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Analysis: How Do You Compete With Free?

Analysis: How Do You Compete With Free?

September 22, 2011 | By Nicholas Lovell

[In this analysis, Games Brief's Nicholas Lovell examines the totally free iOS dungeon crawler Undercroft to see how it makes money for the developer, and to ask how paid games can hope to compete with this model.]

Remember Dungeon Master? Want to play a game like Dungeon Master, for free, on the iPhone?

I do.

I'm a sucker for old-school RPGs. I put out a plea on Twitter for a game that was like Dungeon Master, Ultima, or Wizardry.

And thanks to Fraser McCrormick, I found Undercroft.

It's an old-school dungeon-crawling RPG. Build a team of four characters " mage, warrior, priest, and so on " and bash an assortment of spiders, rats, undead, and golems with swords, magic and ninja throwing stars.

I'm about 12 hours in so far and really enjoying it.

Don't You Write A Business Column?

The reason I mention Undercroft is because the game is free. Gratis. Complimentary. Not free like League of Legends, but genuinely, totally free.

The game is made by Jagex, a British publisher that operates the phenomenally successful Runescape, a free-to-play browser game that encourages players to subscribe in order to get full access to all of the in-game content (i.e. a traditional MMO model, not a micro-transaction economy).

The last time I spoke to the company, it had 10 million active users (defined as someone who had played in the last two weeks), and 1 million subscribers. In 2010, Jagex generated revenues of £44.5 million ($70.2 million) and profits of £18.8 million ($29.6 million).

So why did they release an iOS dungeon crawler for free? I'm guessing that it was funded by their marketing budget, not their development budget. Undercroft launches with the splash screen you see below. There is a subtle link on the menu screen to see a video about Runescape. That's it.

My supposition, therefore, is that Undercroft is part of the marketing funnel for Runescape. Ideally, players will get drawn into Undercroft, finish it, wonder what to play next, and decide to check out the browser-based game that funded the iPhone game and made it available for free.

I have no idea whether the conversion rate is good, or whether Undercroft has been a good marketing strategy for Runescape. I do know that its existence should scare the bejeesus out of game developers.

Competing With Free-Free

Much has been written about whether the free model will win. I am generally of the view that yes, free (with an associated business model of allowing that subset of users who love what you do to pay you a bucket-load of money) will triumph.

Critics often ask, "How will I afford to make games if users won't pay for them?" To which my response is "Tough. Free is coming. You'd better find a way to deal with it, or you will be in real trouble."

Undercroft is just one example of a game that is free, with no expectation that it will generate any direct revenue at all. It is a good game with relatively high production values. If you are charging for your game, you are not competing with rubbish, no matter what you would like to believe. If you are charging for a game, you are competing with:
  • Advertiser-funded games like Barclaycard Waterslide Extreme
  • A funnel-filling game like Undercroft
  • Free-to-play games that can make a successful business if only 3 percent of users spend money (like Tiny Tower, on track to make over $3 million a year)
  • Pirated games
Do you really believe that your game can stand out when there is so much quality content available for free? If you were making Legends of Grimrock, wouldn't you be a little concerned about how large a percentage of your potential audience might be satisfied with the free dungeon crawling experience of Undercroft?

When so much high quality content is free, doesn't it make sense to work out how to make your high-quality content available for free, and still make bucket-loads of money, rather than clinging to a business model established in a different, physical era?

[Nicholas Lovell makes a living helping people make money from games. He is the author of How to Publish a Game and blogs at Games Brief. His most recent book, the second volume of GAMESbrief Unplugged covers traditional games, the transition to new business models and the power of free. It is available here.]

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