Why Free-To-Play is Doomed

Free-to-play. Play for free. Freemium. Developers give us the game and we spend money on it over a period of time, as opposed to the traditional model of paying for a game up-front (or even on a regular subscription basis). It’s a big thing in MMOs and mobile apps. In many ways the antithesis of Kickstarter funding, publishers are all over it right now as being the best way to make money. It will be coming to traditional PC gaming soon.

Let’s examine why, with some numbers. Take your average high-profile title. For the sake of argument, let’s say the publisher makes $10 per copy sold (after the distribution and marketing people take their cut, and any discounts for sales). The Witcher sold 400,000 copies on Windows, so I’ll use that as an average baseline. In other words,  the publisher can expect to make around $4M from a typical game sold in the traditional way. A typical high-profile free-to-play game, such as DC Universe Online, will interest 1M players. In order to make the same amount of money as a more traditional game, those players need to spend $4 on average.

We know that publishers have better access to numbers than I do, and we know they’re excited about free-to-play. So in reality, the average player spend will probably be higher. How can this be?

Well it hinges on a couple of things. First of all, there’s the idea that the more time people invest in something which increases in value over time, the more valuable they perceive it to be (and hence will be more likely to spend money on it). Second, there’s the idea of “whales” and/or “true fans”. People who, for whatever reason, will spend a lot more than the average person, enough to make a significant impact on the average amount spent per person.

Equation time!

Money made = (Number of players * average spend per player) - ongoing costs

These variables are all well and good, but there’s a lot of reasons why they will lead to an eventually decline in the money made:

  • Everything hinges on a retention. As noted earlier, the average spend per player increases with the average time each player invests in the game. If a game is “front-loaded”, with the most enjoyable parts early on but nothing to do later, the publisher will lose out. Similarly, if the game is “grindy”, with little reward for an initial investment, the player will leave before building enough long-term interest.
  • Greater choice creates a smaller player base. When people have a choice of two free-to-play shooters, both of those shooters will do relatively well. When there’s several dozen clamouring for attention, it becomes much harder to retain (or even hook in the first place) them. Games, unlike other software, solve no real purpose other than entertainment. Even if you assume certain people will only be interested in a certain genre or level of quality, there’s still going to be more Diablo-alikes than note-taking applications. As more publishers try to gain a foothold in the free-to-play arena, the number of players in a given game decreases.
  • The stigma of “pay to win”. Developers have to be very wary of creating mechanisms that give an unfair advantage to people who pay, over those who don’t. The problem is, having such mechanisms is undoubtedly the best way to increase the average spend per person. Cosmetic items only have value to so-called “true fans”, who must have a stake in the game already (either through much time invested, or through some perceived loyalty to the genre or developer).
  • Formation of a class system amongst the player base. True fans and whales will (perhaps rightly) feel that they are entitled to be treated differently from other players. After all, they are subsidising everyone else (and eventually will realise this). It may be that the developers or publishers will also view them differently, thus tailoring the game to suit them, rather than striving for some vision. Casinos do treat high rollers better than the common folk, after all.
  • Avoidance of gambling. Gambling is bad news for publishers. It’s legally (not to mention morally) questionable. In some cases, the use of gambling requires paying for a license or being taxed. In other cases it can be banned outright. Right now we have crates with random loot in Team Fortress 2 (which can only be unlocked with a key that must be bought). In time, we’ll see more devious tricks being needed to retain players’ desires to spend, creeping ever closer to the legal definition of gambling.
  • Escalating support costs. If 1% of 400,000 users encounter a problem, that requires a lot of support. 1% of 1,000,000 users requires over twice as much. In the first case, the people affected have already paid their money, so there’s less of an incentive (other than good will) to solve their problem. In the latter case, you have 100,000 potential customers with an issue.

It could be that the publishers have solutions to all these issues already figured out, or it could be that some survival of the fittest paradigm will play out, and that we’ll merely end up with a number of excellent, free to play titles, with the low-quality stuff unable to raise enough interest.

Your thoughts on this?