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Magazines and MMOs

Patrick Streppel and Rainer Markussen on Gamigo's winding road to the new frontier of free-to-play

Gamigo's entry into the games industry was almost by chance. Founded in 2001 as an online magazine, the company was offered the chance to launch Die vierte Offenbarung, the first German MMORPG. Over the next five years Gamigo launched a number of other subscription-based MMOs, before deciding to focus its entire business on publishing in 2007.

That was also the year it became clear that the subscription model was no longer a reliable source of revenue. The ascendant World of Warcraft had irrevocably altered consumer expectations, so, taking inspiration from the MMOs it licensed from Asia, Gamigo chose to concentrate on free-to-play. The timing could scarcely have been better.

In this exclusive interview, Gamigo's co-CEOs Patrick Streppel and Rainer Markussen discuss free-to-play for the hardcore market, the future of browser games, why traditional publishers will soon be their competitors, the rise and fall of the British games industry, and the next generation of console technology.

GamesIndustry.biz Gamigo has been focused on free-to-play games since 2007, comfortably ahead of its current explosion. Has that head-start afforded you any advantages?
Patrick Streppel

I think so, and in two areas. One is how to understand how monetisation works. I always say that there are two kinds of companies in the free-to-play space: one is the German pure players like Bigpoint, which started to develop [games] by themselves. Or Travian, or Innogames; that's kind of the German model of how to sell a browser game. I wouldn't say they copied each other, but they were inspired by each other.

If you look at those games, they monetise in a different way - or used to monetise in a different way - to the Asian companies, which is the other branch. Gamigo took finished games that were already successful in Asia, and in some cases successful in the US, and in the beginning we didn't change anything. That's how we learned about this market early on.

With our self-produced titles we are trying to merge the two branches, so in a game like Cultures online you have traditional browser-game monetisation like saving time, spending a little bit of money here and there. But they also have the more Asian-style revenue streams like crafting, enchanting, and paying for increasing the probability of success.

You asked about the size of the hardcore market for free-to-play, but I would put it the other way around: I think, for the hardcore segment, free-to-play is the best business model

That is one advantage that we have, but the other is simply learning what works and what doesn't, because when we started out we couldn't ask anybody. When we tried to get experienced staff there was nobody. All of the companies were starting at zero knowledge.

We have done games that failed completely, and we learned a lot from many of those failures. Sometimes we abandoned complete genres; we're very sceptical these days about sports or racing. There are still a lot of games coming out in those genres, but we learned how difficult it is to monetise users in those areas. Then again, when we go into genres like strategy - with, for example, Jagged Alliance Online - we take as many RPG elements as we can, because we know that's where the money is.

GamesIndustry.biz Your products are largely aimed at core gamers, but the majority of free-to-play start-ups over the last few years have focused on a more casual audience. Is the appetite for free-to-play among core gamers growing?
Patrick Streppel

I think so. We always paint it as a pyramid, right? You have the casual users on the bottom, out of which a very small percentage pay anything, and they don't pay that much. And on the very top you have the hardcore users that virtually live in the RPG and play for 3 to 5 years.

Casual companies like Zynga - and even Bigpoint, which is more casual [than Gamigo] - they certainly have a market segment, but we're going for gamers; we're going for people that monetise for a longer time. Although that demographic is smaller, we believe it is a valid business model because there is just so much money to be made with those people. And strategy-wise that's why we're going for old IPs: UFO Online, Jagged Alliance Online, even Cultures.

Rainer Markussen

You asked about the size of the hardcore market for free-to-play, but I would put it the other way around: I think, for the hardcore segment, free-to-play is the best business model. If you look at the customers we're earning money with, these are the people playing the game for ages. With a subscription fee or a retail price you wouldn't end up with the same amount. You would never ask for a subscription that is as high our average revenue per user.

For casual it may even be the other way around. It may be better to get some money on a subscription basis. There aren't too many people paying more than that anyway, and you could probably get some more money than in the item-based model.

GamesIndustry.biz Is the core gamer more demanding of free-to-play experiences than, say, someone who plays a game like CityVille?
Patrick Streppel

In terms of quality it used to be more forgiving, and the bar is rising constantly. In a segment where we have lead-times, from licensing a product to launching it, of up to two years, that is quite challenging. Recently, we have seen that some titles have a harder time competing than they did before, and we made the decision to raise the quality bar, which means that some titles that we licensed might not be released by us.

Then, on the other hand, when we talk about better quality and 'good' quality, we're really talking about wanting to be in the top 5 of each genre. Let's take MMORPGs; there are so many games out there with good graphics, that use Unreal Engine and so on, that our new titles are now trying to reach that mark. Otherland, for example, is a free-to-play MMO with a €25 million budget; Black Prophecy has a huge budget with huge production values. But there are other genres where the quality bar isn't in graphics or production values. Jagged Alliance Online, for example, the players focus on whether the balancing is right, whether the AI works great.

So I really think it comes down to the genre, but yes, it is becoming less and less forgiving if a title is not polished. And the other thing is service after the game has been launched: how fast customer support reacts, how good the events are, how the game reacts to players. That's also becoming more and more important, and it's an area where we want to focus and increase.

Matthew Handrahan avatar
Matthew Handrahan: Matthew Handrahan joined GamesIndustry in 2011, bringing long-form feature-writing experience to the team as well as a deep understanding of the video game development business. He previously spent more than five years at award-winning magazine gamesTM.
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