The problem with most entertainment mediums is that you don’t know precisely what you’re going to get until money changes hands and a product is purchased. As consumers continue to timidly approach games with $60 price tags, savvy developers are realizing that success in the free-to-play arena isn’t just a few isolated incidents anymore. In fact, some new research into mobile gaming profits supports the idea that free-to-play games could generate more revenue for publishers than the traditional retail model they’ve grown so accustomed to.
Mobile analytics firm Flurry has been actively tracking the sales of more than 90,000 games available in the iTunes App Store. Of those 90,000 they selected the top 100 games which grossed the most revenue. Surprisingly, 65 of those 100 titles were freemium, microtransaction-based games. But the data from six months ago paints an even clearer picture: In January, only 35 of the top 100 grossing games were free-to-play. This means that both the popularity and success of freemium games on the iOS platform have nearly doubled in that short timespan.
There is no question that the freemium model is a success on mobile platforms.
In the last six months, we’ve seen drastic advances in the freemium space outside of mobile gaming. Lord of the Rings Online and Everquest have adopted the model. Steam has ushered freemium games into their catalog, along with one of Valve’s own titles, the immensely popular Team Fortress 2. Sony introduced Free Realms – previously a PC exclusive MMO – onto their Playstation 3 platform as the first console based, free-to-play MMO. Microsoft is entertaining the model for Xbox Live Arcade, and games like League of Legends and Dungeons and Dragons Online are enjoying surging profits. Publishers like EA and 2K are scrambling to develop freemium versions of successful retail titles such as Battlefield Play4Free and Civ World, respectively.
As Flurry argues in their blog:
When you make your game free and add in-app purchases, two powerful things can happen: first, more people will likely try your game since you’ve made the “ante” zero; and second, you will likely take more total money, since different players can now spend different amounts depending on their engagement and preferences.
Sure, we understand that rabid fans of a free iOS game could spend considerably more than the average .99 cent pricetag, and that this won’t be as easily achievable on a console platform where the average game retails for $60. But we have seen high-profile publishers experiment with the model. For example, THQ’s recently released MX vs ATV Alive retailed for $40 ($20 less than most commercial console releases) and allowed a relatively deep gameplay experience, while leaving room for extra content like tracks, outfits, and bikes to be purchased separately. But to thrive, console publishers will need to remain open-minded to the freemium model, regardless of habit and history.
A freemium version of CoD for consoles would attract even more gamers, and possibly more money.
There are two undisputed facts about the mobile industry: Of all apps, games drive the most profits – and those mobile games continues to cut into the profits and mind-share of both dedicated gaming handhelds like the Nintendo 3DS, and sales of console titles. Rest assured, this trend is at the center of the console manufacturer’s radar, and they’ll likely start pursuing the freemium movement rather aggressively. Said movement is surging in popularity on PC as well as the mobile space, and they simply have to follow suit in order to stay relevant across all fronts.
In a way, Microsoft’s Xbox Live Indie Games felt like an experiment in emulating the App Store: give indies a place to sell their wares, regulate the quality of the software through a review process, and take a cut of the resulting profits. Microsoft has also found success with microtransactions from their Avatar Marketplace. As consumers continue to gravitate toward digital distribution and free-to-play games (which aren’t just for the casual crowd anymore), Sony and Microsoft – and indeed third party publishers like Ubisoft, THQ, EA and Activision – will need to start thinking about translating their successful franchises into free-to-play iterations.
The looming question isn’t if they will, but instead which games and when. It may be a few years until we see free to play versions of Call of Duty or Halo (with the necessary high production values to attract a crowd) but the freemium model is here to stay, and the smart developers know it.
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