F2P: How the Free to Play pricing strategy is shaping the gaming industry
The Free to Play pricing strategy to the gaming industry equivalent of FREEMIUM. FREEMIUM usually refers to business models such as LinkedIn or Dropbox similarly Free to play games (F2P) are games that users can access for free. The revenue model of these games usually is based on selling additional features such as “Extra Lives” or can be based on creating a revenue stream from advertising. This pricing strategy currently rules the Smartphone gaming industry. See the graph bellow.
Out of the top 100 grossing apps, across the major mobile platforms, were using this model.
Keeping in mind that within these apps 91% in googleplay, 80% on iPhone and 72% on iPad are apps tied to games.
Some argue that such game do not have the potential to create sustainable profits as shown by candy crush saga’s fall in popularity and revenues.
However some games do it right.
Dota 2 for example a Multiplayer Online Battle Arena game is one of the most successful free to play games offered by Steam, the most popular online market for PC video games.
What does Dota 2 do better?
The game focuses on giving the free player the best possible user experience. The features offered by Valve (Developers of the game) are not based on annoyance such as Ads or longer loading times, neither are based on performance features. There is not one feature offered that gives any player an inherent advantage over others. Instead “items” that allow users to customise and change the appearance of characters, and items that allow to alter their gaming experience, such as different interface looks or background musics are sold for prices ranging from $1 to 10$ on average.
By offering free users an optimal user experience, Valve also makes sure to maximise the size of the player network. This enables the company to find alternate revenue sources based on the devoted community. An example would be the yearly tournament organised by the Developers. Every year Valve organises a tournament in which the 20 best teams around the world meet to become the world champions. This event is followed by fans all around the world with hundred thousands of people watching the matches live.
Taking the International 2015 as an example what really was interesting about the international is the way they raised the money constituting the prize pool. They created new Special items and features especially designed in honour of the event that were sold at different times throughout the period preceding the tournament. A percentage of the revenue generated by these items was used for the tournament reward prize pool and the rest became pure profit. this motivated the players to purchase the items for two reasons: they were limited Items only sold during the event and they were contributing to making the tournament a success. Moreover the more the users spend, the more rewards benefited the the entire community. At every New $million reached, the players were granted new special Features affecting all players. On the graph below you can see how each newly available items created sudden rises in the money raised.
This example shows how the Free to Play pricing strategy allows for the creation of infinite revenue model possibilities. When done right, F2P models can also make customers happy to spend money on the game if it means helping a community they are proud to belong to. This pricing strategy has only been introduced to the gaming industry a few years ago and has been ruling it ever since. This shows the true potential of the FREEMIUM economy. What will the next industry be?