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Live Free: Freemium Thinking For Console Games

Fri 17 Feb 2012 7:45am GMT / 2:45am EST / 11:45pm PST
Business

Whether they know it or not, today's most successful console games are using freemium ideas to extend their shelf life

Among the various concepts which underpin the "freemium" business model, one of the most difficult for developers and publishers to accept is the idea that you're going to be giving away the vast majority of your work for free. Not only will most of the people who play a freemium game do so without paying anything - even those who pay will actually be paying for add-on content, consumables or customisation items, rather than directly parting with money for the core game you've laboured to build.

I suspect that that's part of the reason why some people in the industry have such a strong, instinctive reaction against freemium. To those brought up in the culture of spending years building a game and then selling it at a premium price, the suggestion that they should instead give that game away for free and make their money by selling cosmetic items or energy potions to a minority of players seems somewhere between farce and blasphemy.

I don't feel all that guilty about playing a copy of Arkham City I didn't directly pay for, because the game is an excellent example of a kind of "quietly freemium" title.

Those who recoil from the very concept of freemium, however, might do well to consider the proposition from another angle. It's popular to characterise freemium as a market-upsetting, disruptive approach to making money from games - but I think there's a more rational perspective which simply says that freemium is a way of describing and understanding something that's already happening anyway in this business. It's not an attempt to replace existing business models with something new - it's just a recognition of a reality that already exists.

Take, for example, Rocksteady's absolutely fantastic Batman: Arkham City. An immensely successful game which has sold millions of copies at a premium price point, it would seem like something of a stretch to describe Arkham City as being a freemium game - yet I'd contend that that's exactly what it is, to a significant body of its users.

Certainly, there are plenty of gamers who bought Arkham City for £30 or so, paying for access to the content up front. Equally, however, there are many users who access Arkham City through a service like Lovefilm or any other rental service you care to mention. Then there are users who bought Arkham City second hand, or borrowed it from a friend.

In all of those cases apart from the borrowing example, the users did pay some fee for access to the content - but from the perspective of the developer and publisher, all of those users are effectively accessing the content for free, because none of them paid for it in a way which returns revenue to the creators. Lovefilm makes money from its subscribers, and retailers make money from their second-hand trade, but publishers and developers don't see anything. From the developer's point of view, those users may as well have picked up Arkham City from "Free: Please Take One!" bins on high streets.

I'm one of those consumers, I'm afraid. Arkham City dropped through my letterbox from Lovefilm - a service that I'm using to keep me honest in my pledge to spend this year dispensing with, rather than accumulating, stuff on my shelves, games included.

Yet I don't feel all that guilty about playing a copy of Arkham City I didn't directly pay for, because the game is an excellent example of the kind of "quietly freemium" titles I'm referring to. Within an hour of play - and realising that I was really enjoying the game - I'd spent 800 Microsoft Points on the Catwoman pack for the game. Having finished the main story missions and embarked on the challenges - many, many hours of play down the line - I dropped another 1200 points on the pack containing Nightwing, Robin and various challenge maps and Batman skins. There may also have been a shameful incident involving a few hundred points spent on Batman avatar goodies.

Total expenditure? Almost £20 - not bad for a player who didn't buy the game and, in theory, should have been a dead loss to the bottom line of developer and publisher alike. Extend that kind of expenditure over a significant percentage of those who rent, borrow or buy the game second hand, and you're looking a fairly major chunk of income coming from what is effectively a freemium model - despite the price tag the game has up front.

Indeed, I'd argue that this looks very much like the model which many MMOs have preferred in recent years - subscription up front for the dedicated consumers, followed by a long tail of freemium for the less devoted. Although this is a business model which emerged from desperation - a last-ditch effort to save MMOs with collapsing subscriber bases from extinction - it actually maximises revenue very nicely, making the game expensive up front and cheap (even free) later on.

Perhaps publishers could make life harder for the rental market, but there's very little they could do about the second hand market, and absolutely nothing they can do about game borrowing - unless they want to risk completely destroying the console game market in the process. Many in the industry grumble regularly about these aspects of the market, but it's telling that people are very nervous, in general, about rumours that Microsoft's next console might be designed to prevent second-hand sales entirely. Nobody knows what actually happens to game sales if you deny consumers the ability to trade in or loan out their games. It's not hard to see how decreasing the effective value of a product, thus essentially making it vastly more expensive, might not exactly equate to sprinkling magical pixie dust on your sales figures.

Games are on shelves for a few months and then they're dead - except that now, they're not, because there's this ripe opportunity to exploit what is effectively a freemium long tail.

So instead of trying to destroy those things, the rise of things like DLC, online passes and so on suggest a market that's turning to freemium (whether it wants to call it that or not) for a solution. For the early weeks and months of a game's lifespan, the majority of consumers pay for it up front. After that, second hand copies - sold or borrowed - flood the market. You'll still make some sales, of course, but you have to accept that it's now possible for consumers to access your content in a way which may not be entirely free to them, but is definitely free to you - in that it generates no revenue. Instead, you need to apply freemium ideas to pull in revenue from those people - and perhaps from some of your premium customers, still playing after all this time, as well.

Denying this market opportunity and instead trying to find a way to shut down second hand sales or lending would be like a movie studio refusing to let its products ever be shown on TV, instead insisting that they should only ever be seen in the cinema. Games business leaders have complained for years that unlike movies, games only get one bite of the cherry. Movies sell cinema tickets, then DVDs, then pay-per-view and airline deals, then TV syndication. Games are on shelves for a few months and then they're dead - except that now, they're not, because there's this ripe opportunity to exploit what is effectively a freemium long tail, even after the games in circulation stop returning revenue to your coffers through direct sales.

Of course, the trick to this isn't an easy one. You need to make a game that people seriously want to engage with and don't mind spending a bit of money on as a consequence. That's why Arkham City is a good example - you get to the end of a very sizeable game but are left wanting more, and the developers have created content which scratches that itch. A game you're bored of half way through will never sell add-on content. A game that's simply too short but has a store full of extra content looks greedy and off-putting. The old rules of making great games still apply, then - build something amazing, something substantial, but something that leaves your players hungry for more. The difference is that today, you have the opportunity to feed that hunger - and in doing so, take advantage of the realities of today's game market, instead of just complaining about them.

20 Comments

Jason Avent VP, Studio Head, NaturalMotion

139 140 1.0
You're right and it seems crazy to me that console manufacturers and publishers haven't clubbed together already to make LoveFilm irrelevant. If console games were allowed to be truly freemium, there would be no space for such an opportunist interloper. Designing games from the start for consumers with several different budgets ranging from zero to thousands just makes sense. Data is virtually free to deliver. If a game is good and the motives are there to pay, then people will pay. It's a bit of a leap of faith that console manufacturers and publishers seem too scared to make.

Posted:2 years ago

#1

Joe Winkler trained retail salesman, Expert

171 4 0.0
Good article. I think that's one of the reasons why "I am Alive" has turned into an arcade/psn title. A triple A title countlessly reanounced and delayed returned from the dead as a "for download only title".
Batman is maybe the best example in offering DLC without getting greedy with it. The game itself is good or even great without the Catwoman DLC. But it has the ability to make you buy it just to enjoy the whole game a little more.

Posted:2 years ago

#2
DLC or episodic content is different that the Freemium model. They still require the player to pay the going rate for content, even if it is delivered in small chunks rather than all at the beginning.

The freemium model requires you to give most of your game away for free in the hope that you will be able to monetize a very small percentage of those people.

Posted:2 years ago

#3

Caspar Field CEO & Co Founder, Wish Studios Ltd

40 93 2.3
We tried console freemium with Buzz! at the end of 2010 - it was an interesting experiment. Unfortunately I can't share the outcome of that experiment with you as Sony holds the results!

But I remember it was challenging to work out how much to include and how much to hold back - as you say Rob, it's a difficult thing for a console game developer to get their head around. We had a regular retail version of the game released two months prior to the freemium one too, which added complication to the decision making.

Bit more info here: http://blog.us.playstation.com/2010/12/2...

Posted:2 years ago

#4

Gary Lucero QA Analyst, Advanced

27 6 0.2
As a gamer I try to avoid Freemium. I rarely try a free game on iOS or Android if I know that I'll see ads or have to pay to continue versus waiting for time to pass or whatever other gimmick it uses. If Skyrim were Freemium and I couldn't enchant, for example, without either waiting a few hours for soul gems to regenerate or just pay real cash to buy some, I wouldn't play the game.

I don't want to live in a world where Freemium is the rule rather than the exception. It might be good for developers, and that's great, but as a consumer I want to plunk down my $60 and just play. I have no problem paying for DLC, and I'll often buy a game a second time once it's available in downloadable form on Xbox Live just so I can do away with the disc. In other words, I feel like I give plenty to the developers without having to be nickel and dimed to death.

Freemium may be a new model for selling games, and it might have its place, but as someone who has been buying new games for over 25 years, it's not one I'm interested in. I might just be a stodgy old timer but as a consumer of games I would rather take a risk on a game and give developers my money up front and be burned rather than get it for "free" and find out that my time investment is a shame that requires me to change the way I play and pay for games.

Posted:2 years ago

#5

Tony Johns

520 12 0.0
I perhaps feel that Freemium could only work if you give at least 10% of the game away for free, like for a level and a basic outline of the story.

And if you ask the consumer that if they want to get to know more of what happens in the story or even get to control extra characters and extend the life of the story, then you can ask them to pay more for downloadable content and episode content that extends the story.

a bit like Final Fantasy XIII-2, except for the fact that XIII-2 had me originally expecting a full game only to be told later on that the story ended in a sad to be continued and it would continue in downloadable content when I had already paid the cost of a new expensive game.

So yeah, I guess that the Freemium model does work in some way, but I feel it can only be applied well in small downloadable games with stories interwoven with each downloadable content.

Posted:2 years ago

#6

Rob Fahey Columnist, GamesIndustry.biz

76 190 2.5
@John Owens: That's as may be, but I'm not talking about an episodic model here. A player who rents, borrows or buys a game second hand is acquiring the entire boxed game for "free" from the developer's point of view; the add-ons become the only route to monetisation for these "after-market" players. My argument is that we need to recognise the reality of that and try to work out how to use freemium ideas to monetise those players, rather than just grumbling constantly about the curse of second-hand.

Posted:2 years ago

#7

Sam Brown Programmer, Cool Games Ltd.

235 164 0.7
And when exactly does DLC such as mission packs cross the border from add-ons to new episodes anyway? What's the size limit? :)

Posted:2 years ago

#8

John Foster Senior Designer, SCEE Team Soho

3 3 1.0
"Lovefilm makes money from its subscribers, and retailers make money from their second-hand trade, but publishers and developers don't see anything"

I don't think that is true. I'm pretty sure that revenue from rental does make it back to the publisher, just like authors get paid (albeit a small amount) when their books are loaned out by libraries. Second hand sales are something else of course.

Posted:2 years ago

#9

Eric Preisz CEO, GarageGames

12 0 0.0
"it's just a recognition of a reality that already exists"

It's taken me a while to come to terms with it, but I agree.

Software isn't like most mediums that require high cost for duplication and distribution. And as long as that is true, there's a price point where duplication and distribution cost is lower than that of marketing spend. If you have software today that you are getting up front payment for I say stick with it while you can...but it won't be long until someone comes in an changes that for you. Are you prepared?

Posted:2 years ago

#10

Todd Templeman President, Logic Factory

6 1 0.2
While I normally think the editorials here are extremely well thought out, this one misses the point entirely. The problem with "Freemium" is that it creates pressure for horrible design and, many of us predict, will lead to massive backlash from parents and politicians, probably most significantly in China where once something has gotten started it can really get rolling. It's hardly a well kept secret that the political class in any territory is always sniffing for every juicy bone, and we're lucky in the technology oriented sectors to be harder for them to trail, but not impossibly so.

There are not many good games in which a Freemium model falls directly out of design, although there are a small few designs that could make a natural fit. But what we are seeing now, especially on the mobile/social side of things, is a mad rush to grab market share in the free-giveaway-but-charge-in-game-later model. In other words, it's the old "business plan": give away a small little taste now so that they'll buy up your entire factory's supply of crack cocaine later. Oh, wait! It's digital! We'll never run out, so prepare the IPO.

The market will teach us all eventually, so we'll see. But those of us who've been in the industry a long time are most revolted at one simple fact: developers and publishers are now demanding their own customers and fans pay for that which by rights should just be part of gameplay. Kids all over the world, especially in newer markets, are going to their parents and saying, "I need a dollar to buy a sword," or "my sheep need more food." And please don't try to pretend this is like getting a roll of quarters ready for the old stand-up arcade machines. If you think that then you never played them, and aren't even playing now.

In short, in nearly all cases on the market now, from a product design perspective, the "freemium", "free-to-play", "microtransaction" trends are creating a massive mistake.

The attitude goes hand in glove with the marketing trend of trying to take your youngest and most easily manipulated customers and convincing them to act as paid shills for reviewing pabulum. Who thought it would be hackers, anarchists, and trolls that blew up the quaint emerging customer review efforts? Of course not. Of course it's our own professionals.

Edited 1 times. Last edit by Todd Templeman on 17th February 2012 5:15pm

Posted:2 years ago

#11

Thiago Attianesi Creative Director, Fan Studios

59 2 0.0
Complex.... But new games.. new rules. We need get over of it

Posted:2 years ago

#12

Greg Wilcox Creator, Destroy All Fanboys!

2,193 1,170 0.5
The problem here is the complete ignorance by the industry that a LOT of gamers STILL have crappy online connections and can't do "freemium" or ANY online games if this becomes the new standard. Ignoring these users at their peril and continuing to find ways to squeeze more money out of less and less content isn't a good idea, i say.

Whatever. Everyone's heading off the same cliff and counting every penny as it's a victory instead of trying to find ways to keep folks who used to be on board that bandwagon before they got shut out. Hell, not everyone is as teched-out as you'd like to believe...

Posted:2 years ago

#13

Dave Herod Senior Programmer, Codemasters

527 786 1.5
From a consumer perspective, I really don't like freemium at all. Handing over money to someone requires me to think "is it worth what they're asking?" and "how much have I already spent on this?", and it's just a distraction that's just ruining the experience for me, and it's not something you can ignore, because if you do, there's no upper limit on how much this game can cost you. It's like having an annoying beggar following you round all day long interrupting everything you do. Personally I'd rather just dump a load of cash on a game and be left in peace to enjoy it. DLC is worth it when it's fairly substantial, and usually when I've already "finished" with the main game but decide I haven't quite had enough yet.

But then I don't think I'm the type of person this kind of business model is aimed at catering towards. I see freemium as a way to trick people who normally wouldn't even consider spending a lot of money on video games into doing so.

Posted:2 years ago

#14

Marcus Feital Graphic Designer / 3D Artist

7 1 0.1
@ Dave Herod
"But then I don't think I'm the type of person this kind of business model is aimed at catering towards. I see freemium as a way to trick people who normally wouldn't even consider spending a lot of money on video games into doing so."

I think you hit the nail on the head here, for me it is something along these line. I might be the type of person for that kind of offer, it will depend on the offer. For some games I might go full price, for others I would try freemium.

I don't see it working if somebody simply finish the dev process and then goes thinking "humm, now how can I slice my game product to fit freemium marketing trend.", it's something that need to be thought from the start. "Gameplay" is not an issue also, it is not a closed box of set laws that must be strictly followed, it can be worked and adapted, as long as you give some thought to it. It does not work if you just slice it to fit, indeed.

Posted:2 years ago

#15

Christopher Bowen Editor in Chief, Gaming Bus

453 724 1.6
It doesn't matter what we, gamers, think of freemium as a model because we are used to the consumer standard of the past 20 years. We are largely irrelevant when our mothers and our young daughters and sons are playing video games. They aren't used to it. So they see something like Farmville and go "ooh, crops! I can beat you, middle school classmate!", whereas we go "why would I do this crap, I'll play SimCity 3000 when I get home". Neither approach is right or wrong, it just is.

Of course, this also means that what I've said about freemium all along is true: it's not sustainable. It's in right now, but that's because it's largely being supported by the whales. Most people simply will not buy in, and developers are loathe to create a game worthy of acclaim that they have to then give away for free. This means you have two types of people: those making freemium games to try to compel weak willed gamers to have to keep buying (the Zynga approach, which is now being adopted by those who used to make good premium games like Gamevil), or those that say, damn the torpedoes, and making a good game that makes people want to buy in. Most of these games are the hipsters of the market; they were doing it before freemium was cool, like Maplestory.

EDIT: Of course, you can always do what EA Sports has done: charge a premium price for a game that's obsolete in a year, compel people to adopt the freemium pricing market for in-game items ("hey, you want to have a good online avatar? Great! But good luck, you're competing against Timmy, who bought the "fuck you" set for $8.99!"), AND make it an MMO-like subscription service for $50/year. Holy shit, that's so evil it's commendable.

Edited 1 times. Last edit by Christopher Bowen on 17th February 2012 9:40pm

Posted:2 years ago

#16

Jeffrey Kesselman CTO, Nphos

112 0 0.0
TANSTAAFL

So called "free to play" games are either free advertisements for products you have to pay for, or limited trial versions. The latter we have always had in the industry. The former is a new phenomenon but not IMO a good one. Zynga games are a great example. All of their development effort is targeted at one of two things-- getting you to buy something or getting you to recruit more customers. If it doesn't do one of those two things they
arent interested, and rightly so.

None of your examples are the same at all. In every case, there is one legitimate buyer for every copy of a game in play at the same time. And thats a reasonable thing for the industry to ask for. A closer analogy to 'free to play' would be the pirate copies that are in play at the same time as the copy they were made from. IMHO you *should* feel guilty if thats what you are playing.

The worst thing about "free to play' is that its a lie, and a dangerous one. Once you've told your audience gameplay should be free, can you really blame them if they steal it in other venues? You have devalued your product in your PR, which is a never a good thing to do.

Edited 2 times. Last edit by Jeffrey Kesselman on 17th February 2012 10:16pm

Posted:2 years ago

#17

Joakim Månsson Senior texture Artist, Ubisoft Massive

9 0 0.0
Premium sales drove Arkham , not ILOVE film users...

Posted:2 years ago

#18

Joakim Månsson Senior texture Artist, Ubisoft Massive

9 0 0.0
Btw, COD elite and EAs online passes are other ways to get cash on second hand products and it works. Consumers had to settle into the line, and they did. If the developers stick to this , the power will be in the developers hands.

Posted:2 years ago

#19

William Usher Assistant Editor, Cinema Blend

44 41 0.9
@Joakim,

Um that sounds more like the power will be in the publisher's hands and as developers you're just going to have to hope that it limits their excuse to shutdown a studio. It's not as if second, third, or fourth-hand used sales with consumers paying for online passes will ever make it back to the devs...it's just extra profits for the guys up top.

Posted:2 years ago

#20

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