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The past few years has seen a shift in how people consume and pay for games. Moving from a cash up front model to a freemium one, free-to-play games appear to be on the rise. So, why this sudden increase and what does this mean for incumbent game producers?
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GfK 2012
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THE RISE OF FREEMIUM GAMING
GfK 2012
On 14 July 2011 Steam the popular online game distribution service launched free-to-play games Initially offering five titles its offer ballooned to 76 titles in a little over a year and this number is set to increase Valve the owners of Steam even made one of its most popular games of all time - Team Fortress 2 - a free-to-play product
The rise of freeYet the size of the computer gaming market seems at odds with this free-gaming revolution In 2011 it was estimated the industry had revenues of US$74 billion (euro57 billion) and that figure is set to rise to US$115 billion (euro88 billion) by 2015 In the UK it is the biggest entertainment sector having recently outpaced even video in terms of sales while in the US video game revenue in 2011 was around US$16 billion (euro12 billion)
So why the sudden drive toward giving games away for free There are a range of factors at play here PC games have long been subject to piracy with the industry claiming this has impacted on revenues Meanwhile gaming on tablets and smartphones is still a relatively limited experience meaning producers cannot rely on large numbers buying their games
The past few years has seen a shift in how people consume and pay for games Moving from a cash up front model to a freemium one free-to-play games appear to be on the rise So why this sudden increase and what does this mean for incumbent game producers
By Chris Cox
Game producers in Europe and the US have also noted the huge success of companies in Asia For these companies free-to-play has been the norm for some time driven by multiplayer games with micropayment systems (such as Ragnarok Online) The dream as expressed by Tim Sweeney CEO of Epic Games is to couple the sophisticated business models from Asia with the production values available to European and American studios
It is also hoped that free-to-play will make inroads in the battle to combat piracy Yves Guillemot CEO of Ubisoft said recently ldquoThe advantage of F2P is that we can get revenue from countries where we couldnrsquot previously mdash places where our products were played but not bought
TECHTALK - FREEMIUM GAMING
GAME PRODUCERS IN EUROPE AND THE US
HAVE ALSO NOTED THE HUGE SUCCESS OF
COMPANIES IN ASIA
GfK 2012
There was also a brief phase of lsquotry and buyrsquo games particularly for casual games on mobile platforms These games allowed users a small amount of game time for free before being forced to purchase the game in order to play further This practice has largely died out in favor of ad-supported gaming with some claiming that ad-supported gaming provides three to seven times more revenue
The scale of this industry shouldnrsquot be under-estimated Research conducted by IHS in January 2012 found that in-game purchases totaled US$970 million (euro734 million) last year while predictions indicated this figure could grow to US$56 billion (euro43 billion) by 2015
The risksMany industry experts have been quick to criticize the rise of free-to-play games arguing that they will never guarantee large enough revenues to create so called lsquoAAArsquo games like Call of Duty Due to the significant upfront cost of creation it seems unlikely anyone would risk creating a free-to-play game of this scale when there is the possibility that it could flop
Other commentators say that free-to-play lends itself primarily to multiplayer online gaming rather than the single player experience enjoyed by many gamers Within multiplayer games enjoyment can be limited by introducing a so called lsquopay-to-winrsquo factor due to the item store Games like Team Fortress 2 and Tribes Ascend
Now with F2P we gain revenue which helps brands last longer ldquo Free-to-play games remove barriers to entry and micropayments within games are usually low priced and streamlined encouraging and enabling purchases
So where does the money come fromCompanies are becoming more sophisticated in how they monetize both free-to-play games as well as paid games after the point of sale Some of the most common methods are
TECHTALK - FREEMIUM GAMING
subscriptions - most online multiplayer games allow players to play for free for a set period and then require a monthly fee for continued gaming This is uncommon outside of multiplayer games Notable examples World of Warcraft EVE Onlinein-game advertising ndash ad-supported games are primarily found on tablets and smartphone games Due to their potentially disruptive impact on the game experience theyrsquove not been used significantly in PC gaming Notable examples Angry Birdsdownloadable content (DLC) ndash a long-standing tradition in both paid and free-to-play games offers players a few hours more gameplay for a relatively small fee Notable examples Mass Effect 3 Dragon Age II Forza Motorsportunlocksitem stores ndash many games now offer players opportunities to purchase in-game items (such as additional weapons or characters) direct from an online store Notable examples Tribes Ascend
GfK 2012
customers it would represent a major victory for gaming publishers who have always struggled to deal with piracy With Team Fortress 2 Valve also showed that more money can be made through free-to-play with monthly revenue rising by a factor of 12 after the game was made free
Free-to-play gaming is not a nirvana that the industry has finally reached it is a disruptive element within an established industry There will of course be both winners and losers yet the main winner is likely to be the consumer Gaming companies will have to work harder than ever to define themselves in an increasingly crowded marketplace where lsquofreersquo is the price point to compete against
For further information please contact Chris Cox chriscoxgfkcom
have been on the receiving end of these criticisms potentially driving players away from these gamesTherersquos also the risk that producers will be overzealous in trying to monetize their games The paid game Mass Effect 3 fell into this trap alienating fans by removing content from the main game and repackaging it as downloadable content to be sold the same day the main game came out Fans felt they had been cheated out of content which should have been theirs
The rewardsFree-to-play is undeniably a good trend for gamers at least on the surface it offers more content at an attractive price point Although there might be variation in the quality of free games the play experience of popular games will be enhanced as more players buy in
Small lsquoindiersquo gaming studios will be able to share their products with a wider audience As a result there will be greater opportunities to make money Of course gaining an audience in the face of monolithic gaming companies is a significant challenge Yet free-to-play has helped smaller companies like Zygna build impressive revenues despite the relative simplicity of their offering Although Zygna is now struggling it shouldnrsquot be forgotten that one of Facebookrsquos largest sources of income is social gaming
The same opportunities also exist for the large publishers who increasingly experiment with free gaming For them it would be beneficial to convert pirates into potential customers Even if a small proportion could be converted into paying
EVEN IF A SMALL PROPORTION COULD BE
CONVERTED INTO PAYING CUSTOMERS IT WOULD REPRESENT A MAJOR VICTORY FOR GAMING
PUBLISHERS WHO HAVE ALWAYS STRUGGLED TO
DEAL WITH PIRACY
TECHTALK - FREEMIUM GAMING
GfK 2012
On 14 July 2011 Steam the popular online game distribution service launched free-to-play games Initially offering five titles its offer ballooned to 76 titles in a little over a year and this number is set to increase Valve the owners of Steam even made one of its most popular games of all time - Team Fortress 2 - a free-to-play product
The rise of freeYet the size of the computer gaming market seems at odds with this free-gaming revolution In 2011 it was estimated the industry had revenues of US$74 billion (euro57 billion) and that figure is set to rise to US$115 billion (euro88 billion) by 2015 In the UK it is the biggest entertainment sector having recently outpaced even video in terms of sales while in the US video game revenue in 2011 was around US$16 billion (euro12 billion)
So why the sudden drive toward giving games away for free There are a range of factors at play here PC games have long been subject to piracy with the industry claiming this has impacted on revenues Meanwhile gaming on tablets and smartphones is still a relatively limited experience meaning producers cannot rely on large numbers buying their games
The past few years has seen a shift in how people consume and pay for games Moving from a cash up front model to a freemium one free-to-play games appear to be on the rise So why this sudden increase and what does this mean for incumbent game producers
By Chris Cox
Game producers in Europe and the US have also noted the huge success of companies in Asia For these companies free-to-play has been the norm for some time driven by multiplayer games with micropayment systems (such as Ragnarok Online) The dream as expressed by Tim Sweeney CEO of Epic Games is to couple the sophisticated business models from Asia with the production values available to European and American studios
It is also hoped that free-to-play will make inroads in the battle to combat piracy Yves Guillemot CEO of Ubisoft said recently ldquoThe advantage of F2P is that we can get revenue from countries where we couldnrsquot previously mdash places where our products were played but not bought
TECHTALK - FREEMIUM GAMING
GAME PRODUCERS IN EUROPE AND THE US
HAVE ALSO NOTED THE HUGE SUCCESS OF
COMPANIES IN ASIA
GfK 2012
There was also a brief phase of lsquotry and buyrsquo games particularly for casual games on mobile platforms These games allowed users a small amount of game time for free before being forced to purchase the game in order to play further This practice has largely died out in favor of ad-supported gaming with some claiming that ad-supported gaming provides three to seven times more revenue
The scale of this industry shouldnrsquot be under-estimated Research conducted by IHS in January 2012 found that in-game purchases totaled US$970 million (euro734 million) last year while predictions indicated this figure could grow to US$56 billion (euro43 billion) by 2015
The risksMany industry experts have been quick to criticize the rise of free-to-play games arguing that they will never guarantee large enough revenues to create so called lsquoAAArsquo games like Call of Duty Due to the significant upfront cost of creation it seems unlikely anyone would risk creating a free-to-play game of this scale when there is the possibility that it could flop
Other commentators say that free-to-play lends itself primarily to multiplayer online gaming rather than the single player experience enjoyed by many gamers Within multiplayer games enjoyment can be limited by introducing a so called lsquopay-to-winrsquo factor due to the item store Games like Team Fortress 2 and Tribes Ascend
Now with F2P we gain revenue which helps brands last longer ldquo Free-to-play games remove barriers to entry and micropayments within games are usually low priced and streamlined encouraging and enabling purchases
So where does the money come fromCompanies are becoming more sophisticated in how they monetize both free-to-play games as well as paid games after the point of sale Some of the most common methods are
TECHTALK - FREEMIUM GAMING
subscriptions - most online multiplayer games allow players to play for free for a set period and then require a monthly fee for continued gaming This is uncommon outside of multiplayer games Notable examples World of Warcraft EVE Onlinein-game advertising ndash ad-supported games are primarily found on tablets and smartphone games Due to their potentially disruptive impact on the game experience theyrsquove not been used significantly in PC gaming Notable examples Angry Birdsdownloadable content (DLC) ndash a long-standing tradition in both paid and free-to-play games offers players a few hours more gameplay for a relatively small fee Notable examples Mass Effect 3 Dragon Age II Forza Motorsportunlocksitem stores ndash many games now offer players opportunities to purchase in-game items (such as additional weapons or characters) direct from an online store Notable examples Tribes Ascend
GfK 2012
customers it would represent a major victory for gaming publishers who have always struggled to deal with piracy With Team Fortress 2 Valve also showed that more money can be made through free-to-play with monthly revenue rising by a factor of 12 after the game was made free
Free-to-play gaming is not a nirvana that the industry has finally reached it is a disruptive element within an established industry There will of course be both winners and losers yet the main winner is likely to be the consumer Gaming companies will have to work harder than ever to define themselves in an increasingly crowded marketplace where lsquofreersquo is the price point to compete against
For further information please contact Chris Cox chriscoxgfkcom
have been on the receiving end of these criticisms potentially driving players away from these gamesTherersquos also the risk that producers will be overzealous in trying to monetize their games The paid game Mass Effect 3 fell into this trap alienating fans by removing content from the main game and repackaging it as downloadable content to be sold the same day the main game came out Fans felt they had been cheated out of content which should have been theirs
The rewardsFree-to-play is undeniably a good trend for gamers at least on the surface it offers more content at an attractive price point Although there might be variation in the quality of free games the play experience of popular games will be enhanced as more players buy in
Small lsquoindiersquo gaming studios will be able to share their products with a wider audience As a result there will be greater opportunities to make money Of course gaining an audience in the face of monolithic gaming companies is a significant challenge Yet free-to-play has helped smaller companies like Zygna build impressive revenues despite the relative simplicity of their offering Although Zygna is now struggling it shouldnrsquot be forgotten that one of Facebookrsquos largest sources of income is social gaming
The same opportunities also exist for the large publishers who increasingly experiment with free gaming For them it would be beneficial to convert pirates into potential customers Even if a small proportion could be converted into paying
EVEN IF A SMALL PROPORTION COULD BE
CONVERTED INTO PAYING CUSTOMERS IT WOULD REPRESENT A MAJOR VICTORY FOR GAMING
PUBLISHERS WHO HAVE ALWAYS STRUGGLED TO
DEAL WITH PIRACY
TECHTALK - FREEMIUM GAMING
GfK 2012
There was also a brief phase of lsquotry and buyrsquo games particularly for casual games on mobile platforms These games allowed users a small amount of game time for free before being forced to purchase the game in order to play further This practice has largely died out in favor of ad-supported gaming with some claiming that ad-supported gaming provides three to seven times more revenue
The scale of this industry shouldnrsquot be under-estimated Research conducted by IHS in January 2012 found that in-game purchases totaled US$970 million (euro734 million) last year while predictions indicated this figure could grow to US$56 billion (euro43 billion) by 2015
The risksMany industry experts have been quick to criticize the rise of free-to-play games arguing that they will never guarantee large enough revenues to create so called lsquoAAArsquo games like Call of Duty Due to the significant upfront cost of creation it seems unlikely anyone would risk creating a free-to-play game of this scale when there is the possibility that it could flop
Other commentators say that free-to-play lends itself primarily to multiplayer online gaming rather than the single player experience enjoyed by many gamers Within multiplayer games enjoyment can be limited by introducing a so called lsquopay-to-winrsquo factor due to the item store Games like Team Fortress 2 and Tribes Ascend
Now with F2P we gain revenue which helps brands last longer ldquo Free-to-play games remove barriers to entry and micropayments within games are usually low priced and streamlined encouraging and enabling purchases
So where does the money come fromCompanies are becoming more sophisticated in how they monetize both free-to-play games as well as paid games after the point of sale Some of the most common methods are
TECHTALK - FREEMIUM GAMING
subscriptions - most online multiplayer games allow players to play for free for a set period and then require a monthly fee for continued gaming This is uncommon outside of multiplayer games Notable examples World of Warcraft EVE Onlinein-game advertising ndash ad-supported games are primarily found on tablets and smartphone games Due to their potentially disruptive impact on the game experience theyrsquove not been used significantly in PC gaming Notable examples Angry Birdsdownloadable content (DLC) ndash a long-standing tradition in both paid and free-to-play games offers players a few hours more gameplay for a relatively small fee Notable examples Mass Effect 3 Dragon Age II Forza Motorsportunlocksitem stores ndash many games now offer players opportunities to purchase in-game items (such as additional weapons or characters) direct from an online store Notable examples Tribes Ascend
GfK 2012
customers it would represent a major victory for gaming publishers who have always struggled to deal with piracy With Team Fortress 2 Valve also showed that more money can be made through free-to-play with monthly revenue rising by a factor of 12 after the game was made free
Free-to-play gaming is not a nirvana that the industry has finally reached it is a disruptive element within an established industry There will of course be both winners and losers yet the main winner is likely to be the consumer Gaming companies will have to work harder than ever to define themselves in an increasingly crowded marketplace where lsquofreersquo is the price point to compete against
For further information please contact Chris Cox chriscoxgfkcom
have been on the receiving end of these criticisms potentially driving players away from these gamesTherersquos also the risk that producers will be overzealous in trying to monetize their games The paid game Mass Effect 3 fell into this trap alienating fans by removing content from the main game and repackaging it as downloadable content to be sold the same day the main game came out Fans felt they had been cheated out of content which should have been theirs
The rewardsFree-to-play is undeniably a good trend for gamers at least on the surface it offers more content at an attractive price point Although there might be variation in the quality of free games the play experience of popular games will be enhanced as more players buy in
Small lsquoindiersquo gaming studios will be able to share their products with a wider audience As a result there will be greater opportunities to make money Of course gaining an audience in the face of monolithic gaming companies is a significant challenge Yet free-to-play has helped smaller companies like Zygna build impressive revenues despite the relative simplicity of their offering Although Zygna is now struggling it shouldnrsquot be forgotten that one of Facebookrsquos largest sources of income is social gaming
The same opportunities also exist for the large publishers who increasingly experiment with free gaming For them it would be beneficial to convert pirates into potential customers Even if a small proportion could be converted into paying
EVEN IF A SMALL PROPORTION COULD BE
CONVERTED INTO PAYING CUSTOMERS IT WOULD REPRESENT A MAJOR VICTORY FOR GAMING
PUBLISHERS WHO HAVE ALWAYS STRUGGLED TO
DEAL WITH PIRACY
TECHTALK - FREEMIUM GAMING
GfK 2012
customers it would represent a major victory for gaming publishers who have always struggled to deal with piracy With Team Fortress 2 Valve also showed that more money can be made through free-to-play with monthly revenue rising by a factor of 12 after the game was made free
Free-to-play gaming is not a nirvana that the industry has finally reached it is a disruptive element within an established industry There will of course be both winners and losers yet the main winner is likely to be the consumer Gaming companies will have to work harder than ever to define themselves in an increasingly crowded marketplace where lsquofreersquo is the price point to compete against
For further information please contact Chris Cox chriscoxgfkcom
have been on the receiving end of these criticisms potentially driving players away from these gamesTherersquos also the risk that producers will be overzealous in trying to monetize their games The paid game Mass Effect 3 fell into this trap alienating fans by removing content from the main game and repackaging it as downloadable content to be sold the same day the main game came out Fans felt they had been cheated out of content which should have been theirs
The rewardsFree-to-play is undeniably a good trend for gamers at least on the surface it offers more content at an attractive price point Although there might be variation in the quality of free games the play experience of popular games will be enhanced as more players buy in
Small lsquoindiersquo gaming studios will be able to share their products with a wider audience As a result there will be greater opportunities to make money Of course gaining an audience in the face of monolithic gaming companies is a significant challenge Yet free-to-play has helped smaller companies like Zygna build impressive revenues despite the relative simplicity of their offering Although Zygna is now struggling it shouldnrsquot be forgotten that one of Facebookrsquos largest sources of income is social gaming
The same opportunities also exist for the large publishers who increasingly experiment with free gaming For them it would be beneficial to convert pirates into potential customers Even if a small proportion could be converted into paying
EVEN IF A SMALL PROPORTION COULD BE
CONVERTED INTO PAYING CUSTOMERS IT WOULD REPRESENT A MAJOR VICTORY FOR GAMING
PUBLISHERS WHO HAVE ALWAYS STRUGGLED TO
DEAL WITH PIRACY
TECHTALK - FREEMIUM GAMING
