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Why Free-to-Play Could Spell the End for Mobile Developers
by Luis Levy on 07/24/12 06:55:00 pm   Expert Blogs   Featured Blogs

The following blog post, unless otherwise noted, was written by a member of Gamasutra’s community.
The thoughts and opinions expressed are those of the writer and not Gamasutra or its parent company.

 

In mobile development, the free-to-play model (F2P) is now seen as the one and only way to make money... and eventually get acquired by Zynga or EA. All joking aside, most developers understandably see “free” as the quickest route to the top of the App Store rankings.

However, there’s a dark underbelly to the F2P model, one that is rarely discussed: it could be the fastest route to layoffs, loss of income and, finally, bankruptcy.



The Price of Free

Many of my clients have had positive experiences with the F2P model. Others saw the (expected) increase in download numbers, but no revenue gain. Everyone else – mobile developers in general – seem to be struggling with the fact that games are now supposed to be free.

For the record, I am a believer in in-app purchases (IAP). However, I see them more as DLC – which you acquire after paying for a game - than the sole way to make money. My thesis is that a low-but-affordable price will always be better than free with IAPs. 

The income from a single sale cannot be ignored. If you see a million downloads at $1.99, you’ll collect $1,393,000 after Apple’s 30 percent cut. If your app is free, you’ll collect ZERO. In the meantime, developers will need to be paid salaries on time and the rent, as always, will be due. IAPs can work in the long run – and if your game has legs – but they won’t convert to actual income right away.

Another problem of free is how we see free. If you could get your hands on a “free” tablet game expected to include IAPs, ads, etc. OR pay $1.99 for a “premium” version, which one would you choose? Some – especially kids and teenagers – might opt for the free version because they don’t have access to funds, but everyone else would pay the $1.99 and be very happy about it. It turns out paying for stuff is a pleasurable feeling. We like to invest our money in items of our own choosing, enjoying them to the fullest, then defending them in public. That new app/game/smartphone/car/house/boat is now “ours” to cherish and promote to our peers.

On the other hand, if we get something for free, no exchange takes place. Essentially, we were given that product – we took it. The whole dynamic of ownership is now broken. Have you noticed how free apps get a lot more bad reviews than paid ones? How free phones (given away in the U.S. as incentive for long-term contracts) never have the same fervent supporters as the latest and greatest costing $299 or $200? It turns out that price qualifies a product as much as the product itself. If you give your product away, it’s the same thing as saying your product is worth nothing

Apple and the Power of Premium Pricing

Did you ever meet an iPad owner that complained about paying $700 for their tablet? Did you ever hear a high-powered exec say that he overpaid for that stunning Retina-enabled MacBook Pro? I guess not. Apple has figured out that price can differentiate products in a very meaningful way. Beyond profits, expensive products create a protective halo around them IF they deliver on the quality standards expected of such price. This is one of the main reasons why Apple does so well with the iPhone, iPad and MacBook product lines.

Following Apple’s lead, my suggestion is that developers adopt a base price of $1.99 for apps/games assuming they are polished, bug-free and engaging. A starting price of $1.99 will also allow for $0.99 sales and even Free App A Day promos.

A free app will never lend itself to sales and/or giveaways. It will also generate complaints from those irritated with artificial paywalls and incomplete gameplay. You will gain rankings, download numbers and market penetration – and that’s it.

The PR Angle

I do mobile and indie game PR for a living. After roughly three years working with mobile developers, I’ve seen a stark difference between free apps with IAPs and premium apps. Mostly, free apps are much harder to “rep” because:

(a) Journalists can download them at will
(b) They’re free
(c) You can't promote them with sales or giveaways

When a journalist wants to review a premium app, they will often email about a promo code. Sure, managing and distributing promo codes is more work for me, but I now know someone is planning to review the game. This allows me to follow up with them in a couple weeks if no review has been published. It also opens a line of communication before the review process starts, so the journalist can get in touch if he or she stumbles on a critical bug. Free apps may be reviewed without me ever knowing about it. If a nasty bug sneaked into the launch build, we might find out about in the review itself, which is never pretty.

Journalists who review games are gatekeepers. Their role is to inform readers about the worthiness of a game or app. I heard from several members of the press that they’re more likely to review paid apps. Why? Because there’s no point in evaluating a free app if it costs nothing to download and play. That’s also why most $50 or $60 consolegames get reviewed, but free apps (even high-quality games from developers with a track-record) get ignored. And if your app is targeting kids, I heard from a major syndicated writer that she avoids free apps because kids can get easily tricked into spending actual cash without their parents’ consent. She specifically told me that paid apps will always be more newsworthy – and therefore deserving of coverage – than free apps.

Do not underestimate the power of sales. Round-ups on “apps on sale” are very common in both iOS and Android sites. Dropping an app to free, temporarily, can also be very powerful. Who wouldn’t want to get Shadowgun for free? If your app is free by definition you essentially eliminated these marketing tools.

Rovio’s Castle in the Sky

Rovio famously made Angry Birds available for free on Android, but paid on iOS. For Angry Birds Space, they charge $2.99 for the “HD” version and $0.99 for the iPhone/iPod touch version. Rovio is playing to win. They know that price aggregates value to the new Angry Birds. It tells customers that “this app is worth something.” Even if they eventually add IAPs to the franchise, they are already making money on every download on a global scale. That alone will help them grow, hire, and prosper.



The console world, while challenged in its own way by smartphone and tablet gaming, got one thing right: games should cost money. Publishers also figured out that it’s best to make some money upfront, then charge for extra content – which we know as premium DLC. Mobile developers, in my opinion, would be better off charging for their games every single time, then offering meaningful, massive premium content as a way to expand gameplay. Not charging for features that should be there anyway (like some have been accused, recently) but offering players a way to invest in a game they already love to play.

Free-to-play is fine and dandy, but you have mouths to feed, right? At one point, basic survival is still better than being forced to take an office job to pay the bills. In 1983, low quality titles flooded the market and resulted in games losing most of their value. Journalists and analysts alike saw this as the game industry's demise until Nintendo, like a knight in shining armor, led the rebirth of console gaming with a focus on premium pricing and the best quality standards in the business. If we don’t address the fallout of “free,” indies might be in for a rough ride (to say the least) and the game industry could once again go through a traumatic crash with the potential to decimate studios big and small.

If you have any questions – or comments – feel free to email me at luis@novypr.com. I'd also love to see a discussion take place on this post as well. 


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Comments


E Zachary Knight
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A Couple of things that rubbed me the wrong way:

"In 1983, crumbling prices doomed the game industry until Nintendo, like a knight in shining armor, led the rebirth of console gaming with a focus on premium pricing, premium games and the best quality standards in the business."

It was the lack of quality control that lead to the fall of gaming. Not low prices. The low prices were a symptom of that lack of quality control. It was then Nintendo's official seal of approval that brought some aspect of consumer confidence. That allowed for prices to adjust accordingly.

"If you give your product away, it’s the same thing as saying your product is worth nothing. "

I don't necessarily agree with this statement either. Depending on how you structure your free game, it could be saying that you want people to judge for themselves what th true value of the game is. Many people get burned by games they paid money for, buying into the hype, and then finding a game that was worth far less than they paid. By providing a free offering, you provide a way for people to judge for themselves.

Of course, an easy way to bypass that problem is to ALWAYS have a free demo that really shows off the game. It must be reflective of the overall game experience rather than cherry picked sections.

But overall, yes adding a price can be a great way of establishing some value to a game. But don't be surprised when actual customers disagree with that price.

Luis Levy
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Zachary,

Re: Nintendo, I see your point. I think you are correct so I'll make the edit :)

Re: free games and the "nothing" statement, the trick is to charge a fair price -- I tend to favor $1.99. It's hard to be disappointed by a AAA-like, fun $1.99 game. I agree with you that free demos or trials can sidestep the whole "don't give your game away" issue but indies usually don't have the bandwidth to work on the main game AND a trial at the same time. I've seen it happen from the front row, before the advent of F2P -- devs sometimes simply can't afford to work on a "lite" version.

Thanks for commenting :)

Stephen Chin
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It seems like what you're both ultimately getting as is that whatever your barrier to entry is, it should be low enough that people can try and get a taste for whether or not they like it while avoiding making them feel like they got sucked if they didn't. Because ultimately, making the end user/customer/consumer/audience/whatever you wanna call 'em risk-adverse means they are less inclined to buy anything - games as whole, DLC, etc - which in turn makes it harder for devs to stay afloat and forcing them to have find ways like poor f2p/freemium schemes.

James Coote
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The problem with f2p for indies is that you need a lot of players to break even on your development costs. More players means more support costs. Then you need to spend on marketing to get those players. Larger companies can reduce some of those costs through economies of scale, that indies, by their very nature of being small, can't.

For a "fun AAA-like game", $1.99 is criminally undervaluing the product. It's basic maths: (man hours * salary per hour + overheads + marketing) / (($1.99 *0.7) - tax) = a lot of sales needed to break even.

If you're an indie, you probably don't have an AAA-like game, nor a marketing budget, so consequently your sales are just never going to hit break even. And then there is piracy to factor in

I'm making the same calculation for myself, and it doesn't look good

The ones I feel sorry for are those that did quit their office job to become indies only to burn through their savings or scrape a meager existence

Curtiss Murphy
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It's a rough road. But, free is the new standard. Look at Ouya - they pitch that games are free (at least partially)! I'm an Indy, and I can't fight the industry. I have to work within it.

So, I'm trying something unique. I give my product away, and ask users to buy it when they finish. It's about trust and they seem to respond (10%). My challenge is to create better products that more people finish!

Gigi

(PS - Want to see? Search for Gratitude Habit or LiveBetterYou on iTunes)

Eric Schwarz
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"The income from a single sale cannot be ignored. If you see a million downloads at $1.99, you’ll collect $1,393,000 after Apple’s 30 percent cut. If your app is free, you’ll collect ZERO. In the meantime, developers will need to be paid salaries on time and the rent, as always, will be due. IAPs can work in the long run – and if your game has legs – but they won’t convert to actual income right away."

I think this is an extremely pertinent point. Some income is better than no income, and providing demo versions in order to hook players into picking up your game for cash is a lot better than giving the entire thing away for free. Some developers can afford to make their games free, but unless they make a lot of money out of in-app purchases, or have a lot of money backing them to cushion the fall, it's a huge risk to charge absolutely nothing for a game. Better to have *any* sales that make *some* money than nothing at all.

Scot White
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F2P model works well if you offer disposable purchases. If you cannot, paid app is better.

David Phan
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As an independent (boot-strapped) start-up, we just submitted our first game, Harvest Lands, to Apple for review. Our first game is a freemium title with IAP that combines creature collection and town building. We do not believe that traditional PR services can provide tangible ROI results for this type of game. We've accepted that as fact based on how the top competitors in this genre have executed to date. The casual demographic that we're targeting doesn't read or care (generally) about reviews from journalists, much like how most casual console gamers didn't know or care about Metacritic scores. Unfortunately with mobile and freemium, it's all about paid user acquisitions and who's got the biggest war chest to attain and retain their Top Downloads and Top Grossing positions. Going Freemium with IAP as an indie is very viable if you've got the right product built from the ground-up for freemium and the right partner who's got the war chest and expertise to execute on the whole paid install < LTV rinse and repeat cycle.

It's a massive risk we're taking as a start-up with our first game, but I think the overall risk vs reward is much better than cranking out a paid game that may be hot for a week or two, pirated a bunch and then disappear into obscurity until you do a price drop and get that tiny blip again in your Apple dashboard. I look forward to sharing a detailed "indie freemium w/ IAP" gaem post-mortem with the dev community once we've launched and have had a chance to collect some sales and performance data.

DP

Luis Levy
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David, I agree that planning from the ground up for F2P is the ONLY way to go. Anything else will result in failure.

I look forward to reading your postmortem!

Steve Cawood
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I'm releasing a lite version of my latest mobile game for free & a paid version with more options, levels and such. This is based on how I like to purchase games. I give the demo a try & if I like it I buy it. I've never bought any IAPs because I always feel like they're a requirement rather than something like DLC which is an optional extra, I like to pay for a game if I like it and have all the features and no ads.

GameViewPoint Developer
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All of these arguments against F2P are completely pointless, and a quick story will prove so.

The other day I was having my hair cut, and discovered that the person cutting my hair had an iPhone, the conversation went like this...

Me "Do you play games on your iPhone?"

Her "Yes"

Me "Cool, so have you bought any games?"

Her "Oh no I never do that"

Me "Why not?"

Her "Well any games that I see that I might like, there's no point buying because there's always free ones just like them available!"

Me "Oh I see..." Thinking that's the end of the conversation.

Her "But I've spent money in games though! Oh that Diamond...Da.. Diamond something, I spend money all the time in that, I keep having to buy lives!"

And right there tells you everything you need to know about the F2P debate. The horse has bolted people, it's too late, the public expect free games, but that doesn't mean they won't pay money for games. Of course on the face of it, it makes no sense that she wouldn't buy a game for a one off payment of $.99c, but has paid .99c many times over, and some might say she's being duped into paying for the IAP, but the key point here is that she's happy to pay for the IAP, BECAUSE SHE ALREADY KNOWS SHE LIKES THE GAME.....and that's the key difference between before and now.....games are so readily available, and there's so many of them, that unless it's a AAA title on a high end games console, people expect and feel that they can just play, they can just download and play, and figure out over time whether they actually like the game or not without it costing them anything.

It's understandable why to a lot of developers not charging up front for something they have slaved many months of hard work on is not something they want to even think about, but all you are really doing with F2P is moving the gateway slightly further back, yeah it means giving them a taste of that hard work, and if it's designed correctly more than just a taste, you will allow them to become completely engorged in the game environment without paying anything. You see time is money, and that's what mobile is all about, so people actually regard them giving your game their time almost as them giving you something valuable already, which is why charging up front is such a turn-off for many players. "You want my time? AND I have to pay? BEFORE I even know I like it??"

Now having said all that, of course there are bad examples of F2P, which are just game loops designed to get people to part with their money, and not much else, and ultimately that's not good for anyone, players or the industry. But I get the sense that a lot of people are desperately trying to put the genie back into the bottle and it really is too late for that, at least on mobile without the major platforms changing the rules in some fundamental way.

I'm trying not to turn this into 5 page essay but to address some of the Authors points.

"It turns out paying for stuff is a pleasurable feeling." - You're joking right? Ask yourself this, when you go into a store, what gives you more pleasure, buying something for the price it's always priced up at, or buying something for a bargain knocked down price, which you know will never be that low again? People want cheap, people want free. ( I take your point of starting paid and lowering your price, but you can only do that so many times, and even doing it once annoys people)

"That new app/game/smartphone/car/house/boat is now “ours” to cherish and promote to our peers." - Not mobile apps/games, or especially not games, rightly or wrongly they are seen as quick time killers, which ironically you might end up spending most of your time on, but the perception is something disposable, if you lose your house, car, boat you might be pretty upset, if you lose a game installation on a smart phone, not so much (at least in comparison) and if you are upset, it's the time that you have lost through how far you have got in the game you have played that upsets you, not so much the actual app/game.

"Have you noticed how free apps get a lot more bad reviews than paid ones? How free phones (given away in the U.S. as incentive for long-term contracts) never have the same fervent supporters as the latest and greatest costing $299 or $200?" - I suspect the review thing has a lot to do with the extra downloads a freemium game gets, and the demographic that is doing most of that downloading (i'e younger), the other thing is availability, yeah there are a lot of smart phones on the market (well not really if you are talking about the main revenue generating market for mobile apps/games, i'e apple products), but that's nothing compared to the number of games that are available on these phones, ok reverse the argument, what if you had 1000s and 1000s of smart phones, and many of them did pretty much the same functions, are you going to buy the 1 or 2 that are a lot more expensive, OR are you going to go for the free phone, which let's you use it for free, and charges you for a few things? I just don't buy (not sure if that's a pun or not) the "people just love spending money on things argument", not when it comes to something which is already cheap and is available 1000s of times over.

"Beyond profits, expensive products create a protective halo around them IF they deliver on the quality standards expected of such price." - I think that's absolutely true of AAA console titles, on mobile not so much.

"A free app will never lend itself to sales and/or giveaways." - Maybe I'm missing something here, but why can't you do sales and/or giveaways for IAP's? Granted it's more difficult but it can be done.

You make a good point regarding paid/free and journalists, except to say of course that those journalists don't actually pay for those games! they get promo codes turning those premium games into....yup...free games. But the tracking issue is a good point, although I don't see it as an issue with F2P so much as it's an issue with the current systems that are in place for F2P games. I also think that if a game is good, regardless of whether it's a F2P title or not, the media will be interested, journalists review/see many games, they can tell pretty quickly if it's worth their time or not, and I'll be surprised if any of them look at a game which they think looks great, but then see's it's F2P and thinks "oh I won't be reviewing that then"

I agree games should cost money, but how exactly do you then fund a game which is constantly expanding? it seems to me just charging a one off fee cannot work with that kind of game, the developers need a way to fund the continued development of the game, you might argue well you just price it so that it gives you lots of money to continue expanding it, but that's not what's going happen, the revenue generated will get put into other projects etc, and the original project will just die, unless it's continually generating revenue in some fashion...this doesn't have to be IAP's though it can also be subscription.

You mentioned the 80s, well I can remember paying lots for high priced games during that time that were shall we say not that great, games you buy, you play once and then you never touch them again, of course there were many great games over the past 30 years, but there were also many many not so great ones.

Nobody who supports F2P wants to see indie developers struggling (I'm an indie developer), but you have to work with what you have got, and due to the factors mentioned above (availability of games, peoples time limited lives, peoples perception of mobile games etc) as an indie developer you need to get as many fingers playing your game as humanly possible, and I also think that if you are confident that you're game is great, making it free and charging afterwards won't scare you, on the contrary I think you would welcome the chance to have people playing your game.

Hell that's a big post.

David Phan
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Perchance, is your hairstylist Lin from Xtreme-Image?!?

John Flush
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I'll be honest. I didn't read it all. But I fit into that mold a little bit early on with my phone. "Free" is the only game I would play - I would only get a game if it was part of the 'free app a day' promotion. I also have other people around me that follow the same process.

Then, as a gamer, I realized was was waiting to play games I wanted to play to save what? $.99? $2? - What a dumbass I was being. I kept trying free 'grind me' games over and over and waiting to get lucky when game I wanted to play finally got made free. I haven't used a free game since (unless it was on a promotion)

I asked around again, surely there were still some that refused to buy a game - but they were the people I wouldn't even classify as a gamer. Two, they wouldn't buy in app purchases either. When they ran out of free, they ran out of the game to find the next free consume and throw away game they could.

But I actually noticed a lot more people in the category of only buying games now. They were usually the avid gamers. The ones that played on their phones as handheld replacements or for a break at the office.

So I agree with the author on this one. Just as Apple figured out a way to get people to pay $300 for a phone they could get free from someone else - I think there are games to be made and marketed to people that want to pay money for their gaming experiences. I also think the article clearly defines the advantages of doing so.

Now the real question is getting momentum behind your game so it takes off and people actually pay for it without a trial - or maybe it only works with games that can provide a trial?

GameViewPoint Developer
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@John Flush, "but they were the people I wouldn't even classify as a gamer"

But that's the point, those are exactly the kind of people that have driven this mobile phone game revolution, hardcore gamers by an large are still sitting in front of TV's playing AAA titles.

@David Phan, No :), good luck with your release though.

James Coote
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Debating about f2p in broad general terms here, we're forgetting both the product and customers will affect the decision about what monetization strategy to use.

Some games just don't lend themselves to f2p. I'm making a management simulation game, where the aim of the game is to build a business. Being able to buy in-game credits or items would somewhat defeat the point of the game.

It's also a game that has appeal to a limited niche audience. That market probably doesn't have enough people to support an f2p game with 100k MAU


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