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.

screen-shot-2014-03-25-at-10-32-31-am

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.

Screen Shot 2015-10-19 at 20.45.14

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?

Sources:

http://qz.com/191931/the-phenomenal-growth-of-the-mobile-games-industry-in-charts/

http://www.hardcoregamer.com/2014/09/07/why-dota-2-is-the-only-game-that-does-free-to-play-right/99773/

http://www.gdconf.com/conference/f2p.html

http://www.gamesindustry.biz/articles/2012-08-25-how-to-monetize-of-free-to-play-games

http://dota2.prizetrac.kr/international2015

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2 responses to “F2P: How the Free to Play pricing strategy is shaping the gaming industry”

  1. euclidh says :

    Hi, thx for the nice post.
    This post is based on my personal experience with free to play games.
    I believe most free to play games do not do it right. I think we should make a distinction between games like the ones you mentioned that are free to play and offer only cosmetic/customization options (which is fine/great); and games that are free to play but are actually “pay 2 win” (P2W). The latter category has in all cases that I have come into contact with produced very bad games. These games seem to focus on greedy features/tactics such as “buying more lives to play longer” or “buying items in-game that give you distinct advantages over non-paying players”. The main problem is that these P2W games are designed from the start to make you spend as much money as possible on in-app purchases. These results in games that are merely addictive (so you spend more money on them) instead of fun/entertaining (e.g. candycrush). They create frustrating games that should presumably (I have never spent money on these) be fun when you pay. The problem is that usually paying once is just not enough; I know tons of people that keep spending money on these games; while admitting that they aren’t even fun to play (these people are addicted).
    I believe in the long run most players will be able to distinguish whether a game is P2W within just a few seconds of starting out and will stop playing and investing money in these. Candycrush for instance is just a derived and less fun version of bejewelled. Why keep paying money for a game I could have played for free since the 90’s? The answer is simple, because these games have been designed from the ground up to be addictive. I believe these kinds of games are very dangerous; they often focus on making children that don’t know better addicted (children will grow up and have money of their own to spend soon).
    I for one have never spent a single cent on P2W-games; however, I have spent quite some money on games that only offer cosmetic/customization features as purchase options. I do this because I have no intention of supporting addictive games by greedy companies. When I spend money on these (the former group of games) cosmetic/customization features I usually do not do it because I really want these features.
    I do it because I want to support the developers of great games.
    I do it because I want these developers to keep improving their games and create more great games.

    p.s. Games are not only entertainment, they are also often an art form, a form of self-expression.

    • 365747fg says :

      Hey, I completely agree with you, I really feel like there is no long term sustainable model to such P2W games. Moreover they do not have the potential to create really communities where as you mentioned you become happy to contribute to improve the game as you feel the developers are doing their best to satisfy your needs. I am curious though, which other F2P games do you feel are doing it right?

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