out there).

2) Neil pointed out above, there's nothing all that new to a PAYGO model.

3) Fundamentally, iOS gaming will always be predominantly "Casual", by nature of the context in which the devices are used (I don't care about the HW capabilities -- these are NOT consoles folks). These devices and context in which they are used lend themselves to shorter gameplay sessions than most browser games. It's a small-screen experience - and aside from geeks like us, and several novelty expressions of the tech, very few iOS consumers will use these to drive a big-screen gaming experience.

3) As such, shall we all remember back to the mid 2000's, when the Casual market was the belle of the ball, driven by a $20 download model? I was running the business end of Yahoo! Games back then, and (gasp!) what a coincidence -- the conversion rate from the timed-out free trial to paying customers was less than 2%. Same/less than the general F2P conversions we see today. Can Sandy, Greg, or Michael please explain to me how that was a better model for *anyone* in the business, than what we have now? Moreover, every distributor (e.g. Yahoo, et al) had to bear the cost of all those free downloads, which were never, ever going to convert (at Google/Apple's scale -- those costs are effectively negligible. Search Google for an analysis by Tony Greenberg on how YouTube bandwidth effectively costs Google near $0). At least now the ecosystem supports continued upsells/re-engagement via automatic updates keep the freeloaders (err... prospective customers) connected ("Hey... I know you haven't played in a while, but here's something *new*!) . Better still, there's NO CAP to what the most addicted players will pay -- that was never even a possibility in the old models.

Posted:2 years ago

#13

Sandy Lobban
Founder and Creative Director

319 177 0.6
In my own personal opinion..

@Thom,

I see your point on the conversion rates to people who actually buy through in relation to other platforms, but I donít think that relates to anything that isnít free initially. I really donít think you do your franchise any favours by building it from low audience expectations. Itís also worth questioning why the conversion rate is so low, as you mention. I suspect itís down to ethics at the point of asking someone to spend and continue.

Some real world questions I would be asking myself if I was making a game that was going out for free:

Is the loyalty to the device as a whole or this piece of software ?

Where are my users expectations after downloading for free and how much can I negotiate with them on cost from this point?

What is my aim leading up to the conversion point that I ask for money?

Are your aims to get someone addicted to your game, and therefore be presented with a spending opportunity, and how is this perceived by the user who is bombarded with such processes constantly in modern life?

Is this escapism and enjoyment?

Is it in fact perceived as a game at all, or is it a monetisation tool dressed up to trick you into spending money?

Why are they playing your game? Is it simply because itís free?

Would it stand on its own two feet if it wasnít free?

Would it have been better to ask for money for a high quality product in the first place, without having to worry about the questions above?

In my eyes, youíre saying Iím not worthy of an initial investment, and what you will get here is the same process of taking money that you will get everywhere else when you download something for free. I personally jsut dont like that form of delivery for my entertainment.

If people want to take that approach then thatís fine, but they will in the majority of cases find themselves not making very much. I know a few of you say its old news, but itís an industry site, these things are worth discussing.

I am not saying donít make a "casual" game or any sort of game. Your game can get noticed at higher price point if you make something of quality. ie World of Goo. Great game on the ipad, and one that doesnít need to think about free. I happily paid £5 for it, and would recommend it to anyone who wants to have fun. My mum even plays it. Now thatís what you call a casual user. I just think the free model is a waste of your own development time in the long run and presents you with the obstacles above. This is time that could be better spent telling people about your great game anyway.

Posted:2 years ago

#14

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