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Opinion: Move Over Freemium - Paymium Is The New Game In Town
Opinion: Move Over Freemium - Paymium Is The New Game In Town
October 20, 2011 | By Nicholas Lovell

October 20, 2011 | By Nicholas Lovell
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Freemium or free-to-play have been the business model buzzwords in games for the last two years. We've begun to move from the kneejerk reactions ("they're not even games", "people who play them are stupid") to an emerging acceptance that freemium games are a viable business that can also support fun, engaging games.

I also think that we're moving beyond freemium.

A recent report from Distimo was widely reported as saying that In-App Purchases accounted for 72 percent of revenues on iOS devices. Given that only 4 percent of games on iOS devices even have IAP, that was an amazing stat.

The press reports were not entirely accurate. Distimo actually said that games with IAP accounted for 72 percent of revenues, including the cost of the buying the game in the first place.

Enter the world of Paymium™.

What's Better Than Free? Paid For

Mark Rein, outspoken VP at Infinity Blade and Unreal developer, has said that he could not imagine launching a game without in-app purchases that were ready on launch on iOS ever again.

Infinity Blade was a premium title that sold for as much as $5.99 on a platform where free or $0.99 have become the norm. Within two weeks, Epic had released IAP with price points that reached as high as $50.

Before long, revenues from IAP were approaching those from initial sales. It wouldn't surprise me if Epic is now making more money from IAP than it is from initial sales of the game.

So Do You No Longer Support Free?

I remain a huge supporter of free. I believe that free is the natural price point on any platform where the price of making one more copy is as close to zero as makes no odds. There are some situations where I believe paid may, possibly, be a better solution:
  • If you have a strong brand: the primary advantage of free is that people who don't know your IP, brand, or game can experience it easily. If you already have a strong brand, you may be able to price high. (Few brands are actually this strong)
  • If you are a marketing-led organisation: If marketing is your USP as a business, you know how to persuade gamers to part with their money for a game. It might be worth playing to your strengths.
  • If your product is the best game the world has ever seen: this is highly unlikely
In essence, you will have to spend money to market your game; the higher the barrier to entry (i.e. the price), the more likely you are to have to spend lots of money to market your game. So in most cases, I would argue in favor for free.

But whether I am arguing for free or not, I always support allowing users to spend more money in the course of their enjoyment of the game.

The internet has enabled you to find your biggest fans and let them spend more money with you. Whether your game is free or paid-for, it will have cost you money to acquire customers. Some of those customers will love what you do. How will you enable these fans to spend lots of money from you?


The screenshot of Infinity Blade's iTunes page shows you the top in-app purchases for the game. The most popular upgrade (for a game that sells for £3.99) is £2.99. They also sell IAP for much higher rates, and in total IAP, is about half their revenue.

I believe that games should go free, or they should go expensive. Never be cheap. But always, always, always offer IAP.

Move over freemium, Paymium is here to stay.

Nicholas Lovell helps companies make money from games. He blogs at www.gamesbrief.com and has recently released a free F2P forecasting spreadsheet to help companies estimate how much money they can make from a free-to-play game.


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Comments


Marc-Andre Caron
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Coming up with buzzwords is good business, my friends!

Eric Geer
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Coming up with Acronyms is as well!

Bruno Patatas
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I'm a supporter of freemium but I think that this paymium model can be something quite complicated. If you give your game for free, then charging your player for added content imo is fine. But if you pay for the game, and then you have to pay for more content? Well, it can work like in the case of Infinity Blade, but it can also lead to cases like Batman: Arkham City controversial Catwoman Code. I think the industry needs to be careful.

Bruno Patatas
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The Catwoman segments of the game are unlocked with a “VIP Pass,” a redemption code printed on a sheet of paper inside new copies of the game. Gamers who rent, borrow or buy a used copy of Arkham City will have to pay an extra $10 for the code. And those who can’t connect their consoles to the Internet will be unable to experience the story of Batman’s feline rival.



If you buy a used copy, or if someone gives one to you, you need to pay an extra $10 for content that is already on your disk! And it's not small. It's about 10% of the game. You need to pay an extra fee to play something you already have!



I don't agree _at all_ with this type of business.

Jeffrey Crenshaw
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Would it be more agreeable if it was DLC instead of on the disc, but the logistics were the same (same amount of content, one time code)?

Nicholas Lovell
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I think your comment about paying "$10 for something "that is already on your disc" is strange. As Jeffrey said, would it somehow be fine if exactly the same content had to be downloaded?



So much so, I think there's a column in this.

Bruno Patatas
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@Jeffrey and Nicholas



For me DLC is different than having content on your disc locked.



For me, the point is this one:

The Catwoman code allows players to assume the role of Catwoman at points throughout the game. It alters the beginning of the game and has the potential to add a lot to the experience.



A whole bunch of gamers will not be able to have all those features (that are already on the disc he has) without spending extra $10 on top of the $60 he already spent for the "full" game. DLC you buy if you want. This is content _you already have_ but that you can't access. It's an ethical problem imo, and I do not feel comfortable when I see stuff like this.



Plus, if you see the news, things are not working well. If publishers are going to do something like this as a preorder bonus, they have to get it right! That is not happening and is frustrating to players. And frustrating players that _paid_ for your game because of stuff like this is not the best future for the industry in my opinion.



http://www.1up.com/news/batman-arkham-city-catwoman-code-issues-l
ooked-into

http://community.batmanarkhamcity.com/forums/forumdisplay.php/13-
Technical-Issues

http://www.screwattack.com/news/update-new-arkham-city-catwoman-c
ode-fustercluck

Tom Baird
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Wait, the Catwoman codes are for all new copies. Arkham City new is $60 at GameStop. I'd hope used is at least $10 cheaper, except at GameStop where the codes are provided in used copies.



It's also not a preorder bonus, it's a buy new bonus, or even used at GameStop (but at least some of their used revenue goes to the developers now too). The only copies that do not have it are: rentals or borrowed copies, and used copies not from GameStop. Rentals kinda suck, and it's difficult to provide an alternative, but hopefully used copies are at least $10 cheaper or else however is selling it used has a pretty heavy mark up on their used copies.



I also had to download ~200 megs from PSN to use get the Catwoman bonus, so at least a good chunk of it was not on disc.

Bruno Patatas
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@Tom A lot of people is wondering what those ~200 megs are... :)



For one thing, playable Catwoman has been a feature of the game advertised since way back in E3. It's not some last minute thing they came up with after the game went gold. So it's something they purposely took out/denied access to and now have to waste that much more time to access something that's been advertised as a main part of the game for nearly a year.



This is offline content that they are cutting out as the online pass. It bears repeating; they're cutting out OFFLINE, singleplayer content.

And not just any singleplayer offline content; STORY content. Catwoman's parts are most likely minor, but they do play a notable role in the story, as IGN's review makes a point of mentioning.



The reason why this is even more outrageous is it effect the millions of people who aren't online. They could still buy it new and not be able to get their heavily promoted single player content. If it was just skins or even challenge maps, people wouldn't be as upset. But its single player content that adds to the story.

Tom Baird
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For one they weren't advertising it as an Online Pass, so while other games may have online pass mechanics at the same price point, it doesn't mean that all buy new incentives need to be about online activities.



I do agree that it is not good for people lacking an internet connection, maybe it would have been better if it WAS on disc, then users without LIVE or PSN could have access as well.



I also think that if it was originally advertised as content in all versions it's not great that it is in the pass feature now, although the majority of users won't experience any difference other than a longer than expected initial startup time.



I'm not saying there arn't issues with it, I was trying to clarify a number of things you were claiming that were not true. It's not on disc, it's not $10 on top of $60. It's not a preorder bonus. You can say some people are skeptical about what's in the download, but unless there is some sort of evidence that it was 200 megs of wasted garbage, then it's hard to argue that it wasn't content (why would XBox/PSN permit Rocksteady to clog their servers/consoles with wasted download content, and why would Rocksteady do that?).



You are not paying for something you already have, but some users are getting a bonus of launch day DLC for free for purchasing in a way that benefits the original creator (if you didn't get the Catwoman DLC your purchase did not make it to the developer's pockets, and it makes sense they arn't inclined to give you bonus freebies).

Joe Wreschnig
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The Catwoman content isn't even on the disc. Please have better examples.

Bruno Patatas
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It seems there is a lot of confusion regarding the fact of Catwoman being on the disk or not.

http://www.amazon.com/screw-awesome-like-this-Catwoman/forum/Fx3H
Z6FX6L0SATI/Tx1DXTU1SCWL2YN/1/ref=cm_cd_fp_ef_tft_tp

Since there is no official word from developers or publishers on that subject, I will leave that in blank.



But, even if that content is not on the disc, gamers have been deceived. Only a few weeks before release gamers knew about this.

Plus, adding injury to the insult, Catwoman is the largest thing on the back of the box. Definitely advertising that she is featured.



In all case, it's a lesson of greed and how things can go wrong. It's a shame because it's a damn great game, but this thinking of trying to squeeze money over single player content that has been advertised as being part of the story content only hurts the game and the industry on the long term.

Tom Baird
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By "Alot of Confusion" you mean a couple guys on amazon claiming it's on disc and having no mention of (and therefore assuming no knowledge of) the large content download required to access the DLC?



Can you point out any user that A) Claims it's on disc B) Mentions the large download required C) Has any evidence that the disc contains the content and the download does not?



Otherwise there is no confusion; There is a baseless conspiracy. Again, why would XBox/PSN permit Rocksteady to clog their servers/consoles with wasted download content, and why would Rocksteady do that? There is neither evidence nor motive.

Bruno Patatas
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If you see all the websites like 1up some say dlc is on disc, some say it isn't. The Amazon link was just an example. A quick google search will show you that :)

Tom Baird
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Someone could say the whole game is downloaded via PSN, but that doesn't mean there is confusion, because there is no reason to believe it would be true, and no evidence for it to be the case. There's no confusion without evidence and/or motive (unless you believe everything said by every schmuck off the street).

james sadler
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I still don't see the problem with this at all. I disagree with the fact that it was something that they said would be a normal part of the game only to create these barriers to actually getting it, but the idea of making someone who bought the game used or got it from a friend pay for added content, that may or may not already reside on the disc, is not a problem for me. For at least the next two years the used version of the game wont cost that much less than a new copy if you go by GameStop's pricing strategy, which most do. So the buyer is given the choice of buying a new copy for X or a used copy for Y plus an added Z amount to get the added content. If Y + Z is >= X why would anyone not buy the new version? People can argue that this is just there to destroy the used market, but personally I think GameStop destroyed that market long ago by under paying the seller and over pricing the used games. Its also just an incentive to buy the game new, as there are incentives to pre-order a game now. The game developer has every right to add this kind of limitation to used sales since it is their product. If you don't like it don't buy the game or don't buy a used copy. Its pretty simple. Its not like they're hiding anything here, so by buying it one should understand what it means.

William Barnes
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@ james sadler,



"So the buyer is given the choice of buying a new copy for X or a used copy for Y plus an added Z amount to get the added content. If Y + Z is >= X why would anyone not buy the new version? People can argue that this is just there to destroy the used market, "



Umm, BECAUSE they feel full price is a risk for a game that they think may turn out to suck. THERE IS NO RETURNS for refunds or a different title here in the States, exchange only. And then, some places demand a receipt for a refund on a sealed copy ("You might have stolen it from our inventory and now want to trade the stolen goods for cash.") Too many people have accepted the "But you might have copied it, and are now bringing it back for a refund, you thief!" story. USED with GameStop, gives you a whole week to "try" the game, and if you don't like it, you can get something else entirely if you wish. (Others may only give a day or up to three days to find out.)

Harry Fields
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Fairly priced, value-added content, I don't think anyone has a problem with. The 30$ weapon skin pack for Gears of War is a prime example of "microstransactions" that really stick it to the player. I mean come on.. half the price of a new game for a weeks worth of artists time?



That said, map backs for 10 bucks.. I think that's fair and most people don't mind.



things like a skin should be like 50 cents.... not 3 dollars..



Provide value in your IAPs at reasonable prices so your relationship with your playerbase is not one of anal rape-age. Then, Paymium is viable for the long-haul.



And in the next generation, as dev costs continue to soar, additional revenue streams will become necessary. Just be careful that you're not screwing little Jimmy who can't afford the IAPs out of the meat and potato experience he put 60$ up for.

Jeremy Reaban
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Unfortunately, that is the difference between DLC & freemium/paymium, aka "Pay to Win"



There are people out there with really, really deep pockets. Are companies only going to start catering to those people? That's basically what all F2P MMORPGs do - there's a certain point where you need to spend $100s a month.



Unfortunately, as this article illustrates, that is spreading to the rest of gaming.

Jeremie Sinic
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I agree with Harry Field. I admit I got "caught" by the Gears of War season pass giving access to content to be released in the future. I guess in my case it will be worth it if I stick to the game, and I won't have to worry about the few next map packs (which I will be able to download when released).

I just feel weird lending money to Epic... well, whatever.

As long as there is meaningful content coming, I am fine with it.

What I like much less is Forza 4's system, where in addition to a similar "season pass", users can purchase coins with Microsoft Points, in other words spend cash for Forza Coins, which can be used to unlock cars in the game. For example, a car that costs 3 million in-game credits (which you earn through gameplay) will cost 3 coins, the minimum for any car being 1 coin.

The problem is that when you have cars that cost 6 million in-game credits, your only choice is to spend your whole life on the game OR spend cash on it.

I am alright with it for the moment because the game is really awesome apart from it, but I am not buying the "season pass" for this one, at least not until I know exactly what I am paying for.

@Jeremy Reaban: that's the problem indeed. Personally, that's the reason why I don't play F2P games, but if the "Pay to Win" mechanics contaminates retail games as well, I guess I will just stop playing at all. However, I believe there will be always gamers who care about fairness in game balance. I even think it might become a selling point in the future. I am thinking of a "Fair Play" label or something that would guarantee consumers clearly that "we-are-not-trying-to-rip-you-off-with-unethical-selling-methods". What about that?

Jeffrey Crenshaw
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"I believe that free is the natural price point on any platform where the price of making one more copy is as close to zero as makes no odds."



I believe this too for _some_ definition of "natural". But the price of making one more copy of IAPs is also close to zero. The price of copying any data constructed in bits is close to zero (until DRM and closed platforms kick in, but then is this still "natural"?). Does this mean that the "natural" price for software is free, and should we accept this, and if so how will software developers make a living? Will game development become just a hobby, its developers forced to earn their living through other jobs while making games for free on the side?

Nicholas Lovell
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That's a good point about IAP. It is also bits. However, it has generally has additional value in the minds of the player (i.e. Status, Progress, Self-expression, or something similarly emotional/social/psychological).



I do believe that there is a future for game devs but yes, I believe that the natural price for software (more accurately "basic access to software" is free), and we will have to find other ways to make money.

Joe Wreschnig
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@Nicholas,



Why does the IAP have this value, and the "base game" does not?

Nicholas Lovell
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@joe My basic answer is that because people are prepared to pay IAP, in volume to make money. And the reason is because they are not paying for content, but for something more personal - whether that is progress, status, self-expression. But I realise I need to explain this better, and will do so, once I've had a chance to think it through better.

Seb Berthet
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The value if the IAP over the base game is that IAP use the base game as a store (and a store which features only products from the developer!). The store by itself has no value (for customers), only the items inside have one...

Joe Wreschnig
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@Nicholas,



One thing to keep in mind as you think it through is that the IAP only has value because the player values the game itself.



The line you appear to be going down is something like, if the game makes everyone a stock avatar, avatar customization IAPs have tremendous value because they let me stand out and express myself somehow. Or the game doesn't let me upload replays / high scores until I buy some leaderboard access. Definitely these things have value themselves. But they only have value because I have also assigned value to the rest of the game. I buy the clothes, upload my scores, because how people see me in that environment or how much I achieve in it already has some value to me.



Otherwise, the IAP only has perceived value due to commitment bias (and if the IAP costs are low enough this can be initiated solely by impulse buys or considering your time as a sunk cost). That's not real value, even if it separates people from real money, and it's extremely damaging both personally and economically in the long run.

Nicholas Lovell
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@Joe I agree entirely. If the game isn't fun to play in its right, and draw people in its own right, I don't believe it will be a long term success

Matthew Cooper
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How to do it right:

http://www.thinkwithportals.com/blog.php?id=6430

Lennard Feddersen
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Paymium TM - sooo, does this mean that further usage of this word comes with a royalty stream?



If so, I'm in the wrong business. This article can't have taken that long to bang out and there is zero chance of technical support issues as time goes by due to shifting platform and OS upgrade issues.



These emerging business models are, without a doubt, the future of our industry and are coming none too soon. When I was a kid (back in the early 80's) there was a huge market for Atari 2600 games at $45 a pop. They took a few months to make by a small team and that was in 1982 dollars. Now we have big teams making games for $2.99 (2011 dollars mind you) in the app. store and the market isn't any bigger (there were something like 50 million Atari 2600 units). Somethings gotta give.

Nicholas Lovell
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The TM ws menat to be ironic :-)

Joshua Dallman
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Another complication to these IAP statistics are titles like those of Big Fish Games that are free to download and play then have an in-game IAP upgrade for the full version ala a 60 minute try-and-buy model, which would be included in any IAP stats.



Games with extraordinary engagement or IP can charge premium currency for basic game features like inventory that come free in other games - this same principle can be applied to the download price itself which is the coining of paymium here.



Further the principle of always offering IAP is nothing new to the game industry, akin to MMO's that have both a subscription fee and further microtransaction opportunity in the game.



I'm coining my own term - instead of "try and buy" I'm going to call it "buy and buy" - that's all it is, paymium is just a buzzword way to say it (can't wait to hear paymium used in VC pitches that have everything and the kitchen sink for monetization buzzwords in them).

Lennard Feddersen
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Hah. I'll start using buy and buy as well, I like it!

Eric Geer
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give me a solid price and a solid game over this freemium/paymium/DLC/IAP crappola--its great for business but for the consumer its more of a cost and less of a benefit.



More and more these odd business practices are getting to become more and more of a hinderance to the consumer--

Between freemium/paymium/DLC/IAP/online passes/day one patches/incomplete games/mandatory sign-ins to company owned websites/registration codes/mandatory installs.etc---good luck trying to put in a game and just playing

^(This is why I respect Nintendo and the Wii).



For most new games that come out---good luck with the old "Plug in and Play" mentality. May be a good half hour before you get to play the damn thing.

Joe Wreschnig
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"I believe that free is the natural price point on any platform where the price of making one more copy is as close to zero as makes no odds."



Have you written elsewhere about that belief? That statement is significantly more radical than anything I've seen expressed on Gamasutra, but maybe I missed the article.



At first blush it looks like you're being clever with mathematics but it's really only a practical statement if you have literally infinite distribution - obviously not possible. When the market is small it can easily sustain - and require - far higher prices than free - such as your own book for 100 GBP.



The criterion you've laid out - can be copied freely - also applies to IAPs themselves. So by your logic the natural price point for those is also free. Where does the regression end and why?



Certainly one can argue along the lines "free-to-play is the most cost-effective way to market in this environment", but that's been true of gaming platforms since shareware. "Free is the natural price point for anything with a marginal cost of free"? I don't buy it, and I think by your own book's pricing, you don't buy it either.

Eric Geer
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"don't buy it, and I think by your own book's pricing, you don't buy it either. "



I don't buy it either...



http://www.gamesbrief.com/store/buy/

Digital version of that book--£99-£199



I guess he is not living by that belief very well.

Jane Castle
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Yeah looking at this "book" and his pricing model, this Lovell guy is pushing a personal agenda. Perhaps trying to drum up more business for himself......

Joe Wreschnig
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@Eric, Jane,



I didn't mean that confrontationally. I think Nicholas is wrong, but I don't think he's being duplicitous like you seem to be implying. I think his position has an inconsistency (two, actually) and contains a claim I think is made too casually, one both new and far too strong to be put forward undefended.



I don't think he's hidden his agenda at any point. (Openly pushing an agenda is not inherently bad. Everyone here is doing it.) I don't think it's bad that he's trying to sell a book, and that book probably does consist of business advice that has worked well for many people. But the basis of that belief is the same one that tells me it's also not bad - pragmatically, financially, ethically - to assign a positive non-zero monetary value to a game as well. So conversely, if you think games have value, you'll need to criticize the book on its content (possibly in relation to its price), not its price alone.

Nicholas Lovell
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@Jane Of course I'm trying to drum up more business for myself. SUrely that's obvious, not least in the bio I put at the bottom of the column.



I give a lot of content away for free: all my thoughts on the blog (1,000 articles on the business of games in the past 3 years). GAMESbrief Unplugged Volume 1 is free as a pdf or you can buy the book in paperback. Volume 2 is not currently free as an experiment.



How to Publish a Game is my premium offering. I give an enormous amount of value away for free and hope that people value what I do enough to buy HTPAG, which is a premium, business-to-business book (i.e. not a status/emotion led consumer offering).



I acknowledge that it would be better to find a way to make the same free argument work as strongly in B2B as it does in B2C. I'm still working on that.



I welcome these threads, because I learn, refine my arguments and even, on occasion, change my mind.



But it's not a personal agenda, except in as far as it's what I believe.

Nicholas Lovell
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@Joe



Thanks for the thoughtful answer. The belief you quoted is based on Bertrand Competition and is covered in detail in Chris Anderson's book Free.



Your point about IAP is valid. I think there are some counters, and I plan to think them through over the next few weeks.



Keept the feedback coming, I really value it.

Anthony Giallourakis
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While everyone is trying to optimize the investment driven video game market, no one seems to be paying any attention to the 800 pound gorilla called advergames. Advertising sponsored browser advergaming is going to explode in the next 2 years. This is not in-game advertising, that is something completely different (for those readers who do not know the difference).



The quality and amount of advergames that will hit the Internet in the coming 2 years is going to be a huge force in the video game marketplace. A measurable amount of the collective casual gaming market will select to play more advergames as a percentage of their total casual gaming consumption as several positive forces converge (for the advertising sponsored advergaming marketplace).



The freemium model manifested itself out of the pricing pressure placed upon the casual games industry by developers and publishers giving away games on the Internet and later in the App Store. Competitive forces and easy alternatives (all free) created a marketplace that had to adapt. A decent portion of the casual games market still is being dragged into freemium kicking.



When huge corporations with advertising budgets bigger than the market caps of some game development companies (implied or otherwise) start to plow tens of millions each into annual advergaming campaigns, the investment driven casual games market is going to feel an increasingly larger part of its audience disappear. There are only so many hours in a day, and only so many eyeballs to engage. Advergames, THEY ARE COMING.

Jane Castle
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This reads like marketing hocus pocus speak.....

Jeremy Reaban
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Is that true? I guess HTML5 is the new hope, but a lot of browser gaming portals have closed - at least Big Fish Gaming's did. I guess there are still some left, but it's very clunky playing games in a browser vs natively.

Nicholas Lovell
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I don't agree. Advergaming is real, but brands dont know how to make games. They are still reluctant to spend budgets of over $150,000 on games, and are uncomfortable running them as services.



There is a role for brands funding games, a big one. But if I were a startup, I would be trying to do freemium games where I took revenue from end customers, not chasing big marketing departments for projects.

Joe McGinn
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Good article, makes sense to me, go free or go expensive.



Of course in such a fluid market there is always an exception. Gunship Zombie is 99 cents, but I bet they make far more income from their IAP. Would love to see their data.



The digital age is so much more complex than box products, if for no other reason than we no longer have access to accurate competitor data. Thanks for the insights Nicholas.

Marc Schaerer
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I am against paymium, especially if paymium gets pulled off as NCSoft for example does it with Aion where you pay a monthly sub and then pay for them doing their work a second time (lets remember that subscriptions were meant to pay ongoing support and expansion not to stick it in your pocket dear SOE and Blizzard) its just no longer a payment model, its a ripp off system and one where I have serious doubts that its going to work out at all and that for the good of it.



There are naturally exceptiosn to it like full content unlocker so you don't have to play through it or ingame currency so you don't have to play to afford equipment in an RPG or racing game, basically selling 'time savers' (and even unlockers are lame in old days games had cheats or even option menu entries for it), but I truely hope that any business that starts to sell shells at premium prices to expand them (C&C on iOS anyone) with IAP just deserves a single thing and thats going down immediately


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