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Free-to-play has reached its limits - Analyst

SuperData CEO says he sees a sort of backlash against freemium models, kids and parents preferring premium

The free-to-play trend may be cooling off, according to SuperData CEO Joost van Dreunen. Speaking today at the GameON: Finance conference in Toronto, the head of the research firm said the monetization model seems to be on the decline in some genres, while demand for premium-priced offerings like the latest World of Warcraft expansion, Warlords of Draenor, show there's still a healthy market for those willing to pay.

In his presentation, van Dreunen made comparisons to TV and film, where plenty of people will pay $15 a ticket to enjoy an IMAX movie, but there's also a market for free fare like soap operas.

"I think games are splitting up the same way," van Dreunen said. "You have the free-to-play, social/mobile experience, and then you have the blockbuster, super-produced fantastic stuff. And there are really different audiences here.

"So I think what's really happening is on the one hand you have the free-to-play audience, and I think that's reached its limits, to some degree. And then there's the premium audience saying, 'Yes, I want to buy a game. I don't want to deal with the ads and in-game items. I want premium.' While in the mobile market, three-quarters of stuff is built with free-to-play as its dominant monetization model, you see somewhat of a backlash."

He noted Apple recently changing its terms so free-to-play games could no longer be advertised as free, saying, "there's definitely this sort of moment of a plateau." He then pointed to a recent SuperData study on kids and their preferences on spending models.

"They prefer premium. So like Minecraft, you buy it for $6 on tablets and that's all you need. Sure, you can buy an expansion, but the experience is there. And I think that works well for kids as well as for parents, and game companies have kind of figured that out. Certainly platforms have figured it out by saying, 'We don't want people advertising in-game spending to little children.' Because that borders on the unethical."

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Latest comments (6)

Brian Lewis Operations Manager, PlayNext2 years ago
I am not sure that there is any movement away from F2P... but rather that the F2P market is saturated, and many of the offerings are low quality money grabs. Part of this saturation is due to everyone (and their brother) jumping on the F2P bandwagon, without actually understanding how to make it work. Some of these offerings would have been better off using another monetization method. We are starting to see a return to using different monetization methods, based on the product.
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Nicholas Lovell Founder, Gamesbrief2 years ago
For me, the challenge is how we make it easy for parents to pay money for content and experiences they want their children to have. Variable pricing models are not the issue (just look at collectible experiences in the physical world ranging from Lego to Octonauts play sets to collectible toys/cards/stickers).

There are big issues for people, particularly parents who don't play the games, when they don't understand what the child wants them to buy, or where they are uncomfortable about how much they will end up spending. But I am not sure Pay-a-Single-Fixed price is the best answer either.

I look forward to seeing what creative developers come up with in this market.
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Igor Galochkin Game Programmer 2 years ago
We develop educational games for kids and strangely I haven't really seen this "preference for premium" in parents, at all. According to our sales figures, most (99%) of parents want the games for free. Yes, some of them will complain about ads which supposedly aren't suited for kids, but the vast majority just doesn't care. The want it free, and they want it all free, with no locked content or any other tricks. And if something is locked, they go and write 1-star reviews, and the games decrease in rankings.
We earn the same on ads in the free versions as we earn on sales of the paid versions. 50/50.
So, yes, it was strange to me too, but apparently premium doesn't work EVEN in kids/educational categories on mobile nowadays. They want everything for free, with no IAP, no ads. But at least they write fewer 1-star reviews because of ads, compared to locked content.
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Andrew Ihegbu Studying Bsc Commercial Music, University of Westminster2 years ago
Igor, I think you misunderstand. He is not comparing 'ad-based free to play and premium' he's comparing 'BIO monetisation and per-item monetisation'. In that case, parents much prefer to buy it once and be done with it than anything with internal item or 'upgrade' purchases. What ends up worrying the parents is that a child will badger their parent until they give in and buy them a hat or some other cheap in-game item, but the game, either due to glitch, design or simply their kid's ingenuity will retain those card details and he will spend three or four figures buying cosmetics or other largely overpriced items. Lots of these parents aren't technically minded enough to set up parental controls on their child's Xbox 360 let alone trust Apple to keep their wallet safe from their much more technically advanced kids.

If you define kids as 4 to 8 year olds, then free definitely is the demographic, but after the age of 8, nearly every kid I've ever known wants a games console and they and their games definitely aren't free. Of course that may not be the outlook of the parent, but most children have enough control of the games spending from that point forward to decide which game they prefer to play from a price bracket.

Edited 2 times. Last edit by Andrew Ihegbu on 24th November 2014 6:32pm

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Benjamin Crause Supervisor Central Support, Nintendo of Europe2 years ago
He is certainly right where he says the audience is split among people who prefer solus games, premium versions or free to play content. However I heavily doubt the F2P has reached any limit yet. The only thing that happened is that many in the industry did their best to exploit this scheme, alienated customers and partially tricked customers.
The F2P business got a lot of room left to explore and monetize if we stop exploiting people, making sure we offer actual content and services for the money we ask for and stop slamming the in-game store into players faces the moment they log in.
The field is under heavy competition and that is the reason why we need to convince players to pay for our game thus they will stay and continue instead of exploiting them asap before they might leave the shitty game.
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Adam Jordan Community Management/Moderation 2 years ago
F2P certainly hasn't reached its limit. However what has reached its limit is people's tolerance to the games that are being used as a "get rich quick scheme" and the fact that players that don't pay are highly alienated.

The other issue is that not all F2P games are backed by a competent customer service team or even have a community team on the front line to drive interaction and discussion.

Solve all of the above and F2P can win hearts. Just look at the guys doing it right such as Riot and Valve
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