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 firstname.lastname@example.org. I'd also love to see a discussion take place on this post as well.†