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America's missing link: Core-focused free-to-play
America's missing link: Core-focused free-to-play Exclusive
February 23, 2012 | By Frank Cifaldi

February 23, 2012 | By Frank Cifaldi
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More: Console/PC, Social/Online, Exclusive, Business/Marketing



If nothing else, the revenue figures unveiled when Zynga went public have proven that the microtransaction-based "free-to-play" business model for video games was not limited to places like China and Korea.

Even America, the land of the video game console, has been catching on: according to upcoming research by DFC Intelligence previewed at Ayzenberg Group's [a]list summit in San Francisco on Thursday (and with subsequent data revealed exclusively to Gamasutra), North American gamers spent $1.1 billion on microtransactions in 2011.

That figure, however, represents less than 10 percent of a global microtransaction spend of $11.7 billion. By comparison, North America commands 42 percent of the worldwide console sales market.

So where is the discrepancy? North America's dominance in the console market is easily explainable, as home consoles are relegated to the gray market in places like China and Korea, but why is America's slice of the pie so small?

The answer, when looking at the numbers, is in the types of free-to-play games being played.

"What Zynga has done is proven the popularity of the basic concept [of a free-to-play game] to a large group of people here in the U.S. with fairly...I don't want to say 'unsophisticated,' but simple games," DFC analyst David Cole tells us. In the rest of the world, meanwhile, deeper games (primarily MMOs) aimed at "core" gamers dominate the free-to-play space.

In 2011, DFC estimates that "light" free-to-play games (like those from Zynga) brought in $3.2 billion in revenue, about $0.9 billion of that from North America alone. Those considered core-focused, however, brought in more than double that: $7.4 billion worldwide, with only 3 percent of that coming from here.

According to Cole, these core games not only draw in more money, they also attract more big spender "whales" and have a much more substantial long tail effect.



Nexon's MapleStory, for example, hit its peak revenue in 2010, some six years after its release. By comparison, a typical Facebook hit starts its decline after two or three months.

DFC's analysis, which will be published later this year in a report called "The Market for Browser and Social Network Games," predicts that the global free-to-play market will grow from $10.6 billion in 2011 to $17.3 billion by 2016, though it warns that growth may be hindered by an inability for North America to attract core free-to-play gamers and a possible decline in product quality as players get fed up with playing "clones" of other popular titles.


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Comments


R. Hunter Gough
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"North American gamers spent $1.1 billion on microtransactions in 2011.



That figure, however, represents less than 10 percent of a global microtransaction spend of $11.7 million."



did a "b" and an "m" get switched somewhere?

Frank Cifaldi
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Not switched no, but that should read $11.7 BILLION. Thanks for the correction.

K Gadd
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I don't think anyone should be surprised that higher long term retention makes it possible to monetize better. However, I don't see an explanation of their definition of 'core' anywhere, and there's no link to the study, so:

What makes it a 'core' game instead of a 'light' game? Is it the retention? The revenue model? Just a bucketized categorization based on publisher? Or something else?

Also, you left a few more million/billion mixups in there: "In 2011, DFC estimates that "light" free-to-play games (like those from Zynga) brought in $3.2 million in revenue, about $0.9 million of that from North America alone."

Alan Rimkeit
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I theorize that "core gamers" are people who would spend their disposable income on a video game before they would spend it on say, a movie or music. They are the people, like me for example, that have been playing games for years, perhaps decades. They will most likely be playing video games for the rest of their lives. I know I will and I have known many people over my life time that fit this categorization. I highly suspect many of the people who frequent this website fit this profile as well.

Jeremy Reaban
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I actually think much of the discrepancy is that Asians don't really have much choice in the matter. Outside of Japan, as you noted, consoles are not readily available (and extremely expensive if they are), so basically their only real option for gaming is F2P games at internet cafes. They have a captive audience, basically.

Beyond that, there is the popularity of genres. FPSes and open world games like Skyrim or GTA are the most popular ones in the West - they translate poorly to the F2P model.

Sure, companies could simply stop producing them, and only make a F2P variant which forces customers to spend more than $60 on a game, but I don't think anyone would choose such a model given the chance.

It works for MMORPGs, because to a certain extent, they are more gear and time based rather than skill based. Buying items through Microtransactions isn't viewed as cheating - people really don't want to play a FPS when the other side is better simply because they spend more money a month to get better guns and gear. It's really only restricted to things like new hats, something Valve has done.

Matt Robb
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On something like an FPS, it's not viable to sell power, but it is viable to sell variety. Any game where you pick a class or kit, they can make the standard one free and the others cost. Now that I think about it, that might make it more realistic, since you'd have a lot more "standard" infantry and fewer specialists that way.

Brandon Sheffield
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hmm, I wonder how correct his stats are. I reckon League of Legends brings in partway to 3% of $7.4 billion all by itself. I guess that's about $220 million, so maybe not, but I would not be surprised.

Neal Nellans
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I agree with the other commenters here that there are more questions raised by this report than quantifiable data. I feel that cole's division of F2P games based on "core" and "light" games is flawed. For example maxon predominately targets pc markets while zynga targets web and mobile devices. Also what about Wow, League of Legends, Team fortress and Hi-res studios games like global agenda? I think that these games alone would generate more than 1.1 billion annually.

Christopher Pfeiffer
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Actually, core focused social games are the exactly what Balanced Worlds is focused on creating: http://www.facebook.com/pages/Bomb-Buddies/251621804900970 is our first game coming out on Facebook in April. Bomb Buddies is core focused (light core). There are lots of challenges: 3d in the web, fair monetization, funding for indy developers, ... I've been making games since 1995 and believe that 3d will help transform the social space. I like play games with my friends; and, strongly prefer games with fun and solid core game mechanics. Riot Games has done a great job moving toward this end goal. At the same time, aren't MMOs social games for core players? :)


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