The big payoff when video games are free

Game developers are finding free-to-play can be a smart business strategy, trading up front profits for long term revenue.
Game developers are finding free-to-play can be a smart business strategy, trading up front profits for long term revenue.
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Giving away your core product might not sound like the most intuitive way to turn a profit, but it’s a strategy that is increasingly popular — and profitable — among some game developers. This guest post comes courtesy of MassDiGi.

Here’s one way a video game company can get gamers to try a new release: Make it free.

A number of game studios, including several based in Massachusetts, have embraced the free-to-play model for new game products. That includes some of the big boys. According to a Bloomberg News report early this fall, giant video game maker “Electronic Arts Inc., whose ‘Command & Conquer’ is ranked by researcher NPD among the top-five best-selling PC franchises of all time with more than 30 million copies sold since 1995, will make the game free online next year.”

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Locally, Turbine Inc. in Needham did a lot of pioneering work in free-to-play with their big hit Dungeons Dragons Online, then adapted the model when they translated the Lord of the Rings fantasy franchise into another online game. And studios like Hatfield’s HitPoint Studios have launched several titles using this payment model, to great success. Subatomic Studios , a Boston game developer and maker of Fieldrunners, has used the one-time payment model in the past, but its latest release added the ability to purchase some coins. It’ll be interesting to see how this experiment is reflected in future releases.

The free-to-play model was pioneered by Zynga Inc., maker of Farmville. The way it works is that the basic game is free, but players are able to add extras by paying what are generally small fees – often one dollar. The model has been widely adopted in the mobile game field – quick purchases can be made easy on smartphones and tablets—and is making its presence felt in quite a few major titles, like EA’s Star Wars :The Old Republic. Expect more big releases to use free-to-play as a means for enticing gamers to sample the new wares.

Free-to-play offers opportunity for both players – who can sample more games without spending the big bucks—and developers, who can build a richer experience as they create paid layers of play and other benefits for gamers willing to pay their way along. The result: More games, and more fun on both ends of the equation. No wonder this model is becoming pervasive through the interactive entertainment industry.

There are differing approaches to the free-to-play model, but most include these elements:

— Game titles are offered to players with no upfront charge.

— Small amounts of money are charged to players for receiving game items that allow them to advance more quickly in the game, adopt new facets or powers for the characters they play within the game, or even make their characters simply look better.

It’s a world of difference from the venerable old model of a game a player buys in a box, then owns right down to the last level of play. In free-to-play, the game becomes an ongoing source of revenue for the developer. With its constant stream of potential upgrades and enhancements, the game is less a product that the player buys than a service he or she subscribes to.

The biggest advantage for the developer is the reduced cost of marketing. By not charging up front, the game will draw more players who will try it. Once they become active players, the service model will continue to keep them engaged and reduce ongoing marketing costs.

Between 5 percent and 20 percent of players tend to buy game items. Because the base of players becomes much larger, and because some players will spend a lot of money on hit games, free-to-play can be very profitable for the developer.

For the player, the real advantage is the ability to try a game before spending any money. Every game player has a story of spending $50 on some game that ended up being a dud. In free-to-play, the spending is incremental; a player can spend as little or as much money as he or she wants on the experience. Players who have more time than money get to play at no cost, and in multiplayer games, often end up contributing to the shared experience for those who do pay. Players who have more money than time will often spend to accelerate game play, or to buy their way to a character with more cool.

I believe this two-way dynamic will lead to a stronger industry. More games are being developed under this model, since the lower cost of marketing gives smaller developers a fighting chance in the competitive video game market. Treating the game as a service means the developer is incentivized to continue to add features and improve the game experience. Ongoing improvement means that players who enjoy the game will have a lot more content to play through than if they bought the game outright.

Free-to-play may even change the shape of future releases, as games are built to fit the model. It’s a long way from the old shoot-‘em-up and put it away, but the result will be a richer game experience for both game maker and game player.

This post comes courtesy of the Massachusetts Digital Games Institute (MassDiGI), a statewide center housed at Becker College and aimed at promoting economic development within the Massachusetts video and digital games industry.