Inflated console prices are fuelling free-to-play growth

DICE 2012: Mobile is taking risks and innovating, says Addmired CEO

The high price of home console games is fuelling the growth of the free-to-play market, as consumers shun fixed prices and sample games with no initial costs.

Speaking at the 2012 D.I.C.E. Summit in Las Vegas, Gabriel Leydon, CEO of mobile company Addmired, said that the console business has upheld a standard pricing structure for physical product for so long it can no longer afford to take risks with IP, instead churning out sequels to recoup the inflated costs of game development.

"Mobile is the home of free-to-play and that's the next big model for video games," said Leydon. "The real problem [for consoles] is price fixing. Consoles set expectations for prices for thirty years."

There's something the Americans don't get yet, that the Chinese, Korean and Japanese developers are much, better at making the next ten years of games than we are.

Gabriel Leydon, Addmired

"Nobody talks about how bad it is to charge somebody $70 for something they don't like. You can't know what you're getting because it's another sequel with $100 million of marketing. One day after Call of Duty is out the used section in GameStop is filled with them. You have an army of consumers who paid $70 and lost $40 by trading it in."

Free-to-play eliminates risk for the consumer, said Leydon, while the console business is making it harder for consumers to find value in a market where online passes reduce the ability to trade a game, or future consoles may eliminate the ability to play used games at all.

According to Leydon, with good free-to-play the risk is passed to the developer, which is then forced to innovate to attract and keep consumers playing games.

"It removes the risk from the consumer, the consumer pays nothing to try out the game. I want the consumer to play for months without paying. Good free to play encourages players to stay and that's where the longevity is because the risk of an online pass, consoles that can't play used games, DLC and all this stuff, after I've paid $70... Why would do I do that? I can play lots of great games that are free.

"The risk is being transferred from the consumer to the developer. The developer has all of the risk now so they end up doing crazy stuff because it's a new industry."

The argument that console games offer something bigger or better than mobile games isn't valid, said Leydon, who pointed to the record industry sticking by vinyl as better for audio quality when CDs were first introduced, and CD's when MP3 technology came to market.

"Free-to-play is the MP3 of the video game industry and it will destroy all business models and it removes the risk for the consumer," he stated.

But he admitted that there are a lot of poor free-to-play games on the market, and that the biggest challenge in the mobile sector is pulling in players to sample games in the first place.

"It's brutal. The model for acquiring users is insanely complicated," he offered. "We've been doing this for three years and it keeps changing, it's very hard. It can be profitable but we can also throw money down a black hole. Most of our players don't play a second session. But the rest stay and play and if they stay long enough they end up playing and we can run a business."

He also pointed to the success of a company like Gree, which makes a better profit from its 25 million users than Zynga does with over 200 million players on Facebook, as evidence that the US is way behind Asian companies when it comes to creating successful free-to-play, mobile and social games.

"They make better and better games than most western developers. There's something the Americans don't get yet, that the Chinese, Korean and Japanese developers are much, much better at making the next ten years of games than

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Latest comments (38)

James Prendergast Research Chemist 7 years ago
"They make better and better games than most western developers."

I'm not sure i agree with this statement if i take it at face value. What i would say is probably more true is that Eastern developers know what their markets want (or their markets want something more specific - think about traditional "grind" in those games) when compared to Western developers.

Also, i think the end of the article was cut off:

much better at making the next ten years of games than

Than? :)

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Dave Herod Senior Programmer, Codemasters7 years ago
Oh please, don't pretend that free to play exists for the benefit of the customer. Micro transactions are there to *hide* the true cost of the game from the consumer and trick them into spending more money than they'd want to if they actually realised what they were spending.
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Bruce Everiss Marketing Consultant 7 years ago
This is just so true. The figures do not lie. Freemium mobile gaming is exploding with new studios setting up everywhere, whilst console gaming is shrinking with studios going out of business.

Also so many gamers have been burned so many times, buying hyped up games which, when they get them home, turn out to be rubbish or bugged like crazy or both. We all know this and it is easy to name names.

With freemium the gamer gets to play the game before investing in it. So hype and reviews don't matter any more. Product launches are less relevant and it is more about providing a service than a product.

Also with mobile the competition is immense. Anyone can pay Apple $95 and become a publisher. Even if they are in Mali or Mongolia. So product quality is rocketing. Product that is less than perfect in every way stands no chance.

With consoles it is not just the games that are ridiculously expensive. The consoles themselves are still overpriced, so they are not an impulse purchase. The platform holders have not invested sufficiently in building user base.

Also with games there is no correlation between product quality and price. In the 8 bit home computer games era we at Codemasters sold games at £1.99 that were usually better than the "full price" games. And we sold a lot more of them, gaining over 27% of the UK market. It is called price elasticity of demand.
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Show all comments (38)
Dave Herod Senior Programmer, Codemasters7 years ago
Technically you could argue console games are already "Freemium". For most games you can download a demo for free and if you like it, pay money and get the whole thing. If you like it even more, buy the DLC. It's just a case of granularity of the purchases really.
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I actually like the barriers to entry for console games which require stricter quality assurance, and criteria
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Bruce Everiss Marketing Consultant 7 years ago
@Dr. Chee Ming Wong

Mobile has higher QA standards than console. Just look math Skyrim as a prime example. Most people didn't know it was so badly bugged when they spent their money. And this is not uncommon.

With a bugged freemium app downloaders pay no money and just walk away from the app if it is bugged, leaving a low score on the app store. So apps need to be perfect or their brand is instantly toxified.
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Dave Herod Senior Programmer, Codemasters7 years ago
Absolute rubbish, Bruce. Plenty of games I've downloaded on Android and iOS crash regularly, sometimes before I've even got to the title screen. Skyrim's an enormous game that would be incredibly difficult to give extensive QA coverage to every last section of the game, and of course will contain a lot of bugs down to the sheer scale of it. It hasn't stopped millions of players spending an average of 75 hours playing it.
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Bruce Everiss Marketing Consultant 7 years ago
@Dave Herod
The mobile games that don't work get punished instantly.
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Sandy Lobban Founder, Noise Me Up7 years ago
Seriously, whats new here. When did people not want something for nothing? Just make a decent product and people will probably come get it.
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Morville O'Driscoll Blogger & Critic 7 years ago
""Nobody talks about how bad it is to charge somebody $70 for something they don't like""

Ignoring all other points, this needs to be focussed upon in the industry. Asking such large sums of money for something that may or may not be "good" needs to be tackled. Whether it's decent reviewing/criticism that doesn't bend the knee to embargos that ensure the review (whether it be good or bad) comes out on the day of release of the game it's reviewing, or whether it's more demos, the industry needs to look at how it approaches the customer. As Dave says, "most games you can download a demo for free". Most. And even then, the demo may not be representative (The Darkness 2 demo is a good example).

As regards Free-To-Play, surely it's not that it is the way of the future. Surely it's that the Console industry needs to accept a tiered pricing system more readily? Look at the PC market - I can buy DustForce for 6 quid, Q.U.B.E for £12, Evochron Mercenary for £20, or Anno 2070 for £35 (all on Steam). The customer can evaluate what a game is worth to them, and the physical retail console market needs to accept that. That's the beauty of Freemium - the customer can pay as much as they think it's worth.
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Jim Webb Executive Editor/Community Director, E-mpire Ltd. Co.7 years ago
So lets talk bias a bit. Mr. Leydon decries the price of console games by pointing out he $70 per game price tag. Checking online (and recalling every recent trip to the game store since the SNES days), games don't cost $70 per game. Unless you are buying a special edition, games average at $60 and less. If you're going to be taken seriously for your criticisms, check your bias at the door.

Now back to that SNES comment I made. Games back then would regularly retail for $70 but thanks to the advent of optical media they have reduced in price. Granted they increased again for the PS3 and X360 to help offset the increased cost of development. But my point is that price tag has lived on a long time and I don't see many console gamers bolting en masse to mobile games just because the games are cheaper.

Mobile games do not offer the game experience that console gamers want. Stop trying to claim to be overtaking something you aren't. You have a market...exploit it, grow it, be prosperous but don't go all ego tripping in the process.
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Bruce Everiss Marketing Consultant 7 years ago
We live in interesting times and something fundamental is going on.
Boxed console games, which were pre-eminent for so long, are losing their market position from multiple threats.
Cloud gaming brings infinite user memory, infinite processing power, instant global product distribution and instant game updates. It will be a significant force.
Smart TVs (and there will be billions of them) will connect the main display in the house directly to the interwebs
which removes a lot of the need for a console.
Mobile phone gaming puts instant gaming any time any where into billions of pockets. Once again with instant global distribution and updates.
And there are other threats.

Now I am sure that if I know this then so do the clever people at Microsoft, Sony, Apple and Nintendo. Already we know that Microsoft are uniting the console, desktop and mobile environments. So games (and many other things) will have the same look and feel across all three and users will be able to move seamlessly from device to device.

So as an industry we are facing the biggest upheaval and change since consoles took over from home computers. Just now we are somewhere near the beginning of this change process. For people who are open minded and who adapt quickly there are huge opportunities out there. For people who are fixed in their way of thinking the way of the dinosaur beckons.
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Morville O'Driscoll Blogger & Critic 7 years ago
@ Jimmy

Whilst I agree both with your underlying argument - that console gamers don't want the mobile experience - and the fact that he exaggerated, I must say he didn't exaggerate that much. Looking at Amazon US, the vast majority of new releases cost $60 dollars. Darkness 2, Kingdoms of Amalur, Asura's Wrath... It goes on. So I would say his point still stands.

@ Bruce

Ah, slightly over-egging the pudding there, I would say. Cloud gaming? Will work when the infrastructure is better in more countries. Billions of smart TVs? There's only 6-7 billion people *in the world*, and a lot of them live in poverty.

Edited 3 times. Last edit by Morville O'Driscoll on 9th February 2012 12:14pm

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Terence Gage Freelance writer 7 years ago
I've only tried a couple of F2P games on my Android, but I dislike their nature and have un-installed both. I would rather pay £2 up front and have access to a full title than play a game for free, but one that's also structured to allow me to pay for advantages. It's like playing Demon's Souls and paying for a massive deadly sword or ultra-powerful spell in order to speed up your progress - it feels so artificial and hollow.

I would like to see more console games try this business model though - I'm especially interested to see how Dust 514 turns out, and I'd love MAG 2 to be made and adopt a similar business model. I enjoyed what little I played of DCUO on my PS3, but I didn't have the option to buy anything cheaper than mission packs for £8 or a subscription for £10 upwards, which seemed a bit self-defeating. I'd have gladly spent a couple of pounds on it, but I wasn't invested enough to pay four or five times that.
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Thomas Dolby Project Manager / Lead Programmer, Ai Solve7 years ago
I have to agree with the part where you mention buying the overpowered sword to advance quicker in the game.

If we stand back and take a look at this, most F2P games rely on in game purchases to speed things up in the game, to bypass certain tasks. Aren't games meant to be fun? Who watches good movies and wants to skip to the next scene so they're further into it, who skips pages in a book so they can boast how far along they are in it to their friends? None of the people who are actually enjoying the experience that's for sure.

That's the reason I don't take part in F2P at the moment, the model seems broken to me when so many seem to just rely on a constant grind where you have to pay to skip some of that grind. I can understand how people get obsessed by this "progress", but I wonder how long it will be before people start to realise these games aren't actually fun. If you ask me, F2P done right would be paying for more of the experience, not skipping half of it.
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Fran Mulhern , Recruit3D7 years ago
Bruce, I know you work for a mobile developer, but taking a more sensible and less partisan approach would probably serve you better here.

Just because you're not working in console doesn't mean they're doomed to failure.
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Bruce Everiss Marketing Consultant 7 years ago
@Fran Mulhern

I was writing much the same on my blog long before Kwalee was even thought of.
This from two years ago:
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Pete Thompson Editor 7 years ago
The words "Mobile" & "freemium" were enough for me to switch off, Not interested in either thanks. im more than happy to pay for my prefered gaming platform, that being good ol consoles!

@Bruce, No disrespect, but you are talking rubbish when you say that gamers are fed up with being burned with bug filled games etc! There's plenty of Demo's about for console games, and as for games full of bugs, take Skyrim for example, its full of bugs, more so on PS3 & Xbox360, Yet it still remains in the top 5 when it comes to sales charts despite the last update for consoles being prior to Xmas, I myself have put in over 200hours on one playthough and because of bugs that prevented me from getting an achievement I started another playthrough that currently have over 60hrs on it.. I also know plently of gamers with more hours than me..
Same with Fallout series, if the games good you'll put up with any short comings.

Edited 1 times. Last edit by Pete Thompson on 9th February 2012 2:34pm

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Bruce Everiss Marketing Consultant 7 years ago
@Thomas Dolby
You can have a freemium business model that doesn't confer player advantage. It is a matter of design philosophy.
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Fran Mulhern , Recruit3D7 years ago
Bruce, your old post seems to make a different point, albeit in the same ballpark.

Above you seem to be saying consoles are dead and buried, that their time is up, that it's all about freemium now. As always, the answer probably lies somewhere in the middle.
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Bruce Everiss Marketing Consultant 7 years ago
@Fran Mulhern
I think I am trying to say that consoles are no longer king of the hill. And that they will have to adapt their business models to rapidly changing times.
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Brian Lewis Operations Manager, PlayNext7 years ago
I work for a F2P company (so am a bit biased), but even I do not believe that F2P is the solution to everything, or that previous methods of publishing are all going to collapse because F2P is now in vogue. The simple truth is that F2P offers alternatives to the standard pay first, then see the product approach of traditional publishing (both console, and PC). In the right situation it is a great idea that adds value to the product, and convenience to the consumer.

I will heartily agree that the traditional publishing method of charging a single price point (be it $60, $45 or whatever) for every product, without providing the customer a chance to see the product is one of the pain points of the consumer. The consumer has to pay the money up front, then hope for the best. If there was more of a RANGE of pricing available, then I think the customer would be happier, and the publisher might see a greater return (over time).

F2P is much harder on the publisher/developer. The customer is not putting any money down, and if they don't like what they see, they walk away (with their money) and tell their friends. F2P is an ongoing sales pitch that has to work harder to get every dollar.... but because they are allowing customers to spend as they wish, there is a larger potential upside if they do a good job.

Gaming is a competitive market. P2P competes via advertising... getting that money up front. F2P competes on service, getting that money one bit at a time as they go along. The games that do both (launch as P2P, then convert to F2P) have an opportunity to maximize both, and as such appeal to a broader range of consumers.
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Jim Webb Executive Editor/Community Director, E-mpire Ltd. Co.7 years ago
Thank you for you input, Brian. That's a fair assessment from the F2P side.

I do believe with the advent of demos that it's not always pay up front. But that does only apply to games with demos, naturally, and not all games are afforded a demo for consumers to test drive.

Also to note, some games do launch at a reduced price model compared to the standard full price but this too is a limited selection of titles and rarely ever a game with a sizable development budget.

With demos become more prevalent and if publishers are given more pricing freedom (as long as the platform holders receive their royalty fees, what do they really care?), we'll see a broader range of consumers taking less up front risks (and doing a little damage to the second hand market in the process).
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Kevin Patterson musician 7 years ago
"They make better and better games than most western developers." - Highly disagree.....
I will agree that game prices are too high. It would be better to have tier of game prices rather than every new game at $59.99. I used to take chances on new games, I would see a new title just released and grab it for $30 to $40, but with games costing $59.99, I only tend to buy the ones I know will be great, and rent the others. If a game is mostly single player, with limited or no DLC in the pipline, I look at it's replayability. If there isn't much reason to replay it, I will probably just rent it, or wait till much later when its on sale, I don't buy used games that often.
Games are no longer whim purchases for many and thats a shame, and part of the reason why all we have is sequels these days. XBLA games are filling the whim void to a degree, but still would be nice for a publishers to get a clue.

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Dennis Crow Producer, Rockstar Games7 years ago
Can we stop lumping AAA games in with free to play games? They are two different industries. It's like comparing Feature Films and Commercials.
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Jim Webb Executive Editor/Community Director, E-mpire Ltd. Co.7 years ago
Thank you, Dennis.
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Mario Tommadich Software QA Analyst, Indie Game Developer 7 years ago
I just remember the good old days, when you could get a demo disc of all soon to be realeased games for PS one in a bloody magazine. Why are we unable to do this today? Are we going to discuss pro and con of free to play and full feature title forever? I say, let's go out there and kick some ftp arse. ftp is the biggest hype and fraud, that i've seen in the last 4 years. Fuck them in the goats arse. They are not making games. They make repetitive shit that is only interesting for people who can't distinguish between a commercial and a full featured title. I mean, let's be realistic here for a moment. FTP games are all the same. No depth, no immersion, no replay value. Once consumers realize that, the ftp industry will take a huge dip and vanish.

Edited 1 times. Last edit by Mario Tommadich on 9th February 2012 8:25pm

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Daniele Azara Creative Director, Palzoun entertainment7 years ago
Not sure we can compare demos to f2p model. F2p normally have a less narrative-concentrated approach and have to carch the attention of the player to the core mechanics really fast. In particular they have to convince the player about the fun factor of the game itself and overall subtle telling her how to spend money. In a AAA demo the thing is more fragile: you have to teaser the core mechanics, the settings, the storytelling and so on,everything connected into a very articulated mechanism. Take Skyrim, since lots of you spoken about it before, i game i dislike as about every computer or console rpg ( i am a old fashioned pen and paper player, you know...). Dou you think a player can understand the overall game complexity and depth with a 20 minutes demo? I don t think so. F2p can let people try the game as long as they like, complex console game just can t do that. These are two different worlds, but what connect every game is the WRONG way industry is growing the players: the actual standard, in fact, seems to drive people to think a game should be for free or priced 0.79 euros.... And when a AAA costs a minimum of 15 millions there is a more difficult situation then the battle between f2p and console markets. My 2 cents.
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Jay Moore Founder, The Alacrity Group7 years ago
The fierce energy that Leydon's position has evoked to me is telling.

Globally consumer behavior is changing and gaming entertainment revenues are expanding. Technology platforms are at a major infection point (phones, tablets, ipTV, cloud and console), distribution channels are in major transition from box to online and business models are doing what they do, looking for best ROI.

Social / Mobile is engaging a larger more casual player base who is generally attracted to a different play experience that can be met at lower production costs than what most core console gamers demand (even PSN & XBLA have a deeper play experience, larger budget, higher production values and are the digital distribution memes of console). F2P titles are known to generate 5-20x revenue over pay to download.

Digital distribution on all platforms is changing buying patterns. The highest volume of revenue being generated in asia on PC and mobile leverages the F2P model / driven mostly to combat piracy (only in Japan has console had the significant market adoption so no market is a global predictor of consumer behavior). Asia is about 7 years ahead of Europe and 10 years ahead of North America on F2P optimization. The publicly traded companies trending toward fastest growing valuations are Tencent, The9, Shanda, GREE, Nexon and Zynga - so that indicates a market shift to me.
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Morville O'Driscoll Blogger & Critic 7 years ago
@ Dennis

Ah, yes, because Team Fortress 2 is not a AAA game. And what about the upcoming DoTA 2? :p

(But yes, you're right... *most* F2P games aren't in the same class as AAA games)

Edited 1 times. Last edit by Morville O'Driscoll on 9th February 2012 11:24pm

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Andrew Coates Lead Programmer, Ninth Ninja7 years ago
That sad fact is people who play games on traditional consoles are just a small minority. In fact those hardcore gamers are irrelevant to mobile and social networks and to the modern publisher. Sure people can say but Halo (what ever sequel number) sold millions at a high price. Ask yourself how many console games per year succeed? No many - probably less than the number of fingers on one hand. In the mobile and social space there are hundreds of games generating millions of dollars per year.

The casual crowd, the ones that got into games because they have an iPhone, the people who are retired and play Angry Birds because they own a device that has other uses other than playing games.

All those Facebook people - everyone on the planet has an account (well almost!) - into their millions who made freemium viable.

The point is in the last 6 years a different gamer has emerged... The casual crowd which mounts up to millions and millions of people who play games on the move or waste time on Facebook. And they certainly don't want to purchase a traditional console!

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Tin Katavic Studying MSc-Games Technology, University of Abertay Dundee7 years ago
One thing about freemium games for a gamer its not that much better then a regular game. Sure - you try the game before you pay it but you do the same with the regular game (demos or in some cases pirated games that you use as a demo) and you cash out and thats it. Freemium games you see a game and if you want to play it - microtransactions. You dont want to wait 30 min to build an unit? 1 dollar - and you get 10 tokens for instant units! You dont want to sit in front of the screen waiting for a coin to spawn so you can click it before it disapears? 1 dollar - you get 100 coins right away! Sounds great but in reality ... if its a good game you spend a lot of time playing (how many hours were spent playing Starcraft or CounterStrike?) and all those microtransactions might come to a price tag much higher then $70. Perhaps I am just an old school gamer.
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Dave Herod Senior Programmer, Codemasters7 years ago
I don't know if it's just me, but I tend to find if I get to play too much of a game for free, I find a slight reluctance to then pay money to continue playing something that I already had. Buying a new game is exciting because it feels like unlocking a new experience to look forward to, the freemium model just makes paying seem like a punishment, paying the price for an experience I've already had and has lost its novelty value.

All I see freemium as is a con, to try and make a quick buck from people by drip feeding them little payments to hide the true amount they've handed over. It takes advantage of people who can't manage their finances well. Possibly even kids who convince their unknowing parents to allow them to buy something because it's "only 50p", only for them to do it over and over day after day without realising the bill they're racking up. As a consumer I'd rather just see the cost of a game up front in black and white.
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Andrew Coates Lead Programmer, Ninth Ninja7 years ago
@Tin Katavic

The reason why these microtransactions are popular? It's all down to time management because people lead busy lives. For instance people that log into Facebook are there just to fill in time gaps so any game that offers short cuts in time will be bought. So for instance someone spent 8 mins checking their Facebook pages, then decides to play a game for a further 10mins and buys a few items (gain some time) then those 10mins feel useful because they are further into the game.

It really does not matter that, eventually, the mirotransactions exceed the price of a console game because the user feels that they have managed their time better.

A large proportion of these people are usually bored office workers, and not just men but women as well.

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William Brown Aspiring Level Designer 7 years ago
@Dave Herod I completely share your attitude towards playing too much for free then being reluctant to pay for the same experience.

What I'd like to see with the freemium model is something similar to the shareware scene of the late 80's/early 90's. Offering extra levels beyond the existing original game, akin to what DLC is for the console market. I believe this approach would increase the transparency to the true cost of these games, which ultimately benefits the consumer and allows consumers to make a better educated descision as to the true cost of 'unlocking' full gameplay (eg. £5 to buy the full non-microtransaction game -vs- £20 built up over many smaller transactions).

I also agree with the analogy of kids buying something for 50p then running up a huge credit card bill due to those 50p's mounting up. Given time consumer watchdogs will highlight this problem amongst the casual gamer/parent due to the difficultly in tracking the running cost of playing the game, especially given the 'insert additional coin to click another button' nature of the freemium model as it stands.
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Tin Katavic Studying MSc-Games Technology, University of Abertay Dundee7 years ago
@Andrew Coates

But wouldnt that logic apply only to casual gamers (or as you said - bored office workers) and games such as farmville? Isnt that incompatible with the idea for serious games (be they AAA or Indie)?

And doesnt that also push games more in the direction of making them more of a time-sink, focusing more on the grind so there would be more reason for microtransactions?
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Jose Martin Entrepreneur & Financing - Media / Tech / Interactive Entertainment 7 years ago
Funny, I was just thinking about all the problems I have with the F2P model and randomly came across this article:
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Geir Aaslid Producer, Virtual Game Worlds As7 years ago
Comparing the consumer playing SKYRIM on a console with another consumer playing freemium games on mobile, is clearly comparing apples and oranges.
The Console business model is clearly under a lot of pressure, not only from mobile but also from F2P downloads delivering games as a service, bypassing not only retail but also the console concept. Undoubtedly SONY and Microsoft will innovate, and be able to retain some of their current console business.

Things are changing far too rapidly these day for us to be able to predict how the market will look two years into the future.

Bruce does have a point, far too many consumers have been burned by inferior and expensive product. But not only from the Console games. Games-as-a-service is not the same business concept as boxed retail product, and ripping off your customers pays a lot less. Anyone remember how Funcom managed to lose roughly 90% of the Conan subscribers within 8 months of launch?
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